<PAGE>
As filed with the Securities and Exchange Commission on November 26, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4812 13-3956940
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
PRICE COMMUNICATIONS CELLULAR INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4812 13-3504402
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
----------------
45 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(212) 757-5600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT PRICE
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
45 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(212) 757-5600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
RICHARD D. TRUESDELL, JR.
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE 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
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH MAXIMUM AGGREGATE AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER NOTE(1) PRICE(1) FEE(2)
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<S> <C> <C> <C> <C>
13 1/2% Series B Senior
Secured
Discount Notes due 2007
of Price Communications
Cellular Holdings, Inc.
("Notes").............. $153,400,000 50.408% $77,326,630 $23,432.31
Guarantee of the Notes by
Price Communication
Cellular Inc.
("Guarantee")(3).......
</TABLE>
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(1)Estimated solely for purposes of calculating the registration fee.
(2)Calculated pursuant to Rule 457(f).
(3)No separate consideration will be received for the Guarantee.
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, AS AMENDED OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER , 1997
PROSPECTUS
, 1997
$153,400,000
OFFER TO EXCHANGE
13 1/2% SERIES B SENIOR SECURED DISCOUNT NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
13 1/2% SERIES A SENIOR SECURED DISCOUNT NOTES DUE 2007
OF
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
FULLY AND UNCONDITIONALLY GUARANTEED AS SET FORTH HEREIN BY
PRICE COMMUNICATIONS CELLULAR INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED
Price Communications Cellular Holdings, Inc. ("Holdings"), hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying Letter of Transmittal (which together constitute the
"Exchange Offer"), to exchange $1,000 principal amount at maturity of 13 1/2%
Series B Senior Secured Discount Notes due 2007 (the "New Notes") of Holdings
for each $1,000 principal amount at maturity of the issued and outstanding 13
1/2% Series A Senior Secured Discount Notes due 2007 (the "Old Notes" and,
together with the New Notes, the "Notes") of Holdings. As of the date of this
Prospectus there were outstanding $153,400,000 principal amount at maturity of
Old Notes. The terms of the New Notes are identical in all material respects
to the Old Notes, except that the offer of the New Notes will have been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), and therefore, the New Notes will not be subject to certain transfer
restrictions, registration rights and related liquidated damage provisions
applicable to the Old Notes.
The Notes will mature on August 1, 2007. The Notes accrete at a rate of 13
1/2%, compounded semiannually, to an aggregate principal amount at maturity of
approximately $153.4 million by August 1, 2002. Cash interest will not
commence to accrue on the Notes prior to August 2, 2002. Commencing on
February 1, 2003, cash interest on the Notes will be payable, at a rate of 13
1/2% per annum, semi-annually in arrears on each February 1 and August 1. The
Notes will be redeemable at the option of Holdings, in whole or in part, at
any time on or after August 1, 2002 in cash at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, thereon to the redemption
date. The Notes will be redeemable at the option of Holdings, in whole or in
part, at any time on or after August 1, 1998 in cash at the redemption prices
set forth herein, plus accrued and unpaid interest, if any, thereon to the
redemption date; provided that the trading price of the common stock, par
value $0.01 per share (the "Common Stock"), of Price Communications
Corporation ("PCC") shall equal or exceed certain levels. See "Description of
Notes."
The Notes are senior obligations of Holdings. The Notes will rank pari passu
in right of payment with all future senior indebtedness of Holdings and will
rank senior in right of payment to all future subordinated indebtedness of
Holdings. The Notes are unconditionally guaranteed (the "Guarantee") by Price
Communications Cellular Inc. (the "Guarantor"), the Company's direct parent
and a direct wholly owned subsidiary of PCC. The Guarantee is secured by a
lien on and security interest in all of the issued and outstanding capital
stock of Holdings. The Guarantee is a senior obligation of the Guarantor. See
"Description of the Guarantee." The Notes are effectively subordinated to all
liabilities of Holdings's subsidiaries. On a pro forma basis after giving
effect to the issuance and sale of the Old Notes and warrants to purchase
527,696 shares of PCC Common Stock (the "Warrants," together with the Old
Notes, the "Units") and the Acquisition (as defined herein) and related
financings as of September 30, 1997, Holdings would have had outstanding
approximately $77.3 million of Indebtedness (as defined herein) and Holdings's
subsidiaries would have had outstanding $620.0 million of Indebtedness,
including Indebtedness under the Senior Subordinated Notes (as defined herein)
and the New Credit Facility (as defined herein) and $276.0 million of other
liabilities including $197.1 million of deferred income tax liabilities
recorded in connection with the purchase accounting treatment of the
Acquisition and including trade payables.
The New Notes are being offered hereunder in order to satisfy certain
obligations of Holdings under the Registration Rights Agreement, dated August
11, 1997, among Holdings and the other signatories thereto (the "Registration
Rights Agreement"). Based upon interpretations contained in letters issued to
third parties by the staff of the Securities and Exchange Commissions (the
"SEC"), including Exxon Capital Holdings Corporation, SEC No-Action Letter
(avail. May 13, 1988), Morgan Stanley & Co. Incorporated, SEC No-Action Letter
(avail. June 5, 1991) and Shearman & Sterling, SEC No-Action Letter (avail.
July 2, 1993) (collectively, the "Exchange Offer No-Action Letters"), Holdings
believes that the New Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise transferred by
each Holder thereof (other than a broker-dealer, as set forth below, and any
such Holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such Holder's business and such
Holder has no arrangement or understanding with any person to participate in
the distribution of such New Notes. Eligible Holders wishing to accept the
Exchange Offer must represent to Holdings in the Letter of Transmittal that
such conditions have been met. Each broker-dealer that receives New Notes for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of New Notes received in exchange of Old
Notes where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. Holdings has agreed
that, for a period of 90 days after the Expiration Date (as defined herein),
it will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution."
Holdings will not receive any proceeds from the Exchange Offer. Holdings
will pay all the expenses incident to the Exchange Offer. Tenders of Old Notes
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. In the event Holdings terminates the Exchange Offer and does
not accept for exchange any Old Notes, Holdings will promptly return tendered
Old Notes to the Holders thereof. See "The Exchange Offer."
Prior to this Exchange Offer, there has been no public market for the Notes.
Holdings does not currently intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active public market for the New
Notes will develop.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT SHOULD BE
CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR OLD NOTES IN THE EXCHANGE
OFFER.
THESE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in
this Prospectus (this "Prospectus") in connection with the offer made hereby
and, if given or made, such information or representations must not be relied
upon as having been authorized by Holdings or any other person. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of Holdings since the date hereof or that the information contained or
incorporated by reference herein is correct as of any time subsequent to its
date. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy the securities offered hereby by anyone in any jurisdiction
in which such offer or solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to do so or to anyone to
whom it is unlawful to make such offer or solicitation.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information (including the financial statements and the notes thereto) included
elsewhere in this Prospectus. Each prospective investor is urged to read this
Prospectus in its entirety. Unless otherwise indicated, all references herein
to "Holdings" refer to Price Communications Cellular Holdings, Inc. and all
references herein to the "Company" refer to Holdings and its subsidiaries and
their respective predecessors. As used in this Prospectus, the terms "PCW" and
"Palmer" include their respective subsidiaries and predecessors. References
herein to the "Acquisition" refer to the acquisition by Price Communications
Wireless, Inc. ("PCW"), a wholly owned direct subsidiary of Holdings, of Palmer
Wireless, Inc. ("Palmer") and the related sales of the Fort Myers and Georgia-1
systems of Palmer, as described below under "The Acquisition." EXCEPT FOR
HISTORICAL FINANCIAL INFORMATION AND UNLESS OTHERWISE INDICATED, ALL
INFORMATION PRESENTED BELOW RELATING TO THE COMPANY AND PCW INCLUDING POPS, NET
POPS AND THE SYSTEMS, GIVES EFFECT TO THE CONSUMMATION OF THE ACQUISITION
(INCLUDING THE SALES OF THE FORT MYERS AND GEORGIA-1 SYSTEMS).
THE COMPANY
The Company is engaged in the construction, development, management and
operation of cellular telephone systems in the southeastern United States. At
September 30, 1997, after giving effect to the Acquisition, the Company
provided cellular telephone service to 295,162 subscribers in Georgia, Alabama,
Florida and South Carolina in a total of 16 licensed service areas composed of
eight Metropolitan Statistical Areas ("MSAs") and eight Rural Service Areas
("RSAs"), with an aggregate estimated population of 3.3 million. The Company
sells its cellular telephone service as well as a full line of cellular
products and accessories principally through its network of retail stores. The
Company markets all of its products and services under the nationally
recognized service mark CELLULAR ONE.
During the first nine months of 1997, on a pro forma basis, after giving
effect to the Acquisition, the Company's subscriber base increased from 243,204
to 295,162 or 21.4%. On a pro forma basis for the first nine months of 1997,
Holdings's operating income before depreciation and amortization ("EBITDA") was
$49.9 million and Holdings would have incurred net losses of $32.0 million. See
"Summary Historical and Unaudited Pro Forma Financial and Operating Data."
OPERATIONS
The Company has developed its business through the acquisition and
integration of cellular telephone systems, clustering multiple systems in order
to provide broad areas of uninterrupted service and achieve certain economies
of scale, including centralized marketing and administrative functions as well
as multi-system capital expenditures. The Company devotes considerable
attention to engineering, maintenance and improvement of its cellular telephone
systems in an effort to deliver high-quality service to its subscribers and to
implement new technologies as soon as economically practicable. Through its
participation in the North American Cellular Network ("NACN"), the Company is
able to offer seven-digit dialing access to its subscribers when they travel
outside the Company's service areas, providing them with convenient roaming
access throughout large areas of the United States, Canada, Mexico and Puerto
Rico served by other NACN participants. By marketing its products and services
under the CELLULAR ONE name, the Company also enjoys the benefits of
association with a nationally recognized service mark.
The Company's cellular telephone systems include 15 contiguous licensed
service areas in Georgia, Alabama and South Carolina, as well as a system in
Panama City, Florida. The following table sets forth as of November 14, 1997,
after giving effect to the Acquisition, with respect to each service area in
which the Company owns a cellular telephone system, the estimated population,
the Company's beneficial ownership percentage, the Net Pops and the date of
initial operation of such system by Palmer or a predecessor operator.
3
<PAGE>
<TABLE>
<CAPTION>
ESTIMATED OWNERSHIP DATE SYSTEM
SERVICE AREA(1) POPULATION(2) PERCENTAGE NET POPS OPERATIONAL
<S> <C> <C> <C> <C>
Albany, GA.................... 118,527 86.5% 102,526 4/88
Augusta, GA................... 439,116 100.0 439,116 4/87
Columbus, GA.................. 254,150 85.2 216,518 11/88
Macon, GA..................... 313,686 99.2 311,234 12/88
Savannah, GA.................. 283,878 98.5 279,578 3/88
Georgia-6 RSA................. 199,516 95.0 189,560 4/93
Georgia-7 RSA................. 134,376 100.0 134,376 10/91
Georgia-8 RSA................. 157,451 100.0 157,451 10/91
Georgia-9 RSA................. 119,410 100.0 119,410 9/92
Georgia-10 RSA................ 149,699 100.0 149,699 10/91
Georgia-12 RSA................ 211,799 100.0 211,799 10/91
Georgia-13 RSA................ 147,392 86.5 127,494 10/90
Dothan, AL.................... 136,160 94.6 128,807 2/89
Montgomery, AL................ 318,371 92.8 295,430 8/88
Alabama-8 RSA................. 173,993 100.0 171,993 7/93
--------- ---------
Subtotal.................... 3,155,524 3,034,991
--------- ---------
Panama City, FL............... 146,018 78.4 114,493 9/88
--------- ---------
Total....................... 3,301,542 3,149,484
========= =========
</TABLE>
- --------------------
(1) Does not include the Alabama-5 RSA, South Carolina-7 RSA and South
Carolina-8 RSA where the Company has interim operating authority ("IOA").
The Company has no subscribers in the South Carolina-7 RSA and South
Carolina-8 RSA, but instead provides roaming access to its own subscribers
and others when they travel in these two service areas, utilizing its
existing cell sites. Construction permits were granted to third parties
("Permittees") for the Alabama-5 RSA and South Carolina-8 RSA on May 20,
1997. The Permittees are required to complete construction of their
respective RSA within 18 months. After completing construction, a Permittee
may give the Company ten days prior written notice, at which point the
Company would be required to sell its subscribers to the Permittee at cost.
The application for a construction permit for the South Carolina-7 RSA has
been remanded by the FCC to the Wireless Bureau for further review.
(2) Based on population estimates for 1996 from the 1996 Donnelley Market
Information Service.
COMPANY STRATEGY
The Company's four strategic objectives are to: (1) expand its revenue base
by increasing penetration in existing service areas and encouraging greater
usage among its existing customers, (2) provide high-quality customer service
to create and maintain customer loyalty, (3) enhance performance by
aggressively pursuing opportunities to increase operating efficiencies and (4)
expand its regional wireless communications presence by selectively acquiring
additional interests in cellular telephone systems (including minority
interests). Specifically, the Company strives to achieve these objectives
through implementation of the following:
Aggressive, Direct Marketing. The Company employs a two-tier direct sales
force. A retail sales force handles walk-in traffic at the Company's 32 retail
outlets, and a targeted sales staff solicits certain industries and government
subscribers. The Company's management believes that its internal sales force is
more likely than independent agents to successfully select and screen new
subscribers and select pricing plans that realistically match subscriber means
and needs. In addition, the Company motivates its direct sales force to sell
appropriate rate plans to subscribers, thereby reducing churn, by linking
payments of commissions to subscriber retention. By lowering commissions and
reducing churn, the Company's use of a direct sales force keeps its marketing
costs among the industry's lowest.
4
<PAGE>
Flexible, Value-Oriented Pricing Plans. The Company provides a range of
pricing plans, each of which includes a monthly access fee and a bundle of
"free" minutes. Additional home rate minutes are charged at rates ranging from
$0.05 per minute to $0.30 per minute depending on usage plan and time of day.
In addition, the Company offers wide area home rate roaming in the Company's
systems and low flat rate roaming in a six state region in the Southeastern
United States.
The Company believes that an increase in its bundled minute offerings will
encourage greater customer usage. By increasing the number of minutes a
customer can use for one flat rate, subscribers perceive greater value in their
cellular service and become less usage sensitive, i.e., they can increase their
cellular phone usage without seeing large corresponding increases in their
cellular bill. These factors translate into more satisfied customers and lower
churn among existing subscribers and also increase the number of potential
customers in the marketplace.
Adopting State of the Art System Design. The Company's network, combined with
its use of the IS-136 protocol, allows the delivery of full personal
communications services ("PCS") functionality to its digital cellular
customers--primarily caller ID, short message paging and extended battery life.
In addition, the Company's network currently provides for the seamless handoff
from PCS (1900 MHZ) to digital cellular (800 MHZ). The Company believes this
innovation will allow the Company to be the roaming partner of choice for PCS
operators employing TDMA (Time Division Multiple Access) technology. The
Company has already reached an agreement with AT&T with respect to PCS roaming
and expects that other PCS operators may choose, like AT&T, to concentrate PCS
buildout in urban centers rather than the more rural areas in which the Company
concentrates.
Focusing on Customer Service. Customer service is an essential element of the
Company's marketing and operating philosophy. The Company is committed to
attracting new subscribers and retaining existing subscribers by providing
consistently high-quality customer service. In each of its cellular service
areas, the Company maintains a local staff, including a market manager,
customer service representatives, technical and engineering staff, sales
representatives and installation and repair facilities. Each cellular service
area handles its own customer-related functions such as credit evaluations,
customer evaluations, account adjustments and rate plan changes. In addition,
subscribers are able to report cellular telephone service or account problems
to the Company's headquarters 24 hours a day. To ensure high-quality service,
Cellular One Group authorizes a third-party marketing research firm to perform
customer satisfaction surveys of each of its licensees. Licensees must achieve
a minimum satisfaction level in order to continue using the Cellular One
service mark. The Company has repeatedly ranked number one in customer
satisfaction among all Cellular One operators (#1 MSA in 1996, 1995, 1993, and
1992; #1 RSA in 1995).
Aggressive Cost Control Efforts. The Company believes that its monthly
operating costs per subscriber rank among the lowest in the industry. The
Company's management attributes this competitive advantage to a variety of
factors, including the efficiencies associated with its direct sales force, the
Company's low churn experience, extensive use of in-house technical and
engineering staff, maintenance of aggressive fraud control procedures and in-
house billing capabilities, as well as general efforts to reduce corporate
general and administrative expenses. The Company has also realized substantial
savings on its interconnection charges from landline carriers by using its own
microwave and fiber optic network to connect cellular switching equipment to
cell sites without the use of landline carriers.
THE ACQUISITION
Prior to the Merger, neither Holdings nor the Guarantor had any assets,
liabilities or operations. Holdings is a wholly owned indirect subsidiary of
PCC, which was incorporated in 1979, and a wholly owned direct subsidiary of
the Guarantor.
On May 23, 1997, PCC, PCW and Palmer entered into an Agreement and Plan of
Merger (the "Merger Agreement"). The Merger Agreement provided, among other
things, for the merger of PCW with and into
5
<PAGE>
Palmer with Palmer as the surviving corporation (the "Merger"). On October 6,
1997, the Merger was consummated and Palmer changed its name to "Price
Communications Wireless, Inc." Pursuant to the Merger Agreement, PCC acquired
each issued and outstanding share of common stock of Palmer for a purchase
price of $17.50 per share in cash and purchased outstanding options and rights
under employee and director stock purchase plans for an aggregate price of
$486.4 million. In addition, as a result of the Merger, the Company assumed all
outstanding indebtedness of Palmer of approximately $378.0 million ("Palmer
Existing Indebtedness"). As a result, the aggregate purchase price for Palmer
(not including transaction fees and expenses) was $864.4 million. The Company
refinanced all of the Palmer Existing Indebtedness concurrently with the
consummation of the Merger.
PCW entered into an agreement (the "Fort Myers Sale Agreement") to sell
Palmer's Fort Myers, Florida MSA covering approximately 382,000 Pops for $168.0
million (the "Fort Myers Sale"). On October 6, 1997, the Fort Myers Sale was
consummated, and generated proceeds to the Company of approximately $166.0
million. The proceeds of the Fort Myers Sale were used to fund a portion of the
acquisition of Palmer.
On October 21, 1997, PCC and PCW entered into an Asset Purchase Agreement
with MJ Cellular Company, L.L.C. (the "Georgia Sale Agreement") which provides
for the sale by PCW, for $25 million, of substantially all of the assets used
or useful in the operation of the non-wireline cellular telephone system
serving the Georgia-1-Whitfield Rural Service Area (Market No. 0371-A)
("Georgia-1"), including the FCC licenses to operate Georgia-1 (the "Georgia
Sale"). The parties expect to consummate the sale of the assets of Georgia-1 by
December 31, 1997. The proceeds from the Georgia Sale will be used to retire a
portion of the debt used to fund the acquisition of Palmer.
In order to fund the Acquisition and pay related fees and expenses, PCW
issued $175.0 million aggregate principal amount of 11 3/4% Senior Subordinated
Notes due 2007 (the "Senior Subordinated Notes") and entered into a syndicated
senior loan facility providing for term loan borrowings in the aggregate
principal amount of approximately $325.0 million and revolving loan borrowings
of $200.0 million (the "New Credit Facility"). On October 6, 1997, PCW borrowed
all term loans available thereunder and approximately $120.0 million of
revolving loans. DLJ Capital Funding, Inc. ("DLJ Capital Funding") provided and
syndicated the New Credit Facility. See "Description of New Credit Facility."
The acquisition of Palmer was funded in part through a $77.4 million equity
contribution from PCC (the "PCC Equity Contribution") which was in the form of
cash and common stock of Palmer. An additional amount of approximately $47.5
million of the purchase price for the Acquisition was raised as a portion of
the proceeds from the issuance and sale of the Units (the "Offering").
6
<PAGE>
The following table sets forth the estimated sources and uses of funds for
the Acquisition, the redemption of the outstanding senior payment-in-kind
increasing rate preferred stock (the "PIK Preferred Stock") of PCC and certain
warrants to purchase PCC Common Stock and related fees and expenses:
<TABLE>
<CAPTION>
TOTAL SOURCES: (IN MILLIONS)
<S> <C>
New Credit Facility:
Term loan............................................... $325.0
Revolving credit facility............................... 120.0
11 3/4% Senior Subordinated Notes due 2007................ 175.0
Units..................................................... 80.0
PCC Equity Contribution................................... 77.4
Proceeds from Fort Myers Sale............................. 166.0
------
Total sources......................................... $943.4
======
TOTAL USES:
Cash consideration for Palmer common stock................ $486.4
Palmer Existing Indebtedness (as of September 30, 1997) .. 378.0
Estimated transaction fees and expenses................... 33.8
Cash for redemption of PIK Preferred Stock and warrants to
purchase
PCC Common Stock......................................... 29.2
Excess cash............................................... 16.0
------
Total uses............................................ $943.4
======
</TABLE>
The foregoing table does not reflect any provision for any taxes payable in
connection with the Fort Myers Sale or the Georgia Sale. The Company has a tax
planning strategy which it believes will avoid the payment of the $50.9 million
tax which would otherwise be payable in connection with the Fort Myers Sale and
Georgia Sale. While there can be no assurances that the Company's position will
prevail if challenged, the Company has received a written opinion from a "big-
six" accounting firm (other than Arthur Andersen LLP) that, under existing
laws, it is more likely than not that the Company's position will prevail if
challenged. In order to effect this tax strategy, the partnership that owns the
Fort Myers system will need to incur approximately $169.0 million of
indebtedness. The partnership has no commitments for such financing and there
can be no assurance it will be successful in obtaining such financing.
The foregoing table also does not reflect $1.4 million which was paid to
William J. Ryan as a severance payment pursuant to his employment contract upon
consummation of the Merger and approximately $2.6 million of severance payments
which are payable over several years pursuant to existing employment contracts
between Palmer and its other executive officers. The Company has entered into
employment contracts with William J. Ryan and M. Wayne Wisehart to continue as
officers of the Company. The Company also entered into employment contracts
with other key employees prior to the consummation of the Merger. See
"Management."
7
<PAGE>
THE EXCHANGE OFFER
Securities Offered.......... Up to $153,400,000 principal amount of 13 1/2%
Series B Senior Secured Discount Notes due 2007.
The terms of the New Notes and the Old Notes are
identical in all material respects, except that
the offer of the New Notes will have been
registered under the Securities Act and
therefore, the New Notes will not be subjected to
certain transfer restrictions, registration
rights and related liquidated damage provisions
applicable to the Old Notes.
The Exchange Offer.......... The Company is offering, upon the terms and
subject to the conditions of the Exchange Offer,
to exchange $1,000 principal amount at maturity
of New Notes for each $1,000 principal amount at
maturity of Old Notes. See "The Exchange Offer"
for a description of the procedures for tendering
Old Notes. The Exchange Offer is intended to
satisfy obligations of the Company under the
Registration Rights Agreement, dated August 11,
1997, between Holdings, the Guarantor and NatWest
Capital Markets Limited and Wasserstein Perella
Securities, Inc. (the "Initial Purchasers").
Tenders, Expiration Date; The Exchange Offer will expire at 5:00 p.m., New
Withdrawal.................. York City time, on , 1997, or such later
date and time to which it is extended. The tender
of Old Notes pursuant to the Exchange Offer may
be withdrawn at any time prior to the Expiration
Date. Any Old Notes not accepted for exchange for
any reason will be returned without expense to
the tendering Holder thereof as promptly as
practicable after the expiration or termination
of the Exchange Offer.
Federal Income Tax The exchange pursuant to the Exchange Offer will
Consequences................ not result in any income, gain or loss to the
Holders for federal income tax purposes. See
"United States Federal Income Tax Consequences of
the Exchange Offer."
Use of Proceeds............. There will be no proceeds to the Company from the
issuance of the New Notes pursuant to the
Exchange Offer.
Exchange Agent.............. Bank of Montreal Trust Company is serving as
Exchange Agent in connection with the Exchange
Offer.
8
<PAGE>
CONSEQUENCE OF EXCHANGING OLD NOTES
PURSUANT TO THE EXCHANGE OFFER
Based upon interpretations contained in letters issued to third parties by
the staff of the SEC as set forth in the Exchange Offer No-Action Letters, the
Company believes that, generally, any Holder of Old Notes (other than a broker-
dealer, as set forth below, and any Holder who is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) who exchanges Old
Notes for New Notes pursuant to the Exchange Offer may offer such New Notes for
resale, resell such New Notes, or otherwise transfer such New Notes without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided such New Notes are acquired in the ordinary course of
the Holder's business and such Holder has no arrangement or understanding with
any person to participate in a distribution of such New Notes. Eligible Holders
wishing to accept the Exchange Offer must represent to the Company in the
Letter of Transmittal that such conditions have been met and must represent, if
such Holder is not a broker-dealer, or is a broker-dealer but will not receive
New Notes for its own account in exchange for Old Notes, that neither such
Holder nor the person receiving such New Notes, if other than the Holder, is
engaged in or intends to participate in the distribution of such New Notes.
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes must represent that the Old Notes tendered in exchange therefor were
acquired as a result of market-making activities or other trading activities
and must acknowledge that it will deliver a prospectus in connection with any
resale of such New Notes. See "Plan of Distribution." To comply with the
securities laws of certain jurisdictions, it may be necessary to qualify for
sale or register the New Notes prior to offering or selling such New Notes. The
Company does not currently intend to take any action to register or qualify the
New Notes for resale in any such jurisdictions. If a Holder of Old Notes does
not exchange such Old Notes for New Notes pursuant to the Exchange Offer, such
Old Notes will continue to be subject to the restrictions on transfer contained
in the legend thereon. In general, the Old Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. Any Holder who tenders in the Exchange Offer with the
intention to participate, or for the purpose of participating, in a
distribution of New Notes could not rely on the position of the staff of the
SEC enunciated in Exxon Capital Holdings Corporation (available May 13, 1988)
or similar no-action letters and, in the absence of an exemption therefrom,
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. Failure to
comply with such requirements in such instance may result in such Holder
incurring liability under the Securities Act for which the Holder is not
indemnified by the Company. See "The Exchange Offer--Consequences of Failure to
Exchange" and "Description of Notes--Registration Rights; Liquidated Damages."
9
<PAGE>
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except that the offer of the New Notes will have been registered
under the Securities Act and, therefore, the New Notes will not be subject to
certain transfer restrictions, registration rights and related provisions
applicable to the Old Notes.
Notes Offered............... Up to $153,400,000 aggregate principal amount at
maturity of 13 1/2% Series B Senior Secured
Discount Notes due 2007.
Maturity Date............... August 1, 2007.
Yield and Interest.......... 13 1/2% (computed on a semi-annual bond
equivalent basis) calculated from August 7, 1997.
The New Notes will accrete at a rate of 13 1/2%,
compounded semi-annually, to an aggregate
principal amount of $153.4 million by August 1,
2002. Cash interest will not commence to accrue
on the New Notes prior to August 2, 2002.
Commencing February 1, 2003, cash interest on the
New Notes will be payable, at a rate of 13 1/2%
per annum, semi-annually in arrears on each
February 1 and August 1.
Optional Redemption......... The Notes will be redeemable in whole or in part
at the option of the Company, at any time on or
after August 1, 2002, at the redemption prices
set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption. See
"Description of Notes--Redemption."
Provisional Redemption...... On or after August 1, 1998, the Company will have
the right to redeem all or any part of the Notes
in cash at 120.000% of the Accreted Value (as
defined herein) thereof, including accrued and
unpaid interest, if any, to the applicable
Redemption Date (subject to the right of Holders
of record on the relevant regular record date to
receive interest due on an interest payment date
that is on or prior to the Redemption Date) if
redeemed during the 12-month period beginning
August 1 of the years indicated below; provided
that redemptions may be made only if the closing
price of PCC Common Stock equals or exceeds the
prices set forth below, for the ten consecutive
trading days prior to the redemption date in each
period:
<TABLE>
<CAPTION>
STOCK
YEAR PRICE
---- ------
<S> <C>
1998.................................................. $15.00
1999.................................................. $20.00
2000.................................................. $25.00
2001.................................................. $30.00
</TABLE>
Guarantee and Security...... The Notes are unconditionally guaranteed (the
"Guarantee") by the Guarantor, the Company's
direct parent and the direct wholly owned
subsidiary of PCC. The Guarantee is secured by a
lien on and security interest in all of the
issued and outstanding capital stock of Holdings.
The Guarantor is required to own 100% of the
common stock of Holdings. The Guarantee is a
senior obligation of the Guarantor. See
"Description of the Guarantee."
10
<PAGE>
Negative Pledge............. Holdings is not permitted to pledge the stock of
PCW except pursuant to the Credit Agreement (as
defined). Holdings is required to own 100% of the
common stock of PCW.
Ranking..................... The Notes are senior obligations of Holdings and
rank pari passu in right of payment with all
existing and future senior Indebtedness of
Holdings and will rank senior in right of payment
to all future subordinated Indebtedness of
Holdings. The Notes are effectively subordinated
to all liabilities of Holdings's subsidiaries. As
of September 30, 1997, on a pro forma basis after
giving effect to the Offering, the application of
the estimated net proceeds therefrom, and the
Acquisition and related financings, Holdings
would have had outstanding $77.3 million of
Indebtedness and Holdings's subsidiaries would
have had outstanding $620.0 million of
Indebtedness, including Indebtedness under the
Senior Subordinated Notes and the New Credit
Facility, and $276.0 million of other liabilities
including $197.1 million of deferred income tax
liabilities recorded in connection with the
purchase accounting treatment of the Acquisition
and including trade payables.
Change of Control........... Upon the occurrence of a Change of Control (as
defined), each Holder of Notes will have the
right, subject to certain limitations, to require
the Company to repurchase such holder's Notes at
101% of the Accreted Value thereof, plus accrued
and unpaid interest thereon, if any, to the
repurchase date. A redemption upon a Change of
Control would be an Event of Default under the
terms of the New Credit Facility. The Company may
not have sufficient funds or financing available
to satisfy its obligations to repurchase the
Notes or meet other debt obligations that may
come due upon a Change of Control.
Certain Covenants...........
The Indenture imposes certain limitations on the
ability of the Company and its subsidiaries to,
among other things, incur Indebtedness (as
defined), make Restricted Payments (as defined),
effect certain Asset Sales (as defined), enter
into certain transactions with Related Persons
(as defined), merge or consolidate with any other
person or transfer all or substantially all of
their properties and assets. The Indenture also
imposes certain restrictions on the Guarantor.
See "Description of Notes--Certain Covenants."
11
<PAGE>
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA
FINANCIAL AND OPERATING DATA
The following table sets forth summary historical data for Palmer and the
unaudited pro forma financial data for the Guarantor for the periods and as of
the dates indicated. The unaudited pro forma data is not designed to represent
and does not represent what the Guarantor's financial position or results of
operations actually would have been had the transactions described herein under
"Unaudited Pro Forma Condensed Consolidated Financial Statements" been
completed as of the date or at the beginning of the periods indicated, or to
project the Guarantor's financial position or results of operations at any
future date or for any future period. The following data should be read in
conjunction with "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Unaudited Pro Forma Condensed Consolidated Financial Statements" and the
consolidated financial statements and notes thereto of Palmer included
elsewhere herein.
The following table also sets forth certain summary operating data for Palmer
as of the dates and for the periods indicated.
<TABLE>
<CAPTION>
GUARANTOR
--------------------------
PALMER PRO FORMA
---------------------------------------------- --------------------------
NINE
YEAR MONTHS
YEAR ENDED NINE MONTHS ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
-------------------------- ------------------ ------------ -------------
1994(1) 1995(2) 1996(3) 1996 1997 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF
OPERATIONS DATA:
Revenue:
Service................ $61,021 $96,686 $151,119 $111,803 $134,123 $127,334 $112,061
Equipment sales and
installation.......... 7,958 8,220 8,624 6,349 7,613 7,026 6,260
------- ------- -------- -------- -------- -------- --------
Total revenue........ 68,979 104,906 159,743 118,152 141,736 134,360 118,321
------- ------- -------- -------- -------- -------- --------
Engineering, technical
and other
direct expenses........ 12,776 18,184 28,717 22,100 23,301 22,999 18,658
Cost of equipment....... 11,546 14,146 17,944 12,271 16,111 15,179 13,250
Selling, general and
administrative
expenses............... 19,757 30,990 46,892 33,842 41,014 42,665 36,489
Depreciation and
amortization........... 9,817 15,004 25,013 18,167 23,313 35,151 30,246
------- ------- -------- -------- -------- -------- --------
Operating income........ 15,083 26,582 41,177 31,772 37,997 18,366 19,678
Other income (expense):
Interest, net.......... (12,715) (21,213) (31,462) (23,654) (24,468) (72,055) (53,768)
Other, net............. (70) (687) (429) (242) 208 (366) 208
------- ------- -------- -------- -------- -------- --------
Total other expense.. (12,785) (21,900) (31,891) (23,896) (24,260) (72,421) (53,560)
Minority interest share
of income.............. (636) (1,078) (1,880) (1,562) (1,310) (1,880) (1,310)
Income taxes (expense)
benefit................ 0 (2,650) (2,724) (1,578) -- 1,508 3,174
------- ------- -------- -------- -------- -------- --------
Net income (loss)....... $ 1,662 $ 954 $ 4,682 $ 4,736 $ 12,427 ($54,427) $(32,018)
======= ======= ======== ======== ======== ======== ========
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
--------------------------
NINE
YEAR MONTHS
YEAR ENDED NINE MONTHS ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
-------------------------------- --------------------- ------------ -------------
1994(1) 1995(2) 1996(3) 1996 1997 1996 1997
(IN THOUSANDS, EXCEPT PERCENTAGES AND PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Capital expenditures.... $ 22,541 $ 36,564 $ 41,445 $ 30,174 $ 40,757 N/A N/A
Operating income before
depreciation and
amortization
("EBITDA")(4).......... $ 24,900 $ 41,586 $ 66,190 $ 49,939 $ 61,310 $ 53,517 $ 49,924
EBITDA margin on service
revenue................ 40.8% 43.0% 43.8% 44.7% 45.7% 42.0% 44.5%
Net cash provided by
operating activities... $ 7,238 $ 27,660 $ 30,130 $ 21,920 $ 38,791 N/A N/A
Penetration(5).......... 4.58% 6.41% 7.45% 6.92% 8.60% 7.73% 8.88%
Subscribers at end of
period(6).............. 117,224 211,985 279,816 261,625 337,345 243,204 295,162
Cost to add a net
subscriber(7).......... $ 247 $ 276 $ 407 $ 387 $ 513 $ 436 $ 503
Average monthly service
revenue per
subscriber(8).......... $ 60.02 $ 56.68 $ 52.20 $ 53.26 $ 47.52 $ 50.23 $ 45.44
Average monthly
churn(9)............... 1.55% 1.55% 1.84% 1.73% 1.89% 1.89% 1.88%
Ratio of earnings to
fixed charges(10)...... 1.17(x) 1.21(x) 1.28(x) 1.32(x) 1.54(x)
CONSOLIDATED BALANCE
SHEET DATA:
Cash.................... $ 1,698 $ 3,581 $ 30,037
Working capital......... 296 7,011 30,825
Property, plant and
equipment, net......... 132,438 161,351 145,441
Licenses and other
intangibles, net....... 387,067 406,878 834,483
Total assets............ 549,942 599,815 1,034,104
Total debt.............. 343,662 378,000 695,349
Stockholders' equity.... 164,930 178,356 52,806
</TABLE>
- --------
(1) Includes the Georgia Acquisition (as defined herein), which occurred on
October 31, 1994. For the two months ended December 31, 1994, the Georgia
Acquisition resulted in revenues to Palmer of $1,803 and operating loss of
$645.
(2) Includes the GTE Acquisition (as defined herein), which occurred on
December 1, 1995. For the one month ended December 31, 1995, the GTE
Acquisition resulted in additional revenues to Palmer of $2,126 and
additional operating income of $208.
(3) Includes the acquisition of the cellular telephone systems of USCOC (as
defined herein) (Georgia-1 RSA), which occurred on June 20, 1996, and
Horizon (as defined herein) (Georgia-6 RSA), which occurred on July 5,
1996. The acquisition of USCOC and Horizon resulted in revenues to Palmer
of $1,239 and $2,682, respectively, and operating income (loss) of $(278)
and $743, respectively, during such year.
(4) EBITDA should not be considered in isolation or as an alternative to net
income (loss), operating income (loss) or any other measure of performance
under generally accepted accounting principles ("GAAP"). The Company
believes that EBITDA is viewed as a relevant supplemental measure of
performance in the cellular telephone industry.
(5) Determined by dividing the aggregate number of subscribers by the
estimated population.
(6) Each billable telephone number in service represents one subscriber.
(7) Determined for a period by dividing (i) all costs of sales and marketing,
including salaries, commissions and employee benefits and all expenses
incurred by sales and marketing personnel, agent commissions, credit
reference expenses, losses on cellular telephone sales, rental expenses
allocated to retail operations, net installation expenses and other
miscellaneous sales and marketing charges, by (ii) the net subscribers
added during such period.
(8) Determined for a period by dividing (i) the sum of the access, airtime,
roaming, long distance, features, connection, disconnection and other
revenues for such period by (ii) the average number of subscribers for
such period, divided by the number of months in such period.
(9) Determined for a period by dividing total subscribers discontinuing
service by the average number of subscribers for such period and dividing
that result by the number of months in such period.
(10) The ratio of earnings to fixed charges is determined by dividing the sum
of earnings before interest expense, taxes and a portion of rent expense
representative of interest by the sum of interest expense and a portion of
rent expense representative of interest. The ratio of earnings to fixed
charges is not meaningful for periods that result in a deficit.
13
<PAGE>
RISK FACTORS
In addition to the other matters described in this Prospectus, Holders of
the Old Notes should carefully consider the following risk factors before
accepting the Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
the Old Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. The
Company does not intend to register the Old Notes under the Securities Act.
The Company believes that, based upon interpretations contained in letters
issued to third parties by the staff of the SEC as set forth in the Exchange
Offer No-Action Letters, New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold or otherwise
transferred by each Holder thereof (other than a broker-dealer, as set forth
below, and any such Holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such New Notes are acquired in the ordinary course of such Holder's
business and such Holder has no arrangement or understanding with any person
to participate in the distribution of such New Notes. Eligible Holders wishing
to accept the Exchange Offer must represent to the Company in the Letter of
Transmittal that such conditions have been met and must represent, if such
Holder is not a broker-dealer, or is a broker-dealer but will not receive New
Notes for its own account in exchange for Old Notes, that neither such Holder
nor the person receiving such New Notes, if other than the Holder, is engaged
in or intends to participate in the distribution of such New Notes. Each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must represent that the Old Notes tendered in exchange therefor
were acquired as a result of market-making activities or other trading
activities and must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with the resales of
New Notes received in exchange for Old Notes where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed that, for a period of 90 days
after the Expiration Date (as defined herein), they will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution." However, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdiction or an
exemption from registration or qualification is available and is complied
with. The Company does not currently intend to take any action to register or
qualify the New Notes for resale in any such jurisdictions. In addition, the
tender of Old Notes pursuant to the Exchange Offer will reduce the principal
amount of the Old Notes outstanding, which may have an adverse effect upon,
and increase the volatility of, the market price of the Old Notes due to a
reduction in liquidity.
EXCHANGE OFFER PROCEDURES
To participate in the Exchange Offer, and avoid the restrictions on Old
Notes, each Holder of Old Notes must transmit a properly completed Letter of
Transmittal, including all other documents required by such Letter of
Transmittal, to Bank of Montreal Trust Company (the "Exchange Agent") at the
address set forth below under "Exchange Agent" on or prior to the Expiration
Date. In addition, (i) certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal, (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Old Notes, if such procedure is available, into the Exchange Agent's account
at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant
to the procedure for book-entry transfer described below, must be received by
the Exchange Agent prior to the Expiration Date or (iii) the Holder must
comply with the guaranteed delivery procedures described below. See "The
Exchange Offer."
14
<PAGE>
LEVERAGE, LIQUIDITY AND ABILITY TO MEET REQUIRED DEBT SERVICE
On a pro forma basis, after giving effect to the Offering, the application
of the estimated net proceeds therefrom and the Acquisition and related
financings, Holdings's consolidated ratio of long-term debt to stockholders'
equity would have been 13.17 to 1.00 at September 30, 1997 and its ratio of
EBITDA to interest expense would have been 0.74 to 1.00 for the year ended
December 31, 1996 and 0.93 to 1.00 for the nine months ended September 30,
1997. The Company's high degree of leverage could limit significantly its
ability to make acquisitions, withstand competitive pressures or adverse
economic conditions, obtain necessary financing or take advantage of business
opportunities that may arise.
Following the Acquisition, the Company's only committed source of liquidity
is the New Credit Facility, under which $80 million of revolving loans remains
available. The Company expects to have sufficient availability under the New
Credit Facility to meet its liquidity needs for the next 18 months. The
Company intends to use the availability under the New Credit Facility for
general corporate purposes and, if the Company's tax planning strategy is
unsuccessful, to finance the $50.9 million tax payment due with respect to the
Fort Myers Sale and Georgia Sale. See "Unaudited Pro Forma Condensed
Consolidated Financial Statements." Borrowings under the New Credit Facility
are subject to significant conditions, including compliance with certain
financial ratios and the absence of any material adverse change. The Company's
ability to meet its working capital and operational needs and to provide funds
for debt service, capital expenditures and other cash requirements is
dependent upon the availability of financing under the New Credit Facility. In
addition, the Company intends to pursue opportunities to acquire additional
cellular telephone systems which, if successful, will require the Company to
obtain additional equity or debt financing to fund such acquisitions. There
can be no assurances as to the availability or terms of any such financing or
that the terms of the Notes or the New Credit Facility will not restrict or
prohibit any such debt financing. See "Description of New Credit Facility" and
"Description of Notes."
The Company's ability to borrow is also limited by the terms of PCC's
outstanding PIK Preferred Stock, which limits the ability of PCC and its
subsidiaries, including the Company and its subsidiaries, to incur additional
indebtedness and to make certain restricted payments, including investments. A
portion of the proceeds of the Offering was used to redeem the PIK Preferred
Stock.
The Company's ability to meet its debt service requirements, including those
represented by the Notes, will require significant and sustained growth in the
Company's cash flow. In addition, the Company expects to fund its growth
strategy from cash from operations and borrowings under the New Credit
Facility. There can be no assurance that the Company will be successful in
improving its cash flow by a sufficient magnitude or in a timely manner or in
raising additional equity or debt financing to enable the Company to meet its
debt service requirements or to sustain its growth strategy. In addition, if
the Company is unable to avoid the $50.9 million tax payment due with respect
to the Fort Myers Sale and Georgia Sale, the Company may be required to obtain
additional equity or debt financing. There can be no assurances that the
Company would be successful in procuring any such financing.
LIMITATIONS ON ACCESS TO CASH FLOW OF SUBSIDIARIES; HOLDING COMPANY STRUCTURE
Holdings is a holding company, and its ability to pay interest on the Notes
is dependent upon the receipt of dividends from its direct and indirect
subsidiaries. Holdings does not have, and may not in the future have, any
assets other than the common stock of PCW. PCW entered into the New Credit
Facility and is a party to an indenture related to the Senior Subordinated
Notes (the "Senior Subordinated Note Indenture"), each of which imposes
substantial restrictions on PCW's ability to pay dividends to Holdings. Any
payment of dividends will be subject to the satisfaction of certain financial
conditions set forth in the Senior Subordinated Note Indenture and the New
Credit Facility. The ability of PCW to comply with such conditions in the
Senior Subordinated Note Indenture may be affected by events that are beyond
the control of Holdings. The breach of any such conditions could result in a
default under the Senior Subordinated Note Indenture and/or the New Credit
15
<PAGE>
Facility, and in the event of any such default, the holders of the Senior
Subordinated Notes or the lenders under the New Credit Facility could elect to
accelerate the maturity of all the Senior Subordinated Notes or the loans
under such facility. If the maturity of the Senior Subordinated Notes or the
loans under the New Credit Facility were to be accelerated, all such
outstanding debt would be required to be paid in full before PCW would be
permitted to distribute any assets or cash to Holdings. In certain
circumstances, including a merger of PCC and PriCellular Corporation, it is
possible that holders of Senior Subordinated Notes and loans under the New
Credit Facility would have the right to require PCW to repurchase the Senior
Subordinated Notes and to repay the loans under the New Credit Facility while
Holders of the Notes would not have a similar right to require the Company to
repurchase the Notes. See "Description of Notes--Change of Control." There can
be no assurance that the assets of the Company would be sufficient to repay
all of such outstanding debt and to meet its obligations under the Indenture.
Future borrowings by PCW can be expected to contain restrictions or
prohibitions on the payment of dividends by such subsidiaries to Holdings. In
addition, under Delaware law, a subsidiary of a company is permitted to pay
dividends on its capital stock only out of its surplus or, in the event that
it has no surplus, out of its net profits for the year in which a dividend is
declared or for the immediately preceding fiscal year. Surplus is defined as
the excess of a company's total assets over the sum of its total liabilities
plus the par value of its outstanding capital stock. In order to pay dividends
in cash, PCW must have surplus or net profits equal to the full amount of the
cash dividend at the time such dividend is declared. In determining PCW's
ability to pay dividends, Delaware law permits the Board of Directors of PCW
to revalue its assets and liabilities from time to time to their fair market
values in order to create surplus. The Company cannot predict what the value
of its subsidiaries' assets or the amount of their liabilities will be in the
future and, accordingly, there can be no assurance that the Company will be
able to pay its debt service obligations on the Notes.
As a result of the holding company structure of the Company, the Holders of
the Notes are structurally junior to all creditors of Holdings's subsidiaries,
except to the extent that Holdings is itself recognized as a creditor of any
such subsidiary, in which case the claims of Holdings would still be
subordinate to any security in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held by Holdings. In the event
of insolvency, liquidation, reorganization, dissolution or other winding-up of
Holdings's subsidiaries, Holdings will not receive any funds available to pay
to creditors of the subsidiaries. As of September 30, 1997, on a pro forma
basis after giving effect to the Offering, the application of the estimated
net proceeds therefrom and the Acquisition and related financings, Holdings's
subsidiaries would have had outstanding $620.0 million of Indebtedness,
including Indebtedness under the Senior Subordinated Notes and the New Credit
Agreement and $276.0 million of other liabilities, including $197.1 million of
deferred income tax liabilities recorded in connection with the purchase
accounting treatment of the Acquisition and trade payables.
POSSIBLE INABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL OR ASSET SALE;
POSSIBLE EFFECT OF A CHANGE OF CONTROL
Upon a Change of Control, each Holder of Notes will have the right to
require the Company to repurchase all outstanding Notes. See "Description of
Notes--Change of Control." However, there can be no assurance that sufficient
funds will be available at the time of any Change of Control to make any
required repurchases of Notes tendered, especially after giving effect to
provisions of the Credit Agreement and the Senior Subordinated Notes Indenture
which require repayment or repurchase, as the case may be, upon such a Change
of Control. Similarly, there can be no assurance that, upon the occurrence of
an Asset Sale which requires prepayment under the Indenture, the Company will
have sufficient funds available to satisfy such obligation after giving effect
to required prepayments under the Credit Agreement and the Senior Subordinated
Notes Indenture as a result of an Asset Sale. In certain circumstances,
including a merger of PCC and PriCellular Corporation, it is possible that
holders of Senior Subordinated Notes and loans under the New Credit Facility
would have the right to require PCW to repurchase the Senior Subordinated
Notes and to repay the loans under the New Credit Facility while Holders of
the Notes would not have a similar right to require the Company to repurchase
the Notes. See "Description of Notes--Change of Control."
16
<PAGE>
GUARANTEE AND SECURITY FOR THE NOTES
As of the closing of the Offering (the "Issue Date"), the Company's capital
stock is the only significant asset of the Guarantor and dividends on the
Company's capital stock will be the sole source of funds available to the
Guarantor to meet its obligations under the Guarantee. See "Description of the
Guarantee." The payment of dividends on the Company's capital stock, however,
is significantly restricted by certain covenants contained in the Indenture
and the New Credit Facility and may be restricted by other agreements entered
into by the Company in the future and by applicable law. See "Description of
Notes--Certain Covenants--Limitation on Restricted Payments," "Description of
New Credit Facility." The Guarantee is secured by a lien on and security
interest in all of the issued and outstanding capital stock of the Company.
See "Description of the Guarantee--Security." As of September 30, 1997, on a
pro forma basis after giving effect to the Offering, the application of the
estimated net proceeds therefrom and the Acquisition and related financings,
the Company would have had stockholders' equity of $52.8 million. In addition,
there is no existing public market for the Company's capital stock, and even
if such capital stock could be sold, there can be no assurance that the
proceeds from the sale of such capital stock would be sufficient to satisfy
the amounts due on the Notes in the event of a default. Furthermore, the
ability of the Holders of the Notes to realize upon the collateral may be
subject to certain bankruptcy law limitations in the event of a bankruptcy.
See "--Certain Other Bankruptcy Considerations." Absent an acceleration of the
Notes, the Guarantor will be able to vote, as it sees fit in its sole
discretion, the stock of the Company. Further, any transfer of the power to
vote the capital stock of the Company, including as a result of foreclosure on
pledged capital stock, will require FCC approval. In the event of a bankruptcy
or liquidation of the Company, the security interest in the Company's capital
stock may be of no value to Holders of Notes because holders of the Company's
capital stock would be entitled only to the assets which remained after all
indebtedness of the Company (including the Notes) had been paid in full.
LIMITATIONS ON HOLDERS' CLAIMS
Under the Indenture, in the event of an acceleration of the maturity of the
Notes upon the occurrence of an Event of Default, the Holders of the Notes may
be entitled to recover only the amount which may be declared due and payable
pursuant to the Indenture, which will be less than the principal amount at
maturity of such Notes. See "Description of Notes--Events of Default and
Remedies."
If a bankruptcy case is commenced by or against Holdings under the
Bankruptcy Code, the claim of a Holder of Notes with respect to the principal
amount thereof may be limited to an amount equal to the sum of (i) the issue
price of the Notes as set forth in the cover page hereof and (ii) that portion
of the original issue discount (as determined on the basis of such issue
price) which is not deemed to constitute "unmatured interest" for purposes of
the Bankruptcy Code (as defined herein). Accordingly, Holders of the Notes
under such circumstances may, even if sufficient funds are available, receive
a lesser amount than they would be entitled to under the express terms of the
Indenture. In addition, there can be no assurance that a bankruptcy court
would compute the accrual of interest under the same rules as those used for
the calculation of original issue discount under federal income tax law and
accordingly, a Holder might be required to recognize gain or loss in the event
of a distribution related to such a bankruptcy case.
NET LOSSES
On a pro forma basis after giving effect to the Offering and the financing
of the Acquisition, the Company would have incurred net losses of
approximately $54.4 million and $32.0 million, respectively, for the year
ended December 31, 1996 and the nine months ended September 30, 1997. There
can be no assurance that the Company's future operations will generate
sufficient earnings to pay its obligations. The Company expects to incur net
losses for several years. See "Selected Consolidated Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
COMPETITION
Although current policies of the FCC authorize only two licensees to operate
cellular telephone systems in each cellular market, there is, and the Company
expects there will continue to be, competition from the other
17
<PAGE>
licensee authorized to serve each cellular market in which the Company
operates, as well as from resellers of cellular service. Competition for
subscribers between cellular licensees is based principally upon the services
and enhancements offered, the technical quality of the cellular telephone
system, customer service, system coverage and capacity and price. The Company
competes with a wireline licensee in each of its cellular markets, some of
which are larger and have access to more substantial capital resources than
the Company.
The Company also faces competition from other existing communications
technologies such as conventional mobile telephone service, specialized mobile
radio ("SMR") and enhanced specialized mobile radio ("ESMR") systems and
paging services. ESMR is a "cellular-like" communications service supplied by
converting analog SMR services into an integrated, digital transmission system
providing for call hand-off, frequency reuse and wide call delivery networks.
The Company also faces limited competition from and may in the future face
increased competition from PCS. It is expected that broadband PCS will involve
a network of small, low-powered transceivers placed throughout a neighborhood,
business complex, community or metropolitan area to provide customers with
mobile and portable voice and data communications. PCS may be capable of
offering, and PCS operators claim they will offer, additional services not
offered by cellular providers. PCS subscribers could have dedicated personal
telephone numbers and would communicate using small digital radio handsets
that could be carried in a pocket or purse. There can be no assurances that
the Company will be able to provide nor that it will choose to pursue,
depending on the economics thereof, such services and features. The Company
currently believes that traditional tested cellular is economically proven
unlike many of these other technologies and therefore does not intend to
pursue such other technologies.
Although the Company believes that the technology, financing and engineering
of these other technologies is not as advanced as their publicity would
suggest, there can be no assurance that one or more of the technologies
currently utilized by the Company in its business will not become obsolete at
some time in the future. See "Business of the Company--Competition."
The Company also faces competition from "resellers." The FCC requires all
cellular licensees to provide service to resellers. A reseller provides
wireless service to customers but does not hold an FCC license or own
facilities. Instead, the reseller buys blocks of wireless telephone numbers
and capacity from a licensed carrier and resells service through its own
distribution network to the public.
POTENTIAL FOR REGULATORY CHANGES AND NEED FOR REGULATORY APPROVALS
The licensing, construction, operation, acquisition, assignment and transfer
of cellular telephone systems, as well as the number of licensees permitted in
each market, are regulated by the FCC. Changes in the regulation of cellular
activities could have a material adverse effect on the Company's operations.
In addition, all cellular licenses in the United States are granted for an
initial term of up to 10 years and are subject to renewal. The Company's
cellular licenses expire in the following years with respect to the following
number of service areas: 1997 (four); 1998 (three); 2000 (two); 2001 (four);
2002 (three) and 2006 (one). On September 22, 1997, the Company filed License
Renewal Applications with the FCC for the Savannah, Georgia MSA; the Albany,
Georgia MSA; the Montgomery, Alabama MSA; and the Panama City, Florida MSA.
Although these four licenses have since expired, the Company is permitted to
continue to operate in these areas during the pendency of its renewal
applications. While the Company believes that each of these licenses will be
renewed based upon FCC rules establishing a renewal expectancy in favor of
licensees that have complied with their regulatory obligations during the
relevant license period, there can be no assurance that all
18
<PAGE>
of the Company's licenses will be renewed in due course. In the event that a
license is not renewed, the Company would no longer have the right to operate
in the relevant service area. A non-renewal of all licenses that are currently
pending would have a material adverse effect on the Company's results of
operations. See "Business of the Company--Regulation."
FLUCTUATIONS IN MARKET VALUE OF LICENSES
A substantial portion of the Company's assets consists of its interests in
cellular licenses. The assignment of interests in such licenses is subject to
prior FCC approval and may also be subject to contractual restrictions, future
competition and the relative supply and demand for radio spectrum. The future
value of the Company's interests in its cellular licenses will depend
significantly upon the success of the Company's business. While there is a
current market for the Company's licenses, such market may not exist in the
future or the values obtainable may be significantly lower than at present. As
a consequence, in the event of the liquidation or sale of the Company's
assets, there can be no assurance that the proceeds would be sufficient to pay
the Company's obligations, and a significant reduction in the value of the
licenses could require a charge to the Company's results of operations.
RELIANCE ON USE OF THIRD-PARTY SERVICE MARK
The Company currently uses the registered service mark CELLULAR ONE to
market its services. The Company's use of this service mark is governed by
five-year contracts between the Company and Cellular One Group, the owner of
the service mark. If these agreements are not renewed upon expiration and the
Company therefore is no longer permitted to use the CELLULAR ONE service mark,
the Company's ability both to attract new subscribers and to retain existing
subscribers could be materially affected. In addition, if for some reason
beyond the Company's control, the name CELLULAR ONE were to suffer diminished
marketing appeal, the Company's ability both to attract new subscribers and
retain existing subscribers could be materially affected. AT&T Wireless
Services, Inc., which has been the single largest user of the CELLULAR ONE
service mark, has significantly reduced its use of the service mark as a
primary service mark. There can be no assurance that such reduction in use by
AT&T Wireless will not have an adverse effect on the marketing appeal of the
brand name.
DEPENDENCE ON KEY PERSONNEL
The Company's affairs are managed by a small number of key management and
operating personnel, the loss of whom could have an adverse impact on the
Company. Robert Price, the Director of the Company and of PCW, and a Director,
the President, Chief Executive Officer and Treasurer of PCC, also serves as a
Director and Chairman of PriCellular Corporation ("PriCellular"), another
operator of cellular telephone systems. The Company believes that Mr. Price's
positions with the Company and PriCellular complement one another and benefit
both companies because the systems they operate are similar but do not
directly compete with one another. Mr. Price's employment agreement with
PriCellular provides that he may not be an employee of or have an ownership
interest in any company engaged in the operation of cellular telephone systems
in the United States other than PriCellular and that any such other company
may not acquire any additional cellular telephone system within the United
States, in each case, without the unanimous consent of the executive committee
of the Board of Directors of PriCellular. The executive committee of the Board
of Directors of PriCellular has approved the acquisition of Palmer by PCC.
Although the Company and PriCellular historically have not imposed
inconsistent demands on Mr. Price's availability, there can be no assurances
that such conflicts will not arise in the future.
The Company entered into employment contracts with William J. Ryan and M.
Wayne Wisehart to remain as officers of the Company and also entered into
employment contracts with other key employees prior to the consummation of the
Acquisition. The success of the Company's operations and expansion strategy
depends on its ability to retain and to expand its staff of qualified
personnel in the future.
19
<PAGE>
RADIO FREQUENCY EMISSION CONCERNS
Media reports have suggested that certain radio frequency ("RF") emissions
from portable cellular telephones may be linked to certain types of cancer. In
addition, recently a limited number of lawsuits have been brought, not
involving the Company, alleging a connection between cellular telephone use
and certain types of cancer. Concerns over RF emissions and interference may
have the effect of discouraging the use of cellular telephones, which could
have an adverse effect upon the Company's business. As required by the Telecom
Act, in August 1996, the FCC adopted new guidelines and methods for evaluating
RF emissions from radio equipment, including cellular telephones. While the
new guidelines impose more restrictive standards on RF emissions from low
power devices such as portable cellular telephones, the Company believes that
all cellular telephones currently marketed and in use comply with the new
standards.
The Company carries $4.0 million in General Liability insurance and $25
million in umbrella liability coverage. This insurance would cover any
liability suits with respect to human exposure to radio frequency emissions.
The Company believes that this coverage is adequate to cover potential
liabilities.
FRAUDULENT CONVEYANCE STATUTES
Various laws enacted for the protection of creditors may apply to the
Company's incurrence of indebtedness and other obligations in connection with
the Acquisition, including the issuance of the Notes and the provision of the
Guarantee by the Guarantor. If a court were to find in a lawsuit by an unpaid
creditor or representative of creditors of the Company or the Guarantor that
the Company or the Guarantor did not receive fair consideration or reasonably
equivalent value for incurring such indebtedness or obligation or providing
the Guarantee and, at the time of such incurrence, the Company or the
Guarantor (i) was insolvent; (ii) was rendered insolvent by reason of such
incurrence; (iii) was engaged in a business or transaction for which the
assets remaining in the Company or the Guarantor constituted unreasonably
small capital; or (iv) intended to incur or believed it would incur
obligations beyond its ability to pay such obligations as they mature, such
court, subject to applicable statutes of limitation, could determine to
invalidate, in whole or in part, such indebtedness and obligations as
fraudulent conveyances or subordinate such indebtedness and obligations to
existing or future creditors of the Company or the Guarantor.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction which is being applied. Generally, however, the
Company or the Guarantor would be considered insolvent at a particular time if
the sum of its debts was then greater than all of its property at a fair
valuation or if the present fair saleable value of its assets was then less
than the amount that would be required to pay its probable liabilities on its
existing debts as they became absolute and matured. On the basis of its
historical financial information, its recent operating history as discussed in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other factors, the Company's management believes that, after
giving effect to indebtedness incurred in connection with the Acquisition and
the other related financings, the Company will not be rendered insolvent, it
will have sufficient capital for the businesses in which it will be engaged
and it will be able to pay its debts as they mature; however, management has
not obtained any independent opinion regarding such issues. There can be no
assurance as to what standard a court would apply in making such
determinations.
In addition, the Guarantee may be subject to review under relevant federal
and state fraudulent conveyance and similar statutes in a bankruptcy or
reorganization case or a lawsuit by or on behalf of creditors of the
Guarantor. In such a case, the analysis set forth above would generally apply,
except that the Guarantee could also be subject to the claim that, since the
Guarantee was incurred for the benefit of the Company (and only indirectly for
the benefit of the Guarantor), the obligations of the Guarantor thereunder
were incurred for less than reasonably equivalent value or fair consideration.
A court could avoid the Guarantor's obligation under the Guarantee,
subordinate the Guarantee to other indebtedness of the Guarantor or take other
action detrimental to the Holders of the Notes.
20
<PAGE>
To the extent the Guarantee was avoided as a fraudulent conveyance, limited
as described above, or held unenforceable for any other reason, Holders of the
Notes would, to such extent, cease to have a claim in respect of the Guarantee
and, to such extent, would be creditors solely of the Company. In such event,
the claims of the Holders of the Notes against the Guarantor would be subject
to the prior payment of all liabilities of the Guarantor. There can be no
assurance that, after providing for all prior claims, there would be
sufficient assets to satisfy the claims of the Holders of Notes.
CERTAIN OTHER BANKRUPTCY CONSIDERATIONS
The right of the Trustee to repossess and dispose of the Collateral upon the
occurrence of an Event of Default (as defined) is likely to be significantly
impaired by applicable bankruptcy law if a bankruptcy proceeding were to be
commenced by or against the Guarantor prior to the Trustee's having disposed
of the Collateral. Under Title 11 of the United States Code (the "Bankruptcy
Code"), a secured creditor such as the Trustee is prohibited from disposing of
a security repossessed from a debtor in a bankruptcy case without bankruptcy
court approval. Moreover, the Bankruptcy Code prohibits a secured creditor
from disposing of collateral even though the debtor is in default under the
applicable debt instruments if the secured creditor is given "adequate
protection." The meaning of the term "adequate protection" may vary according
to circumstances, but it is intended in general to protect the value of the
secured creditor's interest in the collateral and may include cash payments or
the granting of additional security, if and at such times as the court in its
discretion determines, for any diminution in the value of the collateral as a
result of the stay of disposition during the pendency of the bankruptcy case.
In view of the lack of a precise definition of the term "adequate protection"
and the broad discretionary powers of a bankruptcy court, it is impossible to
predict how long payments under the Notes could be delayed following
commencement of a bankruptcy case, whether or when the Trustee could dispose
of the Collateral, or whether or to what extent Holders of the Notes would be
compensated for any delay in payment or loss of value of the Collateral
through the requirement of "adequate protection."
EQUIPMENT FAILURE; NATURAL DISASTER
Although the Company carries "business interruption" insurance, a major
equipment failure or a natural disaster affecting any one of the Company's
central switching offices or certain of its cell sites could have a
significant adverse effect on the Company's operations.
LACK OF PUBLIC MARKET
The New Notes are being offered to the Holders of the Old Notes. The Old
Notes were issued on August 11, 1997 to a limited number of investors. The New
Notes are new securities for which there currently is no market. The Company
does not intend to apply for listing of the Notes on any securities exchange
or for quotation through the National Association of Securities Dealers
Automated Quotation System. There can be no assurance that an active trading
market for the New Notes will develop. If a trading market develops for the
New Notes, future trading prices of such securities will depend on many
factors, including prevailing interest rates, the Company's results of
operations and financial condition and the market for similar securities.
21
<PAGE>
THE ACQUISITION
Prior to the Merger, Holdings had no assets, liabilities or operations and
the Guarantor had no assets (other than the capital stock of Holdings),
liabilities or operations. Holdings is a wholly owned indirect subsidiary of
PCC, which was incorporated in 1979, and a wholly owned direct subsidiary of
the Guarantor.
On May 23, 1997, PCC, PCW and Palmer entered into an Agreement and Plan of
Merger. The Merger Agreement provided, among other things, for the merger of
PCW with and into Palmer with Palmer as the surviving corporation. On October
6, 1997, the Merger was consummated and Palmer changed its name to "Price
Communications Wireless, Inc." Pursuant to the Merger Agreement, PCC acquired
each issued and outstanding share of common stock of Palmer for a purchase
price of $17.50 per share in cash and purchased outstanding options and rights
under employee and director stock purchase plans for an aggregate price of
$486.4 million. In addition, as a result of the Merger, the Company assumed
the Palmer Existing Indebtedness of approximately $378.0 million. As a result,
the aggregate purchase price for Palmer (not including transaction fees and
expenses) was $864.4 million. The Company refinanced all of the Palmer
Existing Indebtedness concurrently with the consummation of the Merger. PCW
entered into the Fort Myers Sale Agreement to sell Palmer's Fort Myers,
Florida MSA covering approximately 382,000 Pops for $168.0 million. On October
6, 1997, the Fort Myers Sale was consummated and generated approximately
$166.0 million of proceeds to the Company. The proceeds of the Fort Myers Sale
were used to fund a portion of the acquisition of Palmer. On October 21, 1997,
PCC and PCW entered into the Georgia Sale Agreement to sell Palmer's Georgia-1
RSA for $25 million. The parties expect to consummate the Georgia Sale by
December 31, 1997. The proceeds from the Georgia Sale will be used to retire a
portion of the debt used to fund the acquisition of Palmer.
In order to fund the Acquisition and pay related fees and expenses, PCW
issued the Senior Subordinated Notes and entered into the New Credit Facility,
which provides for term loan borrowings in the aggregate principal amount of
approximately $325.0 million and revolving loan borrowings of $200.0 million.
On October 6, 1997, PCW borrowed all term loans available thereunder and
approximately $120.0 million of revolving loans. The remaining revolving loans
will, subject to a borrowing base and other significant conditions, including
the absence of any material adverse change, be available to fund the working
capital requirements of the Company. DLJ Capital Funding provided and
syndicated the New Credit Facility. See "Description of New Credit Facility."
The acquisition of Palmer was funded in part through the PCC Equity
Contribution which was in the form of cash and common stock of Palmer. An
additional amount of approximately $47.5 million of the purchase price for the
acquisition of Palmer was raised as a portion of the proceeds from the
Offering.
The following table sets forth the estimated sources and uses of funds for
the Acquisition, the redemption of the PIK Preferred Stock and certain
warrants to purchase PCC Common Stock and related fees and expenses:
<TABLE>
<CAPTION>
TOTAL SOURCES: (IN MILLIONS)
<S> <C>
New Credit Agreement:
Term Loan...................................................... $ 325.0
Revolving Credit Facility...................................... 120.0
11 3/4% Senior Subordinated Notes due 2007....................... 175.0
Units............................................................ 80.0
PCC Equity Contribution.......................................... 77.4
Proceeds from Fort Myers Sale.................................... 166.0
-------
Total sources................................................ $ 943.4
=======
TOTAL USES:
Cash consideration for Palmer common stock....................... $ 486.4
Palmer Existing Indebtedness (as of September 30, 1997).......... 378.0
Estimated transaction fees and expenses.......................... 33.8
Cash for redemption of PIK Preferred Stock and warrants to
purchase PCC Common Stock........................................ 29.2
Excess cash...................................................... 16.0
-------
Total uses................................................... $ 943.4
=======
</TABLE>
22
<PAGE>
The foregoing table does not reflect any provision for any taxes payable in
connection with the Fort Myers Sale or the Georgia Sale. The Company has a tax
planning strategy which it believes will avoid the payment of the $50.9
million tax which would otherwise be payable in connection with the Fort Myers
Sale and the Georgia Sale. While there can be no assurances that the Company's
position will prevail if challenged, the Company has received a written
opinion from a "big-six" accounting firm (other than Arthur Andersen LLP)
that, under existing laws, it is more likely than not that the Company's
position will prevail if challenged. In order to effect this tax strategy, the
partnership that owns the Fort Myers system will need to incur approximately
$169.0 million of indebtedness. The partnership has no commitments for such
financing and there can be no assurance it will be successful in obtaining
such financing.
The foregoing table also does not reflect $1.4 million which was paid to
William J. Ryan as a severance payment pursuant to his employment contract
upon consummation of the Merger and approximately $2.6 million of severance
payments which are payable over several years pursuant to existing employment
contracts between Palmer and its other executive officers. The Company has
entered into employment contracts with William J. Ryan and M. Wayne Wisehart
to continue as officers of the Company. The Company also entered into
employment contracts with other key employees prior to the consummation of the
Merger. See "Management."
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. The net proceeds from the sale of the Units, after
deducting expenses of the Offering, are approximately $76.7 million.
Approximately $47.5 million of the net proceeds of the Offering, together with
borrowings by PCW under the New Credit Agreement, the PCC Equity Contribution
and proceeds from the Fort Myers Sale were used to finance the acquisition of
Palmer and related fees and expenses. Approximately $29.2 million of the net
proceeds of the Offering were applied to the redemption of the PIK Preferred
Stock and certain warrants to purchase PCC Common Stock owned by NatWest
Capital Markets Limited.
23
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
the Guarantor as of September 30, 1997 on (i) an actual basis and (ii) on a
pro forma basis after giving effect to the Acquisition, the sale of the Units,
the redemption of the PIK Preferred Stock and certain warrants to purchase PCC
Common Stock, and the other transactions described herein under "Unaudited Pro
Forma Condensed Financial Statements." This table should be read in
conjunction with the consolidated financial statements of Palmer, including
the notes thereto, the "Unaudited Pro Forma Condensed Consolidated Financial
Statements" and notes thereto, included elsewhere herein, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"The Acquisition."
<TABLE>
<CAPTION>
AS OF SEPTEMBER
30, 1997
----------------
PRO
ACTUAL FORMA
------- --------
(IN THOUSANDS)
<S> <C> <C>
New Credit Facility........................................... $ -- $445,000
11 3/4% Senior Subordinated Notes due 2007.................... -- 175,000
13 1/2% Senior Secured Discount Notes due 2007................ -- 75,349
------- --------
Total long-term debt (including current portion of long-
term debt)............................................... -- 695,349
------- --------
Stockholders' equity:
Common Stock, $0.01 par value per share, 100 shares
authorized, issued and outstanding actual and pro forma.... -- --
Additional paid-in capital.................................. -- 52,806
------- --------
Total stockholders' equity................................ -- 52,806
------- --------
Total capitalization...................................... $ -- $748,155
======= ========
</TABLE>
24
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet of
the Guarantor as of September 30, 1997 gives effect to the following
transactions as if they occurred at that date and the related unaudited pro
forma condensed consolidated statements of operations for the year ended
December 31, 1996 and the nine month period ended September 30, 1997 give
effect to the following transactions as if they occurred at the beginning of
the relevant period:
(a)the acquisition of Palmer;
(b)the Fort Myers Sale (the proceeds of which were used to pay Palmer
Existing Indebtedness);
(c)the issuance and sale of the Senior Subordinated Notes;
(d)the financing under the New Credit Facility;
(e)the issuance and sale of the Units in the Offering;
(f)the PCC Equity Contribution; and
(g) the Georgia Sale.
The Acquisition will be recorded pursuant to the purchase method of
accounting.
The unaudited pro forma condensed consolidated financial statements have
been prepared by the Guarantor's management. The unaudited pro forma data is
not designed to represent and does not represent what the Guarantor's results
of operations or financial position would have been had the above transactions
been completed on or as of the dates assumed, and are not intended to project
the Guarantor's results of operations for any future period or as of any
future date. The unaudited pro forma condensed consolidated financial
statements should be read in conjunction with the audited and unaudited
consolidated financial statements and notes of Palmer, included elsewhere in
this Prospectus.
While the Offering was consummated on August 11, 1997, the Merger was not
consummated until October 6, 1997. Accordingly, for the two month period after
the closing of the Offering, and prior to the consummation of the Merger, the
Company incurred interest expense on the Notes, but was not entitled to any of
the cash flows or earnings of Palmer. The unaudited pro forma condensed
consolidated financial statements do not reflect this additional interest
expense or the accrued liability related thereto since the unaudited pro forma
condensed consolidated statements of operations assume that such transactions
were consummated on January 1, 1996 and the unaudited pro forma condensed
consolidated balance sheet assumes that such transactions were consummated on
September 30, 1997. In addition, the pro forma condensed consolidated
financial statements assume the repayment of the $378.0 million of Palmer
Existing Indebtedness and accrued interest on Palmer Existing Indebtedness as
of September 30, 1997. As a result of the Merger, the Company assumed all
Palmer Existing Indebtedness. The Company refinanced all of the Palmer
Existing Indebtedness concurrently with the consummation of the Merger.
Although the unaudited pro forma condensed balance sheet reflects a $50.9
million deferred tax liability attributable to the Fort Myers Sale and Georgia
Sale, the Company has a tax planning strategy which it believes will avoid the
payment of such tax. While there can be no assurances that the Company's
position will prevail if challenged, the Company has received a written
opinion from a "big-six" accounting firm (other than Arthur Andersen LLP)
that, under existing laws, it is more likely than not that the Company's
position will prevail if challenged. In order to effect this tax strategy, the
partnership that owns the Fort Myers system will need to incur approximately
$169.0 million on indebtedness. The partnership has no commitments for such
financing and there can be no assurance it will be successful in obtaining
such financing.
In addition, the unaudited pro forma condensed consolidated financial
statements do not reflect $1.4 million which was paid to William J. Ryan as a
severance payment pursuant to his employment contract upon consummation of the
Merger and approximately $2.6 million of severance payments which are payable
over several years pursuant to existing employment contracts between Palmer
and its other executive officers. The Company has entered into employment
contracts with Mr. Ryan and M. Wayne Wisehart to continue as officers of the
Company. The Company also entered into employment contracts with other key
employees prior to the consummation of the Merger.
25
<PAGE>
PRICE COMMUNICATIONS CELLULAR INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
FOR THE ADJUSTMENTS FOR
FT. MYERS FT. MYERS THE ACQUISITION
SALE AND SALE AND PALMER AS AND THE RELATED PRO FORMA
PALMER GEORGIA SALE GEORGIA SALE ADJUSTED GUARANTOR FINANCINGS GUARANTOR
-------- ------------ ------------ --------- --------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equiva-
lents................ $ 3,581 $ 60 $191,028(a) $194,549 $ $(164,512)(d) $ 30,037
Investments...........
Accounts receivable,
net.................. 22,178 3,120 19,058 19,058
Inventory............. 2,466 655 1,811 1,811
Prepaid expenses and
other current assets. 3,411 137 3,274 3,274
-------- ------- -------- -------- ---- --------- ----------
Total current as-
sets............... 31,636 3,972 191,028 218,692 (164,512) 54,180
Property, plant and
equipment, net......... 161,351 15,910 145,441 145,441
Cellular licenses, net.. 396,282 34,669 361,613 437,468(i) 799,081
Deferred costs, net..... 8,840 8,840 24,939(e) 33,779
Other .................. 1,706 83 1,623 1,623
-------- ------- -------- -------- ---- --------- ----------
Total assets........ $599,815 $54,634 $191,028 $736,209 $ $ 297,895 $1,034,104
======== ======= ======== ======== ==== ========= ==========
LIABILITIES AND STOCK-
HOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued expenses .... $ 19,802 $ 850 $ $ 18,952 $ $ $ 18,952
Other current liabili-
ties................. 4,823 420 4,403 4,403
-------- ------- -------- -------- ---- --------- ----------
Total current
liabilities........ 24,625 1,270 23,355 23,355
Long-term debt.......... 378,000 378,000 317,349(f) 695,349
Deferred tax liability.. 17,727 50,900(b) 68,627 179,362(g) 247,989
Other long-term liabili-
ties................... 7,445 (7,160) 14,605 14,605
-------- ------- -------- -------- ---- --------- ----------
Total liabilities... 427,797 (5,890) 50,900 484,587 496,711 981,298
Stockholders' equity.... 172,018 60,524 140,128(c) 251,622 (198,816)(h) 52,806
-------- ------- -------- -------- ---- --------- ----------
Total liabilities
and stockholders'
equity............. $599,815 $54,634 $191,028 $736,209 $ $ 297,895 $1,034,104
======== ======= ======== ======== ==== ========= ==========
</TABLE>
26
<PAGE>
PRICE COMMUNICATIONS CELLULAR INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
For purposes of determining the pro forma effect of the transactions
described above on the condensed consolidated balance sheets of the Guarantor
as of September 30, 1997, the following adjustments have been made:
<TABLE>
<C> <S> <C>
(A) CASH AND CASH EQUIVALENTS
Cash proceeds from the Ft. Myers Sale and Georgia Sale....... $ 191,028
=========
(B) TAX PAYABLE
Tax payable resulting from gain on Ft. Myers Sale and Georgia
Sale using a 39% effective tax rate (see the discussion on
page 25 of the Company's tax planning strategy to avoid the
payment of such tax)......................................... $ 50,900
=========
(C) STOCKHOLDERS' EQUITY
Represents the proceeds on the Ft. Myers Sale and Georgia
Sale, net of related tax payable on the gain................. $ 140,128
=========
(D) CASH AND CASH EQUIVALENTS
Proceeds from New Credit Facility............................ $ 445,000
Proceeds from issuance of the Senior Subordinated Notes...... 175,000
Proceeds from sale of the Warrants........................... 4,651
Proceeds from sale of the Old Notes.......................... 75,349
Net equity contributed from PCC.............................. 77,368
Cash used to acquire Palmer outstanding stock and options.... (486,448)
Cash used to retire Palmer Existing Indebtedness............. (378,000)
Cash used to pay estimated transaction fees and expenses..... (48,219)
Cash used to return capital to PCC........................... (29,213)
---------
$(164,512)
=========
(E) DEFERRED COSTS, NET
Estimated fees and expenses in connection with the
acquisition of Palmer ....................................... $ 14,422
Estimated fees and expenses in connection with the debt
financings................................................... 16,731
Estimated fees and expenses in connection with the Offering.. 2,626
To write off unamortized deferred financing costs of Palmer.. (8,840)
---------
$ 24,939
=========
(F) LONG-TERM DEBT
New Credit Facility.......................................... $ 445,000
The Senior Subordinated Notes................................ 175,000
The Notes, net of original issue discount of $73,400 and
Warrants value of $4,651..................................... 75,349
Repayment of Palmer Existing Indebtedness.................... (378,000)
---------
$ 317,349
=========
(G) DEFERRED TAX LIABILITY
To record the deferred tax liability arising from the
acquisition of FCC license using a 41% effective tax rate.... $ 179,362
=========
</TABLE>
27
<PAGE>
PRICE COMMUNICATIONS CELLULAR INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<S> <C> <C>
(H) STOCKHOLDERS' EQUITY
To reflect equity contribution from PCC..................................... $ 77,368
To reflect equity contribution from PCC..................................... 4,651
To eliminate the equity of adjusted Palmer in connection with the
acquisition by PCW.......................................................... (251,622)
To return capital to PCC.................................................... (29,213)
---------
$(198,816)
=========
(I) CELLULAR LICENSES, NET
Represents the increase in cellular licenses due to the acquisition of
Palmer...................................................................... $ 437,468
=========
</TABLE>
28
<PAGE>
PRICE COMMUNICATIONS CELLULAR INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
FOR THE ADJUSTMENTS FOR
FT. MYERS SALE FT. MYERS SALE THE ACQUISITION
AND AND PALMER AS AND THE RELATED PRO FORMA
PALMER GEORGIA SALE GEORGIA SALE ADJUSTED GUARANTOR FINANCINGS GUARANTOR
-------- --------------- -------------- --------- --------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $159,743 $25,383 $ $134,360 $ $ $134,360
Cost and expenses:
Cost of cellular
service/operating
expenses.............. 28,717 5,718 22,999 22,999
Cost of equipment...... 17,944 2,765 15,179 15,179
Selling, general and
administrative........ 46,892 6,867 2,640(j) 42,665 42,665
Depreciation and
amortization.......... 25,013 2,114 22,899 12,252(k) 35,151
-------- ------- ------- -------- ------ -------- --------
Operating income (loss). 41,177 7,919 (2,640) 30,618 (12,252) 18,366
Other income (expense):
Interest expense, net.. (31,462) (300) (31,162) (40,893)(l) (72,055)
Other, net............. (429) (63) (366) (366)
-------- ------- ------- -------- ------ -------- --------
Total other income
(expense)........... (31,891) (363) (31,528) (40,893) (72,421)
Minority interest share
of income.............. 1,880 1,880 1,880
-------- ------- ------- -------- ------ -------- --------
Income (loss) before
income tax expense..... 7,406 7,556 (2,640) (2,790) (53,145) (55,935)
Income tax expense
(benefit).............. 2,724 2,724 (4,232)(m) (1,508)
-------- ------- ------- -------- ------ -------- --------
Net income (loss)....... $ 4,682 $ 7,556 $(2,640) $ (5,514) $ $(48,913) $(54,427)
======== ======= ======= ======== ====== ======== ========
Deficiency of earnings
to fixed charges....... $ 55,935
</TABLE>
29
<PAGE>
PRICE COMMUNICATIONS CELLULAR INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
FOR THE ADJUSTMENTS FOR
FT. MYERS SALE FT. MYERS SALE THE ACQUISITION
AND AND PALMER AS AND THE RELATED PRO FORMA
PALMER GEORGIA SALE GEORGIA SALE ADJUSTED GUARANTOR FINANCINGS GUARANTOR
-------- -------------- -------------- --------- --------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $141,736 $23,415 $ $118,321 $ $ $118,321
Cost and expenses:
Cost of cellular
service/operating
expenses.............. 23,301 4,643 18,658 18,658
Cost of equipment...... 16,111 2,861 13,250 13,250
Selling, general and
administrative........ 41,014 6,555 2,030 (j) 36,489 36,489
Depreciation and
amortization.......... 23,313 2,257 21,056 9,190 (k) 30,246
-------- ------- ------- -------- ------- -------- --------
Operating income (loss). 37,997 7,099 (2,030) 28,868 (9,190) 19,678
Other income (expense):
Interest income
(expense), net........ (24,468) 334 (24,802) (28,966)(l) (53,768)
Other, net............. 208 208 208
-------- ------- ------- -------- ------- -------- --------
Total other income
(expense)........... (24,260) 334 (24,594) (28,966) (53,560)
Minority interest share
of income.............. 1,310 1,310 1,310
-------- ------- ------- -------- ------- -------- --------
Income (loss) before
income tax expense..... 12,427 7,433 (2,030) 2,964 (38,156) (35,192)
Income tax expense
(benefit).............. -- (3,174)(m) (3,174)
-------- ------- ------- -------- ------- -------- --------
Net income (loss)....... $ 12,427 $ 7,433 $(2,030) $ 2,964 $ $(34,982) $(32,018)
======== ======= ======= ======== ======= ======== ========
Deficiency of earnings
to fixed charges....... $ 35,192
</TABLE>
30
<PAGE>
PRICE COMMUNICATIONS CELLULAR INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
For purposes of determining the pro forma effect of the transactions
described above on the condensed consolidated statements of operations of the
Guarantor for the nine months ended September 30, 1997 and the year ended
December 31, 1996, the following adjustments have been made:
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
(J) SELLING, GENERAL AND ADMINISTRATIVE
Represents a portion of the operating expenses
charged to Ft. Myers Sale and Georgia Sale by
Palmer which may not be eliminated upon the Ft.
Myers Sale and Georgia Sale...................... $ 2,030 $ 2,640
======= =======
(K) DEPRECIATION AND AMORTIZATION
Represents amortization of the FCC license over 40
years............................................ $ 7,742 $10,322
Represents amortization of the acquisition of
Palmer and Offering costs
over 5 years..................................... 1,448 1,930
------- -------
$ 9,190 $12,252
======= =======
(L) INTEREST EXPENSE, NET
Interest expense on $445 million of Indebtedness
under the New Credit Facility at an assumed
interest rate of 8.5% per annum*................. $28,369 $37,825
Interest expense on $175 million of the Senior
Subordinated Notes at an interest rate of 11.75%
per annum........................................ 15,422 20,563
Interest expense on $80 million of the Notes at an
interest rate of 13.50%.......................... 8,100 11,165
Interest expense related to the accretion of Notes
due to Warrant value**........................... 349 465
Represents current amortization expense related to
deferred debt financing costs.................... 1,313 1,750
Represents current amortization expense related to
deferred Notes issuance costs.................... 215 287
Elimination of previously recorded interest (24,802) (31,162)
expense.......................................... ------- -------
$28,966 $40,893
======= =======
--------
*An 1/8% change in the interest rate will
increase or decrease the interest expense per
annum on the bank debt by $531.
**Represents the accretion over 10 years of the
Notes resulting from the allocation of proceeds
of the Offering between the Notes and the
Warrants.
(M) INCOME TAX EXPENSE (BENEFIT)
To record deferred tax benefit resulting from the
amortization of the acquired FCC license......... $(3,174) $(4,232)
======= =======
</TABLE>
31
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the periods and dates
indicated set forth below have been derived from the audited consolidated
financial statements and the unaudited condensed consolidated financial
statements of Palmer. The condensed consolidated results of operations of
Palmer for the nine months ended September 30, 1996 and 1997 are unaudited and
not necessarily indicative of Palmer's results of operations for the full
year. The unaudited condensed consolidated financial data reflects all
adjustments (consisting of normal, recurring adjustments) which are, in the
opinion of management, necessary for a fair summary of Palmer's financial
position, results of operations and cash flows for and as of the end of the
periods presented.
The following data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Palmer's Consolidated Financial Statements and Notes thereto, included
elsewhere herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------- ------------------
1992 1993 1994(1) 1995(2) 1996(3) 1996 1997
(IN THOUSANDS, EXCEPT PERCENTAGE AND PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
Service................ $ 23,017 $ 35,173 $ 61,021 $ 96,686 $151,119 $111,803 $134,123
Equipment sales and
installation........... 4,284 6,285 7,958 8,220 8,624 6,349 7,613
--------- -------- -------- -------- -------- -------- --------
Total revenue...... 27,301 41,458 68,979 104,906 159,743 118,152 141,736
--------- -------- -------- -------- -------- -------- --------
Engineering, technical
and other direct
expenses............... 5,395 7,343 12,776 18,184 28,717 22,100 23,301
Cost of equipment....... 5,071 7,379 11,546 14,146 17,944 12,271 16,111
Selling, general and
administrative expenses. 9,458 13,886 19,757 30,990 46,892 33,842 41,014
Depreciation and
amortization............ 11,687 10,689 9,817 15,004 25,013 18,167 23,313
--------- -------- -------- -------- -------- -------- --------
Operating income (loss). (4,310) 2,161 15,083 26,582 41,177 31,772 37,997
--------- -------- -------- -------- -------- -------- --------
Other income (expense):
Interest, net.......... (8,290) (9,006) (12,715) (21,213) (31,462) (23,654) (24,468)
Other, net............. (5) (590) (70) (687) (429) (242) 208
--------- -------- -------- -------- -------- -------- --------
Total other
expense............ (8,295) (9,596) (12,785) (21,900) (31,891) (23,896) (24,260)
--------- -------- -------- -------- -------- -------- --------
Minority interest share
of (income) losses...... 377 83 (636) (1,078) (1,880) (1,562) (1,310)
Income taxes............ 0 0 0 (2,650) (2,724) (1,578) 0
--------- -------- -------- -------- -------- -------- --------
Net income (loss)....... $ (12,228) $ (7,352) $ 1,662 $ 954 $ 4,682 $ 4,736 $ 12,427
========= ======== ======== ======== ======== ======== ========
OTHER DATA:
Capital expenditures.... $ 3,835 $ 13,304 $ 22,541 $ 36,564 $ 41,445 $ 30,174 $ 40,757
Operating income before
depreciation and
amortization
("EBITDA")(4).......... $ 7,377 $ 12,850 $ 24,900 $ 41,586 $ 66,190 $ 49,939 $ 61,310
EBITDA margin on service
revenue................ 32.1% 36.5% 40.8% 43.0% 43.8% 44.7% 45.7%
Net cash provided by
operating activities... $ 78 $ 9,108 $ 7,238 $ 27,660 $ 30,130 21,920 38,791
Penetration(5).......... 2.20% 3.48% 4.58% 6.41% 7.45% 6.92% 8.60%
Subscribers at end of
period(6).............. 37,209 65,761 117,224 211,985 279,816 261,625 337,345
Cost to add a net
subscriber(7)........... $ 283 $ 203 $ 247 $ 276 $ 407 $ 387 $ 510
Average monthly service
revenue per
subscriber(8).......... $ 68.30 $ 62.69 $ 60.02 $ 56.68 $ 52.20 $ 51.28 $ 47.52
Average monthly
churn(9)................ 1.69% 1.37% 1.55% 1.55% 1.84% 1.73% 1.89%
Ratio of earnings to
fixed charges(10)....... 1.17x 1.21x 1.28x 1.32x 1.54x
CONSOLIDATED BALANCE
SHEET DATA:
Cash.................... $ 443 $ 1,670 $ 2,998 $ 3,436 $ 1,698 $ 2,780 $ 3,581
Working capital
(deficit)............... (740) 799 2,490 (1,435) 296 6,173 7,011
Property, plant and
equipment, net......... 17,371 23,918 51,884 100,936 132,438 124,375 161,351
Licenses and other
intangibles, net....... 103,901 114,955 199,265 332,850 387,067 387,982 406,828
Total assets............ 127,867 150,054 273,020 462,871 549,942 545,346 599,815
Total debt.............. 106,811 131,361 245,609 350,441 343,662 335,361 378,000
Stockholders' equity.... 10,659 3,244 4,915 74,553 164,930 173,874 178,356
</TABLE>
32
<PAGE>
(Footnotes from previous page)
- --------
(1) Includes the Georgia Acquisition (as defined herein), which occurred on
October 31, 1994. For the two months ended December 31, 1994, the Georgia
Acquisition resulted in revenues to Palmer of $1,803 and operating loss
of $645.
(2) Includes the GTE Acquisition (as defined herein), which occurred on
December 1, 1995. For the one month ended December 31, 1995, the GTE
Acquisition resulted in revenues to Palmer of $2,126 and operating income
of $208.
(3) Includes the acquisition of the cellular telephone systems of USCOC (as
defined herein) (Georgia-1 RSA), which occurred on June 20, 1996, and
Horizon (as defined herein) (Georgia-6 RSA), which occurred on July 5,
1996. The acquisitions of USCOC and Horizon resulted in revenues to
Palmer of $1,239 and $2,682, respectively, and operating (loss) income of
$(278) and $743, respectively, during such year.
(4) EBITDA should not be considered in isolation or as an alternative to net
income (loss), operating income (loss) or any other measure of
performance under GAAP. The Company believes that EBITDA is viewed as a
relevant supplemental measure of performance in the cellular telephone
industry.
(5) Determined by dividing the aggregate number of subscribers by the
estimated population.
(6) Each billable telephone number in service represents one subscriber.
(7) Determined for a period by dividing (i) costs of sales and marketing,
including salaries, commissions and employee benefits and all expenses
incurred by sales and marketing personnel, agent commissions, credit
reference expenses, losses on cellular telephone sales, rental expenses
allocated to retail operations, net installation expenses and other
miscellaneous sales and marketing charges for such period, by (ii) the
net subscribers added during such period.
(8) Determined for a period by dividing (i) the sum of the access, airtime,
roaming, long distance, features, connection, disconnection and other
revenues for such period by (ii) the average number of subscribers for
such period divided by the number of months in such period.
(9) Determined for a period by dividing total subscribers discontinuing
service by the average number of subscribers for such period, and
dividing that result by the number of months in such period.
(10) The ratio of earnings to fixed charges is determined by dividing the sum
of earnings before interest expense, taxes and a portion of rent expense
representative of interest by the sum of interest expense and a portion
of rent expense representative of interest. The ratio of earnings to
fixed charges is not meaningful for periods that result in a deficit. For
the years ended December 31, 1992 and 1993 the deficit of earnings to
fixed charges was $12,605 and $7,435, respectively.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Prior to the Merger, Holdings had no assets, liabilities or operations and
no recent historical results of operations and the Guarantor had no assets
(other than capital stock of Holdings), liabilities or operations and no
recent historical results of operations. The following is a discussion of
Palmer's historical results of operations. Palmer's historical results of
operations are not directly indicative of future results of operations because
(i) they include results attributable to Palmer's Fort Myers, Florida business
unit, which was sold in connection with the acquisition of Palmer, and
Palmer's Georgia-1 RSA, which is under contract to be sold by December 31,
1997 and (ii) they reflect a significantly less leveraged capital structure
than each of the Guarantor and the Company possesses after the Acquisition.
Principally as a result of interest expense related to the financing for the
Acquisition, the Company expects to incur net losses for several years. See
"The Acquisition." This discussion should be read in conjunction with
"Selected Consolidated Financial Data," "Summary Historical and Unaudited Pro
Forma Financial and Operating Data," "Unaudited Pro Forma Condensed
Consolidated Financial Statements" and Palmer's Consolidated Financial
Statements and related notes thereto.
While the Offering was consummated on August 11, 1997, the Merger was not
consummated until October 6, 1997. Accordingly, for the two month period after
the closing of the Offering and prior to the consummation of the Merger, the
Company incurred interest expense on the Notes but was not entitled to any of
the cash flows or earnings of Palmer.
OVERVIEW OF PALMER
Palmer's revenues consist of service revenue and equipment sales and
installation. Service revenue includes access charges (generally a monthly
charge), usage charges (based upon per minute usage rates), roaming charges
(fees charged for providing services to subscribers of other cellular
telephone systems when such subscribers or "roamers" place or receive a phone
call within one of Palmer's service areas), long distance charges derived from
long distance calls placed by Palmer's subscribers and other charges,
including, among other things, connection charges for initial activation on
the cellular telephone system, and feature services such as voice mail, call
forwarding and call waiting.
GROWTH IN TOTAL REVENUES
(IN THOUSANDS)
<TABLE>
<S> <C>
1996............................ $159,743
1995............................ $104,906
1994............................ $ 68,979
1993............................ $ 41,458
1992............................ $ 27,301
</TABLE>
Palmer's revenues have grown primarily by increasing the number of its
subscribers, both by improving its penetration rate (determined by dividing
the aggregate number of subscribers by estimated population) in cellular
telephone systems owned by Palmer and by acquiring or constructing new
cellular telephone systems. Palmer's subscribers increased from 22,536 at the
beginning of 1992 to 337,345 as of September 30, 1997. During the same period,
Palmer's penetration rate in its cellular telephone systems increased from
1.45% at the beginning of 1992 to 8.6% as of September 30, 1997. Palmer also
made several acquisitions between 1992 and 1996, as later described.
On average, new subscribers use less airtime and generate less revenue per
subscriber than existing subscribers. Therefore, airtime usage and service
revenue generally do not increase proportionately with increases in numbers of
subscribers over the same period. As a result, although Palmer's total revenue
has increased each year, its average minutes of usage per subscriber and its
average monthly revenue per subscriber
34
<PAGE>
have decreased over time as new subscribers have been added. The Company
expects these trends to continue in its existing cellular telephone systems as
its penetration rate increases.
GROWTH IN POPULATION SERVED
(IN THOUSANDS)
<TABLE>
<S> <C>
1996............................... 3,755
1995............................... 3,307
1994............................... 2,561
1993............................... 1,890
1992............................... 1,692
</TABLE>
The Company believes that its cost to add a net subscriber will continue to
be among the lowest in the cellular telephone industry, primarily because of
its in-house direct sales and marketing staff. Although much of the cellular
telephone industry markets through third-party agents, since 1992, Palmer has
sold its products and services almost exclusively through an internal sales
force that works principally out of retail stores in which Palmer offers a
full line of cellular telephone products and services. Palmer's shift to
nearly exclusive use of an internal sales force resulted in significant
decreases in its cost to add a net subscriber during 1992-1993. Starting in
1994, increased losses from Palmer's sales of cellular telephones caused this
downward trend in cost to add a net subscriber slowly to reverse itself. The
Company anticipates that its cost to add a net subscriber will continue to
increase but at a modest rate as savings associated with its nearly exclusive
use of an internal sales force are fully realized, while other components of
its calculation of cost to add a net subscriber continue to increase. In
addition to sales and marketing expenses, Palmer's computation of its cost to
add a net subscriber includes losses on cellular telephone sales, installation
services, credit reference services and an allocation of rental expenses
related to Palmer's retail stores.
Palmer currently has a microwave network in Alabama which connects the
Montgomery, Alabama MSA and the Alabama-8 RSA with the mobile telephone
switching office ("MTSO") in Dothan, Alabama. This microwave network connects
cellular switching equipment to cell sites without utilizing local landline
telephone carriers, thereby reducing or eliminating fees paid to landline
carriers. During 1995, Palmer spent $1.5 million to build additional microwave
connections between Dothan and Montgomery, Alabama, and between Brunswick and
Savannah, Georgia, as well as to complete a network in Fort Myers, Florida.
During 1996, Palmer spent $2.6 million to build a fiber optic network between
Dothan, Alabama and Panama City, Florida. The installation of this fiber optic
network resulted in significant savings to Palmer by the substantial reduction
or elimination of fees paid to landline carriers. In addition, this network
provides Palmer with excess capacity to lease to third parties or trade for
alternate fiber optic routes.
Prior to 1994, Palmer's customer billing was performed by a third-party
vendor. In January 1994, Palmer began performing billing functions in-house,
which significantly reduced customer service costs. The conversion to the in-
house customer billing system reduced annual billing costs per subscriber from
approximately $39 in 1993 to approximately $22 in 1994, $19 in 1995, and $19
in 1996. Since 1993, Palmer spent approximately $2.0 million in capital
expenditures for its in-house billing system. The software utilized for in-
house billing is leased from its previous third-party vendor. Therefore, no
change has occurred in billing function or operation.
In order to compete effectively in the wireless market, the Company plans to
pursue a strategy of increasing its bundled minute offerings. Because of the
relatively fixed cost of providing additional minutes of airtime on the
Company's cellular system, this bundling strategy, while decreasing the
revenue per minute of use, allows the Company to increase its customer base
and corresponding service revenue without negatively affecting its operating
margins.
35
<PAGE>
MARKET OWNERSHIP
The following is a summary of the Palmer ownership interest in the cellular
telephone system in each licensed service area to which Palmer provided
service at December 31, 1996 and September 30, 1997.
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
CELLULAR SERVICE AREA 1996 1997
--------------------- ------------ -------------
<S> <C> <C>
Albany, Georgia................................. 82.7% 86.5%
Augusta, Georgia................................ 100.0 100.0
Columbus, Georgia............................... 84.9 85.2
Macon, Georgia.................................. 99.1 99.2
Savannah, Georgia............................... 98.5 98.5
Dothan, Alabama................................. 92.3 94.6
Montgomery, Alabama............................. 91.9 92.8
Georgia 1 - RSA................................. 100.0 100.0
Georgia 6 - RSA................................. 94.8 95.0
Georgia 7 - RSA................................. 100.0 100.0
Georgia 8 - RSA................................. 100.0 100.0
Georgia 9 - RSA................................. 100.0 100.0
Georgia 10 - RSA................................ 100.0 100.0
Georgia 12 - RSA................................ 100.0 100.0
Georgia 13 - RSA................................ N/A 86.5
Alabama 8 - RSA................................. 100.0 100.0
Fort Myers, Florida............................. 99.0 99.0
Panama City, Florida............................ 77.9 78.4
</TABLE>
On February 1, 1997, one of Palmer's majority-owned subsidiaries acquired
the assets of and the license to operate the non-wireline cellular telephone
system serving Georgia Rural Service Area Market No. 383, otherwise known as
Georgia-13 RSA, for a total purchase price of $31.3 million.
PALMER HISTORICAL RESULTS OF OPERATIONS
The following table sets forth the percentage which certain amounts bear to
Palmer's total revenue.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- --------------
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Service................... 84.3% 84.8% 88.5% 92.2% 94.6% 94.6% 94.6%
Equipment sales and
installation............. 15.7 15.2 11.5 7.8 5.4 5.4 5.4
----- ----- ----- ----- ----- ------ ------
Total revenue......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- ------ ------
Operating Expenses:
Engineering, technical
and other direct:
Engineering and
technical (1).......... 10.3 8.8 8.1 7.6 7.9 8.0 8.0
Other direct costs of
services (2)........... 9.4 8.9 10.5 9.7 10.1 10.7 8.4
Cost of equipment (3)..... 18.6 17.8 16.7 13.5 11.2 10.3 11.4
Selling, general and
administrative:
Sales and marketing (4). 10.3 9.4 8.8 8.7 8.6 8.0 8.4
Customer service (5).... 7.0 7.2 5.6 6.0 5.9 5.7 6.3
General and
administrative (6)..... 17.4 16.9 14.2 14.9 14.9 15.0 14.2
Depreciation and
amortization............. 42.8 25.8 14.2 14.3 15.7 15.4 16.5
----- ----- ----- ----- ----- ------ ------
Total operating
expenses............. 115.8 94.8 78.1 74.7 74.3 73.1 73.2
----- ----- ----- ----- ----- ------ ------
Operating income (loss).... (15.8)% 5.2% 21.9% 25.3% 25.7% 26.9% 26.8%
===== ===== ===== ===== ===== ====== ======
Operating income before
depreciation and
amortization (7).......... 27.0% 31.0% 36.1% 39.6% 41.4% 42.3% 43.3%
===== ===== ===== ===== ===== ====== ======
</TABLE>
- ---------------------
(1) Consists of costs of operating cellular telephone network, including
inter-trunk costs, span-line costs, cell site repairs and maintenance,
cell site utilities, cell site rent, engineers' salaries and benefits and
other operational costs.
36
<PAGE>
(2) Consists of net costs of roaming, costs of long distance, costs of
interconnection with wireline telephone companies and other costs of
services.
(3) Consists primarily of the costs of the cellular telephones and accessories
sold.
(4) Consists primarily of salaries and benefits of sales and marketing
personnel, employee and agent commissions and advertising and promotional
expenses.
(5) Consists primarily of salaries and benefits for customer service
personnel, costs of printing and mailing billings generated in-house in
1994, 1995, and 1996, and for the nine months ended September 30, 1996 and
1997, and fees paid to a third-party vendor of customer service billing
prior to 1994.
(6) Includes salaries and benefits of general and administrative personnel and
other overhead expenses.
(7) Operating income before depreciation and amortization should not be
considered in isolation, or as an alternative to net income (loss),
operating income (loss) or any other measure of performance under
generally accepted accounting principles. Palmer believes that operating
income before depreciation and amortization is viewed as a relevant
supplemental measure of performance in the cellular telephone industry.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
Revenue. Service revenues totaled $134.1 million for the nine months ended
September 30, 1997, an increase of 20.0% over $111.8 million for the nine
months ended September 30, 1996. This increase was primarily due to a 34.4%
increase in the average number of subscribers to 313,611 as of September 30,
1997 versus 233,261 as of September 30, 1996. The increase in subscribers is
the result of internal growth, which the Company attributes primarily to its
strong sales and marketing efforts, and recent acquisitions.
Average monthly revenue per subscriber decreased 7.3% to $47.52 for the nine
months ended September 30, 1997 from $51.28 for the same period in 1996. This
is in part due to the trend, common in the cellular telephone industry, where,
on average, new subscribers are using less airtime than existing subscribers
are. Therefore, service revenues generally do not increase proportionately
with the increase in subscribers. In addition, the decline reflects more
competitive rate plans introduced into the Company's markets.
Equipment sales and installation revenue, which consists primarily of
cellular subscriber equipment sales, increased by 19.9% to $7.6 million for
the nine months ended September 30, 1997 compared to $6.3 million for the same
period in 1996. The increase is due to the 18.6% increase in gross subscriber
activations in the nine months ended September 30, 1997 compared to the same
period in 1996. As a percentage of revenue equipment sales and installation
revenue remained at 5.4% for the nine months ended September 30, 1997 and for
the same period in 1996.
Operating Expenses. Engineering and technical expenses increased by 21.2% to
$11.5 million for the nine months ended September 30, 1997 from $9.5 million
in the same period in 1996, due primarily to the increase in subscribers and
recent acquisitions. As a percentage of revenue, engineering and technical
expenses remained constant at 8.0% for the nine months ended September 30,
1997 and 1996, respectively. The Company expects engineering and technical
expenses to decrease as a percentage of revenue due to its large component of
fixed costs. There can be no assurance, however, that this forward-looking
statement will not differ materially from actual results due to unforeseen
engineering and technical expenses.
Other direct costs of services decreased 6.3% to $11.8 million for nine
months ended September 30, 1997 from $12.6 million for the same period in 1996
reflecting the decrease in interconnection costs as a result of the Company's
renegotiation of interconnection agreements with the local exchange carriers
("LECs") in most of the Company's markets. As a percentage of revenue, these
costs of service decreased to 8.4% from 10.7%, reflecting improved
interconnection agreements with LECs, as well as efficiencies gained from the
growing subscriber base.
The cost of equipment increased 31.3% to $16.1 million for the nine months
ended September 30, 1997 from $12.3 million for the same period in 1996, due
primarily to the increase in gross subscriber activations for the same period.
The equipment sales margin decreased to (111.6%) for the nine months ended
September 30, 1997 from (93.3%) for the same period in 1996. In an effort to
address market competition and improve market share, the Company sold more
telephones below cost in the first half of 1997, on average, than in the same
period of 1996.
37
<PAGE>
Sales and marketing costs increased 26.9% to $11.9 million for the nine
months ended September 30, 1997 from $9.4 million for the same period in 1996.
This increase is primarily due to the 18.6% increase in gross subscriber
activations and the resulting increase in commissions. As a percentage of
total revenue, sales and marketing costs increased to 8.4% from 8.0% for the
nine months ended September 30, 1997 and 1996, respectively. The Company's
cost to add a net subscriber, including loss on telephone sales, increased to
$510 for the nine months ended September 30, 1997 from $387 for the same
period in 1996. This increase in cost to add a net subscriber was caused
primarily by increased losses from the Company's sales of cellular telephones
and an increase in commissions and advertising costs.
Customer service costs increased 31.9% to $8.9 million for the nine months
ended September 30, 1997 from $6.8 million for the same period in 1996. As a
percentage of revenue, customer service costs increased to 6.3% from 5.7% for
the nine months ended September 30, 1997 and 1996, respectively. The increase
was due primarily to higher costs for billing support services.
General and administrative expenditures increased 14.1% to $20.2 million for
the nine months ended September 30, 1997 from $17.7 million for the same
period in 1996, due primarily to the increase in the costs associated with
supporting recent acquisitions. General and administrative expenses decreased
as a percentage of revenue to 14.2% in the nine months ended September 30,
1997 from 15.0% for the same period in 1996. As the Company continues to add
more subscribers, and generates associated revenue, general and administrative
expenses should decrease as a percentage of total revenues. There can be no
assurance, however, that this forward-looking statement will not differ
materially from actual results due to unforeseen general and administrative
expenses and other factors.
Depreciation and amortization increased 28.3% to $23.3 million for the nine
months ended September 30, 1997 from $18.2 million for the same period in
1996. This increase was primarily due to the depreciation and amortization
associated with recent acquisitions and additional capital expenditures. As a
percentage of revenue, depreciation and amortization increased to 16.5% from
15.4% for the nine months ended September 30, 1997 and 1996, respectively.
Operating income increased 19.6% to $38.0 million in the nine months ended
September 30, 1997, from $31.8 million for the same period in 1996. This
improvement in operating results is attributable primarily to increases in
revenue which exceeded increases in operating expenses.
Net Interest Expense, Income Taxes and Net Income. Net interest expense
increased 3.4% to $24.5 million from $23.7 million for the nine months ended
September 30, 1997 and 1996.
Income tax expense was not provided for the nine months ended September 30,
1997 as the Company expects to recognize sufficient interest expense as a
result of the acquisition to eliminate all income taxes. The Company
recognized $1.6 million for the same periods in 1996.
Net income for the nine months ended September 30, 1997 was $12.4 million,
or $0.45 per share, compared to net income of $4.7 million, or $0.19 per
share, for the same period in 1996. The increase in net income is primarily
attributable to increases in revenue which exceeded increases in operating
expenses and to the elimination of income tax expense.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenue. Service revenue totaled $151.1 million for 1996, an increase of
$54.4 million or 56.3% over $96.7 million for 1995. This increase was due
primarily to a 69.7% increase in the average number of subscribers to 241,255
in 1996 from 142,147 in 1995. The increase in subscribers is the result of
internal growth, which Palmer attributes primarily to its sales and marketing
efforts, and recent acquisitions. The GTE Acquisition (as defined herein)
accounted for 41,163 subscribers at December 31, 1996. Service revenue
attributable to the
38
<PAGE>
cellular telephone systems acquired in the GTE Acquisition totaled $24.6
million for 1996 as compared to $2.0 million for the one month ended December
31, 1995.
Average monthly service revenue per subscriber decreased to $52.20 for 1996
from $56.68 for 1995. This decrease occurred because, on average, new
subscribers use less airtime and generate less revenue per subscriber than
existing subscribers as is customary in the cellular telephone industry.
Therefore, airtime usage and service revenue did not increase in proportion to
the increase in subscribers. In addition, Palmer entered into revised roaming
agreements with certain of its neighboring carriers. These agreements provide
for reciprocal lower roaming rates per minute of use. This resulted in lower
roaming revenue for Palmer, but also resulted in offsetting lower direct costs
of services when Palmer's subscribers were roaming on these neighboring
systems.
Equipment sales and installation revenue, which consists primarily of
cellular subscriber equipment sales, increased to $8.6 million for 1996 from
$8.2 million for 1995, a 4.9% increase, due primarily to the increase in gross
subscriber activations offset by lower cellular phone prices. While equipment
sales and installation revenue increased slightly for 1996 from 1995, it
decreased as a percentage of total cellular revenue to 5.4% for 1996 from 7.8%
for 1995, reflecting the increased annual revenue base as well as lower
cellular equipment prices charged to customers. Equipment sales and
installation revenue attributable to the cellular telephone systems acquired
in the GTE Acquisition totaled $ 1.0 million for 1996 as compared to $0.1
million for the one month ended December 31, 1995.
Operating Expenses. Engineering and technical expenses increased by 57.5% to
$12.6 million for 1996 from $8.0 million for 1995, due primarily to the
increase in the number of subscribers. As a percentage of revenue, engineering
and technical expenses increased to 7.9% for 1996 from 7.6% for 1995 due to
additional costs incurred for the recent acquisitions and recurring costs
associated with Palmer's system development and expansion. Such development is
done for the purpose of increasing capacity and improving coverage.
Engineering and technical expenses attributable to the cellular telephone
systems acquired in the GTE Acquisition totaled $2.8 million for 1996 as
compared to $0.2 million for the one month ended December 31, 1995.
Other direct costs of services increased 58.3% to $16.1 million for 1996
from $10.2 million for 1995. As a percentage of revenue, other direct costs of
services increased to 10.1% for 1996 from 9.7% for 1995. This increase in
other direct costs of services as a percentage of revenue was due primarily to
Palmer subsidizing more roaming costs for competitive reasons. Other direct
costs of service attributable to the cellular telephone systems acquired in
the GTE Acquisition totaled $1.6 million for 1996 as compared to $0.2 million
for the one month ended December 31, 1995.
Cost of equipment increased 26.8% to $17.9 million for 1996 from $14.1
million for 1995, due primarily to the increase in gross subscriber
activations for the same period. The equipment sales margin decreased to
(108.1%) for 1996 from (72.1%) for 1995. In an effort to address market
competition and improve market share, Palmer sold more telephones below cost
in 1996 than in 1995. The cost of equipment attributable to the cellular
telephone systems acquired in the GTE Acquisition totaled $3.1 million for
1996 as compared to $0.2 million for the one month ended December 31, 1995.
Sales and marketing costs increased 50.2% to $13.7 million for 1996 from
$9.1 million for 1995. This increase is primarily due to the 28.1% increase in
gross subscriber activations and the resulting increase in salaries and
commissions. Sales and marketing costs as a percentage of total revenue
remained relatively flat at 8.6% for 1996 and 8.7% for 1995. Palmer's cost to
add a net subscriber, including losses on cellular telephone sales, increased
to $407 for 1996 from $276 for 1995. This increase in cost to add a net
subscriber was caused primarily by additional advertising and fixed marketing
overhead associated with the systems acquired in the GTE Acquisition, which
are not yet generating the offsetting gains in net subscribers. In addition,
there were increased losses from Palmer's sales of cellular telephones. Sales
and marketing costs attributable to the cellular telephone systems acquired in
the GTE Acquisition totaled $2.8 million in 1996 as compared to $0.2 million
for the one month ended December 31, 1995.
39
<PAGE>
MONTHLY CASH OPERATING COSTS PER SUBSCRIBER
<TABLE>
<S> <C>
1996................................. $29
1995................................. $32
1994................................. $36
1993................................. $40
1992................................. $48
</TABLE>
Customer service costs increased 49.9% to $9.4 million for 1996 from $6.3
million for 1995. As a percentage of revenue, customer service costs remained
relatively flat at 5.9% and 6.0% for 1996 and 1995, respectively. Customer
service costs attributable to the cellular telephone systems acquired in the
GTE Acquisition totaled $1.9 million in 1996 as compared to $0.2 million for
the one month ended December 31, 1995.
General and administrative expenses increased 52.5% to $23.8 million for
1996 from $15.6 million for 1995 and remained flat as a percentage of revenue
at 14.9% for 1996 and 1995. As the Company continues to add more subscribers
and generate associated revenue, general and administrative expenses should
decrease as a percentage of total revenues. The general and administrative
costs attributable to the cellular telephone systems acquired in the GTE
Acquisition totaled $3.4 million for 1996 as compared to $0.4 million for the
one month ended December 31, 1995.
Depreciation and amortization increased 66.7% to $25.0 million for 1996 from
$15.0 million for 1995. This increase is primarily due to the depreciation and
amortization associated with the recent acquisitions and additional capital
expenditures. Depreciation and amortization attributable to the cellular
telephone systems acquired in the GTE Acquisition totaled $6.2 million for
1996 as compared to $0.5 million for the one month ended December 31, 1995.
Operating income for 1996 increased 54.9% to $41.2 million, an increase of
$14.6 million over operating income for 1995. This improvement in operating
results is attributed primarily to increases in revenue which exceeded
increases in operating expenses. Operating income attributable to the cellular
telephone systems acquired in the GTE Acquisition totaled $3.8 million for
1996 as compared to $0.2 million for the one month ended December 31, 1995.
EBITDA
(IN THOUSANDS)
<TABLE>
<S> <C>
1996............................. $66,190
1995............................. $41,586
1994............................. $24,900
1993............................. $12,850
1992............................. $ 7,377
</TABLE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Revenue. Service revenue totaled $96.7 million for 1995, an increase of
$35.7 million or 58.4% over $61.0 million for 1994. This increase was due
primarily to a 67.8% increase in the average number of subscribers to 142,147
in 1995 from 84,718 in 1994. The increase in subscribers was the result of
internal growth, which Palmer attributes primarily to its sales and marketing
efforts, the Georgia Acquisition (as defined herein) and the GTE Acquisition
(as defined herein). During 1995, Palmer added 13,098 net subscribers in the
Georgia Acquisition, bringing the total subscribers served by those systems to
25,238 at December 31, 1995. Service revenue attributable to the cellular
telephone systems acquired in the Georgia Acquisition totaled $12.3 million
for 1995 as compared to $1.6 million for the two months ended December 31,
1994. The GTE Acquisition increased Palmer's subscribers by 34,904 at December
31, 1995. Service revenue attributable to the cellular telephone systems
acquired in the GTE Acquisition totaled $2.0 million for the one month ended
December 31, 1995, and is included in Palmer's 1995 results of operations.
40
<PAGE>
Average monthly service revenue per subscriber decreased to $56.68 for 1995
from $60.02 for 1994. This decrease occurred because, on average, new
subscribers use less airtime and generate less revenue per subscriber than
existing subscribers as is customary in the cellular telephone industry.
Therefore, airtime usage and service revenue did not increase in proportion to
the increase in subscribers.
Equipment sales and installation revenue, which consists primarily of
cellular subscriber equipment sales, increased to $8.2 million for 1995 from
$8.0 million for 1994, a 3.3% increase, due primarily to the increase in
subscriber activations offset by lower cellular phone prices. While equipment
sales and installation revenue increased slightly for 1995 from 1994, it
decreased as a percentage of total cellular revenue to 7.8% for 1995 from
11.5% for 1994, reflecting the increased recurring annual revenue base as well
as lower cellular equipment prices charged to customers. Equipment sales and
installation revenue attributable to the cellular telephone systems acquired
in the Georgia Acquisition totaled $1.1 million for 1995 as compared to $0.2
million for the two months ended December 31, 1994. Equipment sales and
installation revenue attributable to the cellular telephone systems acquired
in the GTE Acquisition totaled $0.1 million for the one month ended December
31, 1995 and is included in Palmer's results of operations for 1995.
Operating Expenses. Engineering and technical expenses increased by 43.2% to
$8.0 million for 1995 from $5.6 million for 1994, due primarily to the
increase in subscribers. As a percentage of revenue, engineering and technical
expenses decreased to 7.6% for 1995 from 8.1% for 1994. Engineering and
technical expenses attributable to the cellular telephone systems acquired in
the Georgia Acquisition totaled $2.4 million for 1995 as compared to $0.3
million for the two months ended December 31, 1994. Engineering and technical
expenses attributable to the cellular telephone systems acquired in the GTE
Acquisition totaled $0.2 million for the one month ended December 31, 1995 and
are included in Palmer's results of operations for 1995.
Other direct costs of services increased 41.7% to $10.2 million for 1995
from $7.2 million for 1994. As a percentage of revenue, other direct costs of
services decreased to 9.7% for 1995 from 10.5% for 1994. This decrease in
other direct costs of services as a percentage of revenue was due primarily to
Palmer improving its roaming agreements with neighboring cellular service
providers, spreading its fixed charges over a larger revenue base, and
bringing its intramarket roaming settlements in-house. Other direct costs of
service attributable to the cellular telephone systems acquired in the Georgia
Acquisition totaled $1.1 million for 1995 as compared to $0.2 million for the
two months ended December 31, 1994. Other direct costs of service attributable
to the cellular telephone systems acquired in the GTE Acquisition totaled $0.2
million for the one month ended December 31, 1995 and are included in Palmer's
results of operations for 1995.
Cost of equipment increased 22.5% to $14.1 million for 1995 from $11.5
million for 1994, due primarily to the increase in gross subscriber
activations for the same period. The equipment sales margin decreased to
(72.1%) for 1995 from (45.1%) for 1994. In an effort to address market
competition and improve market share, Palmer sold more telephones below cost
in 1995 than in 1994. The cost of equipment attributable to the cellular
telephone systems acquired in the Georgia Acquisition totaled $2.4 million for
1995 as compared to $0.3 million for the two months ended December 31, 1994.
The cost of equipment attributable to the cellular telephone systems acquired
in the GTE Acquisition totaled $0.2 million for the one month ended December
31, 1995 and is included in Palmer's results of operations for 1995.
Sales and marketing costs increased 51.5% to $9.1 million for 1995 from $6.0
million for 1994. This increase is primarily due to the 49.1% increase in
gross subscriber activations and the resulting increase in salaries and
commissions. Sales and marketing costs as a percentage of total revenue
remained relatively flat at 8.7% for 1995 and 8.8% for 1994. Palmer's cost to
add a net subscriber, including losses on cellular telephone sales, increased
to $276 for 1995 from $247 for 1994. This increase in cost to add a net
subscriber was caused primarily by increased losses from Palmer's sales of
cellular telephones. Sales and marketing costs attributable to the cellular
telephone systems acquired in the Georgia Acquisition totaled $1.7 million for
1995 as compared to $0.3 million for the two months ended December 31, 1994.
Sales and marketing costs attributable to the cellular telephone systems
acquired in the GTE Acquisition totaled $0.2 million for the one month ended
December 31, 1995 and are included in Palmer's results of operations for 1995.
41
<PAGE>
Customer service costs increased 62.0% to $6.3 million for 1995 from $3.9
million for 1994 and increased as a percentage of total revenue to 6.0% for
1995 from 5.6% for 1994. This increase is primarily due to an increase in
subscribers, to operating costs associated with the newly established regional
customer service call centers in Montgomery, Alabama and Savannah, Georgia and
to non-recurring expenditures incurred in connection with the implementation
of new area codes in Palmer's Alabama and Fort Myers, Florida service areas.
Customer service costs attributable to the cellular telephone systems acquired
in the Georgia Acquisition totaled $0.9 million for 1995 as compared to $0.2
million for the two months ended December 31, 1994. Customer service costs
attributable to the cellular telephone systems acquired in the GTE Acquisition
totaled $0.2 million for the one month ended December 31, 1995 and are
included in Palmer's results of operations for 1995.
General and administrative expenses increased 58.2% to $15.6 million for
1995 from $9.8 million for 1994 and increased as a percentage of total revenue
to 14.9% for 1995 from 14.2% for 1994 due primarily to the increase in the
number of subscribers, as well as the Georgia and GTE Acquisitions. Fixed
general and administrative costs attributable to the acquisitions are incurred
prior to the development of the subscriber base and the generation of
associated revenue. As the Company continues to add more subscribers and
generate associated revenue, general and administrative expenses should
decrease as a percentage of total revenues. The general and administrative
costs attributable to the cellular telephone systems acquired in the Georgia
Acquisition totaled $3.2 million for 1995 as compared to $0.4 million for the
two months ended December 31, 1994. The general and administrative costs
attributable to the cellular telephone systems acquired in the GTE Acquisition
totaled $0.4 million for the one month ended December 31, 1995 and are
included in Palmer's results of operations for 1995.
Depreciation and amortization increased 52.8% to $15.0 million for 1995 from
$9.8 million for 1994. This increase is primarily due to the depreciation and
amortization associated with the acquisitions and additional capital
expenditures. Depreciation and amortization attributable to the cellular
telephone systems acquired in the Georgia Acquisition totaled $3.6 million for
1995 as compared to the $0.7 million for the two months ended December 31,
1994. Depreciation and amortization attributable to the cellular telephone
systems acquired in the GTE Acquisition totaled $0.5 million for the one month
ended December 31, 1995 and are included in Palmer's results of operations for
1995.
Operating income for 1995 increased 76.2% to $26.6 million, an increase of
$11.5 million over operating income for 1994. This improvement in operating
results is attributed primarily to increases in revenue which exceeded
increases in operating expenses. Operating income (loss) attributable to the
cellular telephone systems acquired in the Georgia Acquisition totaled $(2.0)
million for 1995 as compared to $(0.6) million for the two months ended
December 31, 1994. Operating income attributable to the cellular telephone
systems acquired in the GTE Acquisition totaled $0.2 million for the one month
ended December 31, 1995 and is included in Palmer's results of operations for
1995.
NET INTEREST EXPENSE, OTHER EXPENSE, INCOME TAX EXPENSE, AND NET INCOME
Net interest expense increased 48.3% to $31.5 million for 1996 from $21.2
million for 1995 due primarily to debt incurred for the recent acquisitions
and the amortization of deferred financing fees related to Palmer's credit
facility. For 1995, net interest expense increased 66.8% to $21.2 million from
$12.7 million for 1994 due primarily to debt incurred for the Georgia
Acquisition and the GTE Acquisition, the amortization of deferred financing
fees related to Palmer's credit facility and increased interest rates.
Other expense was $0.4 million in 1996, $0.7 million in 1995 and $0.1
million in 1994. Other expense consists primarily of the disposal of certain
assets by Palmer and other non-operating expenses.
Income tax expense was $2.7 million for both 1996 and 1995 compared to none
in 1994. The $2.7 million income tax expense in 1995 was a non-recurring
deferred income tax charge related to the difference between the financial
statement and income tax return bases of certain assets and liabilities of
Palmer Cellular Partnership
42
<PAGE>
(the "Partnership"), predecessor of Palmer. In connection with Palmer's
initial public offering of securities in March, 1995, all of the assets and
liabilities of the Partnership were exchanged for stock in Palmer. Due to the
exchange, a deferred tax liability was recorded to reflect the difference
between the financial statement and income tax return bases in these assets
and liabilities. See notes 2 and 5 to Palmer's consolidated financial
statements.
Net income for 1996 was $4.7 million, or $0.18 per share of common stock,
compared to net income of $1.0 million, or $0.04 per share of common stock for
1995. The increase in net income is primarily attributable to increases in
revenue which exceeded increases in expenses. Net income for 1994 was $1.7
million, or $0.09 per share of common stock. The decrease in net income
between 1995 and 1994 is primarily attributable to interest expense on debt
incurred for the Georgia Acquisition and the GTE Acquisition, and income tax
expense.
LIQUIDITY AND CAPITAL RESOURCES
Following the Acquisition, the Company's principal sources of liquidity are
cash flow from operations and borrowings under the New Credit Facility. The
borrower under the New Credit Facility is PCW. The Company's principal uses of
cash will be debt service requirements, capital expenditures and working
capital.
The Company will incur substantial indebtedness in connection with the
Acquisition. On a pro forma basis, after giving effect to the Acquisition, the
Company, on a consolidated basis, would have had approximately $695.3 million
of Indebtedness outstanding as of September 30, 1997 and its ratio of EBITDA
to interest expense would have been 0.74 to 1.00 and 0.93 to 1.00 for the year
ended December 31, 1996 and the nine months ended September 30, 1997.
Palmer's long-term capital requirements consist of funds for capital
expenditures, acquisition and debt service. Historically, Palmer met its
capital requirements primarily through equity contributions, bank and
intercompany debt and, to a lesser extent, through operating cash flow. The
Company expects to meet its capital requirements following the Acquisition
from cash from operations and borrowings under the New Credit Facility.
Following the Acquisition, the Company's only committed source of liquidity is
the New Credit Facility, under which $80 million of revolving loans remains
available. The Company believes that these sources will provide the Company
with adequate capital to satisfy its projected funding requirements for the
next 18 months. The Company intends to use the availability under the New
Credit Facility for general corporate purposes and, if the Company's tax
planning strategy is unsuccessful, to finance the $50.9 million tax payment
due with respect to the Fort Myers Sale and Georgia Sale. However, borrowings
under the New Credit Facility are subject to significant conditions, including
compliance with certain financial ratios and the absence of any material
adverse change. For a description of the New Credit Facility, including a
description of the interest rates applicable to borrowings thereunder and
repayment schedule, see "Description of New Credit Facility."
In 1996, Palmer spent approximately $41.4 million for capital expenditures.
The Company expects to spend approximately $35 million and $20 million for
capital expenditures, including the construction of new stores and additional
cell sites, for the years ended December 31, 1997 and 1998, respectively. The
Company expects to use net cash provided by operating activities and
borrowings available under the New Credit Facility to fund such capital
expenditures.
Upon the occurrence of a Change of Control (as defined), each Holder of
Notes will have the right to require the Company to repurchase such Holder's
Notes at 101% of the Accreted Value thereof, plus accrued and unpaid interest
thereon, if any, to the repurchase date. A redemption upon a Change of Control
would be an Event of Default under the terms of the New Credit Facility. The
Company may not have sufficient funds or financing available to satisfy its
obligations to repurchase the Notes or meet other debt obligations that may
come due upon a Change of Control.
OTHER
Pursuant to the Merger Agreement, PCC acquired all issued and outstanding
shares of common stock of Palmer and outstanding options and rights under
employee and director stock purchase plans for a purchase price of $17.50 per
share in cash.
43
<PAGE>
Following the Merger, the common stock of Palmer ceased to be authorized to
be quoted on the NASDAQ Stock Market and became eligible for termination of
registration pursuant to Section 12(g)(4) of the Securities Exchange Act of
1934 (the "Exchange Act").
ACCOUNTING POLICIES
For financial reporting purposes, Palmer reports 100% of revenues and
expenses for the markets for which it provides cellular telephone service.
However, in several of its markets, Palmer holds less than 100% of the equity
ownership. The minority stockholders' and partners' shares of income or losses
in those markets are reflected in the consolidated financial statements as
"minority interest share of (income) losses," except for losses in excess of
their capital accounts and cash call provisions which are not eliminated in
consolidation. For financial reporting purposes, Palmer consolidates each
subsidiary and partnership in which it has a controlling interest (greater
than 50.0%). From 1992 through 1996, Palmer had controlling interests in each
of its subsidiaries and partnerships.
INFLATION
The Company believes that inflation affects its business no more than it
generally affects other similar businesses.
44
<PAGE>
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
New York City time, on , 1997; provided, however, that if the Company, in
its sole discretion, has extended the period of time for which the Exchange
Offer is open, the term "Expiration Date" means the latest time and date to
which the Exchange Offer is extended.
As of the date of this Prospectus, $153,400,000 aggregate principal amount
at maturity of the Old Notes was outstanding. This Prospectus, together with
the Letter of Transmittal, is first being sent on or about the date set forth
on the cover page to all Holders of Old Notes at the addresses set forth in
the security register with respect to Old Notes maintained by the Trustee. The
Company's obligations to accept Old Notes for exchange pursuant to the
Exchange Offer is subject to certain conditions as set forth under "Certain
Conditions to the Exchange Offer" below.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance of any Old Notes, by giving oral or written notice of
such extension to the Exchange Agent and notice of such extension to the
Holders as described below. During any such extension, all Old Notes
previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by the Company. Any Old Notes not accepted for exchange
for any reason will be returned without expense to the tendering Holder
thereof as promptly as practicable after the expiration or termination of the
Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted
for exchange, upon the occurrence of any of the conditions of the Exchange
Offer specified below under "Certain Conditions to the Exchange Offer." The
Company will give oral or written notice of any extension, amendment, non-
acceptance or termination to the Holders of the Old Notes as promptly as
practicable, such notice in the case of any extension to be issued by means of
a press release or other public announcement no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of the State of Delaware or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the
Exchange Offer in accordance with the applicable requirements of the Exchange
Act and the rules and regulations of the SEC thereunder.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a Holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering Holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a Holder who wishes to
tender Old Notes for exchange pursuant to the Exchange Offer must transmit a
properly completed and duly executed Letter of Transmittal, including all
other documents required by such Letter of Transmittal, to Bank of Montreal
Trust Company (the "Exchange Agent") at one of the addresses set forth below
under "Exchange Agent" on or prior to the Expiration Date. In addition, (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal, (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(The "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date or (iii) the Holder must comply with the guaranteed delivery
45
<PAGE>
procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered Holder of the Old Notes who
has not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust
company having an office or correspondent in the United States (collectively,
"Eligible Institutions"). If Old Notes are registered in the name of a person
other than the person signing the Letter of Transmittal, the Old Notes
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by the Company in its sole discretion, duly executed by the
registered Holder with the signature thereon guaranteed by an Eligible
Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company in its reasonable discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and
all tenders of any particular Old Notes not properly tendered or to not accept
any particular Old Notes which acceptance might, in the judgment of the
Company or its counsel, be unlawful. The Company also reserves the absolute
right in its sole discretion to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular Old Notes either before
or after the Expiration Date (including the right to waive the ineligibility
of any Holder who seeks to tender Old Notes in the Exchange Offer). The
interpretation of the terms and conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
Letter of Transmittal and the instructions thereto) by the Company shall be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with the tenders of Old Notes for exchange must be cured within
such reasonable period of time as the Company shall determine. Neither the
Company, the Exchange Agent nor any other person shall be under any duty to
give notification of any defect or irregularity with respect to any tender of
Old Notes for exchange, nor shall any of them incur any liability for failure
to give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered Holder or Holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered Holder or Holders that appear on the
Old Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers or corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing and, unless waived by
the Company, proper evidence satisfactory to the Company of its authority to
so act must be submitted.
By tendering, each Holder will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the Holder, (ii) neither the Holder nor
any such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes, (iii) if the Holder is not
a broker-dealer, or is a broker-dealer but will not receive New Notes for its
own account in exchange for Old Notes, neither the Holder nor any such other
person is engaged in or intends to participate in the distribution of such New
Notes and (iv) neither the Holder nor any such other person is an "affiliate,"
as defined under Rule 405 of the Securities Act, of the Company. If the
tendering Holder is a broker-dealer that
46
<PAGE>
will receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities,
it will be required to acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of
the Old Notes. See "Certain Conditions to the Exchange Offer" below. For
purposes of the Exchange Offer, the Company shall be deemed to have accepted
properly tendered Old Notes for exchange when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-
Entry Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, a properly completed and duly executed Letter of Transmittal
and all other required documents. If any tendered Old Notes are not accepted
for any reason set forth in the terms and conditions of the Exchange Offer or
if certificates representing Old Notes are submitted for a greater principal
amount than the Holder desires to exchange, such unaccepted or non-exchanged
Old Notes will be returned without expense to the tendering Holder thereof
(or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described below, such non-exchanged Old Notes
will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration or termination of
the Exchange Offer.
INTEREST ON THE NEW NOTES
The New Notes will accrete at a rate of 13 1/2%, compounded semi-annually,
to an aggregate principal amount of $153.4 million by August 1, 2002. Cash
interest will not commence to accrue on the New Notes prior to August 2, 2002.
Commencing February 1, 2003, cash interest on the New Notes will be payable,
at a rate of 13 1/2% per annum, semi-annually in arrears on each February 1
and August 1.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer promptly after the date of this Prospectus. Any financial
institution that is a participant in the Book-Entry Transfer Facility's
systems may make book-entry delivery of Old Notes by causing the Book-Entry
Transfer Facility to transfer such Old Notes into the Exchange Agent's account
in accordance with the Book-Entry Transfer Facility's Automated Tender Offer
Program ("ATOP") procedures for transfer. However, the exchange for the Old
Notes so tendered will only be made after timely confirmation of such book-
entry transfer of Old Notes into the Exchange Agent's account, and timely
receipt by the Exchange Agent of an Agent's Message (as such term is defined
in the next sentence) and any other documents required by the Letter of
Transmittal. The term "Agent's Message" means a message, transmitted by the
Book-Entry Transfer Facility and received by the Exchange Agent and forming a
part of a Book-Entry Confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgement from a participant tendering
Old Notes that are the subject of such Book-Entry Confirmation that such
participant has received and agrees to be bound by the terms of the Letter of
Transmittal, and that the Company may enforce such agreement against such
participant.
47
<PAGE>
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
Holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is
made through an Eligible Institution, (ii) prior to the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the Holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within five New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates of all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and all other documents required by the Letter of Transmittal, are
received by the Exchange Agent within five NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at the address set forth below under "Exchange
Agent." Any such notice of withdrawal must specify the name of the person
having tendered the Old Notes to be withdrawn, identify the Old Notes to be
withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which
such Old Notes are registered, if different from that of the withdrawing
Holder. If certificates for Old Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates, the withdrawing Holder must also submit the serial numbers of
the particular certificates to be withdrawn and a signed notice of withdrawal
with signatures guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any note of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Old Notes and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the Holder thereof without cost to such Holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Old Notes) as soon
as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following
one of the procedures described under "Procedures for Tendering Old Notes"
above at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Notes in
exchange for, any Old Notes and may terminate or amend the Exchange Offer, if
at any time before the Expiration Date, such acceptance or issuance would
violate applicable law or any interpretation of the staff of the SEC.
48
<PAGE>
The foregoing condition is for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any
time to exercise the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Prospectus constitutes a part or
the qualification of the Indenture under the Trust Indenture Act of 1939, as
amended (the "TIA").
EXCHANGE AGENT
Bank of Montreal Trust Company has been appointed as the Exchange Agent for
the Exchange Offer. All executed Letters of Transmittal should be directed to
the Exchange Agent at the address set forth below. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent, addressed as follows:
Deliver To:
Bank of Montreal Trust Company, Exchange Agent
By Mail, by Overnight Courier or By Hand:
Wall Street Plaza
88 Pine Street, 19th floor
New York, New York 10005
Attention: Amy Roberts
Corporate Trust Department
By Facsimile:
(212) 701-7698
Confirm by Telephone:
(212) 701-7653
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The principal solicitation is being made by mail; however, additional
solicitation may be made by telegraph, telephone or in person by officers and
regular employees of the Company and its affiliates. No additional
compensation will be paid to any such officers and employees who engage in
soliciting tenders. The Company will not make any payment to brokers, dealers,
or others soliciting acceptances of the Exchange Offer. The Company, however,
will pay the Exchange Agent reasonable and customary fees for its services and
will reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
$ .
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that Holders who instruct
the Company to register New Notes in the name of, or
49
<PAGE>
request that Old Notes not tendered or not accepted in the Exchange Offer to
be returned to, a person other than the registered tendering Holder will be
responsible for the payment of any applicable transfer tax thereon and if a
transfer tax is imposed for any reason other than the transfer of Old Notes to
the Company or its order pursuant to the Exchange Offer, the amount of any
such transfer tax (whether imposed on the registered Holder or any other
person) will be payable by the tendering Holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
the Old Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. The
Company does not intend to register the Old Notes under the Securities Act.
The Company believes that, based upon interpretations contained in letters
issued to third parties by the staff of the SEC as set forth in the Exchange
Offer No-Action Letters, New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold or otherwise
transferred by each Holder thereof (other than a broker-dealer, as set forth
below, and any such Holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such New Notes are acquired in the ordinary course of such Holder's
business and such Holder has no arrangement or understanding with any person
to participate in the distribution of such New Notes. If any Holder has any
arrangement or understanding with respect to the distribution of the New Notes
to be acquired pursuant to the Exchange Offer, such Holder (i) could not rely
on the applicable interpretations of the staff of the SEC and (ii) must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale transaction. Each broker-dealer that
receives New Notes for its own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution." In addition, to comply with the
securities laws of certain jurisdictions, if applicable, the New Notes may not
be offered or sold unless they have been registered or qualified for sale in
such jurisdiction or an exemption from registration or qualification is
available and is complied with. The Company does not currently intend to take
any action to register or qualify the New Notes for resale in any such
jurisdiction.
50
<PAGE>
BUSINESS OF THE COMPANY
GENERAL
The Company is engaged in the construction, development, management and
operation of cellular telephone systems in the southeastern United States. At
September 30, 1997, after giving effect to the Acquisition, the Company
provided cellular telephone service to 295,162 subscribers in Georgia,
Alabama, Florida and South Carolina in a total of 16 licensed service areas
composed of eight MSAs and eight RSAs, with an aggregate estimated population
of 3.3 million. The Company sells its cellular telephone service as well as a
full line of cellular products and accessories principally through its network
of retail stores. The Company markets all of its products and services under
the nationally recognized service mark CELLULAR ONE. All information in this
section gives effect to the Acquisition.
MARKETS AND SYSTEMS
The Company's cellular telephone systems serve contiguous licensed service
areas in Georgia, Alabama and South Carolina. The Company also has a cellular
service area in Panama City, Florida. The following table sets forth on a pro
forma basis after giving effect to the Acquisition as of July 18, 1997, with
respect to each service area in which the Company owns a cellular telephone
system, the estimated population, the Company's beneficial ownership
percentage, the Net Pops and the date of initial operation of such system by
Palmer or a predecessor operator.
<TABLE>
<CAPTION>
ESTIMATED DATE SYSTEM
SERVICE AREA(1) POPULATION(2) PERCENTAGE NET POPS OPERATIONAL
<S> <C> <C> <C> <C>
Albany, GA.................... 118,527 86.5% 102,526 4/88
Augusta, GA................... 439,116 100.0 439,116 4/87
Columbus, GA.................. 254,150 85.2 216,518 11/88
Macon, GA..................... 313,686 99.2 311,234 12/88
Savannah, GA.................. 283,878 98.5 279,578 3/88
Georgia-6 RSA................. 199,516 95.0 189,560 4/93
Georgia-7 RSA................. 134,376 100.0 134,376 10/91
Georgia-8 RSA................. 157,451 100.0 157,451 10/91
Georgia-9 RSA................. 119,410 100.0 119,410 9/92
Georgia-10 RSA................ 149,699 100.0 149,699 10/91
Georgia-12 RSA................ 211,799 100.0 211,799 10/91
Georgia-13 RSA................ 147,392 86.5 127,494 10/90
Dothan, AL.................... 136,160 94.6 128,807 2/89
Montgomery, AL................ 318,371 92.8 295,430 8/88
Alabama-8 RSA................. 173,993 100.0 173,993 7/93
--------- ---------
Subtotal.................... 3,155,524 3,034,991
--------- ---------
Panama City, FL............... 146,018 78.4 114,493 9/88
--------- ---------
Total....................... 3,301,542 3,149,484
========= =========
</TABLE>
- --------
(1) Does not include the Alabama-5 RSA, South Carolina-7 RSA and South
Carolina-8 RSA where the Company has IOA. The Company has no subscribers in
the South Carolina-7 RSA and South Carolina-8 RSA, but instead provides
roaming access to its own subscribers and others when they travel in these
two service areas, utilizing its existing cell sites. Construction permits
were granted to Permittees for the Alabama-5 RSA and South Carolina-8 RSA on
May 20, 1997. The Permittees are required to complete construction of their
respective RSA within 18 months. After completing construction, a Permittee
may give the Company ten days prior written notice, at which point the
Company would be required to sell its subscribers to the Permittee at cost.
The application for a construction permit for the South Carolina-7 RSA has
been remanded by the FCC to the Wireless Bureau for further review.
(2) Based on population estimates for 1996 from the 1996 Donnelley Market
Information Service.
51
<PAGE>
GEORGIA/ALABAMA
In 1988, the Company acquired controlling interests in the licenses to
operate cellular telephone systems in the four MSAs (Montgomery and Dothan,
Alabama and Columbus and Albany, Georgia) that make up the core of its
Georgia/Alabama cluster. The Company continued to increase its presence in
this market by acquiring additional cellular service areas in 1989 (Macon,
Georgia MSA), 1992 (Georgia-9 RSA), 1993 (Alabama-8 RSA), 1994 (Georgia-7 RSA,
Georgia-8 RSA, Georgia-10 RSA and Georgia-12 RSA), 1995 (Savannah, Georgia MSA
and Augusta, Georgia MSA) and 1996 (Georgia-1 RSA and Georgia-6 RSA). The
Augusta, Georgia MSA includes Aiken County in South Carolina. In 1994, the
Company also received IOA from the FCC to provide service in two counties
within the southern portion of the Alabama-5 RSA. In 1995, as a result of the
GTE Acquisition, the Company received IOA from the FCC to provide service to
South Carolina-7 RSA and South Carolina-8 RSA. In the aggregate, this market
(excluding the Alabama-5 RSA, South Carolina-7 RSA and South Carolina-8 RSA
where the Company has only IOA) now covers a contiguous service area of
approximately 38,000 square miles that includes Montgomery, the state capital
of Alabama, prominent resort destinations in Jekyll Island, St. Simons Island
and Sea Island, Georgia, and over 710 miles of interstate highway, including
most of I-95 from Savannah, Georgia to Jacksonville, Florida. The Company
collects substantial roaming revenue from cellular telephone subscribers from
other systems traveling in this market from nearby population centers such as
Atlanta and Birmingham, as well as from vacation and business traffic in the
southeastern United States. Due in part to the favorable labor environment,
moderate weather and relatively low cost of land, during the last several
years there has been an influx of new manufacturing plants in this market. As
of December 31, 1996, the Company utilized 172 cell sites in this cluster
(including three cell sites in Alabama-5 RSA), 23 of which were constructed by
the Company in 1995 and 42 of which were placed in service in 1996.
PANAMA CITY
The Company acquired control of the non-wireline cellular license for the
Panama City, Florida market in 1991. The Company collects substantial roaming
revenue in this market from subscribers from other systems who visit Panama
City, a popular spring and summer vacation destination. As of December 31,
1996, the Company utilized 11 cell sites in this market. In 1997, the Company
plans to add two additional cell sites in this market.
OPERATIONS
General
The Company has concentrated its efforts on creating an integrated network
of cellular telephone systems in the southeastern United States, principally
to date in Georgia, Alabama, Florida and South Carolina. At September 30,
1997, after giving effect to the Acquisition, the Company provided cellular
telephone service to 295,162 subscribers in a total of 16 licensed service
areas composed of eight MSAs and eight RSAs. The Company also participates in
the NACN, a nationwide consortium of non-wireline cellular telephone
companies, with the goal of providing seamless regional and national cellular
telephone service to its subscribers. Participation in the NACN allows seven-
digit dialing access to the Company's subscribers when they travel outside the
Company's service areas, providing them with convenient call delivery
throughout large areas of the United States, Canada, Mexico and Puerto Rico
served by other NACN participants.
52
<PAGE>
The following table sets forth information, at the dates indicated after
giving effect to the Acquisition, regarding the Company's subscribers,
penetration rate, cost to add a net subscriber, average monthly churn rate and
average monthly service revenue per subscriber.
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------- -------------
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Subscribers at end of period (1)... 29,869 54,382 99,626 187,870 243,204 295,162
Penetration at end of period (2)... 2.23% 3.57% 4.54% 6.41% 7.73% 8.88%
Cost to add a net subscriber (3)... $ 272 $ 198 $ 247 $ 275 $ 436 $ 503
Average monthly churn (4).......... 1.58% 1.32% 1.54% 1.51% 1.89% 1.88%
Average monthly service revenue per
subscriber (5).................... $ 59.65 $ 56.70 $ 56.54 $ 53.80 $ 50.23 $ 45.44
</TABLE>
- ---------------------
(1) Each billable telephone number in service represents one subscriber.
Amounts at December 31, 1992 and 1993 include 955 and 2,576 subscribers,
respectively, in the Alabama-7 RSA where the Company had interim operating
authority from June 1991 through July 1994.
(2) Determined by dividing the aggregate number of subscribers by the
estimated population.
(3) Determined for the periods, by dividing (i) all costs of sales and
marketing, including salaries, commissions and employee benefits and all
expenses incurred by sales and marketing personnel, agent commissions,
credit reference expenses, losses on cellular telephone sales, rental
expenses allocated to retail operations, net installation expenses and
other miscellaneous sales and marketing charges for such period including
fees paid for use of the CELLULAR ONE service mark, by (ii) the net
subscribers added during such period.
(4) Determined for the periods, by dividing total subscribers discontinuing
service by the average number of subscribers for such period , and divided
by the number of months in the relevant period.
(5) Determined for the periods by dividing the (i) sum of the access, airtime,
roaming, long distance, features, connection, disconnection and other
revenues for such period by (ii) the average number of subscribers for
such period, divided by the number of months in the relevant period.
SUBSCRIBERS AND SYSTEM USAGE
On a pro forma basis, after giving effect to the Acquisition, the Company's
subscribers have increased from 17,148 at January 1, 1992 to 295,162 at
September 30, 1997. Reductions in the cost of cellular telephone services and
equipment at the retail level have led to an increase in cellular telephone
usage by general consumers for non-business purposes. As a result, the Company
believes that there is an opportunity for significant growth in each of its
existing service areas. The Company will continue to broaden its subscriber
base for basic cellular telephone services as well as to increase its offering
of customized services. The sale of custom calling features typically results
in increased usage of cellular telephones by subscribers, thereby further
enhancing revenues. In 1996, cellular telephone service revenues represented
94.8% of the Company's total revenues, with equipment sales and installation
representing the balance.
MARKETING
The Company's marketing strategy is designed to generate continued net
subscriber growth by focusing on subscribers who are likely to generate lower
than average deactivations and delinquent accounts, while simultaneously
maintaining a low cost of adding net subscribers. Management has implemented
its marketing strategy by training and compensating its sales force in a
manner designed to stress the importance of high penetration levels and
minimum costs per net subscriber addition. The Company's sales staff has a
two-tier structure. A retail sales force handles walk-in traffic, and a
targeted sales staff solicits certain industries and government subscribers.
The Company's management believes that its internal sales force is more likely
than independent agents successfully to select and screen new subscribers and
select pricing plans that realistically match subscriber means and needs. In
addition, the Company motivates its direct sales force to sell appropriate
53
<PAGE>
rate plans to subscribers, thereby reducing churn, by linking payment of
commissions to subscriber retention. The Company believes its use of an
internal sales force keeps marketing costs low, both because commissions are
lower and because subscriber retention is higher than if it used independent
agents. For the nine months ended September 30, 1997, the Company's cost to
add a net subscriber was $503. The Company believes its cost to add a net
subscriber will continue to be among the lowest in the cellular telephone
industry, principally because of its in-house direct sales and marketing
staff.
The Company also maintains its low churn rate through an after-sale
telemarketing program implemented through its sales force and a telemarketing
service specializing in cellular customer services. This program not only
enhances customer loyalty, which reduces churn, but also increases add-on
sales and customer referrals. The telemarketing program allows the sales staff
to check customer satisfaction as well as to offer additional calling
features, such as voicemail, call waiting and call forwarding.
The Company's sales force works principally out of retail stores in which
the Company offers its cellular products and services. As of September 30,
1997, the Company maintained 32 retail stores and 4 offices. Retail stores,
which range in size up to 11,000 square feet are fully equipped to handle
customer service and the sale of cellular services, telephones and
accessories. Eight of the newer and larger stores are promoted by the Company
as "Superstores," seven of which are located in the Company's Georgia/Alabama
service areas, and one in the Panama City, Florida service area. Each
Superstore has an authorized warranty repair center and provides cellular
telephone installation and maintenance services. Most of the Company's larger
markets currently have at least one Superstore. In addition, to enhance
convenience for its customers, the Company has begun to open smaller stores in
locations such as shopping malls. In 1997, the Company plans to open three
more stores in its Georgia/Alabama service areas. The Company's stores provide
subscriber-friendly retail environments--extended hours, a large selection of
phones and accessories, an expert sales staff, and convenient locations--which
make the sales process quick and easy for the subscriber.
The Company markets all of its products and services under the name CELLULAR
ONE. The national advertising campaign conducted by Cellular One Group
enhances the Company's advertising exposure at a fraction of what could be
achieved by the Company alone. The Company also obtains substantial marketing
benefits from the name recognition associated with this widely used service
mark, both with existing subscribers traveling outside the Company's service
areas and with potential new subscribers moving into the Company's service
areas. In addition, travelers who subscribe to CELLULAR ONE service in other
markets may be more likely to use the Company's service when they travel in
the Company's service areas. Cellular telephones of non-wireline subscribers
are either programmed to select the non-wireline carrier (such as the Company)
when roaming, unless the non-wireline carrier in the roaming area is not yet
operational, or the subscriber dials a special code or has a cellular
telephone equipped with an "A/B" (wireline/non-wireline) switch and selects
the wireline carrier.
Through its membership in NACN and other special networking arrangements,
the Company provides extended regional and national service to its
subscribers, thereby allowing them to make and receive calls while in other
cellular service areas without dialing special access codes. This service
distinguishes the Company's call delivery features from those of many of its
competitors.
PRODUCTS AND SERVICES
In addition to providing high-quality cellular telephone service in each of
its markets, the Company also offers various custom-calling features such as
voicemail, call forwarding, call waiting, three-way conference calling and no
answer and busy transfer. Several rate plans are presented to prospective
subscribers so that they may choose the plan that will best fit their expected
calling needs. Generally, these rate plans include a high user plan, a medium
user plan, a basic plan and an economy plan. Most rate plans combine a fixed
monthly access fee, per minute usage charges and additional charges for
custom-calling features in a package that offers value to
54
<PAGE>
the subscriber while enhancing airtime use and revenues for the Company. In
general, rate plans which include a higher monthly access fee typically
include a lower usage rate per minute. An ongoing review of equipment and
service pricing is maintained to ensure the Company's competitiveness. As
appropriate, revisions to pricing of service plans and equipment are made to
meet the demands of the local marketplace.
The following table sets forth a breakdown of the Company's revenues from
the sale of its services and equipment for the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------- ----------------
1992 1993 1994 1995 1996 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Service revenue:
Access and usage (1)... $11,821 $20,324 $37,063 $61,607 $105,006 $77,414 $ 89,517
Roaming (2)............ 2,231 3,075 5,844 11,157 13,099 10,000 14,523
Long distance (3)...... 992 1,309 2,218 3,634 6,632 4,969 5,972
Other (4).............. 680 1,230 2,745 2,585 2,596 2,125 2,049
------- ------- ------- ------- -------- ------- --------
Total service
revenue............. $15,724 $25,938 $47,870 $78,983 $127,333 $94,508 $112,061
Equipment sales and
installation (5)....... 3,558 5,238 6,381 6,830 7,027 5,182 6,260
------- ------- ------- ------- -------- ------- --------
Total................ $19,282 $31,176 $54,251 $85,813 $134,360 $99,690 $118,321
======= ======= ======= ======= ======== ======= ========
</TABLE>
- ---------------------
(1) Access and usage revenues include monthly access fees for providing
service and usage fees based on per minute usage rates.
(2) Roaming revenues are fees charged for providing services to subscribers of
other systems when such subscribers or "roamers" place or receive a
telephone call within one of the Company's service areas.
(3) Long distance revenue is derived from long distance telephone calls placed
by the Company's subscribers.
(4) Other revenue includes, among other things, connect fees charged to
subscribers for initial activation on the cellular telephone system and fees
for feature services such as voicemail, call forwarding and call waiting.
(5) Equipment sales and installation revenue includes revenue derived from the
sale of cellular telephones and fees for the installation of such
telephones.
Reciprocal roaming agreements between each of the Company's cellular
telephone systems and the cellular telephone systems of other operators allow
their respective subscribers to place calls in most cellular service areas
throughout the country. Roamers are charged usage fees which are generally
higher than a given cellular telephone system's regular usage fees, thereby
resulting in a higher profit margin on roaming revenue. Roaming revenue is a
substantial source of incremental revenue for the Company. For 1996, roaming
revenues accounted for 10.7% of the Company's service revenues and 10.1% of
the Company's total revenue. This level of roaming revenue is due in part to
the fact that the Company's market in Panama City, Florida is a regional
shopping and vacation destination and a number of the Company's cellular
telephone systems in the Georgia and Alabama market are located along major
interstate travel corridors.
In order to develop the market for cellular telephone service, the Company
provides retail distribution of cellular telephones and maintains inventories
of cellular telephones. The Company negotiates volume discounts for the
purchase of cellular telephones and, in many cases, passes such discounts on
to its customers. The Company believes that earning an operating profit on the
sale of cellular telephones is of secondary importance to offering cellular
telephones at competitive prices to potential subscribers. To respond to
competition and to enhance subscriber growth, Palmer has historically sold
cellular telephones below cost.
The Company is currently developing several new services which it believes
will provide additional revenue sources. Packet-switching technology will
allow data to be transmitted much more quickly and efficiently than the
current circuit-switching technology. Packet-switching uses the intervals
between voice traffic on cellular channels to send packets of data instead of
tying up dedicated cellular channels. The packets of information, which may be
transmitted using several different channels, are subsequently reassembled and
directed to the correct party at the receiving end. It is expected that the
development of this technology will make it possible for
55
<PAGE>
cellular carriers to offer a broad range of cost-effective wireless data
services, including facsimile and electronic mail transmissions, point-of-sale
credit authorizations, package tracking, remote meter reading, alarm
monitoring and communications between laptop computer units and local area
computer networks or other computer databases. During 1996 Palmer began to
implement the use of microcells. Microcells are low powered transmitters,
typically constructed on a pole or the roof of a building, which provide
reduced radius service within a specific area, such as large office buildings,
underground facilities or areas shielded by topographical obstructions.
Microcell service could be used, for instance, to provide wireless service
within an office environment that was also integrated with wireless service to
the home.
CUSTOMER SERVICE
The Company is committed to attracting new subscribers and retaining
existing subscribers by providing consistently high-quality customer service.
In each of its cellular service areas, the Company maintains a local staff,
including a store manager, customer service representatives, technical and
engineering staff, sales representatives and installation and repair
facilities. Each cellular service area handles its own customer-related
functions such as customer activations, account adjustments and rate plan
changes. Local offices and installation and repair facilities enable the
Company to better service customers, schedule installations and repairs and
monitor the technical quality of the cellular service areas.
In addition, subscribers are able to report cellular telephone service or
account problems to the Company 24 hours a day. Through the use of
sophisticated monitoring equipment, technicians at the Company's headquarters
are able to monitor the technical performance of its service areas.
To ensure high-quality customer service, the Cellular One Group authorizes a
third-party marketing research firm to perform customer satisfaction surveys
of each of its licensees. Licensees must achieve a minimum customer
satisfaction level in order to be permitted to continue using the CELLULAR ONE
service mark. In 1996, the Company was awarded the #1 MSA and #2 RSA rankings
in CELLULAR ONE's National Customer Satisfaction Survey. The Company has held
number one rankings in four out of the last five years. The Company believes
it has achieved this first place ranking through effective implementation of
its direct sales and customer service support strategy.
The Company has implemented a new software package to combat cellular
telephone service fraud. This new software system can detect counterfeit
cellular telephones while they are being operated and enables the Company to
terminate service to the fraudulent user of the counterfeit cellular
telephone. The Company also helps protect itself from fraud with pre-call
customer validation and subscriber profiles specifically designed to combat
the fraudulent use of subscriber accounts.
NETWORKS
The Company strives to provide its subscribers with virtually seamless
coverage throughout its cellular service market areas, thereby permitting
subscribers to travel freely within this region and have their calls and
custom calling features, such as voicemail, call waiting and call forwarding,
follow them automatically without having to notify callers of their location
or to rely on special access codes. The Company has been able to offer
virtually seamless coverage by implementing a switch interconnection plan to
mobile telephone switching offices ("MTSO") located in adjoining markets. The
Company's equipment is built by NORTEL, formerly Northern Telecom, Inc.
("NTI"), and interconnection between MTSOs has been achieved using NTI's
internal software and hardware.
Through its participation in NACN since 1992 and other special networking
arrangements, the Company has pursued its goal of offering seamless regional
and national cellular service to its subscribers. NACN is the largest wireless
telephone network system in the world--linking non-wireline cellular operators
throughout the United States and Canada. Membership in NACN has aided the
Company in integrating its cellular telephone systems within its region and
has permitted the Company to offer cellular telephone service to its
subscribers throughout a large portion of the United States, Canada, Mexico
and Puerto Rico. NACN has provided the
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<PAGE>
Company with a number of distinct advantages: (i) lower costs for roaming
verification, (ii) increased roaming revenue, (iii) more efficient roaming
service and (iv) integration of Palmer's markets with over 4,600 cities in
more than 40 states in the United States, Canada, Mexico and Puerto Rico.
SYSTEM DEVELOPMENT AND EXPANSION
The Company develops its service areas by adding channels to existing cell
sites and by building new cell sites. Such development is done for the purpose
of increasing capacity and improving coverage in direct response to projected
subscriber demand. Projected subscriber demand is calculated for each cellular
service area on a cell by cell basis. These projections involve a traffic
analysis of usage by existing subscribers and an estimation of the number of
additional subscribers in each such area. In calculating projected subscriber
demand, the Company builds into its design assumptions a maximum call
"blockage" rate of 2.0% (percentage of calls that are not connected on first
attempt at peak usage time during the day).
The following table sets forth, by market, at the dates indicated, the
number of the Company's operational cell sites.
<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30,
------------------------------------ ----------------
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Georgia/Alabama....... 28(1) 39(1) 70(2) 121(3) 181(4) 192(5)
Panama City, FL....... 4 7 7 9 11 11
--- --- --- --- --- ---
Total............... 32(1) 46(1) 77(2) 130(3) 192(4) 203(5)
=== === === === === ===
</TABLE>
- ---------------------
(1) Includes two cell sites in the Alabama-7 RSA where Palmer had interim
operating authority from June 1991 through June 1994.
(2) Includes one cell site in the Alabama-5 RSA where Palmer has interim
operating authority for two counties of such RSA and 17 existing cell sites
that were purchased in the Georgia Acquisition.
(3) Includes two existing cell sites in the Alabama-5 RSA where Palmer has
interim operating authority for two counties of such RSA and 28 existing
cell sites that were purchased in the GTE Acquisition.
(4) Includes three existing cell sites in the Alabama-5 RSA where Palmer has
interim operating authority for two counties of such RSA and 17 existing
cell sites that were purchased in the Horizon and USCOC acquisitions. See
"--Acquisitions."
(5) Includes two existing cell sites in the Alabama-5 RSA where Palmer has
interim operating authority.
The Company estimates that in 1996 the capacity of its existing cellular
telephone systems increased 42.0%. During 1996, the Company spent $38.5
million and, based on projected growth in subscriber demand, expects to spend
approximately $35 million in 1997 in order to build out its cellular service
areas, install an additional microwave network and implement certain digital
radio technology. The Company has constructed 34 cell sites to date in 1997
and plans to construct 7 additional cell sites with respect to its existing
cellular systems during 1997 to meet projected subscriber demand and improve
the quality of service. Cell site expansion is expected to enable the Company
to continue to add subscribers, enhance use of its cellular telephone systems
by existing subscribers, increase services used by subscribers of other
cellular telephone systems due to the larger geographic area covered by the
cellular telephone network and further enhance the overall efficiency of the
network. The Company believes that the increased cellular telephone coverage
will have a positive effect on market penetration and subscriber usage.
Microwave networks enable the Company to connect switching equipment and
cell sites without making use of local landline telephone carriers, thereby
reducing or eliminating fees paid to landline carriers. During 1996, the
Company spent $1.0 million to build additional microwave connections. In
addition, in 1996 the Company spent $2.6 million to build a fiber optic
network between Dothan, Alabama and Panama City, Florida. The installation of
this network resulted in savings to the Company from a reduction in fees paid
to telephone companies for landline charges, as well as giving the Company the
ability to lease out a significant portion of capacity.
57
<PAGE>
DIGITAL CELLULAR TECHNOLOGY
Over the next decade, it is expected that cellular telephones will gradually
convert from analog to digital technology. This conversion is due in part to
capacity constraints in many of the largest cellular markets, such as Los
Angeles, New York and Chicago. As carriers reach limited capacity levels,
certain calls may be unable to be completed, especially during peak hours.
Digital technology increases system capacity and offers other advantages over
analog technology, including improved overall average signal quality, improved
call security, potentially lower incremental costs for additional subscribers
and the ability to provide data transmission services. The conversion from
analog to digital technology is expected to be an industry-wide process that
will take a number of years. The exact timing and overall costs of such
conversion are not yet known.
The Company began offering TDMA standard digital service during 1997. This
digital network allows the Company to offer advanced cellular features and
services such as caller-ID, short message paging and extended battery life.
Where cell sites are not yet at their maximum capacity of radio channels, the
Company is adding digital channels to the network incrementally based on the
relative demand for digital and analog channels. Where cell sites are at full
capacity, analog channels are being removed and redeployed to expand capacity
elsewhere within the network and replaced in such cell sites by digital
channels. The implementation of digital cellular technology over a period of
several years will involve modest incremental expenditures for switch software
and possible significant cost reductions as a result of reduced purchases of
radio channels and a reduced requirement to split existing cells. However, as
indicated above, the extent of any implementation of digital radio channels
and the amount of any cost savings ultimately to be derived therefrom will
depend primarily on subscriber demand. In the ordinary course of business,
equipment upgrades at the cell sites have involved purchasing dual mode radios
capable of using both analog and digital technology.
The benefits of digital radio channels can only be achieved if subscribers
purchase cellular telephones that are capable of transmitting and receiving
digital signals. Currently, such telephones are more costly than analog
telephones. The widespread use of digital cellular telephones is likely to
occur only over a substantial period of time and there can be no assurance
that this technology will replace analog cellular telephones. In addition,
since most of the Company's existing subscribers currently have cellular
telephones that exclusively utilize analog technology, it will be necessary to
continue to support, and if necessary increase, the number of analog radio
channels within the network for many years.
ACQUISITIONS
The Company will continue to evaluate expansion through acquisitions of both
(i) contiguous cellular properties and other strategically located RSAs and
small to mid-sized MSAs and (ii) minority interests in its existing cellular
properties. In evaluating acquisition targets, the Company considers, among
other things, demographic factors, including population size and density,
geographic proximity to existing service areas, traffic patterns, cell site
coverage and required capital expenditures.
PCI entered the cellular telephone business in 1987, when it constructed a
cellular telephone system for the Fort Myers, Florida MSA. PCI acquired
control of this system in March 1988 and rapidly expanded its cellular
telephone holdings, acquiring control of the non-wireline cellular licenses
for the Columbus and Albany, Georgia and Dothan and Montgomery, Alabama MSAs
in 1988.
In 1991, Palmer acquired control of the non-wireline cellular license for
the Panama City, Florida MSA. In 1992 and 1993, Palmer acquired two non-
wireline cellular licenses for RSAs contiguous to Palmer's MSAs in Georgia and
Alabama: the Georgia-9 RSA in June 1992 and the Alabama-8 RSA in April 1993.
The Georgia-9 RSA acquisition added the geographic territory between the
Columbus, Macon and Albany, Georgia MSAs to Palmer's service area coverage.
The Alabama-8 RSA expanded Palmer's service areas around three MSAs served by
Palmer, covering a substantial portion of the geographic territory between the
Montgomery, Alabama, Columbus, Georgia and Dothan, Alabama MSAs and the
Georgia-9 RSA. In 1993, Palmer also increased its majority position in its
MSAs in Albany, Georgia and in Dothan and Montgomery, Alabama, through the
purchase of certain minority interests for an aggregate purchase price of $2.9
million.
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<PAGE>
During 1994, Palmer continued to acquire minority interests in six of its
MSAs for an aggregate purchase price of $3.1 million. Also, on October 31,
1994, Palmer acquired the cellular telephone systems of Southeast Georgia
Cellular Limited Partnership ("SGC") and Georgia 12 Cellular Limited
Partnership ("Georgia 12" and together with SGC, the "Georgia Partnerships")
for an aggregate purchase price of $91.7 million (the "Georgia Acquisition").
The assets acquired by Palmer from SGC included the non-wireline cellular
telephone systems for the Georgia-7 RSA, Georgia-8 RSA and Georgia-10 RSA. The
assets acquired by Palmer from Georgia 12 included the non-wireline cellular
telephone system located in the Georgia-12 RSA. The cellular telephone systems
in the acquired RSAs serve a geographic territory in southeast Georgia that is
adjacent to Palmer's Georgia-9 RSA and Macon, Georgia MSA.
In December 1995, Palmer acquired interests in cellular telephone systems by
purchasing Georgia Metronet, Inc. ("GMI") and Augusta Metronet, Inc. ("AMI"
and together with GMI, the "GTE Companies") for an aggregate purchase price of
$158.4 million (the "GTE Acquisition"). The assets acquired by Palmer in the
GTE Acquisition included the non-wireline cellular telephone system located in
the Savannah MSA and Augusta MSA, respectively. The cellular telephone systems
in the newly-acquired MSAs serve a geographic territory in eastern Georgia and
a portion of South Carolina that is adjacent to Palmer's existing markets in
the Georgia-8 RSA and Georgia-12 RSA. In addition, Palmer also acquired the
interim operating authority to provide cellular service to the southern
portions of the South Carolina-7 RSA and South Carolina-8 RSA, respectively,
which serve a geographic territory that is adjacent to Palmer's existing
markets in the Georgia-8 RSA as well as the Savannah, and Augusta, Georgia
MSAs. In addition, during 1995, Palmer acquired additional minority interests
in six of its MSAs for an aggregate purchase price of $2.0 million.
On June 20, 1996, Palmer acquired the cellular telephone system of USCOC of
Georgia RSA #1, Inc. ("USCOC") for an aggregate purchase price of $31.6
million. The assets acquired by Palmer from USCOC included the cellular
telephone system in the Georgia-1 RSA. The cellular telephone system in the
acquired RSA serves a geographic territory of northwest Georgia between
Chattanooga and Atlanta.
On July 5, 1996, two of Palmer's majority-owned subsidiaries acquired the
cellular telephone system of Horizon Cellular Telephone Company of Spalding,
L.P. ("Horizon") for an aggregate purchase price of $36.0 million. The assets
acquired by Palmer from Horizon include the cellular telephone system in the
Georgia-6 RSA. The cellular telephone system in the acquired RSA serves a
geographic territory of west central Georgia adjacent to Palmer's Macon and
Columbus, Georgia MSAs.
On February 1, 1997, a majority-owned subsidiary of Palmer acquired the
cellular telephone system serving the Georgia-13 RSA from Mobile
Communications Systems L.P. for a total purchase price of $31.1 million. The
cellular telephone system in the acquired RSA serves a geographic territory of
southwest Georgia adjacent to Palmer's Albany, Georgia and Dothan, Alabama
MSAs.
59
<PAGE>
COMPETITION
The cellular telephone service industry in the United States is highly
competitive. Cellular telephone systems compete principally on the basis of
services and enhancements offered, the technical quality of the cellular
system, customer service, coverage capacity and price of service and
equipment. Currently, the Company's primary competition in each of its service
areas is the other cellular licensee--the wireline carrier. The table below
lists the wireline competitor in each of the Company's existing service areas:
<TABLE>
<CAPTION>
MARKET WIRELINE COMPETITOR
<S> <C>
Albany, GA.................. ALLTEL
Augusta, GA................. ALLTEL
Columbus, GA................ Public Service Cellular
Macon, GA................... BellSouth
Savannah, GA................ ALLTEL
Georgia-6 RSA............... BellSouth and Intercel(1)
Georgia-7 RSA............... Cellular Plus and BellSouth(1)
Georgia-8 RSA............... ALLTEL
Georgia-9 RSA............... ALLTEL and Public Service Cellular(1)
Georgia-10 RSA.............. Cellular Plus and ALLTEL(1)
Georgia-12 RSA.............. ALLTEL
Georgia-13 RSA.............. ALLTEL
Dothan, AL.................. BellSouth
Montgomery, AL.............. ALLTEL
Alabama-8 RSA............... ALLTEL
Panama City, FL............. 360(degrees) Communications Company (formerly
Sprint Cellular)
</TABLE>
- ---------------------
(1) The wireline service area has been subdivided into two service areas by
the purchasers of the authorization for the RSA.
The Company also faces limited competition from and may in the future face
increased competition from broadband PCS. Broadband PCS involves a network of
small, low-powered transceivers placed throughout a neighborhood, business
complex, community or metropolitan area to provide customers with mobile and
portable voice and data communications. PCS subscribers communicate using
digital radio handsets.
The FCC allocated 120 MHZ of spectrum for licensed broadband PCS. The
allocations for licensed PCS services are split into six blocks of
frequencies--blocks "A" and "B" being two 30 MHZ allocations for each of the
51 Major Trading Areas ("MTAs") throughout the United States; block "C" being
one 30 MHZ allocation in each of 493 Basic Trading Areas ("BTAs") in the
United States; and blocks "D," "E" and "F" being three 10 MHZ allocations in
each of the BTAs. The FCC has concluded the auction of all broadband PCS
frequency blocks.
The Company also faces competition from other existing communications
technologies such as conventional mobile telephone service, SMR and ESMR
systems and paging services.
In addition, the FCC has licensed operators to provide mobile satellite
service in which transmissions from mobile units to satellites would augment
or replace transmissions to land-based stations. Although such a system is
designed primarily to serve remote areas and is subject to transmission delays
inherent in satellite communications, a mobile satellite system could augment
or replace communications with segments of land-based cellular systems. Based
on current technologies, however, satellite transmission services are not
expected to be competitively priced with cellular telephone services.
In order to grow and compete effectively in the wireless market, the Company
plans to follow a strategy of increasing its bundled minute offerings. By
increasing the number of minutes a customer can use for one flat rate,
subscribers perceive greater value in their cellular service and become less
usage sensitive, i.e., they can increase their cellular phone usage without
seeing large corresponding increases in their cellular bill. These
60
<PAGE>
factors translate into more satisfied customers, greater customer usage and
lower churn among existing subscribers. The perceived greater value also
increases the number of potential customers in the marketplace. The Company
believes that this strategy will enable it to increase its share of the
wireless market.
SERVICE MARKS
CELLULAR ONE is a registered service mark with the U.S. Patent and Trademark
Office. The service mark is owned by Cellular One Group, a Delaware general
partnership of Cellular One Marketing, Inc., a subsidiary of Southwestern Bell
Mobile Systems, Inc., together with Cellular One Development, Inc., a
subsidiary of AT&T and Vanguard Cellular Systems, Inc. The Company uses the
CELLULAR ONE service mark to identify and promote its cellular telephone
service pursuant to licensing agreements with Cellular One Group (the
"Licensor"). In 1996, the Company paid $219,000 in licensing and advertising
fees under these agreements. Licensing and advertising fees are determined
based upon the population of the licensed areas. The licensing agreements
require the Company to provide cellular telephone service to its customers,
and to maintain a certain minimum overall customer satisfaction rating in
surveys commissioned by the Licensor. The Company's customer satisfaction
ratings have consistently far exceeded this required minimum. The licensing
agreements which the Company has entered into are for five-year terms. See
"Risk Factors--Reliance on Use of Third-Party Service Mark."
REGULATION
As a provider of cellular telephone services, the Company is subject to
extensive regulation by the federal government.
The licensing, construction, operation, acquisition and transfer of cellular
telephone systems in the United States are regulated by the FCC pursuant to
the Communications Act of 1934, as amended (the "Communications Act"). The FCC
has promulgated rules governing the construction and operation of cellular
telephone systems and licensing and technical standards for the provision of
cellular telephone service ("FCC Rules"). For cellular licensing purposes, the
United States is divided into MSAs and RSAs. In each market, the frequencies
allocated for cellular telephone use are divided into two equal blocks
designated as Block A and Block B. Block A licenses were initially reserved
for non-wireline companies, such as Palmer, while Block B licenses were
initially reserved for entities affiliated with a local wireline telephone
company. Under current FCC Rules, a Block A or Block B license may be
transferred with FCC approval without restriction as to wireline affiliation,
but generally, no entity may own any substantial interest in both systems in
any one MSA or RSA. The FCC may prohibit or impose conditions on sales or
transfers of licenses.
Initial operating licenses are generally granted for terms of up to 10
years, renewable upon application to the FCC. Licenses may be revoked and
license renewal applications denied for cause after appropriate notice and
hearing. Palmer's cellular licenses expire in the following years with respect
to the following number of service areas: 1997 (four); 1998 (three); 2000
(two); 2001 (four); 2002 (three) and 2006 (one). On September 22, 1997, the
Company filed License Renewal Applications with the FCC for the Savannah,
Georgia MSA; the Albany, Georgia MSA; the Montgomery, Alabama MSA; and the
Panama City, Florida MSA. Although these four licenses have since expired, the
Company is permitted to continue to operate in these areas during the pendency
of its renewal applications. The FCC has issued a decision confirming that
current licensees will be granted a renewal expectancy if they have complied
with their obligations under the Communications Act during their license terms
and provided substantial public service. A potential challenger will bear a
heavy burden to demonstrate that a license should not be renewed if the
licensee's performance merits a renewal expectancy. The Company believes that
the licenses controlled by the Company will be renewed in a timely manner.
However, in the event that a license is not renewed, the Company would no
longer have the right to operate in the relevant service area. A non-renewal
of all licenses that are currently pending would have a material adverse
effect on the Company's result of operations.
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Under FCC rules, each cellular licensee was given the exclusive right to
construct one of two cellular telephone systems within the licensee's MSA or
RSA during the initial five-year period of its authorization. At
the end of such five-year period, other persons are permitted to apply to
serve areas within the licensed market that are not served by the licensee and
current FCC Rules provide that competing applications for these "unserved
areas" are to be resolved through the auction process. Palmer and the Company
have no material unserved areas in any of their cellular telephone systems
that have been licensed for more than five years.
The Company also regularly applies for FCC authority to use additional
frequencies, to modify the technical parameters of existing licenses, to
expand its service territory and to provide new services. The Communications
Act requires prior FCC approval for acquisitions by the Company of other
cellular telephone systems licensed by the FCC and transfers by Palmer of a
controlling interest in any of its licenses or construction permits, or any
rights thereunder. Although there can be no assurance that any future requests
for approval or applications filed by the Company will be approved or acted
upon in a timely manner by the FCC, based upon its experience to date, the
Company has no reason to believe such requests or applications would not be
approved or granted in due course.
The Communications Act prohibits the holding of a common carrier license
(such as the Company's cellular licenses) by a corporation of which more than
20% of the capital stock is owned directly or beneficially by aliens. Where a
corporation such as the Company controls another entity that holds an FCC
license, such corporation may not have more than 25% of its capital stock
owned directly or beneficially by aliens, in each case, if the FCC finds that
the public interest would be served by such prohibitions. Failure to comply
with these requirements may result in the FCC issuing an order to Palmer
requiring divestiture of alien ownership to bring the Company into compliance
with the Communications Act. In addition, fines or a denial of renewal, or
revocation of the license are possible.
From time to time, legislation which could potentially affect the Company,
either beneficially or adversely, may be proposed by federal and state
legislators. On February 8, 1996, the Telecommunications Act of 1996 (the
"Telecom Act") was signed into law, revising the Communications Act to
eliminate unnecessary regulation and to increase competition among providers
of communications services. The Company cannot predict the future impact of
this or other legislation on its operations.
The major provisions of the Telecom Act potentially affecting Palmer are as
follows:
Interconnection. The Telecom Act requires state public utilities commissions
and/or the FCC to implement policies that mandate cost-based reciprocal
compensation between cellular carriers and local exchange carriers ("LEC") for
interconnection services.
On August 8, 1996, the FCC released its First Report and Order in the matter
of Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996 ("FCC Order") establishing the rules for the
costing and provisioning of interconnection services and the offering of
unbundled network elements by incumbent local exchange carriers. The FCC Order
established procedures for Palmer's renegotiation of interconnection
agreements with the incumbent local exchange carrier in each of Palmer's
markets. LECs and state regulators filed appeals of the FCC Order, which have
been consolidated in the US Court of Appeals for the Eighth Circuit. The Court
has temporarily stayed the effective date of the pricing rules until more
permanent relief can be fashioned.
The Company is currently negotiating with the incumbent local exchange
carriers and has already renegotiated certain interconnection agreements with
LECs in most of the Company's market. These negotiations have resulted in a
substantial decrease in interconnection expenses incurred by the Company.
Facilities siting for personal wireless services. The siting and
construction of cellular transmitter towers, antennas and equipment shelters
are often subject to state or local zoning, land use and other regulation.
Such regulation may require zoning, environmental and building permit
approvals or other state or local certification.
62
<PAGE>
The Telecom Act provides that state and local authority over the placement,
construction and modification of personal wireless services (including
cellular and other commercial mobile radio services and unlicensed wireless
services) shall not prohibit or have the effect of prohibiting personal
wireless services or unreasonably discriminate among providers of functionally
equivalent services. In addition, local authorities must act on requests made
for siting in a reasonable period of time and any decision to deny must be in
writing and supported by substantial evidence. Appeals of zoning decisions
that fail to comply with the provisions of the Telecom Act can be made on an
expedited basis to a court of competent jurisdiction, which can be either
federal district or state court. The Company anticipates that, as a result the
Telecom Act, it will more readily receive local zoning approval for proposed
cellular base stations. In addition, the Telecom Act codified the Presidential
memorandum on the use of federal lands for siting wireless facilities by
requiring the President or his designee to establish procedures whereby
federal agencies will make available their properties, rights of ways and
other easements at a fair and reasonable price for service dependent upon
federal spectrum.
Environmental effect of radio frequency emissions. The Telecom Act provides
that state and local authorities cannot regulate personal wireless facilities
based on the environmental effects of radio frequency emissions if those
facilities comply with the federal standard.
Universal service. The Telecom Act also provides that all communications
carriers providing interstate communications services, including cellular
carriers, must contribute to the federal universal service support mechanisms
that the FCC will establish. The FCC implemented this provision of the Telecom
Act in a "Report and Order" released May 8, 1997 in the matter of "Federal-
State Joint Board on Universal Service," which also provides that any cellular
carrier is potentially eligible to receive universal service support.
The Communications Act preempts state and local regulation of the entry of,
or the rates charged by, any provider of cellular service.
EMPLOYEES
At September 30, 1997 Palmer had 565 full-time employees (excluding Fort
Myers and Georgia-1), none of whom is represented by a labor organization.
Management considers its relations with employees to be good.
PROPERTIES
For each market served by the Company's operations, the Company maintains at
least one sales or administrative office and operates a number of cell
transmitter and antenna sites. As of September 30, 1997, the Company had
approximately 31 leases for retail stores used in conjunction with its
operations and 3 leases for administrative offices. The Company also had
approximately 123 leases to accommodate cell transmitters and antennas as of
July 8, 1997.
LEGAL PROCEEDINGS
Neither the Company nor Palmer is currently involved in any pending legal
proceedings likely to have a material adverse impact on the Company.
63
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE OFFICE
---- --- ------
<S> <C> <C>
William J. Ryan.... 65 President and Chief Executive Officer
M. Wayne Wisehart.. 50 Vice President, Treasurer, Chief Financial Officer
K. Patrick Meehan.. 39 Vice President--General Counsel and Secretary
Robert Price....... 64 Director
</TABLE>
EXECUTIVE OFFICERS
The following is a biographical summary of the experience of the executive
officers of Palmer who continue as executive officers of the Company. The
Company has entered into employment contracts with William J. Ryan and M.
Wayne Wisehart to continue as officers of the Company and has entered into
employment contracts with other key employees prior to the consummation of the
Merger.
WILLIAM J. RYAN, President and Chief Executive Officer. Mr. Ryan served as
Chief Executive Officer and President of PCI from 1984 until July 1995. Mr.
Ryan was Chief Operating Officer and President of PCI from 1982 to 1984. Mr.
Ryan has over 40 years of communications and telecommunications experience. He
joined PCI in 1970 following that company's acquisition of certain radio and
cable properties which Mr. Ryan had partially owned and operated since 1955.
In his capacity as Chief Executive Officer, Mr. Ryan has successfully led the
Company through 18 acquisitions of cellular telephone systems. Mr. Ryan is a
director of the Cellular Telecommunications Industry Association, the founding
chairman of Cable Television Advertising Bureau, Inc. and a former president
of the Florida Cable Association, the Florida Broadcasters Association and the
Southern Cable Association.
M. WAYNE WISEHART, Vice President, Treasurer and Chief Financial Officer.
Mr. Wisehart served as Chief Financial Officer of PCI from 1982 until July
1995. He was promoted to Treasurer of PCI in 1983 and to Vice President in
1987. Mr. Wisehart has over 15 years of communications and telecommunications
experience. In his capacity as Chief Financial Officer of PCI, he was
instrumental in the financial management and direction of the Company. Prior
to joining PCI, Mr. Wisehart served as Treasurer of the Des Moines Register &
Tribune Company of Des Moines, Iowa, for approximately five years. He began
his career in 1972 with Peat, Marwick, Mitchell & Co. in St. Louis, Missouri,
where he became a Certified Public Accountant. Mr. Wisehart then served as a
tax specialist for three years with General Dynamics Corporation in St. Louis,
Missouri.
K. PATRICK MEEHAN, Vice President-General Counsel and Secretary. Mr. Meehan
served as Vice President/General Counsel and Assistant Secretary of PCI from
1991 until July 1995. As an attorney with the law firm of Leibowitz & Spencer
in Miami, Florida, from 1985 to May 1991, Mr. Meehan represented clients
before the FCC and handled corporate transactions involving broadcast, paging
and cellular telephone companies. He is a 1985 graduate of the Columbus School
of Law and The Institute for Communications Law Studies at The Catholic
University of America in Washington, D.C. Mr. Meehan is a member of the
Florida Bar, the District of Columbia Bar and the American Bar Association.
DIRECTOR
ROBERT PRICE has served concurrently as a Director and the Chief Executive
Officer, President and Treasurer of PCC since 1979 and has been the Director
of Holdings and PCW since 1997. Mr. Price has been a Director of PriCellular
since 1990. Mr. Price was the President and Assistant Treasurer of PriCellular
from 1990 until May 1997 and has served as Chairman of PriCellular since May
1997. In 1992 PCC filed for protection from creditors pursuant to Chapter 11
of the United States Bankruptcy Code. The Company's Amended Plan of
Reorganization
64
<PAGE>
was confirmed on June 11, 1992 and became effective on December 30, 1992. Mr.
Price, an attorney, is a former General Partner of Lazard Freres & Co. He has
served as an Assistant United States Attorney, practiced law in New York and
served as Deputy Mayor of New York City. In the early sixties, Mr. Price
served as President and Director of Atlantic States Industries, a corporation
owning weekly newspapers and four radio stations. After leaving public office,
Mr. Price became Executive Vice President of The Dreyfus Corporation and an
Investment Officer of The Dreyfus Fund. In 1972 he joined Lazard Freres & Co.
Mr. Price has served as a Director of Holly Sugar Corporation, Atlantic States
Industries, The Dreyfus Corporation, Graphic Scanning Corp. and Lane Bryant,
Inc., and is currently a member of The Council on Foreign Relations. Mr. Price
serves as the Representative of the Majority Leader and President Pro Tem of
the New York Senate and as a member on the Board of Directors of the Municipal
Assistance Corporation for the City of New York and as a Member of the Board
of Trustees of the City University of New York. Mr. Price is also a Director
and president of TLM Corporation.
DIRECTOR COMPENSATION
Directors are not paid fees.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning the
compensation paid to the executive officers of Palmer for the year ended
December 31, 1996.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------ ------------------
NAME AND PRINCIPAL SECURITIES ALL OTHER
POSITION YEAR SALARY($) BONUS($) UNDERLYING OPTIONS COMPENSATION
------------------ ---- --------- -------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
William J. Ryan, Presi-
dent and 1996 $339,731 $ 34,000 $31,422(1)
Chief Executive Officer 1995 $331,651 $119,880 130,000 $55,356
Robert G. Engelhardt,
Executive 1996 $251,538 $ 25,200 $18,726(2)
Vice President and Sec-
retary 1995 $239,019 $ 57,600 120,000 $26,073
M. Wayne Wisehart, Vice
President, 1996 $152,211 $ 15,250 $23,559(3)
Treasurer and Chief Fi-
nancial Officer 1995 $145,256 $ 34,800 75,000 $33,417
Leon J. Hensen, Senior
Vice 1996 $173,173 $ 13,880 $16,798(4)
President-General Man-
ager 1995 $163,862 $ 39,188 75,000 $22,764
K. Patrick Meehan, Vice
President- 1996 $124,423 $ 12,500 $19,386(5)
General Counsel and As-
sistant Secretary 1995 $109,936 $ 26,400 65,000 $15,108
</TABLE>
- --------
(1) Includes the following: PCI 401(k) Profit Sharing Plan and Trust ("401(k)
Plan") contributions of $9,500, auto allowance of $7,415 (including
insurance and license), tax services of $5,228, club dues of $5,535 and
medical reimbursements of $3,744.
(2) Includes the following: 401(k) Plan contributions of $9,500, auto
allowance of $6,744 (including insurance and license), tax services of
$850, club dues of $1,051 and medical reimbursements of $581.
(3) Includes the following: 401(k) Plan contributions of $9,500, auto
allowance of $6,798 (including insurance and license), tax services of $0,
club dues of $7,261 and medical reimbursements of $0.
(4) Includes the following: 401(k) Plan contributions of $9,078, auto
allowance of $6,501 (including insurance and license), tax services of $0,
club dues of $1,219 and medical reimbursements of $0.
(5) Includes the following: 401(k) Plan contributions of $9,500, auto
allowance of $6,975 (including insurance and license), tax services of
$275, club dues of $1,218 and medical reimbursements of $1,418.
65
<PAGE>
STOCK OPTIONS
During 1996, no stock options were granted to or exercised by the executive
officers of Palmer. The following table provides information regarding the
value of all unexercised options held at December 31, 1996 by the executive
officers of Palmer.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1996 DECEMBER 31, 1996(1)
------------------------- -------------------------
NAME UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
---- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
William J. Ryan............. 86,666 43,334 $ 0 $ 0
Robert G. Engelhardt........ 80,000 40,000 $ 0 $ 0
M. Wayne Wisehart........... 50,000 25,000 $ 0 $ 0
Leon J. Hensen.............. 50,000 25,000 $ 0 $ 0
K. Patrick Meehan........... 43,333 21,667 $ 0 $ 0
</TABLE>
- --------
(1) Based on a per share price of $10.375 on February 18, 1997.
EMPLOYMENT AGREEMENTS
In 1995, the Company entered into employment agreements (the "Palmer
Agreements") with each of Messrs. Ryan and Engelhardt, for an initial term of
three years, and Wisehart, Hensen and Meehan, for an initial term of two
years. Each Palmer Agreement had an automatic one-year renewal on each
anniversary date thereof. Base salaries under the Palmer Agreements for 1996
were $340,000, $252,000, $152,500, $173,500 and $125,000, respectively. Each
Palmer Agreement specified that if the executive officer is terminated by the
Company without cause (as defined therein), or if the executive officer
terminates the agreement for good reason (as defined therein, including if the
employment of the executive officer is terminated within one year of a change
in control of the Company), the Company will pay to the executive officer the
full base salary and benefits which would otherwise have been paid to such
officer during a fixed term (three years for Messrs. Ryan and Engelhardt; two
years for Messrs. Wisehart, Hensen and Meehan) (to be paid at the time such
payments are due). The Compensation Committee of the Board of Directors
approved 1997 base salaries under the Palmer Agreements as follows: $340,000
for Mr. Ryan; $178,500 for Mr. Hensen; $160,000 for Mr. Wisehart; and $140,000
for Mr. Meehan.
Pursuant to the change of control provision described above, approximately
$4.0 million of payments became payable under such contracts at the time of
the Merger. Approximately $1.4 million was paid on the effective date of the
Merger to Mr. Ryan as a severance payment pursuant to his existing employment
contract and approximately $2.6 million of severance payments are payable over
several years pursuant to existing employment contracts between Palmer and its
other executive officers. The Company has entered into employment contracts
with Mr. Ryan and Mr. Wisehart to continue as officers of the Company and has
entered into employment contracts with other key employees prior to the
consummation of the Acquisition (the "Price Agreements").
In 1997, the Company entered into an employment agreement with Mr. Ryan (the
"Ryan Agreement") for a term ending on December 31, 1999. The Ryan Agreement
contains an option to engage Mr. Ryan as a consultant for a period of one year
after December 31, 1999 at an annual salary equal to 50% of his base salary.
The base salary under the Ryan Agreement for 1997 is $500,000, plus an annual
bonus based upon the Company's financial performance. The Ryan Agreement
specifies that if Mr. Ryan is terminated by the Company other than for Cause
(as defined therein), disability or death or if Mr. Ryan terminates the
agreement for Good Reason (as defined therein), the Company will pay to Mr.
Ryan the full base salary and benefits which would otherwise have been paid to
Mr. Ryan, as well as a pro-rated bonus, through December 31, 1999 (to be paid
at the time such payments are due).
66
<PAGE>
In 1997, the Company entered into an employment agreement with Mr. Wisehart
(the "Wisehart Agreement") for an initial term ending on December 31, 1999.
The Wisehart Agreement has an automatic one-year renewal on each anniversary
date thereof. The base salary under the Wisehart Agreement for 1997 is
$300,000, plus an annual bonus based upon the Company's financial performance.
The Wisehart Agreement specifies that if Mr. Wisehart is terminated by the
Company other than for Cause (as defined therein), disability or death or if
Mr. Wisehart terminates the agreement for Good Reason (as defined therein),
the Company will pay to Mr. Wisehart the full base salary and benefits which
would otherwise have been paid to Mr. Wisehart, as well as a pro-rated bonus,
until two years after the date of termination (to be paid at the time such
payments are due).
The Wisehart and Ryan Agreements each contain a confidentiality provision
and provide that the executive officer may not during employment or for a
period of one year following termination of employment induce or attempt to
induce any employee of the Company to render services for any other person,
firm or corporation.
In 1997, the Company entered into an employment agreement with Mr. Meehan
(the "Meehan Agreement") for an initial term ending on December 31, 1998. The
Meehan Agreement has an automatic one-year renewal on each anniversary date
thereof. The base salary under the Meehan Agreement for 1997 is $180,000. The
Meehan Agreement specifies that if Mr. Meehan is terminated by the Company
other than for Cause (as defined therein), disability or death or if Mr.
Meehan terminates the agreement for Good Reason (as defined therein), the
Company will pay to Mr. Meehan the full base salary and benefits which would
otherwise have been paid to Mr. Meehan until one year after the date of
termination (to be paid at the time such payments are due).
The Price Agreements provide that for one year following termination of
employment, the executive officer will not, in any state in which the Company
is engaged or plans to engage in business, (i) compete with the Company on
behalf of the executive officer or any third party, (ii) participate as a
director, agent, representative, stockholder or partner or have any direct or
indirect financial interest in any enterprise which engages in the business in
which the Company is engaged, or (iii) participate as an employee or officer
in any enterprise in which such officer's responsibilities relate to the
cellular business or any other business in which the Company is engaged;
provided, however, that ownership by such officer of less than 5% of the
outstanding stock of any corporation listed on a national securities exchange
conducting any such business will not be deemed a violation of such non-
competition provision.
67
<PAGE>
PRINCIPAL STOCKHOLDERS
All of Holdings's issued and outstanding capital stock is owned indirectly
by PCC. The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock and PIK Preferred Stock of PCC as of
August 8, 1997 by (i) each person or group known to the Company who
beneficially owns more than five percent of PCC Common Stock and (ii) all
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
CLASS OF NUMBER OF PERCENTAGE
STOCK SHARES (1) OF CLASS
NAME OF BENEFICIAL OWNER -------- ---------- ----------
<S> <C> <C> <C>
Robert Price............ Common Stock 866,758 17.3%
Series A Preferred Stock(2) 728,133 100%
Series B Preferred Stock(3) 364,066 100%
William J. Ryan......... -- -- --
M. Wayne Wisehart....... -- -- --
K. Patrick Meehan....... -- -- --
NatWest Capital Markets
Limited................ PIK Preferred Stock 1,129,000(4) 100%
All directors and
officers as a
group (5 persons)...... Common Stock 866,758 17.3%
Series A Preferred Stock 728,133 100%
Series B Preferred Stock 364,066 100%
</TABLE>
- ---------------------
(1) Under the applicable rules of the Securities and Exchange Commission, each
person or entity is deemed to be a beneficial owner with the power to vote
and direct the disposition of these shares.
(2) The Series A Preferred Stock votes with the Common Stock on a share for
share basis.
(3) The Series B Preferred Stock votes with the Common Stock on a share for
share basis.
(4) The PIK Preferred Stock does not have voting rights (other than as
required by law).
DESCRIPTION OF NEW CREDIT FACILITY
The New Credit Facility which was entered into by PCW is provided by a
syndicate of banks, financial institutions and other "accredited investors"
(as defined in Regulation D under the Securities Act; each such bank,
financial institution and accredited investor being a "Lender" and,
collectively, the "Lenders"). The New Credit Facility includes a $325.0
million term loan facility and a $200.0 million revolving credit facility,
which provides for loans and under which letters of credit may be issued and a
portion of which will be made available as a swingline facility. The term loan
facility is comprised of tranche A term loans of up to $100.0 million, which
have a maturity of eight years, and tranche B term loans of up to $225.0
million, which have a maturity of nine years. The revolving credit facility
will terminate eight years after the closing date of the New Credit Facility
(October 6, 1997, the "Closing Date").
The New Credit Facility bears interest, at PCW's option, at the alternate
base rate or the reserve adjusted Euro-Dollar rate plus, in each case,
applicable margins of (i) in the case of tranche A term loans and revolving
loans (x) 2.50% for Euro-Dollar rate loans and (y) 1.50% for base rate loans
and (ii) in the case of tranche B term loans (x) 2.75% for Euro-Dollar rate
loans and (y) 1.75% for base rate loans. After the occurrence and during the
continuation of an event of default under the New Credit Agreement, interest
shall accrue at the rate for loans bearing interest at the rate determined by
reference to the base rate plus an additional 2.00% per annum and shall be
payable on demand.
PCW will pay commitment fees in an amount equal to 0.50% per annum on the
daily average unused portion of the revolving credit facility. Such fees shall
be payable quarterly in arrears and upon the maturity or termination of the
revolving credit facility.
Beginning six months after the Closing Date, the applicable margins for the
tranche A term loans and revolving loans will be determined based on the ratio
of consolidated total debt to consolidated EBITDA of PCW and its subsidiaries
(as defined in the New Credit Facility).
68
<PAGE>
PCW will pay, in respect of each letter of credit, a fee calculated on the
daily amount available to be drawn on the issued letter of credit at a rate
per annum equal to the applicable margin for Euro-Dollar rate loans under the
revolving credit facility, which shall be shared by all Lenders, and the
greater of $500 or an additional 0.25% per annum, which shall be retained by
the Lender issuing the letter of credit, which percentage shall be multiplied
by the amount available from time to time for drawing under such letter of
credit.
The New Credit Facility is subject to the following amortization schedule:
<TABLE>
<CAPTION>
REVOLVING
TRANCHE A TRANCHE B CREDIT
YEAR TERM LOANS TERM LOANS FACILITY
(%) (%) (%)
<S> <C> <C> <C>
1...................................... 0.0 1.0 0.0
2...................................... 0.0 1.0 0.0
3...................................... 10.0 1.0 10.0
4...................................... 12.5 1.0 12.5
5...................................... 15.0 1.0 15.0
6...................................... 17.5 1.0 17.5
7...................................... 20.0 1.0 20.0
8...................................... 25.0 1.0 25.0
9...................................... -- 92.0 --
----- ----- -----
100.0 100.0 100.0
</TABLE>
The New Credit Facility is subject to mandatory prepayment: (i) with the net
after-tax cash proceeds of the sale or other disposition of any property or
assets of PCW or any of its subsidiaries in excess of $5 million per year,
subject to certain exceptions, (ii) with 50% of the net cash proceeds received
from the issuance of equity securities of Holdings or any of its subsidiaries,
(iii) with the net cash proceeds received from certain issuances of debt
securities by Holdings or any of its subsidiaries, (iv) with 50% of excess
cash flow (as defined in the New Credit Facility) for each fiscal year,
payable within 90 days after the end of the applicable fiscal year. All
mandatory prepayment amounts shall be applied first to the prepayment of the
term loan facility and thereafter to the prepayment of the revolving credit
facility.
Holdings and all existing or future subsidiaries of PCW are guarantors of
the New Credit Facility. PCW's obligations under the New Credit Facility are
secured by: (i) all existing and after-acquired personal property of PCW and
the subsidiary guarantors, including a pledge of all of the stock of all
existing or future subsidiaries of PCW, (ii) first-priority perfected liens on
all existing and after-acquired real property fee and leasehold interests of
PCW and the subsidiary guarantors, subject to customary permitted liens (as
defined in the New Credit Facility), (iii) a pledge by Holdings of the stock
of PCW and (iv) a negative pledge on all assets of PCW and its subsidiaries,
subject to exceptions.
The New Credit Facility contains customary covenants and restrictions on
PCW's ability to engage in certain activities, including, but not limited to:
(i) limitations on other indebtedness, liens, investments and guarantees, (ii)
restrictions on dividends and redemptions and payments on subordinated debt
and (iii) restrictions on mergers and acquisitions, sales of assets and
leases.
The New Credit Facility also contains financial covenants requiring PCW to
maintain a minimum total debt service coverage test, a minimum EBITDA test, a
minimum interest coverage test, a minimum fixed charge coverage test and a
maximum leverage test.
Borrowing under the New Credit Facility is subject to significant
conditions, including compliance with certain financial ratios and the absence
of any material adverse change. See "Risk Factors--Leverage, Liquidity and
Ability to Meet Required Debt Service."
69
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The New Notes will be issued under an Indenture, dated as of August 11, 1997
(the "Indenture"), by and among the Company, the Guarantor and Bank of
Montreal Trust Company, as trustee (the "Trustee"), which has been filed as an
exhibit to the Registration Statement of which this Prospectus constitutes a
part. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the TIA. The following summaries of
certain provisions of the Indenture are summaries only, do not purport to be
complete and are qualified in their entirety by reference to all of the
provisions of those documents. Unless the context otherwise requires, all
references to the "Company" in this section refer to Price Communications
Cellular Holdings, Inc. Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to them in the Indenture. Wherever
particular provisions of the Indenture are referred to in this summary, such
provisions are incorporated by reference as a part of the statements made and
such statements are qualified in their entirety by such reference.
The terms of the New Notes are identical in all material respects to the
terms of the Old Notes, except for certain transfer restrictions and
registration rights relating to the Old Notes and except that, if the Exchange
Offer is not consummated by February 7, 1998, Holders that have complied with
their obligations under the Registration Rights Agreement will be entitled,
subject to certain exceptions, to liquidated damages in an amount equal to
$0.05 per week per $1,000 principal amount at maturity of Old Notes held by
such Holder until May 8, 1998 and up to $0.25 per week per $1,000 principal
amount at maturity of Old Notes thereafter until the consummation of the
Exchange Offer.
The Notes are general obligations of the Company ranking senior to all
subordinated indebtedness of the Company and pari passu in right of payment to
all other existing and future Indebtedness of the Company. As of September 30,
1997, on a pro forma basis after giving effect to the Offering, the
application of the estimated net proceeds therefrom and the Acquisition and
related financings described herein under "Unaudited Pro Forma Condensed
Consolidated Financial Statements," the Company, on a consolidated basis,
would have had approximately $695.3 million of Indebtedness. The Company is a
holding company and, therefore, the Notes are effectively subordinated to all
liabilities (including trade payables) of the Company's subsidiaries
(including the Senior Subordinated Notes and the New Credit Facility). At
September 30, 1997, on a pro forma basis as described above, the Company's
subsidiaries would have had outstanding $620.0 million of Indebtedness,
including Indebtedness under the Senior Subordinated Notes and the New Credit
Facility, and $276.0 million of other liabilities including $197.1 million of
deferred income tax liabilities recorded in connection with the purchase
accounting treatment of the Acquisition and including trade payables. The
Notes are issued only in fully registered form, without coupons, in
denominations of $1,000 and integral multiples thereof.
The Notes will mature on August 1, 2007. Interest payable in cash will not
commence to accrue on the Notes prior to August 2, 2002. Thereafter, interest
on the Notes will commence to accrue at the rate of 13 1/2% per annum, payable
in cash semi-annually. The Old Notes were issued at a substantial discount
from their principal amount, and the original issue discount on the Notes will
accrete from the date of the original issuance of the Old Notes through August
1, 2002. Thereafter, the Notes will bear interest at the rate per annum stated
on the cover page of this Prospectus from August 2, 2002 or from the most
recent Interest Payment Date to which interest has been paid or provided for,
payable semi-annually on February 1 and August 1 of each year, commencing
February 1, 2003 to the Persons in whose names such Notes are registered at
the close of business on the January 15 or July 15 preceding such Interest
Payment Date.
The Indenture does not contain provisions which would afford Holders of the
Notes protection in the event of a decline in the Company's credit quality
resulting from highly leveraged or other similar transactions involving the
Company.
Principal of, premium, liquidated damages, if any, and interest on the Notes
will be payable, and, subject to the following provisions, the Notes may be
presented for registration of transfer or exchange, at the office or
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agency of the Company maintained for such purpose, which office or agency
shall be maintained in the Borough of Manhattan of The City of New York. At
the option of the Company, payment of interest may be made by check mailed to
the Holders of the Notes at the addresses set forth upon the registry books of
the Company. No service charge will be made for any registration of transfer
or exchange of Notes, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Until otherwise designated by the Company, the Company's office or agency will
be the corporate trust office of the Trustee presently located at Wall Street
Plaza, 88 Pine Street, 19th floor, New York, New York 10005 c/o Corporate
Trust Department.
As the Company conducts its operations through its subsidiaries, the
Company's ability to meet its cash obligations is dependent upon the ability
of its subsidiaries to make cash distributions to the Company. Furthermore,
any right of the Company to receive the assets of any of its subsidiaries upon
any such subsidiary's liquidation (and the consequent right of the Holders of
the Notes to participate in the distribution of the proceeds of those assets)
effectively will be subordinated by operation of law to the claims of such
subsidiary's creditors (including trade creditors) and holders of its
preferred stock, except to the extent that the Company is itself recognized as
a creditor or preferred stockholder of such subsidiary, in which case the
claims of the Company would still be subordinate to any indebtedness or
preferred stock of such subsidiary senior in right of payment to that held by
the Company. In the event of the liquidation, bankruptcy, reorganization,
insolvency, receivership or similar proceeding or any assignment for the
benefit of the creditors of the Company or a marshalling of assets or
liabilities of the Company, Holders of the Notes may receive ratably less than
other such creditors or interest holders.
RANKING
The Notes are senior obligations of Holdings. The Notes will rank pari passu
in right of payment with all future senior indebtedness of Holdings and will
rank senior in right of payment to all future subordinated indebtedness of
Holdings. The Notes are effectively subordinated to all liabilities of
Holdings's subsidiaries. On a pro forma basis after giving effect to the
Offering and the Acquisition and related financings, as of September 30, 1997,
Holdings would have had outstanding approximately $77.3 million of
Indebtedness and Holdings's subsidiaries would have had outstanding $620.0
million of Indebtedness, including Indebtedness under the Senior Subordinated
Notes and the New Credit Facility and $276.0 million of other liabilities
including $197.1 million of deferred income tax liabilities recorded in
connection with the purchase accounting treatment of the Acquisition and
including trade payables.
GUARANTEE
The Company's obligations under the Notes are unconditionally guaranteed
(the "Guarantee") by Price Communications Cellular Inc. (the "Guarantor"). See
"Description of the Guarantee"
NEGATIVE PLEDGE
Holdings is not permitted to pledge the stock of PCW except pursuant to the
Credit Agreement. Holdings is required to own 100% of the common stock of PCW.
SECURITY
The obligations of the Company with respect to the Notes are unsecured.
Pursuant to the Indenture, the Guarantor assigned and pledged to the Trustee,
for its benefit and the benefit of the Holders of the Notes, a security
interest in the capital stock of the Company and certain proceeds from time to
time received, receivable or otherwise distributed in respect thereof. See
"Description of the Guarantee--Security."
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REDEMPTION
Optional Redemption. Except as described under "Provisional Redemption"
below, the Company will not have the right to redeem any Notes prior to August
1, 2002. On or after August 1, 2002, the Company will have the right to redeem
all or any part of the Notes in cash at the redemption prices (expressed as a
percentage of the aggregate principal amount thereof) set forth below, in each
case including accrued and unpaid interest, if any, to the applicable
Redemption Date (subject to the right of Holders of record on the relevant
regular record date to receive interest due on an interest payment date that
is on or prior to the Redemption Date) if redeemed during the 12-month period
beginning August 1 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2002........................................................... 106.750%
2003........................................................... 104.500%
2004........................................................... 102.250%
2005 and thereafter............................................ 100.000%
</TABLE>
Provisional Redemption. On or after August 1, 1998, the Company will have
the right to redeem all or any part of the Notes in cash at 120.000% of the
Accreted Value thereof, including accrued and unpaid interest, if any, to the
applicable Redemption Date (subject to the right of Holders of record on the
relevant regular record date to receive interest due on an interest payment
date that is on or prior to the Redemption Date) if redeemed during the 12-
month period beginning August 1 of the years indicated below; provided that
redemptions may be made only if the closing price of PCC Common Stock equals
or exceeds the prices set forth below for the ten consecutive trading days
prior to the redemption date in each period:
<TABLE>
<CAPTION>
PCC
YEAR STOCK PRICE
---- -----------
<S> <C>
1998.......................................................... $15.00
1999.......................................................... $20.00
2000.......................................................... $25.00
2001.......................................................... $30.00
</TABLE>
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption on a pro rata basis or in such other manner as
it deems appropriate and fair. The Notes may be redeemed in part in multiples
of $1,000 only.
The Notes do not have the benefit of a sinking fund.
Subject to the following, notice of any redemption will be sent, by first-
class mail, at least 30 days and not more than 60 days prior to the date fixed
for redemption to the Holder of each Note to be redeemed to such Holder's last
address as then shown upon the books of the Registrar. Any notice which
relates to a Note to be redeemed in part only must state the portion of the
principal amount to be redeemed and must state that on and after the date
fixed for redemption, upon surrender of such Note, a new Note or Notes in a
principal amount equal to the unredeemed portion thereof will be issued. On
and after the date fixed for redemption, interest will cease to accrue on the
portions of the Notes called for redemption.
CERTAIN COVENANTS
Transactions not Subject to Covenants. Notwithstanding anything to the
contrary in the Indenture, the following transactions shall not be prohibited
by the Indenture (regardless of the form or substance of the transaction or
series of transactions effecting the same):
(i) the Merger, including, without limitation, (A) payments made by PCW
to fund (x) the cash consideration payable in the Merger (including,
whether or not required by the Merger Agreement, pursuant
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to statutory appraisal rights and any settlement thereof) to security
holders of Palmer and (y) fees and expenses incurred in connection with the
Merger, (B) the Incurrence, as a result of the Merger, of any Indebtedness
of Palmer or any subsidiary of Palmer, which Indebtedness was in existence
immediately prior to the Merger and not incurred in contemplation thereof,
(C) the assumption or the suffering to exist of any consensual encumbrance
or restriction on the ability of Palmer or any Subsidiary thereof to pay
dividends or make other distributions on the Capital Stock of any
Subsidiary or to pay or satisfy any obligation to Palmer or any of its
Subsidiaries or to otherwise transfer assets or make or pay loans or
advances to Palmer or any of its Subsidiaries, which encumbrance or
restriction was contained in an instrument that was in effect immediately
prior to the Merger and not put into place in contemplation thereof and (D)
the Incurrence or the suffering to exist of any Lien upon any of the
property or assets of Palmer or any of its Subsidiaries which Liens were in
existence immediately prior to the effectiveness of the Merger and not
imposed in contemplation thereof;
(ii) the dividend, distribution or other payment by Holdings of an amount
sufficient to redeem the PIK Preferred Stock and certain warrants to
purchase PCC Common Stock made directly or indirectly to PCC; and
(iii) any transaction involving FMT Ltd. (the partnership that holds the
system serving Ft. Myers) or any subsidiary of FMT Ltd. or any of their
assets or PCW's partnership interest in FMT Ltd. (each "FMT-Related
Assets") provided that, in the case of this clause (iii), no such
transaction shall (a) in and of itself cause or result in an increase in
the consolidated Indebtedness of the Company and its Restricted
Subsidiaries on and after the 45th day after the Merger Date from that
existing immediately prior to such transaction, (b) cause or result in the
sale of any asset of the Company other than FMT-Related Assets, (c) cause
or result in the imposition of any Lien on any property or assets of the
Company or any of its Restricted Subsidiaries other than solely upon an
FMT-Related Asset, (d) cause or result in the imposition of any encumbrance
or restriction on the ability of any Restricted Subsidiary of the Company
(other than FMT Ltd. or any subsidiary thereof) to pay dividends or make
other distributions on the Capital Stock of any Restricted Subsidiary of
the Company or pay or satisfy any obligation to the Company or any of its
Restricted Subsidiaries or otherwise transfer assets or make or pay loans
or advances to the Company or any of its Restricted Subsidiaries or (e)
cause or result in any dividend or distribution by the Company or any
Investment in any Person except a Restricted Subsidiary or a Subsidiary of
FMT Ltd.; provided, however, that prior to the 45th day after the Merger
Date the Company's consolidated Indebtedness may increase as a result of
such transaction by no more than $169 million (plus accrued interest
thereon). Notwithstanding the foregoing provisions of this covenant,
neither the Company nor any of its Restricted Subsidiaries (other than FMT
Ltd. or any of its Subsidiaries) shall make any Investment in FMT Ltd. or
any of its Subsidiaries.
In addition, the Merger shall not constitute a Change of Control and no
transaction described in clauses (ii) or (iii), above, shall be taken into
account in any calculation under "--Limitation on Restricted Payments."
Repurchase of Notes at the Option of the Holder Upon a Change of Control
The Indenture provides that in the event that a Change of Control has
occurred, each Holder of Notes will have the right, at such holder's option,
pursuant to an irrevocable and unconditional offer by the Company (the "Change
of Control Offer"), to require the Company to repurchase all or any part
(equal to $1,000 principal amount or an integral multiple thereof) of such
Holder's Notes, on a date (the "Change of Control Purchase Date") that is no
later than 45 Business Days after the occurrence of such Change of Control at
a cash price (the "Change of Control Purchase Price") equal to 101% of the
Accreted Value thereof, together with any accrued and unpaid interest to the
Change of Control Purchase Date. The Indenture provides, so long as the
Company has guaranteed the repayment of principal and interest on the Credit
Agreement, that prior to the commencement of a Change of Control Offer, but in
any event within 30 days following any Change of Control, the Company
covenants to, if at such time the terms of the Credit Agreement require
repayment upon a Change of Control, (i) repay in full and terminate all
commitments and Indebtedness under the Credit Agreement or, (ii)(A) offer to
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repay in full and terminate all commitments and all Indebtedness under the
Credit Agreement and (B) repay the Indebtedness owed to each such lender that
has accepted such offer or (iii) obtain the requisite consents under the
Credit Agreement to waive the provisions of this sentence. The Company's
failure to comply with the preceding sentence shall constitute an Event of
Default described in clause (iii) and not in clause (ii) under "Events of
Default," below. The Change of Control Offer shall be made within 20 Business
Days following a Change of Control and shall remain open for 20 Business Days
following its commencement (the "Change of Control Offer Period"). Upon
expiration of the Change of Control Offer Period, the Company shall purchase
all Notes properly tendered in response to the Change of Control Offer.
On or before the Change of Control Purchase Date, the Company will (i)
accept for payment Notes or portions thereof properly tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent cash sufficient to
pay the Change of Control Purchase Price (together with accrued and unpaid
interest) of all Notes so tendered and (iii) deliver to the Trustee Notes so
accepted together with an Officers' Certificate listing the Notes or portions
thereof being purchased by the Company. The Paying Agent promptly will deliver
to the Holders of Notes so accepted payment in an amount equal to the Change
of Control Purchase Price (together with any accrued and unpaid interest), and
the Trustee will promptly authenticate and mail or deliver to such Holders a
new Note equal in principal amount to any unpurchased portion of the Note
surrendered. Any Notes not so accepted will be promptly mailed or delivered by
the Company to the Holder thereof. The Company will announce publicly the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Purchase Date.
The Change of Control purchase feature of the Notes may make more difficult
or discourage a takeover of the Company or its Parent, and, thus, the removal
of incumbent management. The Change of Control purchase feature resulted from
negotiations between the Company, its Parent and the Initial Purchasers and is
not the result of any intention on the part of the Company or its Parent or
their management to discourage the acquisition of the Company or its Parent.
Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under
the Exchange Act and the rules thereunder and all other applicable Federal and
state securities laws and the Company may modify a Change of Control Offer to
the extent necessary to effect such compliance.
Limitation on Incurrence of Additional Indebtedness
The Indenture provides that after the Issue Date the Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
issue, create, incur, assume, guarantee or otherwise directly or indirectly
become liable for (including as a result of an acquisition), or otherwise
become responsible for, contingently or otherwise (individually or
collectively, to "Incur" or, as appropriate, an "Incurrence"), any
Indebtedness. Neither the accrual of interest (including the issuance of "pay
in kind" securities or similar instruments in respect of such accrued
interest) pursuant to the terms of Indebtedness Incurred in compliance with
this covenant, nor the accretion of original issue discount, nor the mere
extension of the maturity of any Indebtedness shall be deemed to be an
Incurrence of Indebtedness.
Notwithstanding the foregoing, if there exists no Default or Event of
Default immediately prior and subsequent thereto, (x) the Company may incur
Indebtedness if the Company's Annualized Operating Cash Flow Ratio, after
giving effect to the Incurrence of such Indebtedness, would have been less
than 8.5 to l and (y) PCW may incur Indebtedness if PCW's Annualized Operating
Cash Flow Ratio, after giving effect to the Incurrence of such Indebtedness,
would have been less than 8.0 to 1.
In addition, if there exists no Default or Event of Default immediately
prior and subsequent thereto, the foregoing limitations will not apply to the
Incurrence of (i) Indebtedness by the Company or any of its Restricted
Subsidiaries constituting Existing Indebtedness, reduced by repayments of and
permanent reductions in commitments in satisfaction of the Net Cash Proceeds
application requirement set forth in the "Limitation on
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Asset Sales and Sales of Subsidiary Stock" covenant and by repayments and
permanent reductions in amounts outstanding pursuant to scheduled
amortizations and mandatory prepayments in accordance with the terms thereof,
(ii) Indebtedness, in an aggregate principal amount not in excess of
$525,000,000, permitted under the Credit Agreement, reduced by (a) repayments
of and permanent reductions in commitments in satisfaction of the Net Cash
Proceeds application requirement set forth in the "Limitation on Asset Sales
and Sales of Subsidiary Stock" covenant and (b) an amount equal to the
aggregate amount of Indebtedness Incurred pursuant to clause (x) below, so
long as such amounts Incurred pursuant to clause (x) remain outstanding;
provided that, if there exists a Default or an Event of Default immediately
prior or subsequent thereto, the Company and its Restricted Subsidiaries may
Incur Indebtedness pursuant to this clause (ii) so long as the proceeds from
such Incurrence are not used directly or indirectly to pay any amounts owing
in respect of any Indebtedness, including, without limitation, principal,
interest and commitment fees, other than with respect to the Notes, (iii)
Indebtedness of the Company evidenced by the Notes and of PCW evidenced by the
Senior Subordinated Notes, (iv) (A) Permitted Acquisition Indebtedness of the
Company or PCW that satisfies the provisions of clause (x) of the definition
thereof or (B) Permitted Acquisition Indebtedness of any Restricted Subsidiary
that satisfies the provisions of clause (y) of the definition thereof, (v)
Indebtedness between the Company and any Restricted Subsidiary of the Company
or between Restricted Subsidiaries of the Company, provided that, in the case
of Indebtedness of the Company, such obligations shall be unsecured and
subordinated in all respects to the Holders' rights pursuant to the Notes, and
the date of any event that causes a Restricted Subsidiary no longer to be a
Restricted Subsidiary shall be an Incurrence Date with respect to such
Indebtedness, (vi) Capitalized Lease Obligations and Purchase Money
Indebtedness in an aggregate amount or aggregate principal amount, as the case
may be, outstanding at any time not to exceed in the aggregate $15,000,000,
provided that in the case of Purchase Money Indebtedness, such Indebtedness
shall not constitute less than 75% nor more than 100% of the cost (determined
in accordance with GAAP) to the Company or such Restricted Subsidiary of the
property purchased or leased with the proceeds thereof, (vii) Indebtedness of
the Company or any Restricted Subsidiary arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
guarantees or letters of credit, surety bonds or performance bonds securing
any obligations of the Company or its Restricted Subsidiaries pursuant to such
agreements, in any case Incurred in connection with the disposition of any
business, assets or Restricted Subsidiary of the Company to the extent none of
the foregoing results in the obligation to repay an obligation for money
borrowed by any Person and are limited in aggregate amount to no greater than
10% of the fair market value of such business, assets or Restricted Subsidiary
so disposed of, (viii) Indebtedness of the Company or any Restricted
Subsidiary under standby letters of credit or reimbursement obligations with
respect thereto issued in the ordinary course of business and consistent with
industry practices (other than under the New Credit Facility) limited in
aggregate amount to $5,000,000 at any one time outstanding, (ix) Indebtedness
of the Company or PCW (other than Indebtedness permitted by clauses (i)
through (viii) or (x) hereof) not to exceed $100,000,000 at any one time
outstanding and (x) Refinancing Indebtedness Incurred to extend, renew,
replace or refund Indebtedness permitted under clauses (i) (as so reduced in
amount), (ii) (as so reduced in amount), (iii), (iv) and (x) of this
paragraph.
Indebtedness of any Person that is not a Restricted Subsidiary of the
Company (or that is a Non-Recourse Restricted Subsidiary designated to be a
Restricted Subsidiary, but no longer a Non-Recourse Restricted Subsidiary),
which Indebtedness is outstanding at the time such Person becomes such a
Restricted Subsidiary of the Company or is merged with or into or consolidated
with the Company or a Restricted Subsidiary of the Company shall be deemed to
have been Incurred, as the case may be, at the time such Person becomes such a
Restricted Subsidiary of the Company, or is merged with or into or
consolidated with the Company or a Restricted Subsidiary of the Company.
Limitation on Restricted Payments
The Indenture provides that after the Issue Date the Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
make any Restricted Payment, if, immediately prior or after giving effect
thereto (a) a Default or an Event of Default would exist, (b) the Company's
Annualized Operating Cash Flow Ratio for the Reference Period would exceed 8.5
to 1, or (c) the aggregate amount of all Restricted
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Payments made by the Company and its Restricted Subsidiaries, including such
proposed Restricted Payment (if not made in cash, then the fair market value
of any property used therefor, as determined in good faith by the Board of
Directors) from and after the Issue Date and on or prior to the date of such
Restricted Payment, shall exceed the sum of (i) the amount determined by
subtracting (x) 2.0 times the aggregate Consolidated Interest Expense of the
Company for the period (taken as one accounting period) from the Issue Date to
the last day of the last full fiscal quarter prior to the date of the proposed
Restricted Payment (the "Computation Period") from (y) Operating Cash Flow of
the Company for the Computation Period, plus (ii) the aggregate Net Proceeds
(other than with respect to the PCC Equity Contribution consisting of cash or
Palmer stock) received by the Company from the sale (other than to a
Subsidiary of the Company) of its Qualified Capital Stock after the Issue Date
and on or prior to the date of such Restricted Payment, plus (iii) to the
extent not otherwise included in clauses (i) or (ii), above, an amount equal
to the net reduction in Investments in Unrestricted Subsidiaries resulting
from payments of dividends, repayment of loans or advances, or other transfers
of assets, in each case to the Company or any Wholly Owned Restricted
Subsidiary of the Company from Unrestricted Subsidiaries, or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued
in each case as provided in the definition of "Investments"), not to exceed,
in the case of any Unrestricted Subsidiary, the amount of Investments
previously made by the Company and any Restricted Subsidiary in such
Unrestricted Subsidiary.
Notwithstanding the foregoing paragraph, the provisions set forth in clause
(b) or (c) of the immediately preceding paragraph will not prohibit (i) the
use of an aggregate of $10,000,000 to be used for Restricted Payments not
otherwise permitted by this "Limitation on Restricted Payments" covenant, (ii)
the distribution of amounts to Holdings sufficient to pay (x) the scheduled
interest owed by Holdings on the Notes as such interest becomes due and
payable and (y) amounts required to redeem the PIK Preferred Stock and certain
warrants to purchase PCC Common Stock and (iii) any dividend, distribution or
other payment by any Restricted Subsidiary on shares of its Capital Stock that
is paid pro rata to all holders of such Capital Stock, and notwithstanding the
foregoing paragraph, the provisions set forth in clause (a), (b) or (c) of the
immediately preceding paragraph will not prohibit (iv) the payment of any
dividend within 60 days after the date of its declaration if such dividend
could have been made on the date of its declaration in compliance with the
foregoing provisions, or (v) the redemption, defeasance, repurchase or other
acquisition or retirement of any Indebtedness or Capital Stock of the Company
or its Restricted Subsidiaries either in exchange for or out of the Net
Proceeds of the substantially concurrent sale (other than to a Subsidiary of
the Company) of Qualified Capital Stock (in the case of any redemption,
defeasance, repurchase or other acquisition or retirement of any Junior
Indebtedness or Capital Stock of the Company or its Restricted Subsidiaries)
or Junior Indebtedness (in the case of any redemption, defeasance, repurchase
or other acquisition or retirement of any Indebtedness of the Company or its
Restricted Subsidiaries) of the Company.
In determining the aggregate amount expended for Restricted Payments in
accordance with clause (c) of the first paragraph of this description of the
"Limitations on Restricted Payments" covenant, 100% of the amounts expended
under clauses (i) through (v) of the immediately preceding paragraph shall be
deducted.
Limitation on Restricting Subsidiary Dividends
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, with respect to securities issued directly
thereby or with respect to which they are obligors, directly or indirectly,
create, assume or suffer to exist any consensual encumbrance or restriction on
the ability of any Restricted Subsidiary of the Company to pay dividends or
make other distributions on the Capital Stock of any Restricted Subsidiary of
the Company or pay or satisfy any obligation to the Company or any of its
Restricted Subsidiaries or otherwise transfer assets or make or pay loans or
advances to the Company or any of its Restricted Subsidiaries, except
encumbrances and restrictions existing under (i) any Indebtedness permitted by
the Indenture to be incurred by PCW or any of its Subsidiaries that are
Restricted Subsidiaries, (ii) the indentures governing the Notes and the
Senior Subordinated Notes, (iii) any Existing Indebtedness, (iv) the Credit
Agreement, (v) any applicable law or any governmental or administrative
regulation or order, (vi) Refinancing Indebtedness permitted under the
Indenture, provided that the restrictions contained in the instruments
governing such
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Refinancing Indebtedness are no more restrictive in the aggregate than those
contained in the instruments governing the Indebtedness being refinanced
immediately prior to such refinancing, (vii) restrictions with respect solely
to a Restricted Subsidiary of the Company imposed pursuant to a binding
agreement which has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Restricted
Subsidiary, provided such restrictions apply solely to the Capital Stock or
assets being sold of such Restricted Subsidiary, (viii) restrictions contained
in any agreement relating to the financing of the acquisition of a Person or
real or tangible personal property after the Issue Date which are not
applicable to any Person or property, other than the Person or property so
acquired and which either (A) were not put in place in anticipation of or in
connection with such acquisition or (B) constituted Permitted Acquisition
Indebtedness of a Person satisfying the provisions of clause (y) of the
definition thereof or (ix) any agreement (other than those referred to in
clause (viii)) of a Person acquired by the Company or a Restricted Subsidiary
of the Company, which restrictions existed at the time of acquisition and were
not put in place in anticipation of or in connection with such acquisition.
Notwithstanding the foregoing, neither (a) customary provisions restricting
subletting or assignment of any lease entered into the ordinary course of
business, consistent with past practices nor (b) Liens on assets securing
Indebtedness, shall in and of themselves be considered a restriction on the
ability of the applicable Restricted Subsidiary to transfer such agreement or
assets, as the case may be.
Limitation on Transactions with Related Persons
The Indenture provides that, after the Issue Date, the Company will not, and
will not permit any of its Restricted Subsidiaries or Unrestricted
Subsidiaries to, enter into any contract, agreement, arrangement or
transaction with any Related Person (each a "Related Person Transaction"), or
any series of Related Person Transactions, except for transactions made in
good faith, the terms of which are (i) fair and reasonable to the Company or
such Subsidiary, as the case may be, and (ii) are at least as favorable as the
terms which could be obtained by the Company or such Subsidiary, as the case
may be, in a comparable transaction made on an arm's length basis with Persons
who are not Related Persons.
Without limiting the foregoing, (a) any Related Person Transaction or series
of Related Person Transactions with an aggregate value in excess of $1,000,000
must first be approved by a majority of the Board of Directors of the Company
who are disinterested in the subject matter of the transaction pursuant to a
Board Resolution, and (b) with respect to any Related Person Transaction or
series of Related Person Transactions with an aggregate value in excess of
$5,000,000, the Company must first obtain a favorable written opinion from an
independent financial advisor of national reputation as to the fairness from a
financial point of view of such transaction to the Company or such Subsidiary,
as the case may be.
Notwithstanding the foregoing, the following shall not constitute Related
Person Transactions: (i) reasonable and customary payments on behalf of
directors, officers or employees of the Company or any of its Restricted
Subsidiaries, or in reimbursement of reasonable and customary payments or
reasonable and customary expenditures made or incurred by such Persons as
directors, officers or employees, (ii) any contract, agreement, arrangement,
or transaction solely between or among the Company and any of its Restricted
Subsidiaries or between or among Restricted Subsidiaries of the Company, (iii)
any Restricted Payment of the type described by clauses (i) and (ii) of the
definition thereof made to all stockholders on a pro rata basis and not
prohibited by the "Limitation on Restricted Payments" covenant, (iv) any loan
or advance by the Company or a Restricted Subsidiary to employees of the
Company or a Restricted Subsidiary in the ordinary course of business, in an
aggregate amount at any one time outstanding not to exceed $500,000 and (v)
any payment pursuant to a tax-sharing agreement between the Company and any
other Person with which the Company is required or permitted to file a
consolidated tax return or with which the Company is or could be part of a
consolidated group for tax purposes, which payments are not in excess of the
tax liabilities attributable solely to the Company and its Restricted
Subsidiaries (as a consolidated group).
Limitation on Asset Sales and Sales of Subsidiary Stock
The Indenture provides that after the Issue Date the Company will not, and
will not permit any of its Restricted Subsidiaries to, in one or a series of
related transactions, convey, sell, transfer, assign or otherwise dispose of,
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directly or indirectly, any of its property, businesses or assets, including
by merger or consolidation, and including any sale or other transfer or
issuance of any Capital Stock of any Restricted Subsidiary of the Company,
whether by the Company or a Restricted Subsidiary (an "Asset Sale"), unless
(1) (a) within 360 days after the date of such Asset Sale, an amount equal to
the Net Cash Proceeds therefrom (the "Asset Sale Offer Amount") are applied to
the optional redemption of the Notes in accordance with the terms of the
Indenture and other Indebtedness of the Company ranking on a parity with the
Notes from time to time outstanding with similar provisions requiring the
Company to make an offer to purchase or to redeem such Indebtedness with the
proceeds from asset sales, pro rata in proportion to the respective principal
amounts (or accreted values in the case of Indebtedness issued with an
original issue discount) of the Notes and such other Indebtedness then
outstanding or to the repurchase of the Notes and such other Indebtedness
pursuant to an irrevocable, unconditional offer (pro rata in proportion to the
respective principal amounts (or accreted values in the case of Indebtedness
issued with an original issue discount) of the Notes and such other
Indebtedness then outstanding) (the "Asset Sale Offer") to repurchase such
Indebtedness at a purchase price (the "Asset Sale Offer Price") of 100% of the
Accreted Value thereof in the case of the Notes or 100% of the principal
amount of such other Indebtedness (or accreted value in the case of
Indebtedness issued with an original issue discount) plus, in each case,
accrued interest to the date of payment, made within 330 days of such Asset
Sale, or (b) within 330 days of such Asset Sale, the Asset Sale Offer Amount
is (i) invested (or committed, pursuant to a binding commitment subject only
to reasonable, customary closing conditions, to be invested, and in fact is so
invested, within an additional 90 days) in tangible assets and property (other
than notes, obligations or securities), which in the good faith reasonable
judgment of the Board of Directors of the Company are of a type used in a
Related Business, or Capital Stock of a Person (which, if such Person becomes
a Subsidiary of the Company by virtue of such Asset Sale, shall initially be
designated a Restricted Subsidiary) all or substantially all of whose assets
and property (in the good faith reasonable judgment of the Board of Directors
of the Company) are of a type used in a Related Business (provided that, with
respect to such Capital Stock, all of the requirements of the last proviso of
clause (v) of the following paragraph shall have been satisfied), or (ii) used
to retire permanently Indebtedness of a Restricted Subsidiary, (2) with
respect to any transaction or related series of transactions of securities,
property or assets with an aggregate fair market value in excess of
$1,000,000, at least 75% of the value of consideration for the assets disposed
of in such Asset Sale (excluding (a) pari passu Indebtedness (and any
Refinancing Indebtedness issued to refinance any such Indebtedness) or
Indebtedness of any Restricted Subsidiary assumed by a transferee which
assumption permanently reduces the amount of Indebtedness outstanding on the
Issue Date and permitted to have been Incurred pursuant to the covenant
"Limitation on Incurrence of Additional Indebtedness" (including that in the
case of a revolver or similar arrangement that makes credit available, such
commitment is permanently reduced by such amount), (b) Purchase Money
Indebtedness secured exclusively by the assets subject to such Asset Sale
which is assumed by a transferee and (c) marketable securities that are
promptly converted into cash or Cash Equivalents) consists of cash or Cash
Equivalents, provided that any cash or Cash Equivalents received within 12
months following any such Asset Sale upon conversion of any property or assets
(other than in the form of cash or Cash Equivalents) received in consideration
of such Asset Sale shall be applied promptly in the manner required of Net
Cash Proceeds of any such Asset Sale as set forth above, (3) no Default or
Event of Default shall occur or be continuing after giving effect to, on a pro
forma basis, such Asset Sale, unless such Asset Sale is in consideration
solely of cash or Cash Equivalents and such consideration is applied
immediately to the permanent reduction of the principal amount of Indebtedness
outstanding pursuant to the Credit Agreement, and (4) the Board of Directors
of the Company determines in good faith that the Company or such Restricted
Subsidiary, as applicable, would receive fair market value in consideration of
such Asset Sale. The Indenture provides that an Asset Sale Offer may be
deferred until the accumulated Net Cash Proceeds from Asset Sales not applied
to the uses set forth in (1) (b) above exceeds $5,000,000 and that each Asset
Sale Offer shall remain open for 20 Business Days following its commencement
and no longer, except as otherwise required by applicable law (the "Asset Sale
Offer Period"). Upon expiration of the Asset Sale Offer Period, the Company
shall apply the Asset Sale Offer Amount, plus an amount equal to accrued
interest to the purchase of all Indebtedness properly tendered (on a pro rata
basis as described above if the Asset Sale Offer Amount is insufficient to
purchase all Indebtedness so tendered) at the Asset Sale Offer Price (together
with accrued interest).
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Notwithstanding the foregoing provisions of the prior paragraph:
(i) the Company and its Restricted Subsidiaries may, in the ordinary
course of business, convey, sell, lease, transfer, assign or otherwise
dispose of assets acquired and held for resale in the ordinary course of
business;
(ii) the Company and its Restricted Subsidiaries may convey, sell, lease,
transfer, assign or otherwise dispose of assets pursuant to and in
accordance with the "Limitation on Mergers, Sales or Consolidations";
(iii) the Company and its Restricted Subsidiaries may sell or dispose of
damaged, worn out or other obsolete property in the ordinary course of
business so long as such property is no longer necessary for the proper
conduct of the business of the Company or such Restricted Subsidiary, as
applicable;
(iv) the Company and its Restricted Subsidiaries may convey, sell, lease,
transfer, assign or otherwise dispose of assets to the Company or any of
its Restricted Subsidiaries; and
(v) the Company and its Restricted Subsidiaries may, in the ordinary
course of business (or, if otherwise than in the ordinary course of
business, upon receipt of a favorable written opinion by an independent
financial advisor of national reputation as to the fairness from a
financial point of view to the Company or such Restricted Subsidiary of the
proposed transaction), exchange all or a portion of its property,
businesses or assets for property, businesses or assets which, or Capital
Stock of a Person all or substantially all of whose assets, are of a type
used in a Related Business (provided that such Person shall initially be
designated a Restricted Subsidiary if such Person becomes a Subsidiary of
the Company by virtue of such Asset Sale), or a combination of any such
property, businesses or assets, or Capital Stock of such a Person and cash
or Cash Equivalents; provided that (i) there shall not exist immediately
prior or subsequent thereto a Default or an Event of Default, (ii) a
majority of the independent directors of the Board of Directors of the
Company shall have approved a resolution of the Board of Directors that
such exchange is fair to the Company or such Restricted Subsidiary, as the
case may be, and (iii) any cash or Cash Equivalents received pursuant to
any such exchange shall be applied in the manner applicable to Net Cash
Proceeds from an Asset Sale as set forth pursuant to the provisions of the
immediately preceding paragraph of this covenant; and provided, further,
that any Capital Stock of a Person received in an Asset Sale pursuant to
this clause (v) shall be owned directly by the Company or a Restricted
Subsidiary and, when combined with the Capital Stock of such Person already
owned by the Company and its Restricted Subsidiaries, shall constitute a
majority of the voting power and Capital Stock of such Person, unless (A)
(i) the Company has received a binding commitment from such Person (or the
direct or indirect parent of such Person) that such Person (or the direct
or indirect parent of such Person) will distribute to the Company in cash
an amount equal to the Company's Annualized Operating Cash Flow (determined
as of the date of such Asset Sale) attributable to the property, business
or assets of the Company and its Restricted Subsidiaries exchanged in
connection with such Asset Sale during each consecutive 12-month period
subsequent to such Asset Sale (unless and until the Company shall have sold
all of such Capital Stock, provided that the provisions of clause (B)
below, if applicable, shall have been satisfied), (ii) immediately after
such Asset Sale the aggregate number of Net Pops of the wireless
communications systems in which the Company or any of its Restricted
Subsidiaries has ownership interests ("Company Systems") that are owned
directly by a Person or Persons a majority of whose voting power and
Capital Stock is owned directly or indirectly by the Company is no less
than 80% of the aggregate number of Net Pops of Company Systems immediately
prior to such Asset Sale and (iii) upon consummation of such Asset Sale, on
a pro forma basis, the ratio of such Person's Annualized Operating Cash
Flow to the product of Consolidated Interest Expense for the Reference
Period multiplied by four (but excluding from Consolidated Interest Expense
all amounts that are not required to be paid in cash on a current basis)
shall be at least 1 to 1, or (B) in the case of Capital Stock of a Person
that is not a Subsidiary of the Company owned by the Company or a
Restricted Subsidiary that is exchanged (the "Exchanged Capital Stock") for
Capital Stock of another Person all or substantially all of whose assets
are of a type used in a Related Business, either (i) the Exchanged Capital
Stock shall not have been acquired prior to such Asset Sale in reliance
upon clause (A) of this proviso or (ii) the requirements of subclauses (A)
(i) (based on the original guaranteed cash flow) and (A) (iii) shall be
satisfied with respect to any Capital Stock acquired in consideration of
the Exchanged Capital Stock.
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Restricted Payments that are made in compliance with, and are counted
against amounts available to be made as Restricted Payments pursuant to clause
(c) of, the "Limitation on Restricted Payments" covenant, without giving
effect to clause (i) of the second paragraph thereof, shall not be deemed to
be Asset Sales.
Any Asset Sale Offer shall be made in compliance with all applicable laws,
rules, and regulations, including, if applicable, Regulation 14E of the
Exchange Act and the rules and regulations thereunder and all other applicable
Federal and state securities laws.
Limitations on Liens
The Indenture provides that the Company will not and will not permit any
Restricted Subsidiary, directly or indirectly, to Incur or suffer to exist any
Lien (other than Permitted Liens) upon any of its property or assets, whether
now owned or hereafter acquired.
Limitation on Status as Investment Company
The Indenture prohibits the Company and its Restricted Subsidiaries from
becoming "investment companies" (as that term is defined in the Investment
Company Act of 1940, as amended), or from otherwise becoming subject to
regulation under the Investment Company Act.
Limitation on Merger, Sale or Consolidation
The Indenture provides that the Company will not consolidate with or merge
with or into another Person, or sell, lease, convey, transfer or otherwise
dispose of all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions,
to another Person or group of affiliated Persons, unless (i) either (a) the
Company is the continuing entity or (b) the resulting, surviving or transferee
entity is a corporation organized under the laws of the United States, any
state thereof or the District of Columbia and expressly assumes by
supplemental indenture all of the obligations of the Company in connection
with the Notes and the Indenture; (ii) no Default or Event of Default shall
exist or shall occur immediately after giving effect on a pro forma basis to
such transaction; (iii) (A) immediately after giving effect to such
transaction on a pro forma basis, the consolidated resulting surviving or
transferee entity would immediately thereafter be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Annualized Operating Cash
Flow Ratio provision set forth in the second paragraph of the "Limitation on
Incurrence of Additional Indebtedness" covenant or (B), if the requirement of
clause (A) is not satisfied, (x) any Indebtedness of the resulting surviving
or transferee entity in excess of the amount of the Company's Indebtedness
immediately prior to such transaction is Permitted Acquisition Indebtedness
and (y) the requirement of clause (A) is not satisfied solely due to the
Incurrence of such Permitted Acquisition Indebtedness; and (iv) the Company
shall have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, if applicable, confirming compliance with the requirements of this
covenant.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company in accordance with the foregoing, the successor
corporation formed by such consolidation or into which the Company is merged
or to which such transfer is made, shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under the Indenture
with the same effect as if such successor corporation had been named therein
as the Company, and the Company shall be released from the obligations under
the Notes and the Indenture.
Limitation on Lines of Business
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries shall directly or indirectly engage in any line or lines of
business activity other than that which, in the reasonable, good faith
judgment of the Board of Directors of the Company, is a Related Business.
Restriction on Sale and Issuance of Subsidiary Stock
The Indenture provides that the Company will not sell, and will not permit
any of its Restricted Subsidiaries to issue or sell, any shares of Capital
Stock of any Restricted Subsidiary of the Company other than Disqualified
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Capital Stock of PCW to any Person other than the Company or a Wholly Owned
Restricted Subsidiary of the Company, except for shares of common stock with
no preferences or special rights or privileges and with no redemption or
prepayment provisions ("Special Rights"); provided that, in the case of a
Restricted Subsidiary that is a partnership or joint venture partnership (a
"Restricted Partnership") the Company or any of its Restricted Subsidiaries
may sell or such Restricted Partnership may issue or sell Capital Stock of
such Restricted Partnership with Special Rights no more favorable than those
held by the Company or such Restricted Subsidiary in such Restricted
Partnership. Notwithstanding the foregoing, Holdings is required to own 100%
of the capital stock of PCW.
REPORTS
The Indenture provides that whether or not the Company is subject to the
reporting requirements of Section 13 or 15 (d) of the Exchange Act, the
Company shall deliver to the Trustee and to each Holder, within 15 days after
it is or would have been required to file such with the Commission, annual and
quarterly financial statements substantially equivalent to financial
statements that would have been included in reports filed with the Commission,
if the Company were subject to the requirements of Section 13 or 15(d) of the
Exchange Act, including, with respect to annual information only, a report
thereon by the Company's certified independent public accountants as such
would be required in such reports to the Commission, and in each case,
together with a management's discussion and analysis of financial condition
and results of operations which would be so required.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by the Company
to pay any installment of interest on the Notes as and when the same becomes
due and payable and the continuance of any such failure for 30 days, (ii) the
failure by the Company to pay all or any part of the Accreted Value, or
premium, if any, on the Notes when and as the same becomes due and payable at
maturity, redemption, by acceleration or otherwise, including, without
limitation, payment of the Change of Control Purchase Price or the Asset Sale
Offer Price, (iii) the failure by the Company to observe or perform any other
covenant or agreement contained in the Notes or the Indenture and, subject to
certain exceptions, the continuance of such failure for a period of 30 days
after written notice is given to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in aggregate principal amount
of the Notes outstanding, (iv) certain events of bankruptcy, insolvency or
reorganization in respect of the Company or any of its Significant Restricted
Subsidiaries, (v) the failure to pay at final stated maturity (giving effect
to any applicable grace periods and any extensions thereof) the principal
amount of any Indebtedness of the Company or any Restricted Subsidiary of the
Company or the acceleration of the final stated maturity of any Indebtedness
if the aggregate principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to pay
principal at final maturity or which has been accelerated, aggregates
$15,000,000 or more at any time, and (vi) final unsatisfied judgments not
covered by insurance aggregating in excess of $5,000,000, at any one time
rendered against the Company or any of its Restricted Subsidiaries and not
stayed, bonded or discharged within 60 days. The Indenture provides that if a
default occurs and is continuing, the Trustee must, within 90 days after the
occurrence of such default, give to the Holders notice of such default.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (iv) above) relating to the Company or any
Restricted Subsidiary, then in every such case, unless the Accreted Value of
all of the Notes shall have already become due and payable, either the Trustee
or the Holders of 25% in aggregate principal amount of the Notes then
outstanding, by notice in writing to the Company (and to the Trustee if given
by Holders) (an "Acceleration Notice"), may declare the Accreted Value and
accrued interest thereon, if applicable, to be due and payable and the same
(i) shall become immediately due and payable or (ii) if there are any amounts
outstanding under the Credit Agreement and the Company has guaranteed the
repayment of principal and interest on the Credit Agreement, shall become
immediately due and payable upon the first to occur of an acceleration under
the Credit Agreement or five business days after receipt by the Company and
the representative of the holders of the Indebtedness under the Credit
Agreement of the Acceleration Notice, but
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only if such Event of Default is then continuing. If an Event of Default
specified in clause (iv) above, relating to the Company or any significant
Restricted Subsidiary occurs, the Accreted Value and accrued interest, if
applicable, thereon will be immediately due and payable on all outstanding
Notes without any declaration or other act on the part of Trustee or the
Holders. The Holders of a majority in aggregate principal amount of Notes
generally are authorized to rescind such acceleration if all existing Events
of Default, other than the non-payment of the Accreted Value of, premium, if
any, and interest on the Notes which have become due solely by such
acceleration, have been cured or waived.
The Indenture provides that in the event of a declaration of acceleration of
the Notes because an Event of Default has occurred and is continuing as a
result of the acceleration of any Indebtedness described in clause of (v) of
the first paragraph under "--Events of Default and Remedies," the declaration
of acceleration of the Notes shall be automatically annulled if the holders of
all Indebtedness described in clause (v) (without any payment of any holders
of any such Indebtedness) have rescinded the declaration of acceleration in
respect of such Indebtedness within 30 days of the date of such declaration
and if (i) the annulment of the acceleration of the Notes would not conflict
with any judgment or decree of a court of competent jurisdiction and (ii) all
Events of Default, except nonpayment of principal or interest on the Notes
that became due solely because of the acceleration of the Notes, have been
cured or waived.
The Holders of a majority in aggregate principal amount of the Notes at the
time outstanding may waive on behalf of all the Holders any default, except a
default in the payment of the Accreted Value of or interest on any Note not
yet cured, or a default with respect to any covenant or provision which cannot
be modified or amended without the consent of the Holder of each outstanding
Note affected. Subject to the provisions of the Indenture relating to the
duties of the Trustee, the Trustee will be under no obligation to exercise any
of its rights or powers under the Indenture at the request, order or direction
of any of the Holders, unless such Holders have offered to the Trustee
reasonable security or indemnity. Subject to all provisions of the Indenture
and applicable law, the Holders of a majority in aggregate principal amount of
the Notes at the time outstanding will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may, at its option and at any time,
elect to have its obligations discharged with respect to the outstanding Notes
("Legal Defeasance"). Such Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented, and
the Indenture shall cease to be of further effect as to all outstanding Notes,
except as to (i) rights of Holders to receive payments in respect of the
principal of, premium, if any, and interest on such Notes when such payments
are due from the trust funds; (ii) the Company's obligations with respect to
such Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes, and the maintenance of an office
or agency for payment and money for security payments held in trust; (iii) the
rights, powers, trust, duties, and immunities of the Trustee, and the
Company's obligations in connection therewith; and (iv) the Legal Defeasance
provisions of the Indenture. In addition, the Company may, at its option and
at any time, elect to have the obligations of the Company released with
respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described
under "Events of Default" will no longer constitute an Event of Default with
respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, U.S. Legal Tender, non-callable government
securities or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on such Notes on the
stated date for payment thereof or on the redemption date of such principal or
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installment of principal of, premium, if any, or interest on such Notes, and
the holders of Notes must have a valid, perfected, exclusive security interest
in such trust; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from,
or there has been published by the Internal Revenue Service, a ruling or (B)
since the date of the Indenture, there has been a change in the applicable
Federal income tax law, in each case to the effect that, and based thereon
such opinion of counsel shall confirm that, the holders of such Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such Legal Defeasance, and will be subject to Federal income tax in the same
amount, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to such Trustee confirming
that the holders of such Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will
be subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance had
not occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit; (v) such Legal Defeasance or
Covenant Defeasance shall not result in a breach or violation of, or
constitute a default under the Indenture or any other material agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company shall
have delivered to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders
of such Notes over any other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding any other creditors of the
Company or others; and (vii) the Company shall have delivered to the Trustee
an Officers' Certificate stating that all conditions precedent provided for or
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Company and the Trustee to
enter into a supplemental indenture for certain limited purposes without the
consent of the Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding,
the Company and the Trustee are permitted to amend or supplement the Indenture
or any supplemental indenture or modify the rights of the Holders; provided
that no such modification may, without the consent of each Holder affected
thereby: (i) change the Stated Maturity of any Note, or reduce the principal
amount thereof or the rate (or extend the time for payment) of interest
thereon or any premium payable upon the redemption thereof, or change the
place of payment where, or the coin or currency in which, any Note or any
premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption Date), or
reduce the Change of Control Purchase Price, or the Asset Sale Offer Price or
alter the security or redemption provisions or the provisions of the
"Repurchase of Notes at the Option of the Holder Upon a Change of Control"
covenant in a manner adverse to the Holders, or (ii) reduce the percentage in
principal amount of the outstanding Notes, the consent of whose Holders is
required for any such amendment, supplemental indenture or waiver provided for
in the Indenture, or (iii) modify any of the waiver provisions, except to
increase any required percentage or to provide that certain other provisions
of the Indenture cannot be modified or waived without the consent of the
Holder of each outstanding Note affected thereby. With the consent of Holders
of two-thirds of the outstanding aggregate principal amount of the Notes, the
Company and the Trustee are permitted to change the Change of Control Purchase
Date and the Asset Sale Offer Period.
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS
The Indenture provides that no direct or indirect stockholder, employee,
officer or director, as such, past, present or future of the Company or any
successor entity shall have any personal liability in respect of the
obligations of the Company under the Indenture or the Notes by reason of his
or its status as such stockholder, employee, officer or director.
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CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms contained in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Accreted Value" means, as of any date of determination prior to August 1,
2002, the sum of (a) the initial offering price of each Unit and (b) the
portion of the excess of the principal amount of each Note over such initial
offering price which shall have been accreted thereon through such date, such
amount to be so accreted at the rate of 13 1/2% per annum of the initial
offering price of the Units, compounded semi-annually on each February 1 and
August 1, from the date of issuance of the Units through the date of
determination. On and after August 1, 2002, the Accreted Value of the Notes
shall be equal to the principal amount thereof.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person or (ii) any officer,
director, or controlling stockholder of such other Person. For purposes of
this definition, the term "control" means (a) the power to direct the
management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by
contract, or otherwise, or without limiting the foregoing, the beneficial
ownership of 10% or more of the voting power of the voting common equity of
such Person (on a fully diluted basis) or of warrants or other rights to
acquire such equity (whether or not presently exercisable).
"Annualized Operating Cash Flow" on any date, means with respect to any
Person the Operating Cash Flow for the Reference Period multiplied by four.
"Annualized Operating Cash Flow Ratio" on any date (the "Transaction Date")
means, with respect to any Person and its Subsidiaries, the ratio of (i)
consolidated Indebtedness of such Person and its Subsidiaries on the
Transaction Date (after giving pro forma effect to the Incurrence of such
Indebtedness) divided by (ii) the aggregate amount of Annualized Operating
Cash Flow of such Person (determined on a pro forma basis after giving effect
to all acquisitions or dispositions of businesses made by such Person and its
Subsidiaries from the beginning of the Reference Period through the
Transaction Date as if such acquisition or disposition had occurred at the
beginning of such Reference Period); provided that for purposes of such
computation, in calculating Annualized Operating Cash Flow and consolidated
Indebtedness, (a) the transaction giving rise to the need to calculate the
Annualized Operating Cash Flow Ratio will be assumed to have occurred (on a
pro forma basis) on the first day of the Reference Period; (b) the incurrence
of any Indebtedness during the Reference Period or subsequent thereto and on
or prior to the Transaction Date (and the application of the proceeds
therefrom to the extent used to retire Indebtedness or to acquire businesses)
will be assumed to have occurred (on a pro forma basis) on the first day of
such Reference Period; (c) Consolidated Interest Expense attributable to any
Indebtedness (whether existing or being incurred) bearing a floating interest
rate shall be computed as if the rate in effect on the Transaction Date had
been the applicable rate for the entire period; and (d) all members of the
consolidated group of such Person on the Transaction Date that were acquired
during the Reference Period shall be deemed to be members of the consolidated
group of such Person for the entire Reference Period. When the foregoing
definition is used in connection with the Company and its Restricted
Subsidiaries, references to a Person and its Subsidiaries in the foregoing
definition shall be deemed to refer to the Company and its Restricted
Subsidiaries and when used in connection with PCW and its Subsidiaries shall
be deemed to refer to PCW and its Subsidiaries that are Restricted
Subsidiaries.
"Capitalized Lease Obligations" means obligations under a lease that are
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations, as determined in accordance with
GAAP.
"Capital Stock" means, with respect to any Person, any capital stock of such
Person and shares, interests, participations or other ownership interests
(however designated) of any Person and any rights (other than debt
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securities convertible into capital stock), warrants and options to purchase
any of the foregoing, including (without limitation) each class of common
stock and preferred stock of such Person if such Person is a corporation and
each general and limited partnership interest of such Person if such Person is
a partnership.
"Cash Equivalents" means (i) Securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) in each case maturing within
one year after the date of acquisition, (ii) time deposits and certificates of
deposit and commercial paper issued by the parent corporation of any domestic
commercial bank of recognized standing having capital and surplus in excess of
$500 million and commercial paper issued by others rated at least A-2 or the
equivalent thereof by Standard & Poor's Corporation or at least P-2 or the
equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing within one year after the date of acquisition and (iii) investments
in money market funds substantially all of whose assets comprise securities of
the types described in clauses (i) and (ii) above.
"Change of Control" means (i) any sale, transfer or other conveyance,
whether direct or indirect, of a majority of the fair market value of the
assets of the Company or Parent, on a consolidated basis, in one transaction
or a series of related transactions, if, immediately after giving effect to
such transaction, any "person" or "group" (as such terms are used for purposes
of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable),
other than an Excluded Person or Excluded Group or, if the Company is a direct
or indirect Subsidiary of any other Person immediately prior to such
transaction, other than such other Person or any Subsidiary of such other
Person that is a Parent or a Subsidiary of the Company, is or becomes the
"beneficial owner" (as such term is used in Rule l3d-3 promulgated pursuant to
the Exchange Act), directly or indirectly, of more than 50% of the equity of
the transferee, (ii) any person or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable), other than an Excluded Person or Excluded Group, is or becomes
the "beneficial owner" (as such term is used in Rule l3d-3 promulgated
pursuant to the Exchange Act), directly or indirectly, of more than 50% of the
equity of the Company (unless the Company is a direct or indirect Subsidiary
of any other Person at any time of determination, in which case, of more than
50% of the equity of such other Person) then outstanding normally entitled to
vote in elections of directors, or (iii) during any period of 12 consecutive
months after the Issue Date, individuals who at the beginning of any such 12-
month period constituted the Board of Directors of the Company or Parent
(together with any new directors whose election by such Board or whose
nomination for election by the shareholders of the Company or Parent was
approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company or Parent then
in office; provided, however, that a merger or consolidation of Parent with or
into PriCellular Corporation will not be deemed to be a Change of Control.
"Consolidated Interest Expense" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued,
or scheduled to be paid or accrued (including, in accordance with the
following sentence, interest attributable to the Capitalized Lease
Obligations) of such Person and its consolidated Subsidiaries during such
period, including (i) original issue discount and non-cash interest payments
or accruals on any Indebtedness, (ii) the interest portion of all deferred
payment obligations, and (iii) all commissions, discounts and other fees and
charges owed with respect to bankers' acceptances and letters of credit
financings and currency and Interest Swap and Hedging Obligations, in each
case to the extent attributable to such period, and (b) the amount of
dividends accrued or payable by such Person or any of its consolidated
Subsidiaries in respect of Preferred Stock (other than by Restricted
Subsidiaries of such Person to such Person or such Person's Wholly Owned
Subsidiaries). For purposes of this definition, (x) interest on a Capitalized
Lease Obligation shall be deemed to accrue at an interest rate reasonably
determined by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (y) interest expense
attributable to any Indebtedness represented by the guaranty by such Person or
a Subsidiary of such Person of an obligation of another Person shall be deemed
to be the interest expense attributable to the Indebtedness guaranteed. When
the foregoing definition is used in
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connection with the Company and its Restricted Subsidiaries, references to a
Person and its Subsidiaries in the foregoing definition shall be deemed to
refer to the Company and its Restricted Subsidiaries and when used in
connection with PCW and its Subsidiaries shall be deemed to refer to PCW and
its Subsidiaries that are Restricted Subsidiaries.
"Consolidated Net Income" of any Person for any period means the net income
(or loss) of such Person and its consolidated Subsidiaries for such period,
determined (on a consolidated basis) in accordance with GAAP, adjusted to
exclude (only to the extent included in computing such net income (or loss)
and without duplication) (i) all extraordinary gains and losses and gains and
losses that are nonrecurring (including as a result of Asset Sales outside the
ordinary course of business), (ii) the net income, if positive, of any Person,
that is not a Subsidiary in which such Person or any of its Subsidiaries has
an interest, except to the extent of the amount of dividends or distributions
actually paid to such Person or a Subsidiary of such Person that both (x) are
actually paid in cash to such Person or a Subsidiary of such Person during
such period and (y) when taken together with all other dividends and
distributions paid during such period in cash to such Person or a Subsidiary
of such Person, are not in excess of such Person's pro rata share of such
other Person's aggregate net income earned during such period, (iii) except as
provided in the definition of "Annualized Operating Cash Flow Ratio," the net
income (or loss) of any Subsidiary acquired in a pooling of interests
transaction for any period prior to the date of such acquisition. When the
foregoing definition is used in connection with the Company and its Restricted
Subsidiaries, references to a Person and its Subsidiaries in the foregoing
definition shall be deemed to refer to the Company and its Restricted
Subsidiaries and when used in connection with PCW and its Subsidiaries shall
be deemed to refer to PCW and its Subsidiaries that are Restricted
Subsidiaries.
"Credit Agreement" means, the Credit Agreement described under "Description
of New Credit Facility," or any other senior loan facility in lieu thereof,
together with the related documents thereto (including, without limitation,
any guarantee agreements and security documents), in each case as such
agreements may be amended (including any amendment and restatement thereof),
supplemented or otherwise modified from time to time, including any agreement
extending the maturity of, refinancing, replacing or otherwise restructuring
or adding Restricted Subsidiaries of the Issuer as additional borrowers or
guarantors thereunder) all or any portion of the Indebtedness under such
agreement or any successor or replacement agreement and whether by the same or
any other agent, lender or group of lenders. There can only be one such credit
facility or loan agreement designated to be the "Credit Agreement" at any one
time. Any Indebtedness in excess of $525,000,000 Incurred under the Credit
Agreement, which at the time of Incurrence satisfies the tests for incurrence
of additional indebtedness under paragraph two of the "Limitation on
Additional Indebtedness" covenant, shall thereafter be deemed to be
Indebtedness permitted under the Credit Agreement for all purposes, including,
without limitation, for purposes of clause (ii) of the third paragraph of the
"Limitation on Additional Indebtedness" and for purposes of application of
proceeds from Asset Sales pursuant to clause (3) of the first paragraph of the
"Limitation on Asset Sales and Sales of Subsidiary Stock" covenant.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect
against fluctuation in currency values.
"Default" means any event or condition that is, or after notice or passage
of time or both would be, an Event of Default.
"Designated Senior Indebtedness" means, so long as it is in effect, the
Credit Agreement and, thereafter, any Senior Indebtedness designated by the
Company to be "Designated Senior Indebtedness."
"Disqualified Capital Stock" means, with respect to any Person, Capital
Stock of such Person that, by its terms or by the terms of any security into
which it is convertible, exercisable or exchangeable, is, or upon the
happening of any event or the passage of time would be, required to be
redeemed or repurchased (including at the option of the holder thereof) by
such Person or any of its Subsidiaries, in whole or in part, on or prior to
the
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Stated Maturity of the Notes; provided that Capital Stock will not be deemed
to be Disqualified Capital Stock if it may only be so redeemed or repurchased
solely in consideration of Qualified Capital Stock of the Company or Parent.
"Excluded Group" means a "group" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) that includes one or more Excluded Persons;
provided that the voting power of the Capital Stock of the Company or Parent
"beneficially owned" (as such term is used in Rule 13d-3 promulgated under the
Exchange Act) by such Excluded Persons (without attribution to such Excluded
Persons of the ownership by other members of the "group") represents a
majority of the voting power of the Capital Stock "beneficially owned" (as
such term is used in Rule 13d-3 promulgated under the Exchange Act) by such
group.
"Excluded Person" means members of the Price family who owned Capital Stock
of the Parent and PriCellular Corporation on the Issue Date and any Affiliate
of any of the foregoing that is wholly owned by one of the foregoing.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence and outstanding on the Issue Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board ("FASB") or in such other statements
by such other entity as may be approved by a significant segment of the
accounting profession; provided, however, that for purposes of determining
compliance with covenants in the Indenture, "GAAP" means such generally
accepted accounting principles as in effect as of the Issue Date.
"Holder" means a Person in whose name a Note is registered. The Holder of a
Note will be treated as the owner of such Note, for all purposes.
"Indebtedness" of any Person means, without duplication, (a) all liabilities
and obligations, contingent or otherwise, of such Person, (i) in respect of
borrowed money (whether or not the recourse of the lender is to the whole of
the assets of such Person or only to a portion thereof), (ii) evidenced by
bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except (other than accounts, payable or other obligations to trade creditors
which have remained unpaid for greater than 90 days past their original due
date or to financial institutions, which obligations are not being contested
in good faith and for which appropriate reserves have been established) those
incurred in the ordinary course of its business that would constitute
ordinarily a trade payable to trade creditors, (iv) evidenced by bankers'
acceptances or similar instruments issued or accepted by banks, (v) for the
payment of money relating to a Capitalized Lease Obligation, or (vi) evidenced
by a letter of credit or a reimbursement obligation of such Person with
respect to any letter of credit; (b) all obligations of such Person under
Interest Swap and Hedging Obligations; (c) all liabilities of others of the
kind described in the preceding clauses (a) or (b) that such Person has
guaranteed or that is otherwise its legal liability or which are secured by
any assets or property of such Person and all obligations to purchase, redeem
or acquire any Capital Stock; (d) all Disqualified Capital Stock of such
Person and all Preferred Stock of such Person's Subsidiaries; and (e) any and
all deferrals, renewals, extensions, refinancing and refundings (whether
direct or indirect) of, or amendments, modifications or supplements to, any
liability of the kind described in any of the preceding clauses (a), (b), (c),
or (d) or this clause (e), whether or not between or among the same parties;
provided that the outstanding principal amount at any date of any Indebtedness
issued with original issue discount is the face amount of such Indebtedness
less the remaining unamortized portion of the original issue discount of such
Indebtedness at such date.
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"Interest Swap and Hedging Obligations" means any obligations of any Person
pursuant to any interest rate swaps, caps, collars and similar arrangements
providing protection against fluctuations in interest rates. For purposes of
the Indenture, the amount of such obligations shall be the amount determined
in respect thereof as of the end of the then most recently ended fiscal
quarter of such Person, based on the assumption that such obligation had
terminated at the end of such fiscal quarter, and in making such
determination, if any agreement relating to such obligation provides for the
netting of amounts payable by and to such Person thereunder or if any such
agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligations shall be the
net amount so determined, plus any premium due upon default by such Person.
"Investment" by any Person in any other Person means (without duplication)
(a) the acquisition (whether by purchase, merger, consolidation or otherwise)
by such Person (whether for cash, property, services, securities or otherwise)
of capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities of such other Person or any agreement to make
any such acquisition; (b) the making by such Person of any deposit with, or
advance, loan or other extension of credit to, such other Person (including
the purchase of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such other
Person) or any commitment to make any such advance, loan or extension; (c) the
entering into by such Person of any guarantee of, or other contingent
obligation with respect to, Indebtedness or other liability of such other
Person; (d) the making of any capital contribution by such Person to such
other Person; and (e) the designation by the Board of Directors of the Company
of any Person to be an Unrestricted Subsidiary. For purposes of the
"Limitation on Restricted Payments" covenant, (i) "Investment" shall include
and be valued at the fair market value of the net assets of any Restricted
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary and shall exclude the fair market value of the net
assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any
Investment shall be the fair market value of such Investment plus the fair
market value of all additional Investments by the Company or any of its
Restricted Subsidiaries at the time any such Investment is made; provided
that, for purposes of this sentence, the fair market value of net assets in
excess of $5,000,000 shall be as determined by an independent appraiser of
national reputation.
"Issue Date" means the time and date of the first issuance of the Notes
under the Indenture.
"Junior Indebtedness" means Indebtedness of the Company that (i) requires no
payment of principal prior to or on the date on which all principal of and
interest on the Notes is paid in full and (ii) is subordinate and junior in
right of payment to the Notes in all respects.
"Lien" means any mortgage, lien, pledge, charge, security interest, or other
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement and any lease deemed to constitute a security interest and any
option or other agreement to give any security interest).
"Maturity Date" means, when used with respect to any Note, the date
specified on such Note as the fixed date on which the final installment of
principal of such Note is due and payable (in the absence of any acceleration
thereof pursuant to the provisions of the Indenture regarding acceleration of
Indebtedness or any Change of Control Offer, Proceeds Purchase Offer or Asset
Sale Offer).
"Merger" means the merger of PCW with and into Palmer.
"Merger Date" means the time and date of the consummation of the Merger.
"Net Cash Proceeds" means the aggregate amount of cash and Cash Equivalents
received by the Company and its Restricted Subsidiaries in respect of an Asset
Sale (including upon the conversion to cash and Cash Equivalents of (A) any
note or installment receivable at any time, or (B) any other property as and
when any cash and Cash Equivalents are received in respect of any property
received in an Asset Sale but only to the extent
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such cash and Cash Equivalents are received within one year after such Asset
Sale), less the sum of (i) all reasonable out-of-pocket fees, commissions and
other expenses incurred in connection with such Asset Sale, including the
amount (estimated in good faith by the Board of Directors of the Company) of
income, franchise, sales and other applicable taxes required to be paid by the
Company or any Restricted Subsidiary of the Company in connection with such
Asset Sale and (ii) the aggregate amount of cash so received which is used to
retire any existing Indebtedness of the Company ranking on a parity with the
Notes or Indebtedness of its Restricted Subsidiaries, as the case may be,
which is required to be repaid in connection with such Asset Sale or is
secured by a Lien on the property or assets of the Company or any of its
Restricted Subsidiaries, as the case may be.
"Net Pops" of any Person with respect to any System means the Pops of the
MSA or RSA served by such System multiplied by the direct and/or indirect
percentage interest of such Person in the entity licensed or designated to
receive an authorization by the Federal Communications Commission to construct
or operate a System in that MSA or RSA.
"Net Proceeds" means the aggregate net proceeds (including the fair market
value of non-cash proceeds constituting equipment or other assets of a type
generally used in a Related Business an amount reasonably determined by the
Board of Directors of the Company for amounts under $5,000,000 and by a
financial advisor or appraiser of national reputation for equal or greater
amounts) received by a Person from the sale of Qualified Capital Stock (other
than to a Subsidiary of such Person) after payment of out-of-pocket expenses,
commissions and discounts incurred in connection therewith.
"Obligation" means any principal, premium, interest (including interest
accruing subsequent to a bankruptcy or other similar proceeding whether or not
such interest is an allowed claim enforceable against the Company in a
bankruptcy case under Federal bankruptcy law), penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
pursuant to the terms of the documentation governing any Indebtedness.
"Operating Cash Flow" of any Person means (a), with respect to any period,
the Consolidated Net Income of such Person for such period, plus (b) the sum,
without duplication (and only to the extent such amounts are deducted from net
revenues in determining such Consolidated Net Income), of (i) the provisions
for income taxes for such period for such Person and its consolidated
Subsidiaries, (ii) depreciation, amortization and other non-cash charges of
such Person and its consolidated Subsidiaries and (iii) Consolidated Interest
Expense of such Person for such period, determined, in each case, on a
consolidated basis for such Person and its consolidated Subsidiaries in
accordance with GAAP, less (c) the amount of all cash payments made during
such period by such Person and its Subsidiaries to the extent such payments
relate to non-cash charges that were added back in determining Operating Cash
Flow for such period or for any prior period. When the foregoing definition is
used in connection with the Company and its Restricted Subsidiaries,
references to a Person and its Subsidiaries in the foregoing definition shall
be deemed to refer to the Company and its Restricted Subsidiaries and when
used in connection with PCW and its Subsidiaries shall be deemed to refer to
PCW and its Subsidiaries that are Restricted Subsidiaries.
"Parent" shall mean PCC or any directly or indirectly wholly owned
subsidiary of PCC that directly or indirectly wholly owns the Company.
"Permitted Acquisition Indebtedness" means, with respect to any Person,
Indebtedness Incurred in connection with the acquisition of property,
businesses or assets which, or Capital Stock of a Person all or substantially
all of whose assets, are of a type generally used in a Related Business;
provided that, in the case of the Company or its Restricted Subsidiaries, as
applicable, (x) (i) the Company's or PCW's, as the case may be, Annualized
Operating Cash Flow Ratio, after giving effect to such acquisition and such
Incurrence on a pro forma basis, is no greater than such ratio prior to giving
pro forma effect to such acquisition and such Incurrence, (ii) the Company's
or PCW's, as the case may be, consolidated unsubordinated Indebtedness,
divided by the Net Pops of the Company or PCW, as the case may be, and its
Restricted Subsidiaries, in each case giving pro forma effect to the
acquisition and such Incurrence, does not exceed $120, (iii) the Company's or
PCW's, as the case may be, consolidated Indebtedness divided by the Net Pops
of the Company or PCW, as the case may be, and its
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Restricted Subsidiaries does not exceed $160 as a result of the acquisition
and such Incurrence and (iv) after giving effect to such acquisition and such
Incurrence the acquired property, businesses or assets or such Capital Stock
is owned directly by the Company or PCW, as the case may be, or a Wholly Owned
Restricted Subsidiary thereof or (y) (i) under the terms of such Indebtedness
and pursuant to applicable law, no recourse could be had for the payment of
principal, interest or premium with respect to such Indebtedness or for any
claim based thereon against the Company or any Person that constituted a
Restricted Subsidiary immediately prior to the consummation of such
acquisition or any of their property or assets, (ii) the obligor of such
Indebtedness shall have, immediately after giving effect to such acquisition
and such Incurrence on a pro forma basis, a ratio of Annualized Operating Cash
Flow as of the date of the acquisition to the product of Consolidated Interest
Expense for the Reference Period multiplied by four (but excluding from
Consolidated Interest Expense all amounts that are not required to be paid in
cash on a current basis) of at least l to l and (iii) immediately subsequent
to the Incurrence of such Indebtedness, the obligor thereof shall be a
Restricted Subsidiary and shall have been designated by the Company (as
evidenced by an Officers' Certificate delivered promptly to the Trustee) to be
a "Non-Recourse Restricted Subsidiary."
"Permitted Investment" means (i) Investments in Cash Equivalents; (ii)
Investments in the Company or a Restricted Subsidiary (other than a Non-
Recourse Restricted Subsidiary); (iii) Investments in a Person substantially
all of whose assets are of a type generally used in a Related Business (an
"Acquired Person") if, as a result of such Investments, (A) the Acquired
Person immediately thereupon becomes a Restricted Subsidiary (other than a
Non-Recourse Restricted Subsidiary) or (B) the Acquired Person immediately
thereupon either (1) is merged or consolidated with or into the Company or any
of its Restricted Subsidiaries (other than a Non-Recourse Restricted
Subsidiary) and the surviving Person is the Company or a Restricted Subsidiary
(other than a Non-Recourse Restricted Subsidiary) or (2) transfers or conveys
all or substantially all of its assets to, or is liquidated into, the Company
or any of its Restricted Subsidiaries (other than a Non-Recourse Restricted
Subsidiary); (iv) Investments in accounts and notes receivable acquired in the
ordinary course of business; (v) any securities received in connection with an
Asset Sale (other than those of a Non-Recourse Restricted Subsidiary) and any
investment with the Net Cash Proceeds from any Asset Sale in Capital Stock of
a Person, all or substantially all of whose assets are of a type used in a
Related Business, that complies with the "Limitation on Asset Sales and Sales
of Subsidiary Stock" covenant; (vi) any guarantee issued by a Restricted
Subsidiary in respect of Indebtedness of a Restricted Subsidiary Incurred in
compliance with the Indenture; (vii) advances and prepayments for asset
purchases in the ordinary course of business in a Related Business of the
Company or a Restricted Subsidiary; (viii) Investments in Non-Recourse
Restricted Subsidiaries with the proceeds of contributions irrevocably and
unconditionally received without restriction by the Company from Parent; and
(ix) customary loans or advances made in the ordinary course of business to
officers, directors or employees of the Company or any of its Restricted
Subsidiaries for travel, entertainment, and moving and other relocation
expenses.
"Permitted Lien" means (a) Liens existing on the Issue Date; (b) Liens
imposed by governmental authorities for taxes, assessments or other charges
not yet subject to penalty or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP; (c) statutory
liens of carriers, warehousemen, mechanics, materialmen, landlords, repairmen
or other like Liens arising by operation of law in the ordinary course of
business provided that (i) the underlying obligations are not overdue for a
period of more than 30 days, and (ii) such Liens are being contested in good
faith and by appropriate proceedings and adequate reserves with respect
thereto are maintained on the books of the Company in accordance with GAAP;
(d) Liens securing the performance of bids, trade contracts (other than
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business; (e) easements, rights-of-way, zoning, similar
restrictions and other similar encumbrances or title defects which, singly or
in the aggregate, do not in any case materially detract from the value of the
property, subject thereto (as such property is used by the Company or any of
its Restricted Subsidiaries) or interfere with the ordinary conduct of the
business of the Company or any of its Restricted Subsidiaries; (f) Liens
arising by operation of law in connection with judgments, only to the extent,
for an amount and for a period not resulting in an Event of Default with
respect
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thereto; (g) pledges or deposits made in the ordinary course of business in
connection with worker's compensation, unemployment insurance and other types
of social security legislation; (h) Liens in favor of the Trustee arising
under the Indenture; (i) Liens securing Permitted Acquisition Indebtedness,
which either (A) were not incurred or issued in anticipation of such
acquisition or (B) secure Permitted Acquisition Indebtedness meeting the
requirements set forth in clause (y) of the definition thereof; (j) Liens
securing pari passu Indebtedness or Indebtedness of a Restricted Subsidiary
that was incurred in accordance with the "Limitation on Incurrence of
Additional Indebtedness" covenant; (k) Liens securing Indebtedness of a Person
existing at the time such Person becomes a Restricted Subsidiary or is merged
with or into the Company or a Restricted Subsidiary, provided that such Liens
were in existence prior to the date of such acquisition, merger or
consolidation, were not incurred in anticipation thereof, and do not extend to
any other assets; (l) Liens arising from Purchase Money Indebtedness permitted
under the Indenture; (m) Liens securing Refinancing Indebtedness Incurred to
refinance any Indebtedness that was previously so secured in a manner no more
adverse to the Holders of the Notes than the terms of the Liens securing such
refinanced Indebtedness; and (n) Liens in favor of the Company or a Wholly
Owned Restricted Subsidiary.
"Person" means any corporation, individual, joint stock company, joint
venture, partnership, unincorporated association, governmental regulatory
entity, country, state or political subdivision thereof, trust, municipality
or other entity.
"Pops" means the estimate of the population of a Metropolitan Statistical
Area ("MSA") or Rural Service Area ("RSA") as derived from: (i) the most
recent Donnelly Market Service or if such statistics are no longer printed in
the Donnelly Market Service or the Donnelly Market Service is no longer
published, the most recent Rand McNally Commercial Atlas, or if such
statistics are no longer printed in the Rand McNally Commercial Atlas or if
the Rand McNally Commercial Atlas is no longer published, such other
nationally recognized source of such information; or (ii) the most recent
United States Census Bureau reports as to any year in respect of which such
reports are published.
"Purchase Money Indebtedness" means Indebtedness of the Company or its
Restricted Subsidiaries Incurred in connection with the purchase of property
or assets for the business of the Company or its Restricted Subsidiaries,
provided that the recourse of the lenders with respect to such Indebtedness is
limited solely to the property or assets so purchased without further recourse
to either the Company or any of its Restricted Subsidiaries.
"Qualified Capital Stock" means any Capital Stock of a Person that is not
Disqualified Capital Stock.
"Reference Period" with regard to any Person means the last full fiscal
quarter of such Person for which financial information (which the Company
shall use its best efforts to compile in a timely manner) in respect thereof
is available ended on or immediately preceding any date upon which any
determination is to be made pursuant to the terms of the Notes or the
Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or
(b) constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the
case of Disqualified Capital Stock, liquidation preference (or if such
Indebtedness or Disqualified Capital Stock does not require cash payments
prior to maturity or is otherwise issued at a discount, the original issue
price of such Indebtedness or Disqualified Capital Stock), not to exceed the
sum of (x) the lesser of (i) the principal amount or, in the case of
Disqualified Capital Stock, liquidation preference, of the Indebtedness or
Disqualified Capital Stock so Refinanced and (ii) if such Indebtedness being
Refinanced was issued with an original issue discount, the accreted value
thereof (as determined in accordance with GAAP) at the time of such
Refinancing, (y) the amount of any premium required to be paid in connection
with such refinancing pursuant to the terms of such Indebtedness and (z) all
other customary fees and expenses of the Company or such Restricted Subsidiary
reasonably incurred in connection
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with such refinancing; provided that (A) Refinancing Indebtedness issued by
any Restricted Subsidiary of the Company shall only be used to Refinance
outstanding Indebtedness or Disqualified Capital Stock of such Restricted
Subsidiary, (B) Refinancing Indebtedness shall (x) not have a Weighted Average
Life shorter than the Indebtedness or Disqualified Capital Stock to be so
refinanced at the time of such Refinancing and (y) in all respects, be no less
subordinated or junior, if applicable, to the rights of Holders of the Notes
than was the Indebtedness or Disqualified Capital Stock to be refinanced and
(C) such Refinancing Indebtedness shall have no installments of principal (or
redemption payment) scheduled to come due earlier than the scheduled maturity
of any installment of principal (or redemption payment) of the Indebtedness or
Disqualified Capital Stock to be so refinanced which was scheduled to come due
prior to the Stated Maturity of the Notes.
"Related Business" means any business directly related to the ownership,
development, operation, and acquisition of wireless cellular communications
systems.
"Related Person" means, with respect to any Person, (i) any Affiliate of
such Person or any spouse, immediate family member, or other relative who has
the same principal residence of any Affiliate of such Person and (ii) any
trust in which any Person described in clause (i) above, has a beneficial
interest.
"Restricted Payment" means, with respect to any Person, (i) any dividend or
other distribution on shares of Capital Stock of such Person, its Parent, or
any Subsidiary of such Person, (ii) any payment on account of the purchase,
redemption or other acquisition or retirement for value, or any payment in
respect of any amendment (in anticipation of or in connection with any such
retirement, acquisition or defeasance) in whole or in part, of any shares of
Capital Stock of such Person, its Parent, or any Subsidiary of such Person
held by Persons other than such Person or any of its Restricted Subsidiaries,
(iii) any defeasance, redemption, repurchase or other acquisition or
retirement for value, or any payment in respect of any amendment (in
anticipation of or in connection with any such retirement, acquisition or
defeasance) in whole or in part, of any Indebtedness of the Company (other
than the scheduled repayment thereof at maturity and any mandatory redemption
or mandatory repurchase thereof pursuant to the terms thereof) by such Person
or a Subsidiary of such Person that is subordinate in right of payment to, or
ranks pari passu (other than the Notes) with, the Notes (other than in
exchange for Refinancing Indebtedness permitted to be Incurred under the
Indenture and except for any such defeasance, redemption, repurchase, other
acquisition or payment in respect of Indebtedness held by any Restricted
Subsidiary) and (iv) any Investment (other than a Permitted Investment);
provided, however, that the term "Restricted Payment" does not include (i) any
dividend, distribution or other payment on shares of Capital Stock of the
Company or any Restricted Subsidiary solely in shares of Qualified Capital
Stock, (ii) any dividend, distribution or other payment to the Company, or any
dividend to any of its Restricted Subsidiaries, by any of its Subsidiaries,
(iii) the purchase, redemption or other acquisition or retirement for value of
shares of Capital Stock of any Restricted Subsidiary (other than Non-Recourse
Restricted Subsidiaries) held by Persons other than the Company or any of its
Restricted Subsidiaries, (iv) payments to satisfy obligations to pay statutory
appraisal rights resulting from the Merger and any settlement in respect
thereof to security holders of Palmer, (v) fees and expenses incurred in
connection with the Merger and (vi) cash payments in respect of purchases of
options and rights for shares of Palmer common stock issued pursuant to
Palmer's 1995 Stock Option Plan, 1995 Directors' Stock Option Plan, 1995
Employee Stock Purchase Plan and 1995 Non-Employee Director Stock Purchase
Plan.
"Restricted Subsidiary" means any Subsidiary of the Company which at the
time of determination is not an Unrestricted Subsidiary. The Board of
Directors of the Company may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if, immediately before and after giving effect to
such designation, there would exist no Default or Event of Default and the
Company could incur at least $1.00 of Indebtedness pursuant to the Annualized
Operating Cash Flow Ratio test of the "Limitation on Incurrence of Additional
Indebtedness" covenant, on a pro forma basis taking into account such
designation.
"Significant Restricted Subsidiary" means one or more Restricted
Subsidiaries having an aggregate net book value of assets in excess of 5% of
the net book value of the assets of the Company and its Restricted
Subsidiaries on a consolidated basis.
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"Stated Maturity" means the date fixed for the payment of any principal or
premium pursuant to the Indenture and the Notes, including the Maturity Date,
upon redemption, acceleration, Asset Sale Offer, Proceeds Purchase Offer,
Change of Control Offer or otherwise.
"Subsidiary" with respect to any Person, means (i) a corporation at least
fifty percent of whose Capital Stock with voting power, under ordinary
circumstances to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or
by one or more Subsidiaries of such Person, or (ii) a partnership in which
such Person or a Subsidiary of such Person is, at the time, a general partner
of such partnership, or (iii) any Person in which such Person, one or more
Subsidiaries of such Person, or such Person and one or more Subsidiaries of
such Person, directly or indirectly, at the date of determination thereof has
(x) at least a fifty percent ownership interest or (y) the power to elect or
direct the election of the directors or other governing body of such Person.
"Unrestricted Subsidiary" shall mean any Subsidiary of the Company that, at
the time of determination, shall be an Unrestricted Subsidiary (as designated
by the Board of Directors of the Company, as provided below). The Board of
Directors of the Company may designate any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary at or prior to the
time it is so formed or acquired) to be an Unrestricted Subsidiary if (a) no
Default or Event of Default is existing or will occur as a consequence
thereof, (b) such Subsidiary does not own any Capital Stock of, or own or hold
any Lien on any property or asset of, the Company or any Restricted Subsidiary
that is not a Subsidiary of the Subsidiary to be so designated and (c) such
Subsidiary and each of its Subsidiaries has not at the time of designation,
and does not thereafter, create, incur, issue, assume, guarantee, or otherwise
become directly or indirectly liable with respect to any Indebtedness pursuant
to which the lender has recourse to any property or assets of the Company or
any of its Restricted Subsidiaries (except that such Subsidiary and its
Subsidiaries may guarantee the Notes); provided that either (A) the Subsidiary
to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, that such designation would be
permitted under the "Limitation on Restricted Payments" covenant. Each such
designation shall be evidenced by filing with the Trustee a certified copy of
the resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"Voting Stock" means Capital Stock of the Company having generally the right
to vote in the election of a majority of the directors of the Company or
having generally the right to vote with respect to the organizational matters
of the Company.
"Weighted Average Life" means, as of the date of determination, with respect
to any debt instrument, the quotient obtained by dividing (i) the sum of the
products of the numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such debt instrument
multiplied by the amount of each such respective principal payment by (ii) the
sum of all such principal payments.
"Wholly Owned" means, with respect to a Subsidiary of the Company, (i) a
Subsidiary that is a corporation, of which not less than 99% of the Capital
Stock (except for directors' qualifying shares or certain minority interests
owned by other Persons solely due to local law requirements that there be more
than one stockholder, but which interest is not in excess of what is required
for such purpose) is owned directly by such Person or through one or more
other Wholly Owned Subsidiaries of such Person, or (ii) any entity other than
a corporation in which such Person, directly or indirectly, owns not less than
99% of the Capital Stock of such entity.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Holders of New Notes are not entitled to any registration rights with
respect to the New Notes. Holders of Old Notes are entitled to certain
registration rights pursuant to the Registration Rights Agreement. Pursuant to
the Registration Rights Agreement, the Company has agreed to file with the SEC
and have declared effective on or prior to January 8, 1998 a registration
statement (the "Exchange Offer Registration Statement") under the Securities
Act with respect with the Exchange Offer. The Company also agreed that, after
the effectiveness of the Exchange Offer Registration Statement, it would,
subject to certain conditions, offer to the Holders of Old Notes who are able
to make certain representations the opportunity to exchange their Old Notes
for New Notes.
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In the event that applicable interpretations of the staff of the SEC do not
permit the Company to effect the Exchange Offer ("SEC Blockage") or do not
permit any Holder of Old Notes, subject to certain limitations, to participate
in such Exchange Offer, the Company has agreed to file with the SEC a shelf
registration statement (the "Shelf Registration Statement") to cover resales
of the applicable Old Notes. The Registration Statement of which this
Prospectus is a part constitutes the Exchange Offer Registration Statement.
The Registration Rights Agreement provides that the Company will use its
reasonable best efforts to have the Exchange Offer Registration Statement
(and, if applicable, a Shelf Registration Statement) declared effective by the
SEC on or prior to January 8, 1998. If the Exchange Offer has not been
consummated by February 7, 1998 (unless there exists a SEC Blockage) (such
event, a "Registration Default"), the Company will pay liquidated damages to
each Holder of Old Notes, during the first 90-day period immediately following
the occurrence of such Registration Default in an amount equal to $0.05 per
week per $1,000 principal amount at maturity of Notes constituting Old Notes
held by such Holder. The amount of the liquidated damages will increase by an
additional $0.05 per week per $1,000 of Accreted Value constituting Old Notes
for each subsequent 90-day period until the Exchange Offer is consummated, up
to a maximum amount of liquidated damages of $0.25 per week per $1,000
principal amount at maturity of Notes constituting Old Notes. All accrued
liquidated damages shall be paid to Holders in the same manner as interest
payments on the Notes and on interest payment dates for the Notes.
The Registration Rights Agreement provides that the Company (i) shall make
available for a period of 90 days after the consummation of the Exchange Offer
a prospectus meeting the requirements of the Securities Act to any broker-
dealer for use in connection with any resale of any such New Notes and (ii)
shall pay all expenses incident to the Exchange Offer (including the expenses
of one counsel to the Holders of the Notes) and will indemnify certain Holders
of the Notes (including any broker-dealer) against certain liabilities,
including liabilities under the Securities Act.
Holders of Old Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions regarding
liquidated damages set forth in the preceding sentence. In addition, for so
long as the Notes are outstanding, the Company will continue to provide to
Holders of Notes and to prospective purchasers of the Notes the information
required by Rule 144A(d)(4). The Company will provide a copy of the
Registration Rights Agreement to prospective investors upon request.
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DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee
contained in the Indenture by the Guarantor in for the benefit of the Trustee
and the holders from to time of the Notes. The Guarantee is issued under the
Indenture, which has been filed as an exhibit to the Registration Statement of
which this Prospectus constitutes a part. The terms of the Guarantee include
those stated in the Indenture and those made part of the Indenture by
reference to the TIA. The following summary of certain provisions of the
Guarantee are summaries only, do not purport to be complete and are qualified
in their entirety by reference to all of the provisions of those documents.
Wherever particular provisions of the Indenture are referred to in this
summary, such provisions are incorporated by reference as a part of the
statements made and such statements are qualified in their entirety by such
reference.
GENERAL
Pursuant to the Guarantee, the Guarantor has irrevocably and unconditionally
agreed, to the extent set forth therein, to pay in full, to the holders of
Notes authenticated and delivered by the Trustee and to the Trustee, (without
duplication of amounts theretofore paid by the Company), irrespective of the
validity and enforceability of the Indenture, the Notes or the obligations of
the Company thereunder, the following payments or distributions with respect
to the Notes to the extent not paid or made by the Company (the "Guaranteed
Obligations") (without duplication): (i) the due and punctual payment of the
principal of, premium, if any, interest (including post-petition interest in
any proceeding under any bankruptcy law whether or not an allowed claim in
such proceeding) and interest (including post-petition interest in any
proceeding under any bankruptcy law whether or not an allowed claim in such
proceeding) on overdue principal, premium, if any, and interest, if lawful on
such Note, and (ii) all other monetary obligations payable by the Company
under the Indenture and the Notes, when and as the same shall become due and
payable, whether by acceleration thereof, call for redemption or otherwise.
The Guarantee shall not be valid or become obligatory for any purpose with
respect to any Note until the certificate of authentication on such Note shall
have been signed by or on behalf of the Note. The delivery of any Note by the
Trustee, after the authentication thereof, shall constitute due delivery of
the Guarantee.
CERTAIN COVENANTS OF THE GUARANTOR
The Guarantee restricts the business in which the Guarantor is permitted to
engage to the ownership of 100% of the capital stock of the Company and to
acquire licenses pending before the FCC in respect of television stations on
August 1, 1997 and related television stations and properties, and prohibits
the Guarantor and its Subsidiaries from taking any action or omitting to take
any action, which action or omission would or could reasonably be expected to
have the effect of impairing the security interest in favor of the Trustee on
behalf of the holders of the Notes with respect to the Collateral. The
Guarantor is required to own 100% of the capital stock of PCW. The Guarantee
prohibits the Guarantor from incurring or permitting to exist Indebtedness
(other than pursuant to the Guarantee) and from creating, incurring, or
permitting to exist any Liens on its assets (other than Liens securing the
Guarantee). The Guarantee also prohibits the Guarantor from selling,
transferring or otherwise disposing of any of its assets other than Qualified
Capital Stock and television licenses and related television stations and
properties described above. In addition the Guarantee prohibits the Guarantor
from making Investments in any Person (other than common equity contributions
to the Company) except for Permitted Investments of the kind described in
clauses (i) and (ii) of the definition of Permitted Investments.
AMENDMENTS AND ASSIGNMENT
The Guarantee may be amended in accordance with the general provisions of
the Indenture governing amendments. See "Description of the Notes--Amendments
and Supplements". The Guarantee shall bind the successors and assigns of the
Guarantor and shall inure to the benefit of the Trustee and the holders of the
Notes
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<PAGE>
and, in the event of any transfer or assignment of rights by any holder or the
Trustee, the rights and privileges conferred upon that party in the Indenture
and in the Notes shall automatically extend to and be vested in such
transferee or assignee, subject to the terms and conditions of the Indenture.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect when the
Indenture shall have terminated and the principal of and interest on the Notes
and all other Guaranteed Obligations shall have been paid in full.
Notwithstanding the foregoing, if at any time any payment of the principal of
or interest on any Note or any other payment in respect of any Guaranteed
Obligation is rescinded or must be otherwise restored or returned, the
Guarantor's obligations under the Guarantee with respect to such payment shall
be reinstated as though such payment has been due but not made at such time
and the Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect.
STATUS OF THE GUARANTEE
The Guarantee ranks pari passu in right of payment with all other senior
indebtedness of the Guarantor and senior in right of payment to all
subordinated indebtedness of the Guarantor. As of the Issue Date, the
Company's capital stock is the only significant asset of the Guarantor and
dividends on the Company's capital stock will be the sole source of funds
available to the Guarantor to meet its obligations, including its obligations
under the Guarantee. The Guarantor is required to own 100% of the common stock
of Holdings. The payment of dividends on the Company's capitals stock,
however, is significantly restricted by certain covenants contained in the
Indenture, the Senior Subordinated Notes Indenture and in the Credit Agreement
and may be restricted by other agreements entered into by the Company in the
future and by applicable law. See "Risk Factors--Guarantee and Security for
the Notes." The Guarantee is secured, in the manner and to the extent
summarized below under "Description of the Guarantee--Security," by a pledge
of all of the issued and outstanding capital stock of the Company.
The Guarantee constitutes a guarantee of payment, performance and compliance
when due and not of collection (that is, the guaranteed party may institute a
legal proceeding directly against the guarantor to enforce its rights under
the guarantee without first instituting a legal proceeding against any other
person or entity). The Guarantee provides that (x) the maturity of the
Guaranteed Obligations may be accelerated as provided in "Description of the
Notes--Events of Default and Remedies" for the purposes of the Guarantee
notwithstanding any prohibition preventing such acceleration of the Guaranteed
Obligations and (y) in the event of any declaration of acceleration of the
Guaranteed Obligations, such Guaranteed Obligations shall forthwith become due
and payable by the Guarantor for the purpose of the Guarantee. The rights and
limitations described in "Description of Notes--Events of Default and
Remedies" are applicable to the Guarantee, and if the Guarantor fails to make
any guarantee payment, a holder of the Notes may directly institute a
proceeding against the Guarantor for the enforcement of the Guarantee for such
payment. The Guarantor has agreed to pay any and all costs and expenses
(including reasonable attorney's fees) incurred by the Trustee or any holder
in enforcing any rights under the Guarantee.
SECURITY
Pursuant to the Indenture, the Guarantor assigned and pledged to the
Trustee, for its benefit and the benefit of the Holders of the Notes, a
security interest in the capital stock of the Company and certain proceeds
from time to time received, receivable or otherwise distributed in respect
thereof (the "Collateral"). The Guarantor also agreed to assign and pledge to
the Trustee as part of the Collateral all shares of capital stock of the
Company hereafter acquired by it. The security interest in the Collateral is a
first-priority security interest. However, absent an acceleration of the
Notes, the Guarantor will be able to vote, as it sees fit in its sole
discretion, the capital stock of the Company. Further, any transfer of the
power to vote the capital stock of the Company, including as a result of
foreclosure on pledged capital stock, will require FCC approval.
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There can be no assurance that the proceeds of any sale of the Collateral
pursuant to the Indenture following an Event of Default would be sufficient to
satisfy payments due on the Notes. See "Risk Factors,Guarantee and Security
for the Notes." In addition, the ability of the Holders of Notes to realize
upon the Collateral may be subject to obtaining FCC approval as described
above and certain bankruptcy law limitations in the event of a bankruptcy. See
"Risk Factors--Certain Other Bankruptcy Considerations."
If an Event of Default occurs under the Indenture, the Trustee, on behalf of
the Holders of the Notes, in addition to any rights or remedies available to
it under the Indenture, may take such action as it deems advisable to protect
and enforce its rights in the Collateral, including the institution of
foreclosure proceedings. The proceeds received by the Trustee from any
foreclosure will be applied by the Trustee first to pay the expenses of such
foreclosure and fees and other amounts then payable to the Trustee under the
Indenture and, thereafter, to pay the principal of and interest on the Notes.
GOVERNING LAW
The Guarantee is governed by, and construed in accordance with, the laws of
the State of New York.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not result in any federal income tax consequences to Holders. When a Holder
exchanges an Old Note for a New Note pursuant to the Exchange Offer, the
Holder will have the same adjusted basis and holding period in the New Note as
in the Old Note immediately before the exchange.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that for a period of 90 days after
the Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any such broker-dealer for use in connection with any such
resale. The Company will not receive any proceeds from any sale of New Notes
by broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer and/or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker-dealer that participates
in a distribution of such New Notes may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
New Notes and any commissions or concessions received by any such persons may
be deemed to be underwriting compensation under the Securities Act. The Letter
of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the
Letter of Transmittal.
The Company has agreed in the Registration Rights Agreement to indemnify
each broker-dealer reselling New Notes pursuant to this Prospectus, and their
officers, directors and controlling persons, against certain liabilities in
connection with the offer and sale of the New Notes, including liabilities
under the Securities Act, or to contribute to payments that such broker-
dealers may be required to make in respect thereof.
LEGAL MATTERS
The legality of the New Notes offered hereby will be passed upon for the
Company by [Davis Polk & Wardwell], New York, New York.
EXPERTS
The consolidated balance sheets of Palmer Wireless, Inc. and subsidiaries as
of December 31, 1996 and 1995 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the years in the
three years ended December 31, 1996 appearing in this Prospectus and
Registration Statement have been audited by KPMG Peat Marwick LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein and
in the Registration Statement, and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
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AVAILABLE INFORMATION
This Prospectus constitutes a part of the Registration Statement on Form S-4
under the Securities Act filed by the Company with the SEC under the
Securities Act. As permitted by the rules and regulations of the SEC, this
Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto and reference is
hereby made to the Registration Statement and the exhibits and schedules
thereto for further information with respect to the Company and the Notes
offered hereby. Statements contained herein concerning the provisions of any
documents filed as an exhibit to the Registration Statement or otherwise filed
with the SEC are not necessarily complete, and in each instance reference is
made to the copy of such document so filed. Each such statement is qualified
in its entirety by such reference.
CERTAIN TERMS
Interests in cellular markets that are licensed by the FCC are commonly
measured on the basis of the population of the market served, with each person
in the market area referred to as a "Pop." The number of Pops or Net Pops
owned is not necessarily indicative of the number of subscribers or potential
subscribers. As used in this Prospectus, unless otherwise indicated, the term
"Pops" means the estimate of the 1996 population of an MSA or RSA, as derived
from the 1996 Donnelley Market Information Service. The term "Net Pops" means
the estimated population with respect to a given service area multiplied by
the percentage interest that the Company owns in the entity licensed in such
service area. MSAs and RSAs are also referred to as "markets." The term
"wireline" license refers to the license for any market initially awarded to a
company or group that was affiliated with a local landline telephone carrier
in the market, and the term "non-wireline" license refers to the license for
any market that was initially awarded to a company, individual or group not
affiliated with any landline carrier. The term "System" means an FCC-licensed
cellular telephone system. The term "CTIA" means the Cellular
Telecommunications Industry Association.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PALMER WIRELESS, INC. AND SUBSIDIARIES
Independent Auditors' Report............................................ F-2
Consolidated Balance Sheets, December 31, 1995 and 1996 ................ F-3
Consolidated Statements of Operations, Years Ended December 31, 1994,
1995 and 1996 ......................................................... F-4
Consolidated Statements of Stockholders' Equity, Years Ended December
31, 1994, 1995 and 1996................................................ F-5
Consolidated Statements of Cash Flows, Years Ended December 31, 1994,
1995 and 1996 ......................................................... F-6
Notes to Consolidated Financial Statements ............................. F-8
Condensed Consolidated Balance Sheets, December 31, 1996 and September
30, 1997(Unaudited) ................................................... F-20
Condensed Consolidated Statements of Operations, Nine Months Ended
September 30, 1996 and 1997 (Unaudited) ............................... F-21
Condensed Consolidated Statements of Stockholders' Equity, Year Ended
December 31, 1996 and Nine Months Ended September 30, 1997 (Unaudited)
....................................................................... F-22
Condensed Consolidated Statements of Cash Flows, Nine Months Ended
September 30, 1996 and 1997 (Unaudited) ............................... F-23
Notes to Condensed Consolidated Financial Statements (Unaudited) ....... F-24
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Palmer Wireless, Inc.:
We have audited the accompanying consolidated balance sheets of Palmer
Wireless, Inc. and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1996.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Palmer
Wireless, Inc. and subsidiaries at December 31, 1995 and 1996, and the results
of their operations and their cash flows for each of the years in the three-
year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Des Moines, Iowa
January 30, 1997,
except for Note 10 which is as of
February 1, 1997
F-2
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1996
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C>
ASSETS (NOTE 4)
Current assets:
Cash and cash equivalents....................... $ 3,436 $ 1,698
Trade accounts receivable, net of allowance for
doubtful accounts of $1,880 in 1995 and $1,791
in 1996........................................ 17,347 18,784
Receivable from other cellular carriers......... 3,936 1,706
Prepaid expenses and deposits................... 1,111 2,313
Inventory....................................... 2,434 5,106
Deferred income taxes (note 5).................. 821 830
-------------- --------------
Total current assets.......................... $ 29,085 $ 30,437
-------------- --------------
Property, plant and equipment:
Land and improvements........................... 3,796 5,238
Buildings and improvements...................... 5,120 7,685
Equipment, communication systems, and
furnishings.................................... 127,140 166,735
-------------- --------------
$ 136,056 $ 179,658
Less accumulated depreciation and amortization.. 35,120 47,220
-------------- --------------
Net property, plant and equipment............... $ 100,936 $ 132,438
-------------- --------------
Licenses and goodwill, at cost less accumulated
amortization of $20,828 in 1995 and $30,188 in
1996 (note 3)................................... 321,053 375,808
Other intangible assets and other assets, at cost
less accumulated amortization of $4,471 in 1995
and $7,311 in 1996.............................. 11,797 11,259
-------------- --------------
Total assets.................................. $ 462,871 $ 549,942
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note
4)............................................. $ 7,441 $ 5,296
Notes payable (note 4).......................... -- 1,366
Accounts payable................................ 10,795 10,394
Accrued interest payable........................ 2,508 2,341
Accrued salaries and employee benefits.......... 2,267 2,432
Other accrued liabilities....................... 4,058 3,626
Deferred revenue................................ 2,860 3,929
Customer deposits............................... 591 757
-------------- --------------
Total current liabilities..................... $ 30,520 $ 30,141
Long-term debt, excluding current installments
(note 4)........................................ 343,000 337,000
Deferred income taxes (note 5)................... 9,636 11,500
Minority interests............................... 5,162 6,371
-------------- --------------
Total liabilities............................. $ 388,318 $ 385,012
-------------- --------------
Stockholders' equity (note 7):
Preferred stock par value $.01 per share;
10,000,000 shares authorized; none issued...... -- --
Class A Common Stock par value $.01 per share;
73,000,000 shares authorized; 6,095,772 shares
issued in 1995 and 11,119,681 shares issued in
1996 including shares in treasury and Class B
Common Stock par value $.01 per share;
18,000,000 shares authorized; 17,293,578
shares issued in 1995 and 1996................. 234 284
Additional paid-in capital...................... 72,466 166,975
Retained earnings............................... 1,853 6,535
-------------- --------------
$ 74,553 $ 173,794
Less Class A Common Stock in treasury at cost --
600,000 shares in 1996.......................... -- 8,864
-------------- --------------
Total stockholders' equity.................... $ 74,553 $ 164,930
Commitments and contingencies (note 8).
-------------- --------------
Total liabilities and stockholders' equity.... $ 462,871 $ 549,942
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1994 1995 1996
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenue:
Service............... $ 61,021 $ 96,686 $ 151,119
Equipment sales and
installation......... 7,958 8,220 8,624
------------------ ------------------ ------------------
Total revenue..... $ 68,979 $ 104,906 $ 159,743
------------------ ------------------ ------------------
Operating expenses:
Engineering,
technical, and other
direct............... 12,776 18,184 28,717
Cost of equipment..... 11,546 14,146 17,944
Selling, general, and
administrative:
Related party, net
(note 6)........... (442) (408) (414)
Other............... 20,199 31,398 47,306
Depreciation and
amortization......... 9,817 15,004 25,013
------------------ ------------------ ------------------
Total operating
expenses......... $ 53,896 $ 78,324 $ 118,566
------------------ ------------------ ------------------
Operating income........ $ 15,083 $ 26,582 $ 41,177
------------------ ------------------ ------------------
Other income (expense):
Interest income:
Investment.......... 93 211 62
Related party (note
6)................. 78 -- --
Interest expense:
Long-term debt...... (11,158) (21,424) (31,524)
Related party (note
6)................. (1,728) -- --
------------------ ------------------ ------------------
Interest expense,
net................ $ (12,715) $ (21,213) $ (31,462)
Other expense, net.... (70) (687) (429)
------------------ ------------------ ------------------
Total other
expense.......... $ (12,785) $ (21,900) $ (31,891)
------------------ ------------------ ------------------
Income before minority
interest share of
income and income tax
expense................ $ 2,298 $ 4,682 $ 9,286
Minority interest share
of income.............. 636 1,078 1,880
------------------ ------------------ ------------------
Income before income tax
expense................ $ 1,662 $ 3,604 $ 7,406
Income tax expense (note
5)..................... -- 2,650 2,724
------------------ ------------------ ------------------
Net income.............. $ 1,662 $ 954 $ 4,682
================== ================== ==================
Net income per share of
common stock........... $ 0.09 $ 0.04 $ 0.18
================== ================== ==================
Average shares
outstanding............ 18,000,000 22,326,613 26,132,455
================== ================== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK (ACCUMULATED
CLASS A CLASS B ADDITIONAL DEFICIT) TREASURY STOCK TOTAL
------------------ ----------------- PAID-IN RETAINED --------------- STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT EQUITY
----------- ------ ---------- ------ ---------- ------------ ------- ------- -------------
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1993................... 706,422 $ 7 17,293,578 $173 $ 3,064 $ -- -- $ -- $ 3,244
Partnership earnings
before business
combination............ -- -- -- -- 1,829 -- -- -- 1,829
Net loss................ -- -- -- -- -- (167) -- -- (167)
Capital contribution,
net before business
combination............ -- -- -- -- 9 -- -- -- 9
----------- ---- ---------- ---- -------- ------ ------- ------- --------
Balances at December 31,
1994................... 706,422 $ 7 17,293,578 $173 $ 4,902 $ (167) -- $ -- $ 4,915
Partnership loss before
business combination... -- -- -- -- (1,066) -- -- -- (1,066)
Public offering, net of
issuance costs of
$8,114................. 5,369,350 54 -- -- 68,345 -- -- -- 68,399
Exercise of stock
options................ 20,000 -- -- -- 285 -- -- -- 285
Net income.............. -- -- -- -- -- 2,020 -- -- 2,020
----------- ---- ---------- ---- -------- ------ ------- ------- --------
Balances at December 31,
1995................... 6,095,772 $ 61 17,293,578 $173 $ 72,466 $1,853 -- $ -- $ 74,553
Public offering, net of
issuance costs of
$5,826................. 5,000,000 50 -- -- 94,124 -- -- -- 94,174
Exercise of stock
options................ 6,666 -- -- -- 95 -- -- -- 95
Employee and non-
employee director stock
purchase plans......... 17,243 -- -- -- 290 -- -- -- 290
Treasury shares
purchased.............. -- -- -- -- -- -- 600,000 (8,864) (8,864)
Net income.............. -- -- -- -- -- 4,682 -- -- 4,682
----------- ---- ---------- ---- -------- ------ ------- ------- --------
Balances at December 31,
1996................... 11,119,681 $111 17,293,578 $173 $166,975 $6,535 600,000 $(8,864) $164,930
=========== ==== ========== ==== ======== ====== ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
(DOLLAR AMOUNTS IN THOUSANDS)
Cash flows from operating activities:
Net income.................................... $ 1,662 $ 954 $ 4,682
--------- --------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................ 9,817 15,004 25,013
Minority interest share of income............ 636 1,078 1,880
Deferred income taxes........................ -- 2,650 1,855
Increase in trade accounts receivable........ (4,195) (2,741) (1,561)
(Increase) decrease in inventory............. (3,672) 4,076 (2,595)
Increase (decrease) in accounts payable...... 2,508 2,623 (841)
Increase (decrease) in accrued interest
payable...................................... 1,184 (14) (167)
Interest deferred and added to related party
borrowings................................... 1,611 -- --
Deferred interest paid to related party...... (6,475) -- --
Interest deferred and added to other debt.... 537 607 355
Payment of deferred interest................. -- -- (1,080)
Increase in accrued salaries and employee
benefits..................................... 466 241 165
Increase (decrease) in other accrued
liabilities.................................. 895 583 (507)
Increase in deferred revenue................. 1,163 658 912
Increase (decrease) in customer deposits..... 191 (53) 134
Change in other accounts..................... 910 1,994 1,885
--------- --------- ---------
Total adjustments.......................... $ 5,576 $ 26,706 $ 25,448
--------- --------- ---------
Net cash provided by operating activities.. $ 7,238 $ 27,660 $ 30,130
--------- --------- ---------
Cash flows from investing activities:
Cash payment for purchases of non-wireline
cellular telephone systems and licenses
(note 3)..................................... (91,720) (158,397) (67,588)
Purchases of minority interests.............. (3,097) (1,543) (1,854)
Capital expenditures......................... (22,541) (36,564) (41,445)
Proceeds from sales of property, plant and
equipment.................................... 150 38 5
Decrease (increase) in other intangible
assets and other assets...................... 358 (310) (2,180)
Collection of purchase price adjustment...... -- -- 2,452
--------- --------- ---------
Net cash used in investing activities...... $(116,850) $(196,776) $(110,610)
--------- --------- ---------
Cash flows from financing activities:
Advances from Palmer Communications
Incorporated................................. 4,176 -- --
Payments on advances from Palmer
Communications Incorporated................. (2,359) (1,650) --
Increase in notes payable.................... -- -- 1,366
Proceeds from long-term debt................. 137,000 171,000 100,000
Repayment of long-term debt.................. (75) (65,125) (108,319)
Repayment of related party borrowings........ (20,000) -- --
Payment of debt issuance costs............... (6,454) (4,803) --
Public offering proceeds, net................ -- 71,144 95,000
Proceeds from stock options exercised........ -- 285 95
Payment of deferred offering costs........... (1,448) (1,297) (826)
Collection of common stock subscriptions
receivable................................... 100 -- --
Purchase of treasury stock................... -- -- (8,864)
Proceeds from sales under stock purchase
plans........................................ -- -- 290
--------- --------- ---------
Net cash provided by financing activities.. $ 110,940 $ 169,554 $ 78,742
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents................................ $ 1,328 $ 438 $ (1,738)
Cash and cash equivalents at beginning of
year.......................................... 1,670 2,998 3,436
--------- --------- ---------
Cash and cash equivalents at end of year...... $ 2,998 $ 3,436 $ 1,698
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
During 1994, certain assets net of certain liabilities were transferred
between Palmer Wireless, Inc. and Palmer Communications Incorporated. These
transfers were treated as contributions to and distributions from equity and
amounted to a net contribution of $9 for the year ended December 31, 1994.
During 1994, Palmer Wireless, Inc. accrued $188 for unpaid deferred offering
costs.
During 1995, Palmer Wireless, Inc. committed to purchase certain minority
interests in 1996. This commitment totaling $451 was accrued in 1995 and paid
in 1996.
During 1996, the Company increased the purchase obligations related to the
final purchase price adjustment for the controlling interest in a non-wireline
cellular telephone system purchased in 1991. This increase amounted to $899
and resulted in an increase in licenses.
Acquisitions of non-wireline cellular telephone systems in 1994, 1995 and
1996 (note 3):
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Cash payment...................................... $91,720 $158,397 $67,588
======= ======== =======
Allocated to:
Fixed assets.................................... $11,332 $ 22,846 $ 5,678
Licenses........................................ 79,383 136,940 61,433
Deferred income taxes........................... -- (6,165) --
Current assets and liabilities, net............. 1,005 4,776 477
------- -------- -------
$91,720 $158,397 $67,588
======= ======== =======
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
-----------------------
1994 1995 1996
<S> <C> <C> <C>
Cash paid for interest.............................. $15,199 $18,435 $29,733
Cash paid for income taxes.......................... -- -- $ 1,591
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Palmer
Wireless, Inc. and its subsidiaries (the "Company"), all of which the Company
has an ownership interest in greater than 50 percent.
Palmer Wireless, Inc. ("Wireless") is a Delaware corporation and was
incorporated on December 15, 1993 to effect an initial public offering of its
Class A Common Stock. At December 31, 1996, Palmer Communications Incorporated
("PCI") owned 61 percent of Wireless' outstanding common stock and had 75
percent of Wireless' voting rights and therefore Wireless is a subsidiary of
PCI.
In March of 1995, Wireless issued common stock for 100 percent of the
partnership interests of Palmer Cellular Partnership (the "Partnership") (see
note 2). Since this exchange was between related parties it has been accounted
for in a manner similar to a pooling of interests. Therefore, the statements
of operations, stockholders' equity and cash flows for the year ended December
31, 1994 have been restated to include the accounts of the Partnership.
Losses in subsidiaries, attributable to minority stockholders and partners,
in excess of their capital accounts and cash capital call provisions are not
eliminated in consolidation.
Significant intercompany accounts and transactions have been eliminated in
the consolidation.
OPERATIONS
The Company has majority ownership in corporations and partnerships which
operate the non-wireline cellular telephone systems in nine Metropolitan
Statistical Areas ("MSA") in three states: Florida (two), Georgia (five) and
Alabama (two). The Company's ownership percentages in these entities range
from approximately 78 percent to 100 percent. The Company owns directly and
operates eight non-wireline cellular telephone systems in Rural Service Areas
("RSA") in Georgia (seven) and Alabama (one).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management of the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows the Company considers
repurchase agreements with a maturity of three months or less to be cash
equivalents.
TRADE ACCOUNTS RECEIVABLE
The Company grants credit to its customers. Substantially all of the
customers are residents of the local areas served by the Company. Generally,
the Company discontinues service to customers whose accounts are 60 days past
due. The activity in the Company's allowance for doubtful accounts for the
years ended December 31, 1994, 1995, and 1996 consisted of the following:
<TABLE>
<CAPTION>
ADDITIONS--
BALANCE AT ADDITIONS ALLOWANCE AT BALANCE
BEGINNING CHARGED TO DATES OF DEDUCTIONS NET AT END
OF YEAR EXPENSES ACQUISITIONS OF RECOVERIES OF YEAR
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1994................... $ 681 $1,453 $ 211 $ 778 $1,567
====== ====== ====== ====== ======
Year ended December 31,
1995................... $1,567 $2,078 $ 432 $2,197 $1,880
====== ====== ====== ====== ======
Year ended December 31,
1996................... $1,880 $3,946 $1,270 $5,305 $1,791
====== ====== ====== ====== ======
</TABLE>
F-8
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INVENTORY
Inventory consisting primarily of cellular telephones and telephone parts is
stated at the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is provided
principally by the straight-line method over the estimated useful lives,
ranging from 5 to 20 years for buildings and improvements and 5 to 10 years
for equipment, communications systems and furnishings.
ACQUISITIONS AND LICENSES
The cost of acquired companies is allocated first to the identifiable
assets, including licenses, based on the fair market value of such assets at
the date of acquisition (as determined by independent appraisers or management
of the Company). The excess of the total consideration over the amounts
assigned to identifiable assets is recorded as goodwill.
Also included in licenses are expenditures related directly to acquiring
licenses which were not developed or operating at the time of purchase.
Licenses and goodwill are being amortized from the date of commencement of
service to customers (with applicable interest capitalized from acquisition
date to this date) on a straight-line basis over a 40-year period.
Subsequent to the acquisition of the licenses, the Company continually
evaluates whether later events and circumstances have occurred that indicate
the remaining estimated useful life of licenses may warrant revision or that
the remaining balance of the license rights may not be recoverable. The
Company has undergone an annual independent appraisal of its licenses' value.
The Company utilizes projected undiscounted cash flows over the remaining life
of the licenses and sales of comparable businesses to evaluate the recorded
value of licenses. The assessment of the recoverability of the remaining
balance of the license rights will be impacted if projected cash flows are not
achieved.
OTHER INTANGIBLE ASSETS AND OTHER ASSETS
Other intangibles and other assets consist primarily of deferred financing
costs, covenants not to compete, subscriber base, and other items. These costs
are being amortized by the interest or straight-line method over their
respective useful lives, which range from 5 to 10 years.
INCOME TAXES
The Company accounts for income taxes under the asset and liability method
of accounting for deferred income taxes. Under the asset and liability method,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
The 1994 consolidated financial statements made no provision for income
taxes, due to the fact that the losses of the Partnership were included in the
income tax returns of the individual partners. Also, the consolidated
financial statements made no provision for income taxes of subsidiary
corporations of the Company since those
F-9
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
corporations had approximately $16,182 of net operating loss carryforwards at
December 31, 1994 for federal income tax purposes. In addition, the 1994
consolidated financial statements made no provision for income taxes on the
loss of Wireless due to the non-utilization of Wireless' net operating loss
for the year.
INTEREST RATE SWAP AND CAP AGREEMENTS
The differential to be paid or received in connection with interest rate
swap agreements is accrued as interest rates change and is recognized over the
life of the agreements.
Premiums paid for purchased interest rate cap agreements are amortized to
interest expense over the term of the caps. Unamortized premiums are included
in other assets in the consolidated balance sheet. Amounts receivable under
cap agreements are accrued as a reduction of interest expense.
REVENUE RECOGNITION
Service revenue includes local subscriber revenue and roamer revenue.
The Company earns local subscriber revenue by providing access to the
cellular network (access revenue) or, as applicable, for usage of the cellular
network (airtime revenue). Access revenue is billed one month in advance and
is recognized when earned. Airtime revenue is recognized when the service is
rendered.
Roamer revenue represents revenue earned by the Company for usage of its
cellular network by subscribers of other cellular carriers. Roamer revenue is
recognized when the services are rendered.
Equipment sales and installation revenue is recognized upon delivery or
installation of the equipment to the customer.
OPERATING EXPENSES--ENGINEERING, TECHNICAL AND OTHER DIRECT
Engineering, technical and other direct operating expenses represent certain
costs of providing cellular telephone service to customers. These costs
include cost of incollect roaming service. Incollect roaming is the result of
the Company's subscribers using cellular networks of other cellular carriers.
Incollect roaming revenue is netted against the cost of incollect roaming
service to determine net incollect roaming expense.
STOCK OPTION PLANS
Prior to January 1, 1996, the Company accounted for its stock option plans
in accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees", and related
interpretations. As such, compensation expense would be recorded on the date
of grant only if the current market price of the underlying stock exceeded the
exercise price. On January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation", which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro
forma earnings per share disclosures for employee stock option grants made in
1995 and future years as if the fair-value-based method defined in SFAS No.123
had been applied. The Company has elected to continue to apply the provisions
of APB Opinion No.25 and provide the pro forma disclosure provisions of SFAS
No. 123.
F-10
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates, methods and assumptions used to estimate the fair
value of the Company's financial instruments are set forth below:
For cash and cash equivalents, trade accounts receivable, receivable from
other cellular carriers, notes payable, accounts payable and accrued expenses,
the carrying amount approximates the estimated fair value due to the short-
term nature of those instruments.
Rates currently available to the Company for long-term debt with similar
terms and remaining maturities are used to discount the future cash flows to
estimate the fair value for long-term debt. Note 4 presents the fair value for
long-term debt and the related interest rate cap and swap agreements.
Fair value estimates are made as of a specific point in time, based upon the
relevant market information about the financial instruments. Because no market
exists for a majority of the Company's financial instruments, fair value
estimates are based on judgements regarding current economic conditions and
other factors. These estimates are subjective in nature and involve
uncertainties and matters of judgement and, therefore, cannot be determined
with precision. Changes in assumptions could significantly affect the
estimates.
COMPUTATION OF NET INCOME PER SHARE
The computation of net income per share is based on the weighted average
number of common and dilutive common equivalent shares (common stock options
using the treasury stock method) outstanding during the periods presented.
Average shares of common stock outstanding has been computed assuming that the
704,755 shares of Class A Common Stock and 17,288,578 shares of Class B Common
Stock issued in the Exchange (as defined in note 2) have been outstanding
since January 1, 1994 and the 1,667 shares of Class A Common Stock and the
5,000 shares of Class B Common Stock issued in the initial capitalization of
Wireless have been outstanding since January 1, 1994.
(2) OFFERING AND EXCHANGE
On March 21, 1995 and April 18, 1995, Wireless issued 5,000,000 and 369,350
shares, respectively, of Class A Common Stock in an initial public offering
(the "Offering") for net proceeds of $68,399. In connection with the Offering,
on March 21, 1995, Wireless issued 704,755 shares of Class A Common Stock and
17,288,578 shares of Class B Common Stock in exchange for 100 percent of the
Partnership interests of the Partnership (the "Exchange"). The assets and
liabilities received in the Exchange were recorded at their historical cost to
the Partnership and not revalued at fair value on the date of transfer. Since
the Exchange was between related parties it has been accounted for in a manner
similar to a pooling of interests (see note 1).
(3) ACQUISITIONS AND PURCHASE OF LICENSES
On October 31, 1994, the Company acquired the assets of and the licenses to
operate the non-wireline cellular telephone systems serving the Georgia Rural
Service Area Market Nos. 377, 378, 380 and 382, otherwise known as Georgia-7
RSA, Georgia-8 RSA, Georgia-10 RSA and Georgia-12 RSA, respectively, for an
aggregate purchase price of $91,720. The acquisition was accounted for by the
purchase method of accounting. In connection with this acquisition, $79,383 of
the purchase price was allocated to licenses. From the date of acquisition to
December 31, 1994, revenue, depreciation and amortization, operating loss and
net loss before interest expense related to the purchase price of the non-
wireline cellular telephone systems purchased were $1,803, $744, $(645) and
$(644), respectively.
On December 1, 1995, the Company purchased all of the outstanding stock of
Augusta Metronet, Inc. and Georgia Metronet, Inc., which owned either directly
(or in the case of Georgia Metronet, Inc., through its 97.9 percent interest
in the Savannah Cellular Limited Partnership) the licenses to operate the non-
wireline cellular
F-11
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
telephone systems in the Savannah and Augusta, Georgia MSAs, respectively, for
an aggregate purchase price of $158,397. The acquisition was accounted for by
the purchase method of accounting. In connection with this acquisition,
$136,940 of the purchase was allocated to licenses. From the date of
acquisition to December 31, 1995, revenue, depreciation and amortization,
operating income and net income before interest expense related to the
purchase price of the non-wireline cellular telephone systems were $2,126,
$508, $208 and $202, respectively.
On June 20, 1996, the Company acquired the assets of and the license to
operate the non-wireline cellular telephone system serving the Georgia Rural
Service Area Market No. 371, otherwise known as Georgia-1 RSA for an aggregate
purchase price of $31,616. The acquisition was accounted for by the purchase
method of accounting. In connection with the acquisition, $27,942 of the
purchase price was allocated to licenses. From the date of acquisition to
December 31, 1996, revenue, depreciation and amortization, operating loss and
net loss before interest expense related to the purchase of the non-wireline
cellular telephone system were $1,239, $556, $(278), and $(278), respectively.
On July 5, 1996, two of the Company's majority-owned subsidiaries acquired
the assets of and the license to operate the non-wireline cellular telephone
system serving the Georgia Rural Service Area Market No. 376, otherwise known
as Georgia-6 RSA for an aggregate purchase price of $35,972. The acquisition
was accounted for by the purchase method of accounting. In connection with the
acquisition, $33,491 of the purchase price was allocated to licenses. From the
date of acquisition to December 31, 1996, revenue, depreciation and
amortization, operating income, and net income before interest expense related
to the purchase of the non-wireline cellular telephone system were $2,682,
$578, $743, and $743, respectively.
Assuming the 1995 and 1996 acquisitions had occurred on January 1, 1995,
unaudited pro forma revenue, net (loss) income and net (loss) income per share
for the year ended December 31, 1995 would have been $132,958, $(12,437), and
$(.56), respectively, and for the year ended December 31, 1996, would have
been $163,393, $3,840, and $.15, respectively. These pro forma amounts assume
that the financing requirements were met by the incurrence of bank debt and
are not necessarily indicative of what the actual consolidated results of
operation might have been if the acquisition had been effective on January 1,
1995.
(4) NOTES PAYABLE AND LONG-TERM DEBT
On December 1, 1995, the Company entered into a loan agreement with a bank
which provides for a revolving line of credit of up to $5,000 to facilitate
day-to-day cash management needs. The loan agreement provides for interest at
the bank's prime rate and matures November 30, 1997.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
<S> <C> <C>
Credit agreement (a)......................................... $343,000 $337,000
Purchase obligations (b)..................................... 7,441 5,296
-------- --------
$350,441 $342,296
Less current installments.................................... 7,441 5,296
-------- --------
Long-term debt, excluding current installments............... $343,000 $337,000
======== ========
</TABLE>
(a) On December 1, 1995, the Company entered into an amended and restated
credit agreement with 21 banks which provides for a revolving line of credit
of up to $500,000, subject to certain limitations through June 30, 2004. This
credit agreement increased the Company's previously existing $275,000
revolving line of credit. The credit agreement provides for quarterly
commitment reductions commencing September 30, 1998 and commitment reductions
of 25 to 50 percent of Excess Cash Flow (as defined in the credit agreement),
if any, are
F-12
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
required on April 15, 1998 and annually thereafter. Interest is payable at
variable rates and under various interest rate options. The interest rate at
December 31, 1996 ranged from 7.42 to 8.88 percent before the effect of the
interest rate swap and cap agreements outlined below. The credit agreement
also provides for a commitment fee of .5 percent per year on any unused
amounts of the credit agreement. Amounts outstanding are secured by the assets
of the Company.
The credit agreement provides for various compliance covenants and
restrictions, including items related to mergers or acquisition transactions,
the declaration or payment of dividends or other payments to stockholders,
capital expenditures and maintenance of certain financial ratios. At December
31, 1996, the Company was in compliance with all but one financial ratio
covenant. This covenant was based upon operating results for the year ended
December 31, 1996. The Company obtained a waiver of the noncompliance with
this 1996 financial ratio covenant.
The Company has entered into interest rate swap and cap agreements to reduce
the impact of changes in interest rates on its floating debt and thus were
entered into for purposes other than trading. At December 31, 1996, the
Company had outstanding ten interest rate swap agreements and four interest
rate cap agreements having a total notional value of $295,000. These interest
rate swap and cap agreements effectively change the Company's interest rate
exposure on a quarterly basis on $295,000 of credit.
The cap and swap agreements are summarized as follows:
<TABLE>
<CAPTION>
MAXIMUM NOTIONAL
TYPE OF AGREEMENT MATURITY LIBOR(1) VALUE
<S> <C> <C> <C>
Cap....................................... Nov. 17, 1997 8.00 $ 10,000
Swap...................................... Nov. 17, 1997 8.10 10,000
Swap...................................... Nov. 17, 1997 7.48 20,000
Participating Cap (2)..................... Nov. 23, 1997 8.75 15,000
Participating Swap (3).................... Nov. 24, 1997 8.29 15,000
Trigger Cap (4)........................... Nov. 28, 1997 7.50/8.50 15,000
Pay Later Cap (5)......................... Jan. 12, 1998 8.50 20,000
Swap...................................... Aug. 3, 1998 5.26 25,000
Participating Swap (6).................... Aug. 10, 1998 5.98 15,000
Swap...................................... Aug. 6, 1999 6.36 25,000
Swap...................................... Aug. 7, 2000 6.04 50,000
Swap...................................... Aug. 20, 2000 6.07 25,000
Swap...................................... Oct. 10, 2000 6.03 25,000
Swap...................................... Oct. 11, 2000 5.99 25,000
--------
$295,000
========
</TABLE>
- ---------------------
(1) The maximum interest rate is 2.5 percent over the LIBOR stated in the
table below. The 2.5 percent interest rate over such LIBOR decreases if
certain leverage ratios are met by the Company.
(2) On 36 percent ($5,400) the interest rate is set at 8.75 percent, the
balance is set at the three-month LIBOR up to a maximum 8.75 percent.
(3) When the three-month LIBOR is less than 8.29 percent the Company
participates in 50 percent of the difference.
(4) When LIBOR is below 8.5 percent the rate is 7.5 percent, when LIBOR is 8.5
percent or above the rate is 8.5 percent.
(5) When the three-month LIBOR rate is 8.5 percent or higher the Company
receives a quarterly payment of $98.
(6) When the six-month LIBOR is less than 5.98 percent the Company
participates in 45 percent of the difference.
F-13
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Fees in the amount of $240 were incurred in connection with certain of the
cap agreements and are being amortized over the lives of the respective cap
agreements.
The market value of the swap and cap agreements above, which has not been
reflected in the consolidated financial statements as of December 31, 1996, is
a loss of $1,545.
The Company is exposed to interest rate risk in the event of nonperformance
by the other party to the interest rate swap and cap agreements. However, the
Company does not anticipate nonperformance by any of the banks.
(b) In connection with the purchase of controlling interest in a non-
wireline cellular telephone system in 1991, the Company incurred certain
purchase obligations. The obligations, were retired in July 1996 and January
1997.
Based upon current borrowing rates the fair value approximates the carrying
value of the long-term debt outstanding under the credit agreement described
in (a) above and the purchase obligations described in (b) above.
The aggregate maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, AMOUNT
<S> <C>
1997........................... $ 5,296
1998........................... --
1999........................... --
2000........................... --
2001........................... 72,000
Thereafter..................... 265,000
--------
$342,296
========
</TABLE>
(5) INCOME TAXES
Components of income tax expense consist of the following:
<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
<S> <C> <C> <C>
Year ended December 31, 1995:
Current............................................. $ -- $-- $ --
Deferred............................................ 2,550 100 2,650
------ ---- ------
$2,550 $100 $2,650
====== ==== ======
Year ended December 31, 1996:
Current............................................. $ -- $869 $ 869
Deferred............................................ 1,795 60 1,855
------ ---- ------
$1,795 $929 $2,724
====== ==== ======
</TABLE>
F-14
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The consolidated effective tax rate differs from the statutory United States
federal tax rate for the following reasons and by the following percentages:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER
31,
------------
1995 1996
<S> <C> <C>
Statutory United States federal tax rate........................ 34.0% 34.0%
Partnership loss prior to corporate status...................... 10.1 --
License amortization not deductible for tax..................... 7.7 32.5
Net operating loss carryforwards................................ (59.0) (42.8)
State taxes..................................................... -- 8.3
Recognition of deferred income taxes related to the difference
between financial statement and income tax bases of certain
assets and liabilities in connection with the Exchange......... 73.5 --
Other........................................................... 7.2 4.8
----- -----
Consolidated effective tax rate................................. 73.5% 36.8%
===== =====
</TABLE>
The components of the deferred income tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts..................... $ 658 $ 609
Nondeductible accruals.............................. 163 221
Net operating loss carryforwards.................... 4,314 4,100
-------- --------
Total deferred tax assets......................... $ 5,135 $ 4,930
Valuation allowance................................. (3,898) --
-------- --------
$ 1,237 $ 4,930
-------- --------
Deferred tax liabilities:
Property, plant and equipment....................... (7,323) (7,415)
Licenses............................................ (2,729) (8,185)
-------- --------
Total deferred tax liabilities.................... $(10,052) $(15,600)
-------- --------
Deferred tax liability, net......................... $ (8,815) $(10,670)
======== ========
</TABLE>
The net change in the total valuation allowance for the year ended December
31, 1996 was a decrease of $3,898. A valuation allowance had been recorded
primarily to offset the gross deferred tax assets created by net operating
loss carryforwards until such time as earnings of the Company or alternative
tax planning strategies warranted full recognition. Management believes that
it is more likely than not that the results of future operations will generate
sufficient taxable income to realize that portion of the deferred tax asset
related to the net operating loss carryforwards. The net operating loss
carryforwards totaled approximately $11,700 at December 31, 1996 and expire in
amounts ranging from approximately $400 to $4,100 through 2011. For
carryforwards of approximately $10,900, generated in periods prior to the
Exchange, utilization is limited to the subsidiary that generated the
carryforwards, unless the Company utilizes alternative tax planning
strategies.
F-15
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(6) RELATED PARTY TRANSACTIONS
During 1994, the Company had a subordinated demand note of $20,000 with
Palmer Broadcasting Limited Partnership, a majority-owned subsidiary of PCI.
Interest expense under the note was $1,611 for the year ended December 31,
1994. The note was paid off in 1994.
PCI had previously extended the Company a line of credit in the amount of
$3,000 that was used for the initial operations of the Company, to pay
organization expenses and to pay expenses of the Offering. The line of credit
bore interest at 2 percent above the prime rate. Interest expense on the line
of credit amounted to $117 for the year ended December 31, 1994. The
borrowings totaling $1,615 were repaid with the proceeds of the Offering.
During 1994, the Company earned $78 of interest income from advances to PCI.
During 1994, the Company performed certain management functions for PCI.
These functions included general management, human resources administration,
accounting, and computer services. PCI was charged a fee based on the
Company's estimate of its time spent managing PCI and usage of its computer.
Concurrently with the Offering and the Exchange, the Company and PCI entered
into both a transitional management and administrative services agreement and
a computer services agreement that extend each December 31 for additional one-
year periods unless and until either party notifies the other. The fees from
these arrangements amounted to a total of $509, $492, and $534 for the years
ended December 31, 1994, 1995, and 1996, respectively, and are included as a
reduction of selling, general and administrative expenses.
During 1994, PCI provided certain tax consulting services to the Company.
Concurrently with the Offering and the Exchange, the Company and PCI entered
into a tax consulting agreement that extends each December 31 for additional
one-year periods unless and until either party notifies the other. The fees
for tax consulting services amounted to a total of $67, $84, and $120 for the
years ended December 31, 1994, 1995, and 1996, respectively, and are included
in selling, general and administrative expenses.
PCI has a 401(k) plan with a noncontributory retirement feature and a
matching provision for employees who meet length of service and other
requirements. The Company participates in this plan and was allocated 401(k)
retirement and matching expense of $305, $493, and $696 for the years ended
December 31, 1994, 1995, and 1996, respectively.
(7) COMMON STOCK AND STOCK PLANS
During 1994, the Company amended its certificate of incorporation to
increase the number of authorized shares of common stock from 60,000,000 to
91,000,000 and to provide for Class A Common Stock and Class B Common Stock.
The Class A Common Stock has one vote per share. The Class B Common Stock,
which may be owned only by PCI or certain successors of PCI and of which no
shares may be issued subsequent to the Offering, has five votes per share,
provided, however, that, so long as any Class A Common Stock is issued and
outstanding, at no time will the total outstanding Class B Common Stock have
the right to cast votes having more than 75 percent of the total voting power
of the common stock in the aggregate. Shares of Class B Common Stock shall be
converted into Class A Common Stock on a share-for-share basis: (i) at any
time at the option of the holder; (ii) immediately upon the transfer of shares
of Class B Common Stock to any holder other than a successor of PCI; (iii)
immediately if the shares of Class B Common Stock held by PCI or its
successors constitute 33 percent or less of the outstanding shares of the
Company; (iv) at the end of 20 years from original issuance of those shares of
Class B Common Stock; or (v) if more than 50 percent of the equity interests
in PCI become beneficially owned by persons other than: (i) beneficial owners
of PCI as of December 29, 1994 ("Current PCI Beneficial Owners"); (ii)
affiliates of Current PCI Beneficial Owners; (iii) heirs or devisees of
F-16
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
any individual Current PCI Beneficial Owner, successors of any corporation or
partnership which is a Current PCI Beneficial Owner and beneficiaries of any
trust which is a Current PCI Beneficial Owner; and (iv) any relative, spouse
or relative of a spouse of any Current PCI Beneficial Owner.
The Company adopted a Stock Option Plan in connection with the Offering,
under which options for an aggregate of 1,600,000 shares of Class A Common
Stock are available for grants to key employees. The Company also adopted a
Director's Stock Option Plan in connection with the Offering, under which
options for an aggregate of 300,000 shares of Class A Common Stock are
available for grants to directors who are not officers or employees of the
Company. Stock options under both plans are granted with an exercise price
equal to the stock's fair value at the date of grant. The stock options
granted under the Stock Option Plan have 10-year terms and vest and become
exercisable ratably over three years from the date of grant. The stock options
granted under the Director's Stock Option Plan are vested and become fully
exercisable upon the date of the grant. At December 31, 1996, there were
options with respect to 693,334 and 45,000 shares of Class A Common Stock
outstanding under the Stock Option Plan and the Director's Stock Option Plan,
respectively. At December 31, 1996, there were 880,000 and 255,000 additional
shares available for grant under the Stock Option Plan and the Director's
Stock Option Plan, respectively.
The Company applies APB Opinion No. 25 in accounting for its Stock Option
Plan and Director's Stock Option Plan ("the Plans") and accordingly, no
compensation cost has been recognized for its stock options in the
consolidated financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under
SFAS No.123, the Company's net income (loss) and net income (loss) per share
would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------
1995 1996
<S> <C> <C>
Net income-as reported...................................... $ 954 $4,682
Net (loss) income-pro forma................................. $(777) $2,850
Net income per share-as reported............................ $ .04 $ .18
Net (loss) income per share-pro forma....................... $(.03) $ .11
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the weighted-average assumptions
as follows: dividend yield of 0.0%; expected volatility of 101%; risk-free
interest rate of 5.5%; and expected lives of five years. The fair value of the
option grants in 1995 and 1996 were $11.04 and $13.36 per share, respectively.
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
<S> <C> <C>
Balance December 31, 1994 -- --
Granted......................................... 692,500 $14.25
Exercised....................................... (20,000) 14.25
-------
Balance December 31, 1995......................... 672,500 14.25
Granted......................................... 72,500 17.25
Exercised....................................... (6,666) 14.25
-------
Balance December 31, 1996......................... 738,334 14.54
=======
</TABLE>
At December 31, 1996, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $14.25--$17.25 and 8.3
years, respectively.
F-17
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
At December 31, 1995 and 1996, the number of options exercisable was 37,500
and 250,000, respectively, and the weighted average exercise price of those
options was $14.25 and $14.34, respectively.
The Company adopted a stock purchase plan for employees (the "Employee Stock
Purchase Plan") and a stock purchase plan for non-employee directors (the
"Non-Employee Director Stock Purchase Plan"). Under the Employee Stock
Purchase Plan, 160,000 shares of Class A Common Stock are available for
purchase by eligible employees of the Company or any of its subsidiaries.
Under the Non-Employee Director Stock Purchase Plan, 25,000 shares of Class A
Common Stock are available for purchase by non-employee directors of the
Company. The purchase price of each share of Class A Common Stock purchased
under the Employee Stock Purchase Plan or the Non-Employee Director Stock
Purchase Plan will be the lesser of 90 percent of the fair market value of the
Class A Common Stock on the first trading day of the plan year or on the last
day of such plan year; provided, however, that in no event shall the purchase
price be less than the par value of the stock. Both plans will terminate in
2005, unless terminated at an earlier date by the board of directors. During
the year ended December 31, 1996, 15,541 shares were issued under the Employee
Stock Purchase Plan and 1,702 shares were issued under the Non-Employee
Director Stock Purchase Plan at a purchase price of $16.85. Compensation cost
computed under the provisions of SFAS No. 123 related to the shares issued
under the Employee Stock Purchase Plan and the Non-Employee Director Stock
Purchase Plan is immaterial to the consolidated financial statements.
(8) COMMITMENTS AND CONTINGENCIES
LEASES
The Company occupies certain buildings and uses certain tower sites, cell
sites and equipment under noncancellable operating leases which expire through
2014. The operating leases for a building and certain tower sites and cell
sites are with related parties.
Future minimum lease payments under noncancellable operating leases as of
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
RELATED PARTIES OTHERS
<S> <C> <C>
1997............................................. $285 $ 3,429
1998............................................. 285 2,899
1999............................................. 52 2,507
2000............................................. 14 2,011
2001............................................. -- 1,348
Later years through 2014......................... -- 4,522
---- -------
Total minimum lease payments................... $636 $16,716
==== =======
</TABLE>
Rental expense was $1,609, $2,487, and $3,551 for the years ended December
31, 1994, 1995 and 1996, respectively, of which $253, $269, and $278 was paid
to related parties for 1994, 1995 and 1996, respectively.
CONTINGENCIES
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial statements.
F-18
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
EMPLOYMENT AGREEMENTS
The Company has employment agreements with six officers of the Company. The
agreements have terms of two or three years and provide for aggregate annual
salaries of $1,181 in 1997. Each employment agreement provides that if the
officer is terminated by the Company without cause (as defined therein) or
terminates the agreement for good reason (as defined therein), the Company
will pay the officer the full base salary and benefits which would have been
paid to such officer during the remaining term of the agreement.
(9) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 FIRST QUARTER(A) SECOND QUARTER THIRD QUARTER FOURTH QUARTER TOTAL
<S> <C> <C> <C> <C> <C>
Total Revenue........... $22,374 $25,931 $26,055 $30,546 $104,906
======= ======= ======= ======= ========
Operating Income........ $ 4,872 $ 6,892 $ 8,152 $ 6,666 $ 26,582
======= ======= ======= ======= ========
Net (Loss) Income....... $(3,958) $ 1,620 $ 2,801 $ 491 $ 954
======= ======= ======= ======= ========
Net (Loss) Income Per
Share*................. $ (.21) $ .07 $ .12 $ .02 $ .04
======= ======= ======= ======= ========
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 FIRST QUARTER (B) SECOND QUARTER (B) THIRD QUARTER (B) FOURTH QUARTER TOTAL
<S> <C> <C> <C> <C> <C>
Total Revenue........... $36,950 $40,031 $41,171 $41,591 $159,743
======= ======= ======= ======= ========
Operating Income........ $ 8,514 $11,281 $11,977 $ 9,405 $ 41,177
======= ======= ======= ======= ========
Net Income (Loss)....... $ 76 $ 1,684 $ 2,976 $ (54) $ 4,682
======= ======= ======= ======= ========
Net Income (Loss) Per
Share*................. $ .00 $ .07 $ .10 $ (.00) $ .18
======= ======= ======= ======= ========
</TABLE>
- ---------------------
(a) First quarter loss was increased by $2,650 due to the recognition of
deferred income taxes relating to the difference between financial
statement and income tax return bases of certain assets and liabilities
in connection with the Exchange.
(b) Certain reclassifications have been made to conform to the fourth quarter
presentation.
* Weighted average shares outstanding for the quarters are calculated
independent of the weighted average shares outstanding for the year;
therefore, quarterly net income (loss) per share may not total to annual
net income per share.
(10) SUBSEQUENT EVENT
On February 1, 1997, one of the Company's majority-owned subsidiaries
acquired the assets of and license to operate the non-wireline cellular
telephone system serving the Georgia Rural Service Area Market No. 383,
otherwise known as Georgia-13 RSA for a total purchase price of $30,000,
subject to certain adjustments.
F-19
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents................ $ 1,698 $ 3,581
Trade Accounts Receivable, Net of
Allowance for Doubtful Accounts......... 18,784 19,076
Receivable from Other Cellular Carriers.. 1,706 3,102
Deferred Income Taxes.................... 830 930
Prepaid Expenses and Deposits............ 2,313 2,481
Inventory................................ 5,106 2,466
-------------- --------------
Total Current Assets................... $ 30,437 $ 31,636
Net Property, Plant and Equipment.......... 132,438 161,351
Licenses, Net of Amortization.............. 375,808 396,282
Other Intangible Assets and Other Assets,
at Cost Less Accumulated Amortization..... 11,259 10,546
-------------- --------------
$ 549,942 $ 599,815
============== ==============
LIABILITIES AND EQUITY
Current Liabilities:
Notes Payable............................ $ 1,366 $ --
Current Installments of Long-Term Debt... 5,296 --
Accounts Payable......................... 10,394 9,461
Accrued Expenses......................... 8,399 10,341
Other Liabilities........................ 4,686 4,823
-------------- --------------
Total Current Liabilities.............. $ 30,141 $ 24,625
Long-Term Debt, Excluding Current
Installments.............................. 337,000 378,000
Deferred Income Taxes...................... 11,500 11,389
Minority Interests......................... 6,371 7,445
-------------- --------------
Total Liabilities...................... $ 385,012 $ 421,459
-------------- --------------
Stockholders' Equity....................... 164,930 178,356
-------------- --------------
$ 549,942 $ 599,815
============== ==============
</TABLE>
- ---------------------
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes to condensed consolidated financial statements.
F-20
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
30,
------------------------------
1996 1997
(DOLLAR AMOUNTS IN THOUSANDS
EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C>
Revenue:
Service...................................... $ 111,803 $ 134,123
Equipment Sales and Installation............. 6,349 7,613
-------------- --------------
Total Revenue.............................. $ 118,152 $ 141,736
-------------- --------------
Operating Expenses:
Engineering, Technical and Other Direct...... 22,100 23,301
Cost of Equipment............................ 12,271 16,111
Selling, General and Administrative.......... 33,842 41,014
Depreciation and Amortization................ 18,167 23,313
-------------- --------------
Total Operating Expenses................... $ 86,380 $ 103,739
-------------- --------------
Operating Income........................... $ 31,772 $ 37,997
-------------- --------------
Other Income (Expense):
Interest Expense, Net........................ (23,654) (24,468)
Other Income, Net............................ (242) 208
-------------- --------------
Total Other Expense........................ $ (23,896) $ (24,260)
-------------- --------------
Income Before Minority Interest Share of Income
and Income Taxes.............................. $ 7,876 $ 13,737
Minority Interest Share of Income.............. (1,562) (1,310)
-------------- --------------
Income Before Income Taxes..................... $ 6,314 $ 12,427
Income Taxes................................... (1,578) --
-------------- --------------
Net Income................................. $ 4,736 $ 12,427
============== ==============
Net Income Per Share of Common Stock........... $ 0.19 $ 0.45
============== ==============
Average Shares Outstanding..................... 25,492,054 27,826,080
============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-21
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
CLASS A CLASS B TREASURY STOCK
----------------- ----------------- ----------------
ADDITIONAL TOTAL
PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December
31, 1995............... 6,095,772 $ 61 17,293,578 $173 $ 72,466 $ 1,853 -- $ -- $74,553
Public offering, net of
issuance costs
of $5,826.............. 5,000,000 50 -- -- 94,124 -- -- -- 94,174
Exercise of stock
options................ 6,666 -- -- -- 95 -- -- -- 95
Employee and non-
employee director stock
purchase plans......... 17,243 -- -- -- 290 -- -- -- 290
Treasury shares
purchased.............. -- -- -- -- -- 600,000 (8,864) (8,864)
Net income.............. -- -- -- -- -- 4,682 -- -- 4,682
---------- ---- ---------- ---- -------- ------- ------- -------- --------
Balances at December 31,
1996................... 11,119,681 $111 17,293,578 $173 $166,975 $ 6,535 600,000 $(8,864) $164,930
Exercise of stock
options................ 70,000 1 -- -- 998 -- -- -- 999
Net income.............. -- -- -- -- -- 12,427 -- -- 12,427
---------- ---- ---------- ---- -------- ------- ------- -------- --------
Balances at September
30, 1997............... 11,189,681 $112 17,293,578 $173 $167,973 $18,962 600,000 $ (8,864) $178,356
========== ==== ========== ==== ======== ======= ======= ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-22
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
<S> <C> <C>
1996 1997
<CAPTION>
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income.................................. $ 4,736 $ 12,427
--------------- --------------
Adjustments to reconcile net income to net
cash provided by operating
activities:
Depreciation and amortization............. 18,167 23,313
Minority interest share of income......... 1,562 1,310
Deferred income taxes..................... 809 (210)
Loss on disposal of property.............. 59 7
Interest deferred and added to long-term
debt...................................... 355 --
Payment of deferred interest.............. (1,080) (1,514)
Decrease in trade accounts receivable..... (337) 473
Decrease in inventory..................... (553) 2,800
Increase in accounts payable and accrued
expenses.................................. (3,789) 536
Change in other accounts.................. 1,991 (351)
--------------- --------------
Total adjustments....................... $ 17,184 $ 26,364
--------------- --------------
Net cash provided by operating
activities.............................. $ 21,920 $ 38,791
--------------- --------------
Cash flows from investing activities:
Capital expenditures........................ (30,174) (40,757)
Proceeds from sales of property and
equipment................................... 4 201
Purchase of cellular systems................ (67,580) (31,469)
Collection of purchase price adjustment..... 2,452 --
Purchases of minority interests............. (1,854) (956)
Deposits for PCS auction.................... (5,132) --
Increase in other intangible assets and
other assets................................ (522) (778)
--------------- --------------
Net cash used in investing activities..... $ (102,806) $ (73,759)
--------------- --------------
Cash flows from financing activities:
Increase in short-term notes payable........ 2,964 (1,366)
Repayment of long-term debt................. (108,319) (3,782)
Proceeds from long-term debt................ 91,000 41,000
Public offering proceeds.................... 94,200 --
Exercise of stock options................... 95 999
Employee and non-employee director stock
purchase plans.............................. 290 --
--------------- --------------
Net cash provided by financing activities. $ 80,230 $ 36,851
--------------- --------------
Net increase in cash and cash equivalents. $ (656) $ 1,883
Cash and cash equivalents at the beginning of
period........................................ 3,436 1,698
--------------- --------------
Cash and cash equivalents at the end of
period........................................ $ 2,780 $ 3,581
=============== ==============
Supplemental disclosure of cash flow
information:
Income taxes paid (received), net........... $ 1,498 $ (736)
=============== ==============
Interest paid............................... $ 21,312 $ 27,471
=============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-23
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Palmer
Wireless, Inc. and subsidiaries (the "Company") have been prepared without
audit pursuant to Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financials. In the opinion of management, all adjustments (none of which were
other than normal recurring items) considered necessary for a fair
presentation have been included. The results of operations for the interim
periods reported are not necessarily indicative of results to be expected for
the year.
The computation of net income per share is based on the weighted average
number of common and, as appropriate, dilutive common equivalent shares
(common stock options using the treasury stock method) outstanding during the
periods presented.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 Statement of Operations
to conform to the 1997 presentation.
(2) ACQUISITION AND PURCHASE OF LICENSE
On February 1, 1997, one of the Company's majority-owned subsidiaries
acquired the assets of and license to operate the non-wireline cellular
telephone system serving the Georgia Rural Service Area Market No. 383,
otherwise known as Georgia-13 RSA, for a total purchase price of $31,096.
(3) SALE OF THE COMPANY
On October 6, 1997, the outstanding shares of common stock of the Company
were sold to Price Communications Corporation for a purchase price of $17.50
per share, for an aggregate purchase price of approximately $486,000. In
addition, Price Communications Corporation also repaid approximately $378,000
of outstanding indebtedness of the Company.
F-24
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE INITIAL PURCHASERS OR ANY OTHER PERSON. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 14
The Acquisition........................................................... 22
Use of Proceeds........................................................... 23
Capitalization............................................................ 24
Unaudited Pro Forma Condensed Consolidated Financial Statements........... 25
Selected Consolidated Financial Data...................................... 32
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 34
The Exchange Offer........................................................ 45
Business of the Company................................................... 51
Management................................................................ 64
Principal Stockholders.................................................... 68
Description of New Credit Facility........................................ 68
Description of Notes...................................................... 70
Description of the Guarantee.............................................. 94
United States Federal Income Tax Consequences of the Exchange Offer....... 97
Plan of Distribution...................................................... 97
Legal Matters............................................................. 97
Experts................................................................... 97
Available Information..................................................... 98
Certain Terms............................................................. 98
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$153,400,000
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
13 1/2% SERIES B SENIOR SECURED DISCOUNT NOTES DUE 2007
--------------
PROSPECTUS
--------------
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law (the "DGCL"), which enables a corporation in its original certificate of
incorporation or an amendment thereto to eliminate or limit the personal
liability of a director for violations of the director's fiduciary duty,
except (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) pursuant
to Section 174 of the DGCL (providing for liability of directors for the
unlawful payment of dividends or unlawful stock purchases or redemptions) or
(iv) for any transaction from which a director derived an improper personal
benefit.
Section 145 of the DGCL empowers the Company to indemnify, subject to the
standards set forth therein, any person in connection with any action, suit or
proceeding brought before or threatened by reason of the fact that the person
was a director, officer, employee or agent of such company, or is or was
serving as such with respect to another entity at the request of such company.
The DGCL also provides that the Company may purchase insurance on behalf of
any such director, officer, employee or agent.
The Company's Certificate of Incorporation and By-laws provide in effect for
the indemnification by the Company of each director and officer of the Company
to the fullest extent permitted by applicable law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits (see index to exhibits at E-1)
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes;
(a)(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 of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the 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 the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, 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.
II-1
<PAGE>
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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
Securities and Exchange Commission 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 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.
(c) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(d) 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 the registration statement when
it became effective.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, NEW YORK, ON
NOVEMBER 26, 1997.
PRICE COMMUNICATIONS CELLULAR
HOLDINGS, INC.
/s/ Robert Price
By: _________________________________
ROBERT PRICE
DIRECTOR, PRESIDENT AND TREASURER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Robert Price Director, President November 26,
_____________________________________ and Treasurer 1997
ROBERT PRICE (Principal
Executive Officer,
Financial Officer
and Accounting
Officer)
/s/ Ashley B. Dixon Vice President and November 26,
_____________________________________ Corporate 1997
ASHLEY B. DIXON Secretary
(Principal
Executive Officer)
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, NEW YORK, ON
NOVEMBER 26, 1997.
PRICE COMMUNICATIONS CELLULAR INC.
/s/ Robert Price
By: _________________________________
ROBERT PRICE
DIRECTOR, PRESIDENT AND TREASURER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Robert Price Director, President November 26,
_____________________________________ and Treasurer 1997
ROBERT PRICE (Principal
Executive Officer,
Financial Officer
and Accounting
Officer)
/s/ Ashley B. Dixon Secretary and November 26,
_____________________________________ Assistant 1997
ASHLEY B. DIXON Treasurer
(Principal
Executive Officer)
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 The Merger Agreement*
3.1 Certificate of Incorporation of Holdings, as amended
3.2 By-laws of Holdings
3.3 Certificate of Incorporation of the Guarantor, as amended
3.4 By-laws of the Guarantor
4.1 Indenture to 13 1/2% Senior Secured Discount Notes due 2007 between
Holdings, the Guarantor and Bank of Montreal Trust Company, as Trustee
(including form of Note)
4.2 Registration Rights Agreement
4.3 Guarantee (included in Exhibit 4.1)
5.1 Opinion of Davis Polk & Wardwell regarding the validity of the New
Notes+
10.1 Credit Agreement dated as of September 30, 1997 among Holdings, PCW,
the lenders listed therein, DLJ Capital Funding, Inc., as syndication
agent and Bank of Montreal, Chicago branch, as administrative agent*
10.2 Fort Myers Sale Agreement*
10.3 Georgia Sale Agreement*
10.4 Ryan Agreement*
10.5 Wisehart Agreement*
10.6 Meehan Agreement*
12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges
21.1 Subsidiaries of the Company
23.1 Consent of KPMG Peat Marwick LLP relating to the financial statements
of Palmer
23.2 Consent of Davis Polk & Wardwell (see exhibit 5.1)
25.1 Statement of Eligibility of Bank of Montreal Trust Company with
respect to the 13 1/2% Senior Secured Discount Notes due 2007 of
Holdings
25.2 Statement of Eligibility of Bank of Montreal Trust Company with
respect to the Guarantee of the Notes by the Guarantor
99.1 Form of Letter of Transmittal to 13 1/2% Senior Secured Discount Notes
due 2007 of Holdings
99.2 Form of Notice of Guaranteed Delivery to 13 1/2% Senior Secured
Discount Notes due 2007 of Holdings
99.3 Form of Instruction to Registered Holder and/or Book-Entry Transfer of
Participant from Owner of Holdings
99.4 Form of Letter to Clients
99.5 Form of Letter to Registered Holders and Depository Trust Company
Participants
</TABLE>
- --------
* Incorporated by reference to the Registration Statement on Form S-4, No.
333-36253 filed by Price Communications Wireless, Inc.
+ To be filed by amendment.
E-1
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
PWI PARENT CORP.
The undersigned incorporator, in order to form a corporation under the
General Corporation Law of Delaware, certifies as follows:
FIRST: The name of the corporation is PWI Parent Corp.
SECOND: The registered office of the corporation is to be located at 1013
Centre Road, Wilmington, Delaware, 19805-1297, New Castle County. The name of
its registered agent at that address is Corporation Service Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The corporation shall have the authority to issue 3,000
shares of common stock, par value $0.01 per share.
FIFTH: The name and mailing address of the incorporator are as follows:
Peter G. Samuels, Esq.
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
SIXTH: Whenever a compromise or arrangement is proposed between the
corporation and its creditors or any class of them and/or between the
corporation and its stock holders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the corporation under the
provisions of (S)291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
corporation under the provisions of (S)279 of Title 8 of the Delaware Code order
a meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all
<PAGE>
the creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the corporation, as the case may be, and also on the
corporation.
SEVENTH: The corporation shall, to the fullest extent permitted by law, as
the same is now or may hereafter be in effect, indemnify each person (including
the heirs, executors, administrators and other personal representatives of such
person) against expenses including attorneys' fees, judgments, fines and amounts
paid in settlement, actually and reasonably incurred by such person in
connection with any threatened, pending or completed suit, action or proceeding
(whether civil, criminal, administrative or investigative in nature or
otherwise) in which such person may be involved by reason of the fact that he or
she is or was a director or officer of the corporation or is or was serving any
other incorporated or unincorporated enterprise in such capacity at the request
of the corporation.
EIGHTH: Unless, and except to the extent that, the by-laws of the
corporation shall so require, the election of directors of the corporation need
not be by written ballot.
NINTH: The corporation hereby confers the power to adopt, amend or repeal
bylaws of the corporation upon the directors.
IN WITNESS WHEREOF, I have hereunto set my hand this 29/th/ day of May,
1997.
/s/ Peter G. Samuels, Esq.
------------------------------
Peter G. Samuels, Esq.
Sole Incorporator
<PAGE>
CERTIFICATE OF AMENDMENT
OF
THE CERTIFICATE OF INCORPORATION
OF
PWI PARENT CORP.
(Under Section 242 of the Delaware General Corporation Law)
-----------------------------------------------------------
It is hereby certified that:
1. The name of the corporation is PWI Parent Corp. (the "Corporation").
2. The Certificate of Incorporation of the Corporation was filed with the
Department of State on May 29, 1997.
3. Paragraph FIRST of the Certificate of Incorporation, which sets forth
the name of the Corporation, is hereby amended to read in its entirety as
follows:
FIRST: The name of the corporation is Price Communications
Cellular Holdings, Inc.
4. This amendment has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of Delaware by the
written consent of the Corporation's Board of Directors and stockholders.
IN WITNESS WHEREOF, the undersigned has subscribed this document on July 2,
1997 and does hereby affirm, under penalties of perjury, that the statements
contained therein have been examined by him and are true and correct.
PWI PARENT CORP.
By: /s/ Robert Price
-----------------------------------
Robert Price
President
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
PWI PARENT CORP.
1. MEETINGS OF STOCKHOLDERS.
------------------------
1.1 Annual Meeting. The annual meeting of stockholders shall be held
--------------
at a place and time as determined by the board of directors of the corporation
(the "Board") in its discretion.
1.2 Special Meetings. Special meetings of the stockholders may be
----------------
called by resolution of the Board or the president and shall be called by the
president or secretary upon the written request (stating the purpose or purposes
of the meeting) of a majority of the directors then in office or of the holders
of a majority of the outstanding shares entitled to vote. Only business related
to the purposes set forth in the notice of the meeting may be transacted at a
special meeting.
1.3 Place and Time of Meetings. Meetings of the stockholders may be
--------------------------
held in or outside Delaware at the place and time specified by the Board or the
officers or stockholders requesting the meeting.
1.4 Notice of Meetings; Waiver of Notice. Written notice of each
------------------------------------
meeting of stockholders shall be given to each stockholder entitled to vote at
the meeting, except that (a) it shall not be necessary to give notice to any
stockholder who submits a signed waiver of notice before or after the meeting,
and (b) no notice of an adjourned meeting need be given, except
<PAGE>
when required under section 1.5 below or by law. Each notice of a meeting shall
be given, personally or by mail, not fewer than 10 nor more than 60 days before
the meeting and shall state the time and place of the meeting, and, unless it is
the annual meeting, shall state at whose direction or request the meeting is
called and the purposes for which it is called. If mailed, notice shall be
considered given when mailed to a stockholder at his address on the
corporation's records. The attendance of any stockholder at a meeting, without
protesting at the beginning of the meeting that the meeting is not lawfully
called or convened, shall constitute a waiver of notice by him.
1.5 Quorum. At any meeting of stockholders, the presence in person
------
or by proxy of the holders of a majority of the shares entitled to vote shall
constitute a quorum for the transaction of any business. In the absence of a
quorum, a majority in voting interest of those present or, if no stockholders
are present, any officer entitled to preside at or to act as secretary of the
meeting, may adjourn the meeting until a quorum is present. At any adjourned
meeting at which a quorum is present, any action may be taken that might have
been taken at the meeting as originally called. No notice of an adjourned
meeting need be given, if the time and place are announced at the meeting at
which the adjournment is taken, except that, if adjournment is for more than 30
days or if, after the adjournment, a new record date is fixed for the meeting,
notice of the adjourned meeting shall be given pursuant to section 1.4.
1.6 Voting; Proxies. Each stockholder of record shall be entitled to
---------------
one vote for each share registered in his name. Corporate action to be taken by
stockholder vote, other than the election of directors, shall be authorized by a
majority of the votes cast at a meeting of stockholders, except as otherwise
provided by law or by section 1.8. Directors shall be elected in
<PAGE>
the manner provided in section 2.1. Voting need not be by ballot, unless
requested by a majority of the stockholders entitled to vote at the meeting or
ordered by the chairman of the meeting. Each stockholder entitled to vote at any
meeting of stockholders or to express consent to or dissent from corporate
action in writing without a meeting may authorize another person to act for him
by proxy. No proxy shall be valid after three years from its date, unless it
provides otherwise.
1.7 List of Stockholders. Not fewer than 10 days prior to the date
--------------------
of any meeting of stockholders, the secretary of the corporation shall prepare a
complete list of stockholders entitled to vote at the meeting, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in his name. For a period of not fewer than 10 days prior to
the meeting, the list shall be available during ordinary business hours for
inspection by any stockholder for any purpose germane to the meeting. During
this period, the list shall be kept either (a) at a place within the city where
the meeting is to be held, if that place shall have been specified in the notice
of the meeting, or (b) if not so specified, at the place where the meeting is to
be held. The list shall also be available for inspection by stockholders at the
time and place of the meeting.
1.8 Action by Consent Without a Meeting. Any action required or
-----------------------------------
permitted to be taken at any meeting of stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not fewer than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon
<PAGE>
were present and voting. Prompt notice of the taking of any such action shall
be given to those stockholders who did not consent in writing.
2. BOARD OF DIRECTORS.
------------------
2.1 Number, Qualification, Election and Term of Directors. The
-----------------------------------------------------
business of the corporation shall be managed by the entire Board, which
initially shall consist of one director. The number of directors may be changed
by resolution of a majority of the Board or by the stockholders, but no decrease
may shorten the term of any incumbent director. Directors shall be elected at
each annual meeting of stockholders by a plurality of the votes cast and shall
hold office until the next annual meeting of stockholders and until the election
and qualification of their respective successors, subject to the provisions of
section 2.9. As used in these by-laws, the term "entire Board" means the total
number of directors the corporation would have, if there were no vacancies on
the Board.
2.2 Quorum and Manner of Acting. A majority of the entire Board
---------------------------
shall constitute a quorum for the transaction of business at any meeting, except
as provided in section 2.10. Action of the Board shall be authorized by the
vote of the majority of the directors present at the time of the vote, if there
is a quorum, unless otherwise provided by law or these by-laws. In the absence
of a quorum, a majority of the directors present may adjourn any meeting from
time to time until a quorum is present.
2.3 Place of Meetings. Meetings of the Board may be held in or
-----------------
outside Delaware.
<PAGE>
2.4 Annual and Regular Meetings. Annual meetings of the Board, for
---------------------------
the election of officers and consideration of other matters, shall be held
either (a) without notice immediately after the annual meeting of stockholders
and at the same place, or (b) as soon as practicable after the annual meeting of
stockholders, on notice as provided in section 2.6. Regular meetings of the
Board may be held without notice at such times and places as the Board
determines. If the day fixed for a regular meeting is a legal holiday, the
meeting shall be held on the next business day.
2.5 Special Meetings. Special meetings of the Board may be called by
----------------
the president or by a majority of the directors.
2.6 Notice of Meetings; Waiver of Notice. Notice of the time and
------------------------------------
place of each special meeting of the Board, and of each annual meeting not held
immediately after the annual meeting of stockholders and at the same place,
shall be given to each director by mailing it to him at his residence or usual
place of business at least three days before the meeting, or by delivering or
telephoning or telegraphing it to him at least two days before the meeting.
Notice of a special meeting also shall state the purpose or purposes for which
the meeting is called. Notice need not be given to any director who submits a
signed waiver of notice before or after the meeting or who attends the meeting
without protesting at the beginning of the meeting the transaction of any
business because the meeting was not lawfully called or convened. Notice of any
adjourned meeting need not be given, other than by announcement at the meeting
at which the adjournment is taken.
<PAGE>
2.7 Board or Committee Action Without a Meeting. Any action required
-------------------------------------------
or permitted to be taken by the Board or by any committee of the Board may be
taken without a meeting, if all the members of the Board or the committee
consent in writing to the adoption of a resolution authorizing the action. The
resolution and the written consents by the members of the Board or the committee
shall be filed with the minutes of the proceedings of the Board or the
committee.
2.8 Participation in Board or Committee Meetings by Conference
----------------------------------------------------------
Telephone. Any or all members of the Board or any committee of the Board may
- ---------
participate in a meeting of the Board or the committee by means of a conference
telephone or similar communications equipment allowing all persons participating
in the meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at the meeting.
2.9 Resignation and Removal of Directors. Any director may resign at
------------------------------------
any time by delivering his resignation in writing to the president or secretary
of the corporation, to take effect at the time specified in the resignation; the
acceptance of a resignation, unless required by its terms, shall not be
necessary to make it effective. Any or all of the directors may be removed at
any time, either with or without cause, by vote of the stockholders.
2.10 Vacancies. Any vacancy in the Board, including one created by
---------
an increase in the number of directors, may be filled for the unexpired term by
a majority vote of the remaining directors, though less than a quorum.
2.11 Compensation. Directors shall receive such compensation as the
------------
Board determines, together with reimbursement of their reasonable expenses in
connection with the
<PAGE>
performance of their duties. A director also may be paid for serving the
corporation or its affiliates or subsidiaries in other capacities.
3. COMMITTEES.
----------
3.1 Executive Committee. The Board, by resolution adopted by a
-------------------
majority of the entire Board, may designate an executive committee of one or
more directors, which shall have all the powers and authority of the Board,
except as otherwise provided in the resolution, section 141(c) of the General
Corporation Law of Delaware or any other applicable law. The members of the
executive committee shall serve at the pleasure of the Board. All action of the
executive committee shall be reported to the Board at its next meeting.
3.2 Other Committees. The Board, by resolution adopted by a majority
----------------
of the entire Board, may designate other committees of one or more directors,
which shall serve at the Board's pleasure and have such powers and duties as the
Board determines.
3.3 Rules Applicable to Committees. The Board may designate one or
------------------------------
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In case of the absence
or disqualification of any member of a committee, the member or members present
at a meeting of the committee and not disqualified, whether or not a quorum, may
unanimously appoint another director to act at the meeting in place of the
absent or disqualified member. All action of a committee shall be reported to
the Board at its next meeting. Each committee shall adopt rules of procedure
and shall meet as provided by those rules or by resolutions of the Board.
<PAGE>
4. OFFICERS.
--------
4.1 Number; Security. The executive officers of the corporation
----------------
shall be the president, one or more vice presidents (including an executive vice
president, if the Board so determines), a secretary and a treasurer. Any two or
more offices may be held by the same person. The board may require any officer,
agent or employee to give security for the faithful performance of his duties.
4.2 Election; Term of Office. The executive officers of the
------------------------
corporation shall be elected annually by the Board, and each such officer shall
hold office until the next annual meeting of the Board and until the election of
his successor, subject to the provisions of section 4.4.
4.3 Subordinate Officers. The Board may appoint subordinate officers
--------------------
(including assistant secretaries and assistant treasurers), agents or employees,
each of whom shall hold office for such period and have such powers and duties
as the Board determines. The Board may delegate to any executive officer or
committee the power to appoint and define the powers and duties of any
subordinate officers, agents or employees.
4.4 Resignation and Removal of Officers. Any officer may resign at
-----------------------------------
any time by delivering his resignation in writing to the president or secretary
of the corporation, to take effect at the time specified in the resignation; the
acceptance of a resignation, unless required by its terms, shall not be
necessary to make it effective. Any officer elected or appointed by the Board
or appointed by an executive officer or by a committee may be removed by the
Board
<PAGE>
either with or without cause, and in the case of an officer appointed by an
executive officer or by a committee, by the officer or committee that appointed
him or by the president.
4.5 Vacancies. A vacancy in any office may be filled for the
---------
unexpired term in the manner prescribed in sections 4.2 and 4.3 for election or
appointment to the office.
4.6 The President. The president shall be the chief executive
-------------
officer of the corporation. Subject to the control of the Board, he shall have
general supervision over the business of the corporation and shall have such
other powers and duties as presidents of corporations usually have or as the
Board assigns to him.
4.7 Vice President. Each vice president shall have such powers and
--------------
duties as the Board or the president assigns to him.
4.8 The Treasurer. The treasurer shall be the chief financial
-------------
officer of the corporation and shall be in charge of the corporation's books and
accounts. Subject to the control of the Board, he shall have such other powers
and duties as the Board or the president assigns to him.
4.9 The Secretary. The secretary shall be the secretary of, and keep
-------------
the minutes of, all meetings of the Board and the stockholders, shall be
responsible for giving notice of all meetings of stockholders and the Board, and
shall keep the seal and, when authorized by the Board, apply it to any
instrument requiring it. Subject to the control of the Board, he shall have
such powers and duties as the Board or the president assigns to him. In the
absence of the
<PAGE>
secretary from any meeting, the minutes shall be kept by the person appointed
for that purpose by the presiding officer.
4.10 Salaries. The Board may fix the officers' salaries, if any, or
--------
it may authorize the president to fix the salary of any other officer.
5. SHARES.
------
5.1 Certificates. The corporation's shares shall be represented by
------------
certificates in the form approved by the Board. Each certificate shall be
signed by the president or a vice president, and by the secretary or an
assistant secretary or the treasurer or an assistant treasurer, and shall be
sealed with the corporation's seal or a facsimile of the seal. Any or all of
the signatures on the certificate may be a facsimile.
5.2 Transfers. Shares shall be transferable only on the
---------
corporation's books, upon surrender of the certificate for the shares, properly
endorsed. The Board may require satisfactory surety before issuing a new
certificate to replace a certificate claimed to have been lost or destroyed.
5.3 Determination of Stockholders of Record. The Board may fix, in
---------------------------------------
advance, a date as the record date for the determination of stockholders
entitled to notice of or to vote at any meeting of the stockholders, or to
express consent to or dissent from any proposal without a meeting, or to receive
payment of any dividend or the allotment of any rights, or for the purpose of
any other action. The record date may not be more than 60 or fewer than 10 days
before the date of the meeting or more than 60 days before any other action.
<PAGE>
6. INDEMNIFICATION AND INSURANCE.
-----------------------------
6.1 Right to Indemnification. Each person who was or is a party or
------------------------
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding"), by reason of the fact that he, or a person of whom he is the
legal representative, is or was a director or officer of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action or inaction in an
official capacity or in any other capacity while serving as director, officer,
employee or agent, shall be indemnified and held harmless by the corporation to
the fullest extent permitted by the General Corporation Law of Delaware, as
amended from time to time, against all costs, charges, expenses, liabilities and
losses (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith, and that indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his heirs, executors and administrators;
provided, however, that, except as provided in section 6.2, the corporation
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by that person, only if that proceeding
(or part thereof) was authorized by the Board. The right to indemnification
conferred in these by-laws shall be a contract right and shall include the right
to be paid by the corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if the
General Corporation Law of Delaware, as amended from time to time,
<PAGE>
requires, the payment of such expenses incurred by a director or officer in his
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by that person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding shall be made only upon delivery to the
corporation of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced, if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under these by-laws or
otherwise. The corporation may, by action of its Board, provide indemnification
to employees and agents of the corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
6.2 Right of Claimant to Bring Suit. If a claim under section 6.1 is
-------------------------------
not paid in full by the corporation within 30 days after a written claim has
been received by the corporation, the claimant may at any time thereafter bring
suit against the corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant also shall be entitled to be paid
the expense of prosecuting that claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition, where the required
undertaking, if any, is required and has been tendered to the corporation) that
the claimant has failed to meet a standard of conduct that makes it permissible
under Delaware law for the corporation to indemnify the claimant for the amount
claimed. Neither the failure of the corporation (including its Board, its
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
permissible in the circumstances because he has met that standard of conduct,
nor an actual determination by the corporation (including its Board, its
<PAGE>
independent counsel or its stockholders) that the claimant has not met that
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has failed to meet that standard of conduct.
6.3 Non-Exclusivity of Rights. The right to indemnification and the
-------------------------
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this section 6 shall not be exclusive of any other
right any person may have or hereafter acquire under any statute, provision of
the certificate of incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
6.4 Insurance. The corporation may maintain insurance, at its
---------
expense, to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against that expense,
liability or loss under Delaware law.
6.5 Expenses as a Witness. To the extent any director, officer,
---------------------
employee or agent of the corporation is by reason of such position, or a
position with another entity at the request of the corporation, a witness in any
action, suit or proceeding, he shall be indemnified against all costs and
expenses actually and reasonably incurred by him or on his behalf in connection
therewith.
6.6 Indemnity Agreements. The corporation may enter into agreement
--------------------
with any director, officer, employee or agent of the corporation providing for
indemnification to the fullest extent permitted by Delaware law.
<PAGE>
7. MISCELLANEOUS.
-------------
7.1 Seal. The Board shall adopt a corporate seal, which shall be in
----
the form of a circle and shall bear the corporation's name and the year and
state in which it was incorporated.
7.2 Fiscal Year. The Board may determine the corporation's fiscal
-----------
year.
7.3 Voting of Shares in Other Corporations. Shares in other
--------------------------------------
corporations held by the corporation may be represented and voted by an officer
of this corporation or by a proxy or proxies appointed by one of them. The
Board may, however, appoint some other person to vote the shares.
7.4 Amendments. By-laws may be amended, repealed or adopted by the
----------
Board in its discretion.
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF INCORPORATION
OF
PRICE CELLULAR CORPORATION
THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, do hereby certify as follows:
FIRST: The name of the corporation is PRICE CELLULAR CORPORATION.
SECOND: The registered office of the corporation is to be located at 229
South State Street, in the City of Dover, in the County of Kent, in the State of
Delaware. The name of its registered agent at that address is The Prentice-Hall
Corporation System, Inc.
THIRD: The nature of the business or purposes to be conducted or
promoted is:
To engage in any lawful act or activity for which a corporation may be
organized under the General Corporation Law of Delaware.
FOURTH: The aggregate number of shares which the corporation shall have
authority to issue is Two Thousand (2,000) shares, of which One Thousand (1,000)
shares shall be Common Stock, par value one cent ($.01) per share, and One
<PAGE>
Thousand (1,000) shares shall be Preferred Stock, par value one cent ($.01) per
share. The designations and the powers, preferences and rights, and the
qualifications, limitations and restrictions of the Common Stock and the
Preferred Stock are as follows:
A. Preferred Stock. The Preferred Stock may be issued from time to time
---------------
by the Board of Directors as shares of one or more series of Preferred Stock
and, subject to the provisions hereof and the limitations prescribed by law, the
Board of Directors is expressly authorized, prior to issuance, by adopting
resolutions providing for the issue of, or providing for a change in the number
of, shares of any particular series and by filing a certificate pursuant to the
General Corporation Law of the State of Delaware, to establish or change the
number of shares to be included in each such series and to fix the designation
and relative rights, preferences and limitations of the shares of each such
series. The authority of the Board of Directors with respect to each series
shall include determination of the following:
(i) the distinctive serial designation of such series and the
number of shares constituting such series (provided that the aggregate
number of shares constituting all series of Preferred Stock shall not
exceed 1,000);
2
<PAGE>
(ii) the dividend rate and preference on shares of such series,
whether dividends shall be cumulative and, if so, from which date or
dates;
(iii) whether the shares of such series shall be redeemable and,
if so, the terms and conditions of such redemption, including the date
or dates upon and after which such shares shall be redeemable, the
amount per share payable in case of redemption, which amount may vary
under different conditions and at different redemption dates, and the
manner of selecting shares for redemption if less than all shares of
such series are to be redeemed;
(iv) the obligation, if any, of the corporation to retire shares
of such series pursuant to a sinking fund;
(v) whether shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or classes and, if
so, the terms and conditions of such conversion or exchange, including
the price or prices or the rate or rates of conversion or exchange and
the terms of adjustment, if any;
(vi) whether the shares of such series shall have voting rights,
in addition to the voting rights provided by law and, if so, the terms
of such voting rights;
(vii) the rights of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
corporation;
(viii) whether or not the holders of shares of such series shall
have any preemptive rights with respect to issuance or with respect to
the acquisition of treasury shares of any class of shares of the
corporation theretofore or thereafter authorized, with respect to
3
<PAGE>
the granting by the corporation of rights or options to purchase its
shares of any class or the issuance of shares or other securities
convertible into or carrying rights or options to purchase, subscribe to
or acquire its shares of any class;
(ix) any other relative rights, preferences and limitations of
such series permitted by the General Corporation Law of the State of
Delaware.
8. Common Stock. Subject to all of the rights of the Preferred Stock,
------------
and except as may be expressly provided with respect to the Preferred Stock
herein, by law or by the Board of Directors pursuant to paragraph (A) of this
Article FOURTH:
(1) the entire voting power for the election of directors and in
any corporate proceeding and upon any matter or question whatever
appertaining to the corporation shall be vested exclusively in the
holders of the shares of Common Stock;
(2) dividends may be declared and paid or set apart for payment
upon the Common Stock out of any assets or funds of the corporation
legally available for the payment of dividends;
(3) upon the voluntary or involuntary liquidation, dissolution
or winding up of the corporation, the net assets of the corporation
shall be distributed pro rata to the holders of the Common Stock in
accordance with their respective rights and interests.
4
<PAGE>
C. Preemptive Rights. The holders of the Common Stock of the corporation
-----------------
shall have no preemptive rights with respect to issuance of or with respect to
the acquisition of treasury shares of Common Stock or any other class of shares
of the corporation now or hereafter authorized, nor with respect to the granting
by the corporation of rights or options to purchase its shares of any class or
the issuance of shares or other securities convertible into or carrying rights
or options to purchase, subscribe to or acquire its shares of any class.
FIFTH: The name and mailing address of the sole incorporator is: Dawn E.
Hollworth, Esq., 300 Park Avenue, New York, New York 10022.
SIXTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation:
(1) The number of directors of the corporation shall be the number from
time to time fixed by, or in the manner provided in, the By-Laws. Election of
directors need not be by ballot unless the By-Laws so provide.
(2) In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors shall have power without the assent or vote of
the stockholders to
5
<PAGE>
make, alter, amend, change, add to or repeal the By-Laws of
the corporation; to fix and vary the amount to be reserved for any proper
purpose; to authorize and cause to be executed mortgages and liens upon all or
any part of the property of the corporation; to determine the use and
disposition of any surplus or net profits; and to fix the times for the
declaration and payment of dividends.
(3) The directors in their discretion may submit any contract or act for
approval or ratification at any annual meeting of the stockholders or at any
meeting of the stockholders called for the purpose of considering any such
contract or act, and any contract or act that shall be approved or be ratified
by the vote of the holders of a majority of the stock of the corporation which
is represented in person or by proxy at such meeting and entitled to vote
thereat (provided that a lawful quorum of stockholders be there represented in
person or by proxy) shall be as valid and as binding upon the corporation and
upon all the stockholders as though it had been approved or ratified by every
stockholder of the corporation, whether or not the contract or act would
otherwise be open to legal attack because of directors' interest, or for any
other reason.
(4) In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them,
6
<PAGE>
the directors are hereby empowered to exercise all such powers and do all such
acts and things as may be exercised or done by the corporation; subject,
nevertheless, to the provisions of the statutes of Delaware, of this Certificate
and to any By-Laws from time to time made by the stockholders; provided,
however, that no By-Laws so made shall invalidate any prior act of the directors
which would have been valid if such By-Laws had not been made.
SEVENTH: A director of this corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of Delaware or (iv) for any transaction from which the director derived an
improper personal benefit. The corporation shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of Delaware, as the same
may be amended and supplemented, indemnify any and all persons whom it shall
have power to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said section
and, as provided in said section, shall advance expenses, including reasonable
7
<PAGE>
attorneys' fees, of any and all such persons, and the indemnification and
advancement of expenses provided for herein shall not be deemed exclusive of any
other rights to which a person seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such person.
EIGHTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation,
8
<PAGE>
as the the case may be, to be summoned in such manner as the said court directs.
If a majority in number representing three fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
NINTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors, officers or others are subject to this
reserved power.
IN WITNESS WHEREOF, I have hereunto set my hand, the 25th day of May,
1988.
/s/ Dawn E. Hollworth
----------------------------
Dawn E. Hollworth
Sole Incorporator
9
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
PRICE CELLULAR CORPORATION
--------------------
(Under Section 242 of the General Corporation Law)
The undersigned, being President and Secretary of Price Cellular
Corporation, do hereby certify and set forth:
1. The name of the corporation is Price Cellular Corporation (the
"Corporation").
2. The Certificate of Incorporation was filed by the Secretary of State
on May 26, 1988.
3. Article FIRST of the Certificate of Incorporation of the Corporation,
which sets forth the name of the Corporation, is hereby amended to read in its
entirety as follows:
"FIRST: The name of the Corporation
is PRICELLULAR CORPORATION."
4. The amendment effected herein was authorized by written consent of
the sole director followed by the written consent of the sole stockholder of the
Corporation.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed as of the 9th day of June, 1988 and the undersigned affirm that the
statements made herein are true under penalties of perjury.
PRICE CELLULAR CORPORATION
By: /s/ Robert Price
------------------------------
Robert Price, President
Attest: /s/ Ellen S. Fader
------------------------------
Ellen S. Fader, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF PRICELLULAR CORPORATION
PriCellular Corporation, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY AND SET FORTH:
FIRST: That the sole director of said corporation, by unanimous written
consent, filed with the minutes of the Board, adopted a resolution proposing and
declaring advisable the following amendment to the Certificate of Incorporation
of said corporation:
RESOLVED, that the Certificate of Incorporation of PriCellular
Corporation be amended by changing the FIRST ARTICLE thereof so that, as
amended, said Article shall be and read as follows: "FIRST: The name of
the Corporation is Price Communications Cellular Inc."
SECOND: That in lieu of a meeting and a vote the sole stockholder has
given unanimous written consent to said amendment in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of sections 242 and 228 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said PriCellular Corporation has caused this
Certificate of Amendment to be signed by Robert Price, its President, and
attested by Alisa Diamond, its Assistant Secretary, this 14th day of February,
1990.
PRICELLULAR CORPORATION
By: /s/ Robert Price
------------------------------
Robert Price, President
ATTEST:
By: /s/ Alisa Diamond
------------------------------
Alisa Diamond,
Assistant Secretary
<PAGE>
EXHIBIT 3.4
B Y - L A W S
OF
PRICE CELLULAR CORPORATION
--------------------------
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office of the corporation
shall be in New York, New York.
SECTION 2. OTHER OFFICES. The corporation may have such other offices
and places of business, within or without the State of New York, as shall be
determined by the directors.
ARTICLE II
SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of the shareholders may be held
at such place or places, within or without the State of Delaware, as shall be
fixed by the directors and stated in the notice of the meeting.
SECTION 2. ANNUAL MEETING. The annual meeting of shareholders for the
election of directors and the transaction of such other business as may
properly come before the meeting shall be held, commencing in 1988, on the first
Monday in May at the time designated in the notice of the meeting.
SECTION 3. NOTICE OF ANNUAL MEETING. Notice of the annual meeting shall
be given to each shareholder entitled to vote, not less than ten (10) nor more
than sixty (60) days prior to the meeting.
SECTION 4. SPECIAL MEETINGS. Special meetings of the shareholders for
any purpose or purposes may be called by the President or Secretary and must be
called upon receipt by either of them of the written request of the holders of
twenty-five percent of the stock then outstanding and entitled to vote.
SECTION 5. NOTICE OF SPECIAL MEETING. Notice of a special meeting,
stating the time, place and purpose or purposes thereof, shall be given to each
shareholder entitled to vote, not less than ten (10) nor more than sixty (60)
days prior to the meeting. The notice shall also set forth at whose direction it
is being issued.
59472-001 182 288.203
5/24/88
<PAGE>
SECTION 6. QUORUM. At any meeting of the shareholders, the holders of a
majority of the shares of stock then entitled to vote shall constitute a
quorum for all purposes, except as otherwise provided by law or by the
Certificate of Incorporation.
SECTION 7. VOTING. At each meeting of the shareholders, every holder of
stock then entitled to vote may vote in person or by proxy, and, except as may
be otherwise provided by law or by the Certificate of Incorporation, shall have
one vote for each share of stock registered in his name.
SECTION 8. ADJOURNED MEETINGS. Any meeting of the shareholders may be
adjourned to a designated time and place by a vote of majority in interest of
the shareholders present in person or by proxy and entitled to vote, even though
less than a quorum is so present. No notice of such an adjourned meeting need be
given, other than by announcement at the meeting, and any business may be
transacted which might have been transacted at the meeting as originally called.
SECTION 9. ACTION WITHOUT MEETING. Whenever by any provision of law or
of the Certificate of Incorporation or of these By-Laws, the vote of
shareholders at a meeting thereof is required or permitted to be taken in
connection with any corporate action, including, without limitation, election of
directors, the notice, meeting and vote of shareholders may be dispensed with if
all the shareholders who would have been entitled to vote upon the action if
such meeting were held shall consent in writing to such corporate action being
taken.
ARTICLE III
DIRECTORS
SECTION l. NUMBER. The business of the corporation shall be managed
under the direction of its Board of Directors each of whom shall be at least
eighteen (18) years of age. The number of directors of the corporation shall be
such number, but not more than seven (7), as shall be determined from time to
time by resolution of the Board of Directors or shareholders. The number of
directors may be less than three (3) only when all the shares of the corporation
are owned by less than three (3) shareholders, but in such event the number of
directors may not be less than the number of shareholders. The number of initial
directors of the corporation shall be one (1). Each director shall hold of-
2
<PAGE>
fice for the term of one (l) year and until his successor is elected and
qualified. Directors need not be shareholders.
SECTION 2. POWERS. The Board of Directors shall exercise all of the
powers of the corporation except such as are by law or by the Certificate of
Incorporation or by these By-Laws conferred upon or reserved to the
shareholders.
SECTION 3. MEETINGS, QUORUM. Meetings of the Board may be held at any
place, either within or outside the State of New York, provided a quorum is in
attendance. Except as may be otherwise provided by law or by the Certificate of
Incorporation, if there are three or more directors, 40% of the directors in
office shall constitute a quorum at any meeting of the Board and the vote of a
majority of a quorum of directors shall constitute the act of the Board. If
there are less than three directors, all directors are necessary for a quorum.
The Board of Directors may hold an annual meeting, without notice,
immediately after the annual meeting of shareholders. Regular meetings of the
Board of Directors may be determined from time to time by the Board. The
Chairman of the Board (if any), the President or the Secretary may call, and,
at the request of any two directors, shall call, a special meeting of the Board
of Directors, on at least five (5) days' notice if given by mail or two (2)
days' notice if given personally or by telegraph or cable to each director
specifying the time and place thereof.
Any one or more members of the Board of Directors or any Committee
thereof may participate in a meeting of the Board or such Committee by means of
a conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other at the same time.
Participation by such means shall constitute presence in person at the meeting.
SECTION 4. ACTION WITHOUT MEETING. Any action required or permitted to
be taken by the Board of Directors or any Committee thereof may be taken without
a meeting if all members of the Board or such Committee sign a written consent
thereto, and the resolutions and the written consents are filed with the minutes
of the proceedings of the Board or such Committee.
SECTION 5. VACANCIES, REMOVAL. Except as otherwise provided in the
Certificate of Incorporation or in the following paragraph, vacancies occurring
in the membership
3
<PAGE>
of the Board of Directors, from whatever cause arising (in including vacancies
occurring by reason of the removal of directors with or without cause and newly-
created directorships resulting from any increase in the authorized number of
directors) may be filled by a majority vote of the remaining directors, though
less than a quorum, or such vacancies may be filled by the shareholders.
Except where the Certificate of Incorporation contains provisions
authorizing cumulative voting or the elections of one or more directors by class
or their election by holders of bonds, or requires all action by shareholders to
be by a greater vote, any one or more of the directors may be removed, (a) for
or without cause, by vote of the shareholders holding a majority of the
outstanding stock of the corporation entitled to vote, present in person or by
proxy, at any regular or special meeting of the shareholders or, (b) for cause
by action of the Board of Directors at any regular or special meeting of the
Board.
SECTION 6. COMMITTEES. The Board of Directors, by resolution adopted by
a majority of the entire Board, may designate from its members an Executive
Committee or other committee or committees, each consisting of three or more
members, with such powers and authority (to the extent permitted by law) as may
be provided in said resolution.
ARTICLE IV
OFFICERS
SECTION l. EXECUTIVE OFFICERS. The executive officers of the corporation
shall be a President, one or more Vice-Presidents, a Treasurer and a Secretary,
all of whom shall be elected by the Board of Directors and shall hold office
until removed or until the election and qualification of their respective
successors at the pleasure of the Board of Directors. In addition, the Board of
Directors may elect a Chairman of the Board. Except for the offices of President
and Secretary, any two offices or more may be held by one person, provided,
however, that when all of the issued and outstanding stock of the corporation is
owned by one person, such person may hold all or any combination of offices. All
vacancies occurring among any of the officers shall be filled by the Board of
Directors. Any officer may be removed at any time, with or without cause, by the
affirmative vote of a majority (unless the Certificate of Incorporation requires
a larger vote) of the directors present at a special meeting of Board of
Directors called for that purpose.
4
<PAGE>
SECTION 2. OTHER OFFICERS. The Board of Directors may appoint such other
officers and agents with such powers and duties as it shall deem appropriate.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors, if one is elected, shall preside at all meetings of the shareholders
and the Board of Directors and shall perform such other duties as shall from
time to time be assigned by the Board of Directors.
SECTION 4. PRESIDENT. The President, who may, but need not be a
director, shall, in the absence or non-election of a Chairman of the Board,
preside at all meetings of the shareholders and the Board of Directors. Subject
to the direction of the Board of Directors, the President shall have general
management and control of the business and affairs of the corporation.
SECTION 5. THE VICE-PRESIDENT. The Vice-President, or if there be more
than one, the Senior Vice-President, as determined by the Board of Directors, in
the absence or disability of the President, shall exercise the powers and
perform the duties of the President and each Vice-President shall exercise such
other powers and perform such other duties as shall from time to time be
assigned by the Chairman of the Board (if any), President or Board of Directors.
SECTION 6. TREASURER. The Treasurer shall have custody of all funds,
securities and evidences of indebtedness of the corporation; he shall deposit
all moneys and other valuables in the name and to the credit of the corporation
in such depositories as may be designated from time to time by the Board of
Directors; he shall receive and give receipts for moneys paid to the
corporation; he shall disburse the funds of the corporation on account of all
bills, payrolls, and other just debts of the corporation, of whatever nature,
upon maturity; he shall enter regularly, in books to be kept by him for that
purpose, full and accurate accounts of all moneys received and paid out by him
on account of the corporation; he shall render to the President and the Board of
Directors at the regular meetings of the Board of Directors, or whenever they
may request it, an account of all his transactions as Treasurer and of the
financial condition of the corporation; and he shall perform all other duties
incident to the office of Treasurer and as may be assigned by the Chairman of
the Board (if any), President or Board of Directors.
5
<PAGE>
SECTION 7. SECRETARY. The Secretary shall keep the minutes of all
proceedings of the directors and of the shareholders; he shall attend to the
giving and serving of all notices to the shareholders and directors or other
notice required by law or by these By-Laws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the Chairman of the Board (if any), the President,
directors or shareholders, upon whose requisition the meeting is called as
provided in these By-Laws; he shall affix the seal of the corporation to deeds,
contracts and other instruments in writing requiring a seal, when duly signed or
when so ordered by the directors; he shall have charge of the certificate books
and stock books and such other books and papers as the Board may direct; and he
shall perform all other duties incident to the office of Secretary and as may be
assigned by the Chairman of the Board (if any), President or Board of Directors.
SECTION 8. ADDITIONAL POWERS OF OFFICERS. In addition to the powers
specifically provided in these By Laws, each officer (including officers other
than those referred to in these By-Laws) shall have such other or additional
authority and perform such duties as the Board of Directors may from time to
time determine.
SECTION 9. SALARIES. The salaries of all officers shall be fixed by the
Board of Directors, and the fact that any officer is a director shall not
preclude him from receiving a salary as an officer, or from voting upon the
resolution providing the same.
ARTICLE V
CAPITAL STOCK
SECTION l. FORM AND EXECUTION OF CERTIFICATES. Certificates of stock
shall be in such form as required by the General Corporation Law of Delaware and
as shall be adopted by the Board of Directors. They shall be numbered and
registered in the order issued; shall be signed by the Chairman of the Board (if
any), President or Vice-President and by the Secretary or an Assistant Secretary
or the Treasurer or an Assistant Treasurer and may be sealed with the corporate
seal or a facsimile thereof. When such a certificate is countersigned by a
transfer agent or registered by a registrar, the signatures of any such officers
may be facsimile.
6
<PAGE>
SECTION 2. TRANSFER. Transfer of shares shall be made only upon the
books of the corporation by the registered holder in person or by an attorney,
duly authorized, and upon surrender of the certificate or certificates for such
shares properly assigned for transfer.
SECTION 3. LOST OR DESTROYED CERTIFICATES. The ho1der of any certificate
representing shares of stock of the corporation may notify the corporation of
any loss, theft or destruction thereof, and the Board of Directors may
thereupon, in its discretion, cause a new certificate for the same number of
shares to be issued to such holder upon satisfactory proof of such loss, theft
or destruction, and the deposit of indemnity by way of bond or otherwise, in
such form and amount and with such surety or sureties, if any, as the Board of
Directors may require, to indemnify the corporation against loss or liability by
reason of the issuance of such new certificate.
SECTION 4. RECORD DATE. In lieu of closing the books of the corporation,
the Board of Directors may fix, in advance, a date, not exceeding fifty days,
nor less than ten days, as the record date for the determination of shareholders
entitled to receive notice of, or to vote at, any meeting of shareholders, or to
consent to any proposal without a meeting, or for the purpose of determining
shareholders entitled to receive payment of any dividends, or allotment of any
rights, or for the purpose of any other action.
SECTION 5. RESTRICTION ON OWNERSHIP, VOTING AND TRANSFER. In accordance
with the Federal Communications Act of 1934, as amended, and regulations of the
Federal Communications Commission, the Board of Directors may prohibit the
ownership or voting of more than 20% of the corporation's outstanding capital
stock by or for the account of aliens or their representatives or by a foreign
government or representative thereof or by any corporation organized under the
laws of a foreign country (collectively "Aliens"), or by or for corporations of
which any officer is an Alien, more than one-fourth of its directors are Aliens,
or of which more than one-fourth of its capital stock is owned of record or
voted by Aliens, or any transfer of the corporation's stock which would cause
the corporation to violate the above or any other provision of the Federal
Communications Act of 1934, as amended, or Federal Communications Commission
regulations.
SECTION 6. NO PREEMPTIVE RIGHTS. The holders of the Common Stock of the
corporation shall have no preemptive rights with respect to issuance of Common
Stock or any other
7
<PAGE>
class of equity shares of the corporation, nor with respect to the granting by
the corporation of rights or options to purchase its equity shares of any class
or the issuance of shares or other securities convertible into or carrying
rights or options to purchase its equity shares of any class
SECTION 7. CALLS FOR PAYMENT OF SUBSCRIPTIONS. The Board of Directors
may, from time to time, authorize and call for the payment, by subscribers, for
all shares of Common Stock of the corporation for which they have subscribed.
The Board of Directors, shall in its discretion, determine the time of such
calls and the amounts thereof. Calls for payment by the Board shall be by
written notice to subscribers specifying the amount thereof and subscribers
shall make payment to the corporation within 30 days of such notice.
SECTION 8. OBLIGATIONS UPON TRANSFER OF SHARES. Any transferee of the
corporation's stock must assume in writing all of the transferor's obligations
under such transferor's subscription agreement, if there be one, with the
corporation. Upon a transfer of the corporation's stock, the transferor will
remain obligated for the remaining purchase price of shares he has subscribed
for, in the event the transferee does not make payment on call.
ARTICLE VI
MISCELLANEOUS
SECTION l. DIVIDENDS. The Board of Directors may declare dividends from
time to time upon the capital stock of the corporation from the surplus or net
profits available therefor.
SECTION 2. SEAL. The Board of Directors shall provide a suitable
corporate seal which shall be kept in the charge of the Secretary and shall be
used as authorized by these By-Laws.
SECTION 3. FISCAL YEAR. The fiscal year of the corporation shall be
determined by the Board of Directors.
SECTION 4. CHECKS, NOTES, ETC. Checks, notes, drafts, bills of exchange
and orders for the payment of money shall be signed or endorsed in such manner
as shall be determined by the Board of Directors.
8
<PAGE>
The funds of the corporation shall be deposited in such depositories,
and checks drawn against such funds shall be signed in such manner, as may be
determined from time to time by the Board of Directors.
SECTION 5. NOTICE AND WAIVER OF NOTICE. Whenever any notice is required
by these By-Laws to be given, personal notice shall not be necessary unless
expressly so stated, and any notice so required shall be deemed to be sufficient
if given by depositing the same in the United States mail, with postage thereon
prepaid, addressed to such shareholder, officer or director, at such address as
appears on the books of the corporation, and, unless otherwise indicated herein,
such notice shall be deemed to have been given on the day of such mailing.
Notice may also be given personally, against receipt, or by telegram, telex or
similar communication, and notice so given shall be deemed given when so
delivered personally or when delivered for transmission.
Any notice required to be given under the provisions of any law, or
under the provisions of the Certificate of Incorporation or these By-Laws, may
be waived by the person entitled thereto, in writing, or by telegram, telex or
similar communication, whether before or after the time such notice is required
to be given, and the presence of any person at a meeting shall constitute waiver
of notice thereof as to such person, unless such person appears solely to object
to the lack of notice.
SECTION 6. CONSTRUCTION. Whenever used in these By-Laws, the masculine
pronoun shall include the feminine and the singular shall include the plural,
unless a different meaning is otherwise required by the context.
ARTICLE VII
AMENDMENTS
SECTION l. BY SHAREHOLDERS. These By-Laws may be amended at any
shareholders' meeting by vote of the shareholders holding a majority (unless
the Certificate of Incorporation requires a larger vote) of the outstanding
stock having voting power, present either in person or by proxy, provided notice
of the amendment is included in the notice or waiver of notice of such meeting.
SECTION 2. BY DIRECTORS. The Board of Directors may also amend these By-
Laws at any regular or special meeting of the Board by a majority (unless the
Certificate of
9
<PAGE>
Incorporation requires a larger vote) vote of the entire Board, but any By-Laws
so made by the Board of Directors may be altered or repealed by the
shareholders.
SECTION 3. AMENDMENTS TO BE CONSISTENT WITH APPLICABLE LAW. Any
amendment of these By-Laws shall be consistent with the Certificate of
Incorporation of the corporation and provisions of applicable law then in
effect, including without limitation, the Federal Communications Act Of 1934, as
amended, and the regulations of the Federal Communications Commission.
10
<PAGE>
EXHIBIT 4.1
================================================================================
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.,
Issuer,
PRICE COMMUNICATIONS CELLULAR INC.,
as Guarantor,
and
BANK OF MONTREAL TRUST COMPANY,
Trustee
----------------------
INDENTURE
Dated as of August 11, 1997
----------------------
$153,400,000
13 1/2% Senior Secured Discount Notes due 2007
================================================================================
0000G54P.W51
<PAGE>
TABLE OF CONTENTS
-----------------
Page
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.............. 1
SECTION 1.01. Definitions.................................... 1
SECTION 1.02. Incorporation by Reference of TIA.............. 22
SECTION 1.03. Rules of Construction.......................... 22
ARTICLE 2. THE SECURITIES.......................................... 23
SECTION 2.01. Form and Dating................................ 23
SECTION 2.02. Execution and Authentication................... 23
SECTION 2.03. Registrar and Paying Agent..................... 24
SECTION 2.04. Paying Agent to Hold Assets in Trust........... 25
SECTION 2.05. Holder Lists................................... 25
SECTION 2.06. Transfer and Exchange.......................... 25
SECTION 2.07. Replacement Securities......................... 31
SECTION 2.08. Outstanding Securities......................... 32
SECTION 2.09. Treasury Securities............................ 32
SECTION 2.10. Temporary Securities........................... 32
SECTION 2.11. Cancellation................................... 32
SECTION 2.12. Defaulted Interest............................. 33
ARTICLE 3. REDEMPTION.............................................. 34
SECTION 3.01. Right of Redemption............................ 34
SECTION 3.02. Notices to Trustee............................. 35
SECTION 3.03. Selection of Securities to Be Redeemed......... 35
SECTION 3.04. Notice of Redemption........................... 35
SECTION 3.05. Effect of Notice of Redemption................. 37
SECTION 3.06. Deposit of Redemption Price.................... 37
SECTION 3.07. Securities Redeemed in Part.................... 37
ARTICLE 4. COVENANTS .............................................. 38
SECTION 4.01. Transactions Not Subject to Covenants.......... 38
SECTION 4.02. Payment of Securities.......................... 39
SECTION 4.03. Maintenance of Office or Agency................ 39
SECTION 4.04. Limitation on Restricted Payments.............. 40
SECTION 4.05. Corporate Existence............................ 41
SECTION 4.06. Payment of Taxes and Other Claims.............. 41
SECTION 4.07. Maintenance of Properties and Insurance........ 42
(i)
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Page
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SECTION 4.08. Compliance Certificate; Notice of Default...... 42
SECTION 4.09. Reports........................................ 43
SECTION 4.10. Limitation on Status as Investment Company..... 43
SECTION 4.11. Limitation on Transactions with Related Persons 43
SECTION 4.12. Limitation on Incurrence of Additional
Indebtedness................................. 44
SECTION 4.13. Limitations on Restricting Subsidiary Dividends 46
SECTION 4.14. Limitations on Liens........................... 47
SECTION 4.15. Limitation on Asset Sales and Sales of
Subsidiary Stock............................. 47
SECTION 4.16. Waiver of Stay, Extension or Usury Laws........ 52
SECTION 4.17. Rule 144A Information Requirement.............. 53
SECTION 4.18. Limitation on Lines of Business................ 53
SECTION 4.19. Restriction on Sale and Issuance of Subsidiary
Stock........................................ 53
SECTION 4.20. Deposit of Proceeds with Trustee Pending
Consummation of the Merger................... 53
SECTION 4.21. Negative Pledge................................ 53
ARTICLE 5. SUCCESSOR CORPORATION................................... 54
SECTION 5.01. Limitation on Merger, Sale or Consolidation.... 54
SECTION 5.02. Successor Corporation Substituted.............. 54
ARTICLE 6. EVENTS OF DEFAULT AND REMEDIES.......................... 55
SECTION 6.01. Events of Default.............................. 55
SECTION 6.02. Acceleration of Maturity Date; Rescission and
Annulment.................................... 56
SECTION 6.03. Collection of Indebtedness and Suits for
Enforcement by Trustee....................... 58
SECTION 6.04. Trustee May File Proofs of Claim............... 59
SECTION 6.05. Trustee May Enforce Claims Without Possession of
Securities................................... 59
SECTION 6.06. Priorities..................................... 60
SECTION 6.07. Limitation on Suits............................ 60
SECTION 6.08. Unconditional Right of Holders to Receive
Principal, Premium and Interest.............. 61
SECTION 6.09. Rights and Remedies Cumulative................. 61
SECTION 6.10. Delay or Omission Not Waiver................... 61
SECTION 6.11. Control by Holders............................. 61
SECTION 6.12. Waiver of Past Default......................... 62
SECTION 6.13. Undertaking for Costs.......................... 62
SECTION 6.14. Restoration of Rights and Remedies............. 62
ARTICLE 7. TRUSTEE................................................. 63
SECTION 7.01. Duties of Trustee.............................. 63
SECTION 7.02. Rights of Trustee.............................. 64
SECTION 7.03. Individual Rights of Trustee................... 65
(ii)
0000G54P.W51
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Page
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SECTION 7.04. Trustee's Disclaimer........................... 65
SECTION 7.05. Notice of Default.............................. 65
SECTION 7.06. Reports by Trustee to Holders.................. 65
SECTION 7.07. Compensation and Indemnity..................... 66
SECTION 7.08. Replacement of Trustee......................... 67
SECTION 7.09. Successor Trustee by Merger, Etc............... 68
SECTION 7.10. Eligibility; Disqualification.................. 68
SECTION 7.11. Preferential Collection of Claims Against
Company...................................... 68
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE................ 68
SECTION 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance................................... 68
SECTION 8.02. Legal Defeasance and Discharge................. 68
SECTION 8.03. Covenant Defeasance............................ 69
SECTION 8.04. Conditions to Legal or Covenant Defeasance..... 69
SECTION 8.05. Deposited U.S. Legal Tender Equivalents and U.S.
Government Obligations to be Held in Trust;
Other Miscellaneous Provisions............... 71
SECTION 8.06. Repayment to the Company....................... 71
SECTION 8.07. Reinstatement.................................. 71
ARTICLE 9. AMENDMENTS, SUPPLEMENTS AND WAIVERS..................... 72
SECTION 9.01. Supplemental Indentures Without Consent of
Holders...................................... 72
SECTION 9.02. Amendments, Supplemental Indentures and Waivers
with Consent of Holders...................... 72
SECTION 9.03. Compliance with TIA............................ 74
SECTION 9.04. Revocation and Effect of Consents.............. 74
SECTION 9.05. Notation on or Exchange of Securities.......... 75
SECTION 9.06. Trustee to Sign Amendments, Etc................ 75
ARTICLE 10. COLLATERAL ACCOUNT AND RELEASES......................... 75
SECTION 10.01. Collateral Account............................. 75
SECTION 10.02. Eligible Investments........................... 76
SECTION 10.03. Release of Collateral.......................... 77
ARTICLE 11. RIGHT TO REQUIRE REPURCHASE............................. 77
SECTION 11.01. Repurchase of Securities at Option of the
Holder Upon a Change of Control............. 77
ARTICLE 12. GUARANTEE OF SECURITIES................................. 80
SECTION 12.01. Guarantee...................................... 80
SECTION 12.02. Execution and Delivery of Guarantee............ 81
SECTION 12.03. Successors and Assigns......................... 81
SECTION 12.04. Guarantee Unconditional, Etc................... 82
(iii)
0000G54P.W51
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Page
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SECTION 12.05. Covenants of the Guarantor.................... 83
ARTICLE 13. SECURITY AND PLEDGE OF COLLATERAL....................... 83
SECTION 13.01. Grant of Security Interest.................... 83
SECTION 13.02. Delivery of Collateral........................ 84
SECTION 13.03. Representations and Warranties................ 84
SECTION 13.04. Further Assurances............................ 85
SECTION 13.05. Voting Rights; Dividends; Etc................. 85
SECTION 13.06. Trustee Appointed Attorney-in-Fact............ 86
SECTION 13.07. Trustee May Perform........................... 87
SECTION 13.08. Trustee's Duties.............................. 87
SECTION 13.09. Remedies Upon Event of Default................ 87
SECTION 13.10. Application of Proceeds....................... 88
SECTION 13.11. Pledgor's Obligations Absolute................ 88
SECTION 13.12. Continuing Lien............................... 89
SECTION 13.13. Certificates and Opinions..................... 89
ARTICLE 14. MISCELLANEOUS........................................... 89
SECTION 14.01. TIA Controls.................................. 89
SECTION 14.02. Notices....................................... 89
SECTION 14.03. Communications by Holders with Other Holders.. 90
SECTION 14.04. Certificate and Opinion as to Conditions
Precedent................................... 90
SECTION 14.05. Statements Required in Certificate or Opinion. 91
SECTION 14.06. Rules by Trustee, Paying Agent, Registrar..... 91
SECTION 14.07. Legal Holidays................................ 91
SECTION 14.08. Governing Law................................. 91
SECTION 14.09. No Adverse Interpretation of Other Agreements. 92
SECTION 14.10. No Recourse Against Others.................... 92
SECTION 14.11. Successors.................................... 92
SECTION 14.12. Duplicate Originals........................... 92
SECTION 14.13. Severability.................................. 92
SECTION 14.14. Table of Contents, Headings, Etc.............. 93
SECTION 14.15. Qualification of Indenture.................... 93
SECTION 14.16. Registration Rights........................... 93
(iv)
0000G54P.W51
<PAGE>
INDENTURE, dated as of August 11, 1997 among Price Communications
Cellular Holdings, Inc., a Delaware corporation (the "COMPANY"), Price
Communications Cellular Inc., a Delaware corporation (the "GUARANTOR"), and Bank
of Montreal Trust Company, a New York banking corporation, (the "Trustee").
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Company's 13
1/2% Series A Senior Secured Discount Notes due 2007 and the 13 1/2% Series B
Senior Secured Discount Notes due 2007 which may be exchanged for the 13 1/2%
Series A Senior Secured Discount Notes due 2007:
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
-----------
"ACCELERATION NOTICE" shall have the meaning specified in Section
6.02.
"ACCEPTANCE AMOUNT" shall have the meaning specified in Section
4.15.
"ACCRETED VALUE" means, as of any date of determination prior to
August 1, 2002, the sum of (a) the initial offering price of each Unit and (b)
the portion of the excess of the principal amount of each Security over such
initial offering price which shall have been accreted thereon through such date,
such amount to be so accreted at the rate of 13 1/2% per annum of the initial
offering price of the Units, compounded semi-annually on each February 1, and
August 1, from the date of issuance of the Units through the date of
determination. On and after August 1, 2002, the Accreted Value of the Securities
shall be equal to the principal amount thereof.
"ACCUMULATED AMOUNT" shall have the meaning specified in Section
4.15.
"ACQUIRED PERSON" shall have the meaning as set forth in the
definition of "Permitted Investment."
"AFFILIATE" means, with respect to any specified Person, (i) any
other Person directly or indirectly controlling or controlled by, or under
direct or indirect common control with, such specified Person or (ii) any
officer, director, or controlling stockholder of such other Person. For purposes
of this definition, the term "control" means (a) the power to direct the
management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by contract,
or otherwise, or (b) without limiting the foregoing, the beneficial ownership of
10% or more of the voting power of the voting
0000G54P.W51
<PAGE>
common equity of such Person (on a fully diluted basis) or of warrants or other
rights to acquire such equity (whether or not presently exercisable).
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"ANNUALIZED OPERATING CASH FLOW" on any date means, with respect to
any Person, the Operating Cash Flow of such Person for the Reference Period
multiplied by four.
"ANNUALIZED OPERATING CASH FLOW RATIO" on any date (the "Transaction
Date") means, with respect to any Person and its Subsidiaries, the ratio of (i)
consolidated Indebtedness of such Person and its Subsidiaries on the Transaction
Date (after giving pro forma effect to the incurrence of such Indebtedness)
divided by (ii) the aggregate amount of Annualized Operating Cash Flow of such
Person (determined on a pro forma basis after giving effect to all acquisitions
or dispositions of businesses made by such Person and its Subsidiaries from the
beginning of the Reference Period through the Transaction Date as if such
acquisition or disposition had occurred at the beginning of such Reference
Period); provided that for purposes of such computation, in calculating
Annualized Operating Cash Flow and consolidated Indebtedness, (a) the
transaction giving rise to the need to calculate the Annualized Operating Cash
Flow Ratio will be assumed to have occurred (on a pro forma basis) on the first
day of the Reference Period; (b) the incurrence of any Indebtedness during the
Reference Period or subsequent thereto and on or prior to the Transaction Date
(and the application of the proceeds therefrom to the extent used to retire
Indebtedness or to acquire businesses) will be assumed to have occurred (on a
pro forma basis) on the first day of such Reference Period; (c) Consolidated
Interest Expense attributable to any Indebtedness (whether existing or being
incurred) bearing a floating interest rate shall be computed as if the rate in
effect on the Transaction Date had been the applicable rate for the entire
period; and (d) all members of the consolidated group of such Person on the
Transaction Date that were acquired during the Reference Period shall be deemed
to be members of the consolidated group of such Person for the entire Reference
Period. When the foregoing definition is used in connection with the Company and
its Restricted Subsidiaries, references to a Person and its Subsidiaries in the
foregoing definition shall be deemed to refer to the Company and its Restricted
Subsidiaries and when used in connection with PCW and its Subsidiaries shall be
deemed to refer to PCW and its Subsidiaries that are Restricted Subsidiaries.
"ASSET SALE" shall have the meaning specified in Section 4.15.
"ASSET SALE OFFER" shall have the meaning specified in Section 4.15.
"ASSET SALE OFFER AMOUNT" shall have the meaning specified in
Section 4.15.
"ASSET SALE OFFER PRICE" shall have the meaning specified in Section
4.15.
"ASSET SALE PURCHASE DATE" shall have the meaning specified in
Section 4.15.
-2-
0000G54P.W51
<PAGE>
"BANKRUPTCY LAW" means Title 11, U.S. Code, or any similar Federal,
state or foreign law for the relief of debtors.
"BOARD OF DIRECTORS" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such Person.
"BOARD RESOLUTION" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"BUSINESS DAY" means a day that is not a Legal Holiday.
"CAPITAL STOCK" means, with respect to any Person, any capital stock
of such Person and shares, interests, participations or other ownership
interests (however designated) of any Person and any rights (other than debt
securities convertible into capital stock), warrants and options to purchase any
of the foregoing, including (without limitation) each class of common stock and
preferred stock of such Person if such Person is a corporation and each general
and limited partnership interest of such Person if such Person is a partnership.
"CAPITALIZED LEASE OBLIGATIONS" means obligations under a lease that
are required to be capitalized for financial reporting purposes in accordance
with GAAP, and the amount of Indebtedness represented by such obligations shall
be the capitalized amount of such obligations, as determined in accordance with
GAAP.
"CASH EQUIVALENTS" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) in each case maturing within
one year after the date of acquisition, (ii) time deposits and certificates of
deposit and commercial paper issued by the parent corporation of any domestic
commercial bank of recognized standing having capital and surplus in excess of
$500 million and commercial paper issued by others rated at least A-2 or the
equivalent thereof by Standard & Poor's Corporation or at least P-2 or the
equivalent thereof by Moody's Investors Service, Inc. and in each case maturing
within one year after the date of acquisition and (iii) investments in money
market funds substantially all of whose assets comprise securities of the types
described in clauses (i) and (ii) above.
"CHANGE OF CONTROL" means (i) any sale, transfer or other
conveyance, whether direct or indirect, of a majority of the fair market value
of the assets of the Company, the Guarantor or Parent, on a consolidated basis,
in one transaction or a series of related transactions, if, immediately after
giving effect to such transaction, any "person" or "group" (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable), other than an Excluded Person or Excluded Group or, if the
Company or the Guarantor is a direct or indirect Subsidiary of any other Person
immediately prior to such trans-
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action, other than such other Person or any Subsidiary of such other Person that
is a Parent or Subsidiary of the Company, is or becomes the "beneficial owner"
(as such term is used in Rule 13d-3 promulgated pursuant to the Exchange Act),
directly or indirectly, of more than 50% of the total equity of the transferee,
(ii) any "person" or "group" (as such terms are used for purposes of Sections
13(d) and 14(d) of the Exchange Act, whether or not applicable), other than an
Excluded Person or Excluded Group, is or becomes the "beneficial owner" (as such
term is used in Rule 13d-3 promulgated pursuant to the Exchange Act), directly
or indirectly, of more than 50% of the total equity in the aggregate of all
classes of Capital Stock of the Company or the Guarantor (unless the Company, or
the Guarantor, as applicable, is a direct or indirect Subsidiary of any other
Person at any time of determination, in which case, of more than 50% of the
total equity of such other Person) then outstanding normally entitled to vote in
elections of directors, or (iii) during any period of 12 consecutive months
after the Issue Date, individuals who at the beginning of any such 12-month
period constituted the Board of Directors of the Company, the Guarantor or the
Parent (together with any new directors whose election by such Board or whose
nomination for election by the shareholders of the Company, the Guarantor or the
Parent was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company, the
Guarantor or the Parent then in office; provided, however, that a merger or
consolidation of the Parent with or into PriCellular Corporation will not be
deemed to be a Change of Control. Notwithstanding any of the foregoing
definitions in this paragraph, the Merger, the Corporate Change and the Parent
Exchange Offer, each as defined herein, shall not constitute a Change of
Control.
"CHANGE OF CONTROL OFFER" shall have the meaning specified in
Section 11.01.
"CHANGE OF CONTROL OFFER PERIOD" shall have the meaning specified in
Section 11.01.
"CHANGE OF CONTROL PURCHASE DATE" shall have the meaning specified
in Section 11.01.
"CHANGE OF CONTROL PURCHASE PRICE" shall have the meaning specified
in Section 11.01.
"CHANGE OF CONTROL PUT DATE" shall have the meaning specified in
Section 11.01.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means all cash and Treasury Bills and any proceeds
thereof, which may from time to time be held in the Collateral Account.
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"COLLATERAL ACCOUNT" means the trust account created and maintained
pursuant to Section 10.01.
"COMPANY" means the party named as such in this Indenture until a
successor replaces it pursuant to the Indenture, and thereafter means such
successor.
"COMPANY SYSTEMS" shall have the meaning specified in Section 4.15.
"CONSOLIDATED INTEREST EXPENSE" of any Person means, for any period,
the aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued, or
scheduled to be paid or accrued (including, in accordance with the following
sentence, interest attributable to the Capitalized Lease Obligations) of such
Person and its consolidated Subsidiaries during such period, including (i)
original issue discount and non-cash interest payments or accruals on any
Indebtedness, (ii) the interest portion of all deferred payment obligations, and
(iii) all commissions, discounts and other fees and charges owed with respect to
bankers' acceptances and letters of credit financings and currency and Interest
Swap and Hedging Obligations, in each case to the extent attributable to such
period, and (b) the amount of dividends accrued or payable by such Person or any
of its consolidated Subsidiaries in respect of Preferred Stock (other than by
Restricted Subsidiaries of such Person to such Person or such Person's Wholly
Owned Subsidiaries). For purposes of this definition, (x) interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (y) interest expense
attributable to any Indebtedness represented by the guaranty by such Person or a
Subsidiary of such Person of an obligation of another Person shall be deemed to
be the interest expense attributable to the Indebtedness guaranteed. When the
foregoing definition is used in connection with the Company and its Restricted
Subsidiaries, references to a Person and its Subsidiaries in the foregoing
definition shall be deemed to refer to the Company and its Restricted
Subsidiaries and when used in connection with PCW and its Subsidiaries shall be
deemed to refer to PCW and its Subsidiaries that are Restricted Subsidiaries.
"CONSOLIDATED NET INCOME" of any Person for any period means the net
income (or loss) of such Person and its consolidated Subsidiaries for such
period, determined (on a consolidated basis) in accordance with GAAP, adjusted
to exclude (only to the extent included in computing such net income (or loss)
and without duplication) (i) all extraordinary gains and losses and gains and
losses that are nonrecurring (including as a result of Asset Sales outside the
ordinary course of business), (ii) the net income, if positive, of any Person,
that is not a Subsidiary in which such Person or any of its Subsidiaries has an
interest, except to the extent of the amount of dividends or distributions
actually paid to such Person or a Subsidiary of such Person that both (x) are
actually paid in cash to such Person or a Subsidiary of such Person during such
period and (y) when taken together with all other dividends and distributions
paid during such period in cash to such Person or a Subsidiary of such Person,
are not in excess of such Person's pro rata share of such other Person's
aggregate net income earned during such period and (iii) except as provided in
the definition of "Annualized Operating Cash Flow Ratio," the
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net income (or loss) of any Subsidiary acquired in a pooling of interests
transaction for any period prior to the date of such acquisition. When the
foregoing definition is used in connection with the Company and its Restricted
Subsidiaries, references to a Person and its Subsidiaries in the foregoing
definition shall be deemed to refer to the Company and its Restricted
Subsidiaries and when used in connection with PCW and its Subsidiaries shall be
deemed to refer to PCW and its Subsidiaries that are Restricted Subsidiaries.
"CONTIGUOUS" means, when used in connection with any existing RSA or
MSA of the Company or its Subsidiaries, a wireless cellular communications
system, any part of which exists within 50 miles of such RSA or MSA.
"CORPORATE CHANGE" shall mean a corporate change, subject to
approval of PCC's shareholders, pursuant to which PCC would become a wholly
owned subsidiary of the Holding Company in a transaction in which each share of
capital stock and each option and warrant to purchase capital stock of PCC
(including the Warrants) outstanding immediately prior to the consummation of
such Corporate Change will be automatically converted into a share of capital
stock, option or warrant, as the case may be, in each case with identical rights
and an identical economic interest in the Holding Company.
"CORPORATE TRUST OFFICE" means the principal office of the Trustee
at which at any particular time its corporate trust business shall be
administered, which address as of the date hereof is located at 77 Water Street,
New York, New York 10005.
"COVENANT DEFEASANCE" shall have the meaning specified in Section
8.03.
"CREDIT AGREEMENT" means, a credit agreement to be entered into by
PCW and a syndicate of banks, financial institutions and other "accredited
investors" (as defined in Regulation D under the Securities Act) or any other
senior loan facility in lieu thereof, together with the related documents
thereto (including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring or adding Restricted Subsidiaries of the
Issuer as additional borrowers or guarantors thereunder all or any portion of
the Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders. There
can only be one such credit facility or loan agreement designated to be the
"CREDIT AGREEMENT" at any one time. Any Indebtedness in excess of $525,000,000
Incurred under the Credit Agreement, which at the time of Incurrence satisfies
the tests for incurrence of additional indebtedness under paragraph two of
Section 4.12, shall thereafter be deemed to be Indebtedness permitted under the
Credit Agreement for all purposes, including, without limitation, for purposes
of clause (ii) of the third paragraph of Section 4.12, and for purposes of
application of proceeds from Asset Sales pursuant to clause (3) of the first
paragraph of Section 4.15.
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"CURRENCY AGREEMENT" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect
against fluctuation in currency values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DEFAULT" means any event or condition that is, or after notice or
passage of time or both would be, an Event of Default.
"DEFAULTED INTEREST" shall have the meaning specified in Section
2.12.
"DEFINITIVE SECURITIES" means Securities that are in the form of
Security attached hereto as Exhibit A that do not include the information called
for by footnotes 1 and 3 thereof.
"DEPOSITORY" means, with respect to the Securities issuable or
issued in whole or in part in global form, the person specified in Section 2.03
as the Depository with respect to the Securities, until a successor shall have
been appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"DISQUALIFIED CAPITAL STOCK" means, with respect to any Person,
Capital Stock of such Person that, by its terms or by the terms of any security
into which it is convertible, exercisable or exchangeable, is, or upon the
happening of any event or the passage of time would be, required to be redeemed
or repurchased (including at the option of the holder thereof) by such Person or
any of its Subsidiaries, in whole or in part, on or prior to the Stated Maturity
of the Securities; provided that Capital Stock will not be deemed to be
Disqualified Capital Stock if it may only be so redeemed or repurchased solely
in consideration of Qualified Capital Stock of the Company or Parent.
"ELIGIBLE INVESTMENTS" shall mean those investments in Treasury
Bills made pursuant to Section 10.02.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute.
"EVENT OF DEFAULT" shall have the meaning specified in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"EXCHANGE SECURITIES" means the 13 1/2% Series B Senior Secured
Discount Notes due 2007 to be issued pursuant to this Indenture in connection
with the offer to exchange
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Securities for the Initial Securities that may be made by the Company pursuant
to the Registration Rights Agreement.
"EXCHANGED CAPITAL STOCK" shall have the meaning specified in
Section 4.15.
"EXCLUDED GROUP" means a "group" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) that includes one or more Excluded Persons;
provided that the voting power of the Capital Stock of the Company or the Parent
"beneficially owned" (as such term is used in Rule 13d-3 promulgated under the
Exchange Act) by such Excluded Persons (without attribution to such Excluded
Persons of the ownership by other members of the "group") represents a majority
of the voting power of the Capital Stock "beneficially owned" (as such term is
used in Rule 13d-3 promulgated under the Exchange Act) by such "group."
"EXCLUDED PERSON" means members of the Price Family who owned
Capital Stock of the Parent and PriCellular Corporation on the Issue Date and
any Affiliate of any of the foregoing that is wholly owned by one of the
foregoing.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries in existence and outstanding on the Issue Date.
"FINAL PUT DATE" shall have the meaning specified in Section 4.15.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board ("FASB") or in such
other statements by such other entity as may be approved by a significant
segment of the accounting profession; provided, however, that for purposes of
determining compliance with covenants in the Indenture, "GAAP" means such
generally accepted accounting principles as in effect as of the Issue Date.
"GLOBAL SECURITY" means a Security that contains the paragraph
referred to in footnote 1 and the additional schedule referred to in footnote 3
to the form of Security attached hereto as Exhibit A.
"GUARANTEE" means the guaranty of the Guarantor pursuant to Article
13 hereof, as such guaranty may be amended, modified or supplemented from time
to time.
"GUARANTOR" means Price Communications Cellular Inc., a Delaware
corporation, unless a successor replaces it in accordance with Article 5 and
thereafter means the successor.
"GUARANTOR PERMITTED INVESTMENTS" means Permitted Investments of the
types described in clauses (i) and (ii) of the definition of Permitted
Investments.
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"HOLDER" means a Person in whose name a Security is registered. The
Holder of a Security will be treated as the owner of such Security for all
purposes.
"HOLDING COMPANY" shall mean a newly organized holding company with
a substantially identical certificate of incorporation, by-laws and capital
structure to those of PCC immediately prior to the consummation of the Corporate
Change.
"INCUR" shall have the meaning specified in Section 4.12.
"INDEBTEDNESS" of any Person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such Person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except (other than accounts payable or other obligations to trade creditors
which have remained unpaid for greater than 90 days past their original due date
or to financial institutions, which obligations are not being contested in good
faith and for which appropriate reserves have been established) those incurred
in the ordinary course of its business that would constitute ordinarily a trade
payable to trade creditors, (iv) evidenced by bankers' acceptances or similar
instruments issued or accepted by banks, (v) for the payment of money relating
to a Capitalized Lease Obligation, or (vi) evidenced by a letter of credit or a
reimbursement obligation of such Person with respect to any letter of credit;
(b) all obligations of such Person under Interest Swap and Hedging Obligations;
(c) all liabilities of others of the kind described in the preceding clauses (a)
or (b) that such Person has guaranteed or that is otherwise its legal liability
or which are secured by any assets or property of such Person and all
obligations to purchase, redeem or acquire any Capital Stock; (d) all
Disqualified Capital Stock of such Person and all Preferred Stock of such
Person's Subsidiaries; and (e) any and all deferrals, renewals, extensions,
refinancing and refundings (whether direct or indirect) of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (a), (b), (c), or (d) or this clause (e), whether or not
between or among the same parties; provided that the outstanding principal
amount at any date of any Indebtedness issued with original issue discount is
the face amount of such Indebtedness less the remaining unamortized portion of
the original issue discount of such Indebtedness at such date.
"INDENTURE" means this Indenture, as amended or supplemented from
time to time in accordance with the terms hereof.
"INITIAL PURCHASERS" means NatWest Capital Markets Limited and
Wasserstein Perella Securities, Inc.
"INITIAL SECURITIES" means the 13 1/2% Series A Senior Secured
Discount Notes due 2007, as supplemented from time to time in accordance with
the terms hereof, issued pursuant to this Indenture.
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"INTEREST PAYMENT DATE" means the stated due date of an installment
of interest on the Securities.
"INTEREST SWAP AND HEDGING OBLIGATIONS" means any obligations of any
Person pursuant to any interest rate swaps, caps, collars and similar
arrangements providing protection against fluctuations in interest rates. For
purposes of this Indenture, the amount of such obligations shall be the amount
determined in respect thereof as of the end of the then most recently ended
fiscal quarter of such Person, based on the assumption that such obligation had
terminated at the end of such fiscal quarter, and in making such determination,
if any agreement relating to such obligation provides for the netting of amounts
payable by and to such Person thereunder or if any such agreement provides for
the simultaneous payment of amounts by and to such Person, then in each such
case, the amount of such obligations shall be the net amount so determined, plus
any premium due upon default by such Person.
"INVESTMENT" by any Person in any other Person means (without
duplication) (a) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such Person (whether for cash, property, services, securities or
otherwise) of capital stock, bonds, notes, debentures, partnership or other
ownership interests or other securities of such other Person or any agreement to
make any such acquisition; (b) the making by such Person of any deposit with, or
advance, loan or other extension of credit to, such other Person (including the
purchase of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such other
Person) or any commitment to make any such advance, loan or extension; (c) the
entering into by such Person of any guarantee of, or other contingent obligation
with respect to, Indebtedness or other liability of such other Person; (d) the
making of any capital contribution by such Person to such other Person; and (e)
the designation by the Board of Directors of the Company of any Person to be an
Unrestricted Subsidiary. For purposes of Section 4.04, (i) "INVESTMENT" shall
include and be valued at the fair market value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
an Unrestricted Subsidiary and shall exclude the fair market value of the net
assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any
Investment shall be the fair market value of such Investment plus the fair
market value of all additional Investments by the Company or any of its
Restricted Subsidiaries at the time any such Investment is made; provided that,
for purposes of this sentence, the fair market value of net assets in excess of
$5,000,000 shall be as determined by an independent appraiser of national
reputation.
"ISSUE DATE" means the time and date of the first issuance of the
Securities under the Indenture.
"JUNIOR INDEBTEDNESS" means Indebtedness of the Company that (i)
requires no payment of principal prior to or on the date on which all principal
of and interest on the Securities is paid in full and (ii) is subordinate and
junior in right of payment to the Securities in all respects.
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"LEGAL DEFEASANCE" shall have the meaning specified in Section 8.02.
"LEGAL HOLIDAY" shall have the meaning specified in Section 15.07.
"LIEN" means any mortgage, lien, pledge, charge, security interest,
or other encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest and
any option or other agreement to give any security interest).
"MATURITY DATE" means, when used with respect to any Security, the
date specified on such Security as the fixed date on which the final installment
of principal of such Security is due and payable (in the absence of any
acceleration thereof pursuant to the provisions of the Indenture regarding
acceleration of Indebtedness or any Change of Control Offer or Asset Sale
Offer).
"MERGER" means the merger of PCW with and into Palmer pursuant to
the Merger Agreement.
"MERGER AGREEMENT" means the agreement and plan of merger dated as
of May 23, 1997, among the Parent, Price Communications Cellular Merger Corp. (a
predecessor of PCW) and Palmer.
"MERGER DATE" means the date of the consummation of the Merger.
"MINIMUM ACCUMULATION DATE" shall have the meaning specified in
Section 4.15.
"MSA" shall have the meaning specified in the definition of "POPS."
"NET CASH PROCEEDS" means the aggregate amount of cash and Cash
Equivalents received by the Company and its Restricted Subsidiaries in respect
of an Asset Sale (including upon the conversion to cash and Cash Equivalents of
(A) any note or installment receivable at any time, or (B) any other property as
and when any cash and Cash Equivalents are received in respect of any property
received in an Asset Sale but only to the extent such cash and Cash Equivalents
are received within one year after such Asset Sale), less the sum of (i) all
reasonable out-of-pocket fees, commissions and other expenses incurred in
connection with such Asset Sale, including the amount (estimated in good faith
by the Board of Directors of the Company) of income, franchise, sales and other
applicable taxes required to be paid by the Company or any Restricted Subsidiary
of the Company in connection with such Asset Sale and (ii) the aggregate amount
of cash so received which is used to retire any existing Indebtedness of the
Company ranking on a parity with the Securities or Indebtedness of its
Restricted Subsidiaries, as the case may be, which is required to be repaid in
connection with such Asset
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Sale or is secured by a Lien on the property or assets of the Company or any of
its Restricted Subsidiaries, as the case may be.
"NET OFFERING PROCEEDS" shall have the meaning specified in Section
4.20.
"NET POPS" of any Person with respect to any cellular telephone
system means the Pops of the MSA or RSA served by such system multiplied by the
direct and/or indirect percentage interest of such Person in the entity licensed
or designated to receive an authorization by the Federal Communications
Commission to construct or operate a system in that MSA or RSA.
"NET PROCEEDS" means the aggregate net proceeds (including the fair
market value of non-cash proceeds constituting equipment or other assets of a
type generally used in a Related Business as reasonably determined by the Board
of Directors of the Company for amounts under $5,000,000 and by a financial
advisor or appraiser of national reputation for equal or greater amounts)
received by a Person from the sale of Qualified Capital Stock (other than to a
Subsidiary of such Person) after payment of out-of-pocket expenses, commissions
and discounts incurred in connection therewith.
"NON-RECOURSE RESTRICTED SUBSIDIARY" shall have the meaning
specified in the definition of "Permitted Acquisition Indebtedness."
"NOTICE OF DEFAULT" shall have the meaning specified in Section
6.01(c).
"OBLIGATION" means any principal, premium, interest (including
interest accruing subsequent to a bankruptcy or other similar proceeding whether
or not such interest is an allowed claim enforceable against the Company in a
bankruptcy case under Federal bankruptcy law), penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable pursuant
to the terms of the documentation governing any Indebtedness.
"OFFERING MEMORANDUM" means that certain Offering Memorandum of the
Company, dated August 1, 1997 relating to the original issuance and sale of the
Initial Securities to the Initial Purchasers, as may be supplemented from time
to time.
"OFFICER" means, with respect to the Company or the Guarantor, the
Chief Executive Officer, the President, any Vice President, any Executive Vice
President, the Chief Financial Officer, the Treasurer, the Controller, or the
Secretary of the Company or the Guarantor, as applicable.
"OFFICERS' CERTIFICATE" means, with respect to the Company, the
Guarantor or the Parent, a certificate signed by two Officers or by an Officer
and an Assistant Secretary of the Company, the Guarantor or the Parent,
respectively, and otherwise complying with the requirements of Sections 15.04
and 15.05.
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"OPERATING CASH FLOW" of any Person means (a) with respect to any
period, the Consolidated Net Income of such Person for such period, plus (b) the
sum, without duplication (and only to the extent such amounts are deducted from
net revenues in determining such Consolidated Net Income), of (i) the provisions
for income taxes for such period for such Person and its consolidated
Subsidiaries, (ii) depreciation, amortization and other non-cash charges of such
Person and its consolidated Subsidiaries and (iii) Consolidated Interest Expense
of such Person for such period, determined, in each case, on a consolidated
basis for such Person and its consolidated Subsidiaries in accordance with GAAP,
less (c) the amount of all cash payments made during such period by such Person
and its Subsidiaries to the extent such payments relate to non-cash charges that
were added back in determining Operating Cash Flow for such period or for any
prior period. When the foregoing definition is used in connection with the
Company and its Restricted Subsidiaries, references to a Person and its
Subsidiaries in the foregoing definition shall be deemed to refer to the Company
and its Restricted Subsidiaries and when used in connection with PCW and its
Subsidiaries shall be deemed to refer to PCW and its Subsidiaries that are
Restricted Subsidiaries.
"OPINION OF COUNSEL" means a written opinion from legal counsel who
is reasonably acceptable to the Trustee complying with the requirements of
Sections 14.04 and 14.05.
"PALMER" means Palmer Wireless, Inc.
"PARENT" shall mean Price Communications Corporation or any directly
or indirectly wholly owned subsidiary of Price Communications Corporation that
directly or indirectly wholly owns the Company until a successor replaces it in
accordance with the provisions of this Indenture and thereafter means such
successor.
"PARENT EXCHANGE OFFER" means an event occurring on or about the
Merger Date in which Parent exchanges shares of Parent common stock for shares
of outstanding stock of Palmer in a transaction consummated in connection with
and in furtherance of the Merger.
"PAYING AGENT" shall have the meaning specified in Section 2.03.
"PCC" means Price Communications Corporation, a Delaware
corporation.
"PCW" means Price Communications Wireless, Inc., the direct
Subsidiary of the Company, and an indirect subsidiary of Price Communications
Corporation.
"PCW OFFERING" means an offering by PCW of 11 3/4% Senior
Subordinated Notes due 2007 of PCW.
"PERMITTED ACQUISITION INDEBTEDNESS" means, with respect to any
Person, Indebtedness Incurred in connection with the acquisition of property,
businesses or assets which, or Capital Stock of a Person all or substantially
all of whose assets, are of a type generally used in a Related Business;
provided that, in the case of the Company or its Restricted Subsidiaries,
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as applicable, (x) (i) the Company's or PCW's, as the case may be, Annualized
Operating Cash Flow Ratio, after giving effect to such acquisition and such
Incurrence on a pro forma basis, is no greater than such ratio prior to giving
pro forma effect to such acquisition and such Incurrence, (ii) the Company's or
PCW's, as the case may be, consolidated unsubordinated Indebtedness, divided by
the Net Pops of the Company or PCW, as the case may be, and its Restricted
Subsidiaries, in each case giving pro forma effect to the acquisition and such
Incurrence, does not exceed $120, (iii) the Company's or PCW's, as the case may
be, consolidated Indebtedness divided by the Net Pops of the Company or PCW, as
the case may be, and its Restricted Subsidiaries does not exceed $160 as a
result of the acquisition and such Incurrence and (iv) after giving effect to
such acquisition and such Incurrence the acquired property, businesses or assets
or such Capital Stock is owned directly by the Company or PCW, as the case may
be, or a Wholly Owned Restricted Subsidiary thereof, or (y) (i) under the terms
of such Indebtedness and pursuant to applicable law, no recourse could be had
for the payment of principal, interest or premium with respect to such
Indebtedness or for any claim based thereon against the Company or any Person
that constituted a Restricted Subsidiary immediately prior to the consummation
of such acquisition or any of their property or assets, (ii) the obligor of such
Indebtedness shall have, immediately after giving effect to such acquisition and
such Incurrence on a pro forma basis, a ratio of Annualized Operating Cash Flow
as of the date of the acquisition to the product of Consolidated Interest
Expense for the Reference Period multiplied by four (but excluding from
Consolidated Interest Expense all amounts that are not required to be paid in
cash on a current basis) of at least 1 to 1 and (iii) immediately subsequent to
the Incurrence of such Indebtedness, the obligor thereof shall be a Restricted
Subsidiary and shall have been designated by the Company (as evidenced by an
Officers' Certificate delivered promptly to the Trustee) to be a "Non-Recourse
Restricted Subsidiary."
"PERMITTED INVESTMENT" means (i) Investments in Cash Equivalents;
(ii) Investments in the Company or a Restricted Subsidiary (other than a
Non-Recourse Restricted Subsidiary); (iii) Investments in a Person substantially
all of whose assets are of a type generally used in a Related Business (an
"Acquired Person") if, as a result of such Investments, (A) the Acquired Person
immediately thereupon becomes a Restricted Subsidiary (other than a NonRecourse
Restricted Subsidiary) or (B) the Acquired Person immediately thereupon either
(1) is merged or consolidated with or into the Company or any of its Restricted
Subsidiaries (other than a Non-Recourse Restricted Subsidiary) and the surviving
Person is the Company or a Restricted Subsidiary (other than a Non-Recourse
Restricted Subsidiary) or (2) transfers or conveys all or substantially all of
its assets to, or is liquidated into, the Company or any of its Restricted
Subsidiaries (other than a Non-Recourse Restricted Subsidiary); (iv) Investments
in accounts and notes receivable acquired in the ordinary course of business;
(v) any securities received in connection with an Asset Sale (other than those
of a Non-Recourse Restricted Subsidiary) and any Investment with the Net Cash
Proceeds from any Asset Sale in Capital Stock of a Person, all or substantially
all of whose assets are of a type used in a Related Business, that complies with
Section 4.15; (vi) any guarantee issued by a Restricted Subsidiary in respect of
Indebtedness of a Restricted Subsidiary Incurred in compliance with the
Indenture; (vii) advances and prepayments for asset purchases in the ordinary
course of business in a Related Business of the Company or a Restricted
Subsidiary; (viii) Investments in Non-Recourse
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Restricted Subsidiaries with the proceeds of contributions irrevocably and
unconditionally received without restriction by the Company from Parent; and
(ix) customary loans or advances made in the ordinary course of business to
officers, directors or employees of the Company or any of its Restricted
Subsidiaries for travel, entertainment, and moving and other relocation
expenses.
"PERMITTED LIEN" means (a) Liens existing on the Issue Date; (b)
Liens imposed by governmental authorities for taxes, assessments or other
charges not yet subject to penalty or which are being contested in good faith
and by appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP; (c) statutory
liens of carriers, warehousemen, mechanics, materialmen, landlords, repairmen or
other like Liens arising by operation of law in the ordinary course of business,
provided that (i) the underlying obligations are not overdue for a period of
more than 30 days, and (ii) such Liens are being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP; (d) Liens
securing the performance of bids, trade contracts (other than borrowed money),
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business;
(e) easements, rights-of-way, zoning, similar restrictions and other similar
encumbrances or title defects which, singly or in the aggregate, do not in any
case materially detract from the value of the property, subject thereto (as such
property is used by the Company or any of its Restricted Subsidiaries) or
interfere with the ordinary conduct of the business of the Company or any of its
Restricted Subsidiaries; (f) Liens arising by operation of law in connection
with judgments, only to the extent, for an amount and for a period not resulting
in an Event of Default with respect thereto; (g) pledges or deposits made in the
ordinary course of business in connection with worker's compensation,
unemployment insurance and other types of social security legislation; (h) Liens
in favor of the Trustee arising under the Indenture; (i) Liens securing
Permitted Acquisition Indebtedness, which either (A) were not incurred or issued
in anticipation of such acquisition or (B) secure Permitted Acquisition
Indebtedness meeting the requirements set forth in clause (y) of the definition
thereof; (j) Liens securing pari passu Indebtedness or Indebtedness of a
Restricted Subsidiary that was incurred in accordance with Section 4.12; (k)
Liens securing Indebtedness of a Person existing at the time such Person becomes
a Restricted Subsidiary or is merged with or into the Company or a Restricted
Subsidiary, provided that such Liens were in existence prior to the date of such
acquisition, merger or consolidation, were not incurred in anticipation thereof,
and do not extend to any other assets; (1) Liens arising from Purchase Money
Indebtedness permitted under the Indenture; (m) Liens securing Refinancing
Indebtedness Incurred to refinance any Indebtedness that was previously so
secured in a manner no more adverse to the Holders of the Securities than the
terms of the Liens securing such refinanced Indebtedness; and (n) Liens in favor
of the Company or a Wholly Owned Restricted Subsidiary.
"PERSON" means any corporation, individual, joint stock company,
joint venture, partnership, unincorporated association, governmental regulatory
entity, country, state or political subdivision thereof, trust, municipality or
other entity.
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"PIK PREFERRED STOCK" means the Senior Payment-In-Kind Increasing
Rate Preferred Stock of the Parent held by NatWest Capital Markets Limited.
"POPS" means the estimate of the population of a Metropolitan
Statistical Area ("MSA") or Rural Service Area ("RSA") as derived from (i) the
most recent Donnelly Market Service or if such statistics are no longer printed
in the Donnelly Market Service or the Donnelly Market Service is no longer
published, the most recent Rand McNally Commercial Atlas or if such statistics
are no longer printed in the Rand McNally Commercial Atlas or if the Rand
McNally Commercial Atlas is no longer published, such other nationally
recognized source of such information; or (ii) the most recent United States
Census Bureau reports as to any year in respect of which such reports are
published.
"PREFERRED STOCK" means Capital Stock, other than common stock of an
issuer having no preferences or privileges as to the payment of dividends or the
distribution of the issuer's assets over any other class of such issuer's
Capital Stock.
"PRICE FAMILY" means Robert Price, an individual, and members of his
family who, as of the Issue Date, beneficially owned Capital Stock of Parent.
"PRINCIPAL" of any Indebtedness means the principal of such
Indebtedness plus, without duplication, applicable premium, if any, on such
Indebtedness.
"PROPERTY" means any right or interest in or to property or assets
of any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"PURCHASE AGREEMENT" means that certain Purchase Agreement dated
July 31, 1997 by and among the Company, Parent, the Guarantor and the Initial
Purchasers, as such agreement may be amended, modified or supplemented from time
to time in accordance with the terms thereof.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company or
its Restricted Subsidiaries Incurred in connection with the purchase of property
or assets for the business of the Company or its Restricted Subsidiaries,
provided that the recourse of the lenders with respect to such Indebtedness is
limited solely to the property or assets so purchased without further recourse
to either the Company or any of its Restricted Subsidiaries.
"QUALIFIED CAPITAL STOCK" means any Capital Stock of a Person that
is not Disqualified Capital Stock.
"RECORD DATE" means a Record Date specified in the Securities
whether or not such Record Date is a Business Day.
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"REDEMPTION DATE," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to Article 3 of this
Indenture and Paragraph 5 in the form of Security.
"REDEMPTION PRICE," when used with respect to any Security to be
redeemed, means the redemption price for such redemption pursuant to Article 3
of this Indenture and Paragraph 5 in the form of Security, which shall include,
without duplication, in each case, any accrued and unpaid interest to the
Redemption Date.
"REFERENCE PERIOD" with regard to any Person means the last full
fiscal quarter of such Person for which financial information (which the Company
shall use its best efforts to compile in a timely manner) in respect thereof is
available ended on or immediately preceding any date upon which any
determination is to be made pursuant to the terms of the Securities or the
Indenture.
"REFINANCING INDEBTEDNESS" means Indebtedness or Disqualified
Capital Stock (a) issued in exchange for, or the proceeds from the issuance and
sale of which are used substantially concurrently to repay, redeem, defease,
refund, refinance, discharge or otherwise retire for value, in whole or in part,
or (b) constituting an amendment, modification or supplement to, or a deferral
or renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, liquidation preference (or, if such Indebtedness
or Disqualified Capital Stock does not require cash payments prior to maturity
or is otherwise issued at a discount, the original issue price of such
Indebtedness or Disqualified Capital Stock), not to exceed the sum of (x) the
lesser of (i) the principal amount or, in the case of Disqualified Capital
Stock, liquidation preference, of the Indebtedness or Disqualified Capital Stock
so Refinanced and (ii) if such Indebtedness being Refinanced was issued with an
original issue discount, the accreted value thereof (as determined in accordance
with GAAP) at the time of such Refinancing, (y) the amount of any premium
required to be paid in connection with such refinancing pursuant to the terms of
such Indebtedness and (z) all other customary fees and expenses of the Company
or such Restricted Subsidiary reasonably incurred in connection with such
refinancing; provided that (A) Refinancing Indebtedness issued by any Restricted
Subsidiary of the Company shall only be used to Refinance outstanding
Indebtedness or Disqualified Capital Stock of such Restricted Subsidiary, (B)
Refinancing Indebtedness shall (x) not have a Weighted Average Life shorter than
the Indebtedness or Disqualified Capital Stock to be so refinanced at the time
of such Refinancing and (y) in all respects, be no less subordinated or junior,
if applicable, to the rights of Holders of the Securities than was the
Indebtedness or Disqualified Capital Stock to be refinanced and (C) such
Refinancing Indebtedness shall have no installments of principal (or redemption
payment) scheduled to come due earlier than the scheduled maturity of any
installment of principal (or redemption payment) of the Indebtedness or
Disqualified Capital Stock to be so refinanced which was scheduled to come due
prior to the Stated Maturity of the Securities.
"REGISTRAR" shall have the meaning specified in Section 2.03.
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"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated August 11, 1997 by and among the Initial Purchasers, the Company
and the Guarantor, as such agreement may be amended, modified or supplemented
from time to time in accordance with the terms thereof.
"RELATED BUSINESS" means any business directly related to the
ownership, development, operation, and acquisition of wireless cellular
communications systems.
"RELATED PERSON" means, with respect to any Person, (i) any
Affiliate of such Person or any spouse, immediate family member, or other
relative who has the same principal residence of any Affiliate of such Person
and (ii) any trust in which any Person described in clause (i) above has a
beneficial interest.
"RESTRICTED PARTNERSHIP" shall have the meaning specified in Section
4.19.
"RESTRICTED PAYMENT" means, with respect to any Person, (i) any
dividend or other distribution on shares of Capital Stock of such Person, its
Parent, or any Subsidiary of such Person (except any dividend or distribution
payable to the Guarantor in common stock of the Company), (ii) any payment on
account of the purchase, redemption or other acquisition or retirement for
value, or any payment in respect of any amendment (in anticipation of or in
connection with any such retirement, acquisition or defeasance) in whole or in
part, of any shares of Capital Stock of such Person, its Parent, or any
Subsidiary of such Person held by Persons other than such Person or any of its
Restricted Subsidiaries, (iii) any defeasance, redemption, repurchase or other
acquisition or retirement for value, or any payment in respect of any amendment
(in anticipation of or in connection with any such retirement, acquisition or
defeasance) in whole or in part, of any Indebtedness of the Company (other than
the scheduled repayment thereof at maturity and any mandatory redemption or
mandatory repurchase thereof pursuant to the terms thereof) by such Person or a
Subsidiary of such Person that is subordinate in right of payment to, or ranks
pari passu (other than the Securities) with, the Securities (other than in
exchange for Refinancing Indebtedness permitted to be Incurred under the
Indenture and except for any such defeasance, redemption, repurchase, other
acquisition or payment in respect of Indebtedness held by any Restricted
Subsidiary) and (iv) any Investment (other than a Permitted Investment);
provided, however, that the term "Restricted Payment" does not include (i) any
dividend, distribution or other payment on shares of Capital Stock of the
Company or any Restricted Subsidiary solely in shares of Qualified Capital
Stock, (ii) any dividend, distribution or other payment to the Company, or any
dividend to any of its Restricted Subsidiaries, by any of its Subsidiaries,
(iii) the purchase, redemption or other acquisition or retirement for value of
shares of Capital Stock of any Restricted Subsidiary (other than Non-Recourse
Restricted Subsidiaries) held by Persons other than the Company or any of its
Restricted Subsidiaries, (iv) payments to satisfy obligations to pay statutory
appraisal rights resulting from the Merger and any settlement in respect thereof
to security holders of Palmer, (v) fees and expenses incurred in connection with
the Merger or (vi) cash payments in respect of purchases of options and rights
for shares of Palmer common stock issued pursuant to Palmer's 1995
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Stock Option Plan, 1995 Directors' Stock Option Plan, 1995 Employee Stock
Purchase Plan and 1995 Non-Employee Director Stock Purchase Plan.
"RESTRICTED SECURITY" means a Security, unless or until it has been
(i) disposed of in a transaction effectively registered under the Securities Act
or (ii) distributed to the public pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act; provided that in no case shall an
Exchange Security issued in accordance with this Indenture and the terms and
provisions of the Registration Rights Agreement be a Restricted Security.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company which at
the time of determination is not an Unrestricted Subsidiary. The Board of
Directors of the Company may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if, immediately before and after giving effect to
such designation, there would exist no Default or Event of Default and the
Company could incur at least $1.00 of Indebtedness pursuant to the Annualized
Operating Cash Flow Ratio test of Section 4.12, on a pro forma basis, taking
into account such designation.
"RSA" shall have the meaning specified in the definition of "POPS."
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means, collectively, the Initial Securities and, when
and if issued as provided in the Registration Rights Agreement, the Exchange
Securities.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
"SECURITIES CUSTODIAN" means the Trustee, as custodian for the
Depository with respect to the Securities in global form, or any successor
entity thereto.
"SENIOR SUBORDINATED NOTES" means the 11 3/4% Senior Subordinated
Notes due 2007 of PCW.
"SIGNIFICANT RESTRICTED SUBSIDIARY" means one or more Restricted
Subsidiaries having an aggregate net book value of assets in excess of 5% of the
net book value of the assets of the Company and its Restricted Subsidiaries on a
consolidated basis.
"SPECIAL RECORD DATE" for payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 2.12.
"SPECIAL REDEMPTION" shall have the meaning specified in Section
3.01.
"SPECIAL REDEMPTION AMOUNT" shall have the meaning specified in
Section 4.20.
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"SPECIAL REDEMPTION DATE" shall have the meaning specified in
Section 3.01.
"SPECIAL RIGHTS" shall have the meaning specified in Section 4.19.
"STATED MATURITY" means the date fixed for the payment of any
principal or premium pursuant to the Indenture and the Securities, including the
Maturity Date, upon redemption, acceleration, Asset Sale Offer, Change of
Control Offer or otherwise.
"SUBSIDIARY" with respect to any Person, means (i) a corporation at
least fifty percent of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person, or (ii) a partnership in which such
Person or a Subsidiary of such Person is, at the time, a general partner of such
partnership, or (iii) any Person in which such Person, one or more Subsidiaries
of such Person, or such Person and one or more Subsidiaries of such Person,
directly or indirectly, at the date of determination thereof has (x) at least a
fifty percent ownership interest or (y) the power to elect or direct the
election of the directors or other governing body of such Person.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa77bbbb) as in effect on the date of the execution of this Indenture.
"TRANSFER RESTRICTED SECURITIES" means Securities that bear or are
required to bear the legend set forth in Section 2.06 hereof.
"TREASURY BILLS" means securities issued by the United States of
America maturing no later than the Business Day preceding December 31, 1997.
"TRUST OFFICER" means any officer within the corporate trust
division (or any successor group) of the Trustee or any other officer of the
Trustee customarily performing functions similar to those performed by the
Persons who at that time shall be such officers, and also means, with respect to
a particular corporate trust matter, any other officer of the Trustee to whom
such trust matter is referred because of his knowledge of and familiarity with
the particular subject.
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"UNITS" means the units offered by the Company, each Unit consisting
of $1,000 principal amount of Securities issued by the Company and 3.44 Warrants
issued by Parent. The Securities and the Warrants will be detachable and will be
immediately separated upon sale.
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"UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary of the Company
that, at the time of determination, shall be an Unrestricted Subsidiary (as
designated by the Board of Directors of the Company, as provided below). The
Board of Directors of the Company may designate any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary at or prior to the time
it is so formed or acquired) to be an Unrestricted Subsidiary if (a) no Default
or Event of Default is existing or will occur as a consequence thereof, (b) such
Subsidiary does not own any Capital Stock of, or own or hold any Lien on any
property or asset of, the Company or any Restricted Subsidiary that is not a
Subsidiary of the Subsidiary to be so designated and (c) such Subsidiary and
each of its Subsidiaries has not at the time of designation, and does not
thereafter, create, incur, issue, assume, guarantee, or otherwise become
directly or indirectly liable with respect to any Indebtedness pursuant to which
the lender has recourse to any property or assets of the Company or any of its
Restricted Subsidiaries (except that such Subsidiary and its Subsidiaries may
guarantee the Securities); provided that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, that such designation would be permitted pursuant to
Section 4.04. Each such designation shall be evidenced by filing with the
Trustee a certified copy of the resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"U.S. GOVERNMENT OBLIGATIONS" means direct non-callable obligations
of, or noncallable obligations guaranteed by, the United States of America for
the payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.
"U.S. LEGAL TENDER EQUIVALENTS" means securities issued or directly
and fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof with a maturity of 90 days or less (provided that the
full faith and credit of the United States of America is pledged in support
thereof).
"VOTING STOCK" means Capital Stock of the Company having generally
the right to vote in the election of a majority of the directors of the Company
or having generally the right to vote with respect to the organizational matters
of the Company subject to adjustment.
"WARRANT AGENT" means Bank of Montreal Trust Company, or its
successor, as Warrant Agent under the Warrant Agreement dated as of August 11,
1997 between the Company, the Parent and Bank of Montreal Trust Company.
"WARRANTS" means the warrants offered as part of the Units, each
Warrant allowing the holder thereof to purchase one share of Common Stock of the
Parent.
"WEIGHTED AVERAGE LIFE" means, as of the date of determination, with
respect to any debt instrument, the quotient obtained by dividing (i) the sum of
the products of the numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such debt instrument
multiplied by the amount of each such respective principal payment by (ii) the
sum of all such principal payments.
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"WHOLLY OWNED" means, with respect to a Subsidiary of the Company,
(i) a Subsidiary that is a corporation, of which not less than 99% of the
Capital Stock (except for directors' qualifying shares or certain minority
interests owned by other Persons solely due to local law requirements that there
be more than one stockholder, but which interest is not in excess of what is
required for such purpose) is owned directly by such Person or through one or
more other Wholly Owned Subsidiaries of such Person, or (ii) any entity other
than a corporation in which such Person, directly or indirectly, owns not less
than 99% of the Capital Stock of such entity.
SECTION 1.02. Incorporation by Reference of TIA. Whenever this
---------------------------------
Indenture refers to a provision of the TIA, such provision is incorporated by
reference in and made a part of this Indenture. The following TIA terms used in
this Indenture have the following meanings:
"COMMISSION" means the SEC.
"INDENTURE SECURITIES" means the Securities.
"INDENTURE SECURITYHOLDER" means a Holder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee.
"OBLIGOR" on the indenture securities means the Company, the
Guarantor and any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
SECTION 1.03. Rules of Construction. Unless the context otherwise
---------------------
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions;
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(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision;
(7) references to Sections or Articles means reference to such
Section or Article in this Indenture, unless stated otherwise; and
(8) whenever in this Indenture or the Securities it is provided that
the principal amount with respect to a Security shall be paid, such
provision shall be deemed to require (whether or not so expressly stated)
the simultaneous payment of any accrued and unpaid interest to the date of
payment on such Security payable pursuant to paragraph 1 of the
Securities.
ARTICLE 2.
THE SECURITIES
SECTION 2.01. Form and Dating. The Securities and the Trustee's
---------------
certificate of authentication in respect thereof shall be substantially in the
form of Exhibit A hereto, which Exhibit is part of this Indenture. The
Securities may have notations, legends or endorsements required by law, stock
exchange rule or usage. The Company shall approve the form of the Securities and
any notation, legend or endorsement on them. Any such notations, legends or
endorsements not contained in the form of Security attached as Exhibit A hereto
shall be delivered in writing to the Trustee. Each Security shall be dated the
date of its authentication.
The terms and provisions contained in the forms of Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
SECTION 2.02. Execution and Authentication. Each Security shall be
----------------------------
signed by at least one Officer for the Company by manual or facsimile signature.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless and the
Company shall nevertheless be bound by the terms of the Securities and this
Indenture.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security but
such signature shall be conclusive evidence that the Security has been
authenticated pursuant to the terms of this Indenture.
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The Trustee shall authenticate Initial Securities for original issue
in the aggregate principal amount at maturity of up to $153,400,000 and shall
authenticate Exchange Securities for original issue in the aggregate principal
amount at maturity of up to $153,400,000, in each case upon a written order of
the Company in the form of an Officers' Certificate; provided that such Exchange
Securities shall be issuable only upon the valid surrender for cancellation of
Initial Securities of a like aggregate principal amount at maturity in
accordance with the Registration Rights Agreement. The Officers' Certificate
shall specify the amount of Securities to be authenticated and the date on which
the Securities are to be authenticated. The aggregate principal amount at
maturity of Securities outstanding at any time may not exceed $153,400,000,
except as provided in Section 2.07. Upon the written order of the Company in the
form of an Officers' Certificate, the Trustee shall authenticate Securities in
substitution of Securities originally issued to reflect any name change of the
Company.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company, any Affiliate of the Company,
or any of their respective Subsidiaries.
Securities shall be issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent. The Company shall maintain
--------------------------
an office or agency in the Borough of Manhattan, The City of New York, where
Securities may be presented for registration of transfer or for exchange
("Registrar") and an office or agency where Securities may be presented for
payment ("Paying Agent") and where notices and demands to or upon the Company in
respect of the Securities may be served. The Company or the Guarantor may act as
Registrar or Paying Agent, except that, for the purposes of Articles 3, 8, 11,
Section 4.15 and as otherwise specified in the Indenture, neither the Company
nor any Affiliate of the Company, nor the Guarantor nor any Affiliate of the
Guarantor, shall act as Paying Agent. The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company may have one or more
co-Registrars and one or more additional Paying Agents. The term "Paying Agent"
includes any additional Paying Agent. The Company hereby initially appoints the
Trustee as Registrar and Paying Agent, and the Trustee hereby agrees so to act.
The Company shall enter into an appropriate written agency agreement
with any Agent not a party to this Indenture, which agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company shall
promptly notify the Trustee in writing of the name and address of any such
Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee
shall act as such.
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SECTION 2.04. Paying Agent to Hold Assets in Trust. The Company, the
------------------------------------
Guarantor or any other obligor on the Securities shall require each Paying Agent
other than the Trustee to agree in writing that each Paying Agent shall hold in
trust for the benefit of the Holders or the Trustee all assets held by the
Paying Agent for the payment of principal of, premium, if any, or interest on,
the Securities (whether such assets have been distributed to it by the Company,
the Guarantor or any other obligor on the Securities), and shall notify the
Trustee in writing of any Default in making any such payment. If any of the
Company, a Subsidiary of the Company, the Guarantor or any other obligor on the
Securities acts as Paying Agent, it shall segregate such assets and hold them as
a separate trust fund for the benefit of the Holders or the Trustee. The
Company, the Guarantor or any other obligor on the Securities at any time may
require a Paying Agent to distribute all assets held by it to the Trustee and
account for any assets disbursed and the Trustee may at any time during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee and
to account for any assets distributed. Upon distribution to the Trustee of all
assets that shall have been delivered by the Company, the Guarantor or any other
obligor on the Securities to the Paying Agent, the Paying Agent (if other than
the Company, the Guarantor or any other obligor on the Securities) shall have no
further liability for such assets.
SECTION 2.05. Holder Lists. The Trustee shall preserve in as current
------------
a form as is reasonably practicable the most recent list available to it of the
names and addresses of Holders. If the Trustee is not the Registrar, the
Company, the Guarantor or any other obligor on the Securities shall furnish to
the Trustee on or before the third Business Day preceding each Interest Payment
Date and at such other times as the Trustee may request in writing a list in
such form and as of such date as the Trustee reasonably may require of the names
and addresses of Holders.
SECTION 2.06. Transfer and Exchange.
---------------------
(a) Transfer and Exchange of Definitive Securities. When
Definitive Securities are presented to the Registrar or a co-Registrar with a
request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the
Registrar or co-Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing; and
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(ii) in the case of Transfer Restricted Securities that are Definitive
Securities, shall be accompanied by the following additional
information and documents, as applicable:
(A) if such Transfer Restricted Securities are being delivered
to the Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that
effect (in substantially the form set forth on the reverse of the
Security); or
(B) if such Transfer Restricted Security is being transferred
to a "qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) in accordance with Rule 144A under the
Securities Act, a certification to that effect (in substantially the
form set forth on the reverse of the Security); or
(C) if such Transfer Restricted Security is being transferred
pursuant to any exemption from registration in accordance with
Regulation S under the Securities Act, a certification to that
effect (in substantially the form set forth on the reverse of the
Security); or
(D) if such Transfer Restricted Security is being transferred
to an institutional investor that is an "accredited investor" within
the meaning of Rule 501(a)(1),(2),(3) or (7) under the Securities
Act which delivers a certificate in the form of Exhibit B to the
Indenture to the Trustee; or
(E) if such Transfer Restricted Security is being transferred
in reliance on another exemption from the registration requirements
of the Securities Act, a certification to that effect (in
substantially the form set forth on the reverse of the Security)
accompanied by a customary opinion of counsel substantially to the
effect that such transfer may be effected in reliance upon such
exemption.
(b) Restrictions on Transfer of a Definitive Security for a
Beneficial Interest in a Global Security. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee of
a Definitive Security, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Trustee, together with:
(i) if such Definitive Security is a Transfer Restricted Security,
certification, substantially in the form set forth on the reverse of the
Security, that such Definitive Security is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act; and
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(ii) whether or not such Definitive Security is a Transfer Restricted
Security, written instructions directing the Trustee to make, or to direct
the Securities Custodian to make, an endorsement on the Global Security to
reflect an increase in the aggregate principal amount of the Securities
represented by the Global Security,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount at maturity of Securities represented by the Global
Security to be increased accordingly. If no Global Securities are then
outstanding, the Company shall issue and the Trustee shall authenticate a new
Global Security in the appropriate principal amount at maturity.
(c) Transfer and Exchange of Global Securities. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depository, in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depository
therefor.
(d) Transfer of a Beneficial Interest in a Global Security for a
Definitive Security. (i) Upon receipt by the Trustee of written instructions or
such other form of instructions as is customary for the Depository from the
Depository or its nominee on behalf of any Person having a beneficial interest
in a Global Security and upon receipt by the Trustee of a written order or such
other form of instructions as is customary for the Depository or the Person
designated by the Depository as having such a beneficial interest in a Transfer
Restricted Security only, the following additional information and documents
(all of which may be submitted by facsimile):
(A) if such beneficial interest is being transferred to the Person
designated by the Depository as being the beneficial owner, a
certification from such person to that effect (in substantially the form
set forth on the reverse of the Security); or
(B) if such beneficial interest is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act, a certification to
that effect from the transferor (in substantially the form set forth on
the reverse of the Security); or
(C) if such beneficial interest is being transferred pursuant to any
exemption from registration in accordance with Regulation S under the
Securities Act, a certification to that effect (in substantially the form
set forth on the reverse of the Security); or
(D) if such Transfer Restricted Security is being transferred to an
institutional investor that is an "accredited investor" within the meaning
of Rule 501 (a)(1), (2), (3) or (7) under the Securities Act which
delivers a certificate in the form of Exhibit B to the Indenture to the
Trustee; or
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(E) if such beneficial interest is being transferred in reliance on
another exemption from the registration requirements of the Securities
Act, a certification to that effect from the transferee or transferor (in
substantially the form set forth on the reverse of the Security)
accompanied by a customary opinion of counsel substantially to the effect
that such transfer may be effected in reliance upon such exemption,
then the Trustee or the Securities Custodian, at the direction of the Trustee,
will cause, in accordance with the standing instructions and procedures existing
between the Depository and the Securities Custodian, the aggregate principal
amount at maturity of the Global Security to be reduced and, following such
reduction, the Company will execute and, upon receipt of an authentication order
in the form of an Officers' Certificate, the Trustee will authenticate and
deliver to the transferee a Definitive Security.
(ii) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.06(d) shall be
registered in such names and in such authorized denominations as the Depository,
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee. The Trustee shall deliver such Definitive Securities
to the persons in whose names such Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global Securities.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.06), a Global Security
may not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Authentication of Definitive Securities in Absence of
Depository. If at any time:
(i) the Depository for the Securities notifies the Company that the
Depository is unwilling or unable to continue as Depository for the Global
Securities and a successor Depository for the Global Securities is not
appointed by the Company within 90 days after delivery of such notice; or
(ii) the Company, in its sole discretion, notifies the Trustee in
writing that they elect to cause the issuance of Definitive Securities
under this Indenture,
then the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Securities,
will authenticate and deliver Definitive Securities, in an aggregate principal
amount at maturity equal to the principal amount at maturity of the Global
Securities, in exchange for such Global Securities.
(g) Legends. (i) Except as permitted by the following paragraph
(ii), each Security certificate evidencing the Global Securities and the
Definitive Securities (and all
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Securities issued in exchange therefor or substitution thereof) shall bear
legends in substantially the following form:
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST
HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) (A "QIB"), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR
BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO
UNDER RULE 144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE 144(d)
UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS
IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO PRICE COMMUNICATIONS
CELLULAR HOLDINGS, INC. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF,
(B) TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO A PERSON
WHOM THE HOLDER REASONABLY BELIEVES IS AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER
IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES AT THE TIME
OF TRANSFER OF LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
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UNDER THE SECURITIES ACT (IF AVAILABLE, AND BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY), (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (G) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY) AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER A TRANSFER OF THIS NOTE IN VIOLATION
OF THE FOREGOING RESTRICTIONS.
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID"). YOU
MAY CONTACT THE SECRETARY OF PRICE COMMUNICATIONS CELLULAR HOLDINGS,
INC. AT (212) 757-5600 FOR INFORMATION REGARDING THE ISSUE PRICE,
THE AMOUNT OF OID, THE ISSUE DATE AND THE YIELD TO MATURITY WITH
RESPECT TO THE NOTE.
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global Security)
pursuant to Rule 144 under the Act or an effective registration statement under
the Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Security, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Definitive Security that
does not bear the legend set forth above and rescind any restriction on
the transfer of such Transfer Restricted Security in the case of a Rule
144 Transfer, after delivery of a customary opinion of counsel; and
(B) any such Transfer Restricted Security represented by a Global
Security shall not be subject to the provisions set forth in (i) above
(such sales or transfers being subject only to the provisions of Section
2.06(c) hereof); provided, however, that with respect to any request for
an exchange of a Transfer Restricted Security that is represented by a
Global Security for a Definitive Security that does not bear a legend,
which request is made in reliance upon Rule 144, the Holder thereof shall
certify in writing (to be accompanied by a customary opinion of counsel)
to the
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<PAGE>
Registrar that such request is being made pursuant to Rule 144 (such
certification to be substantially in the form set forth on the reverse of
the Security).
(h) Cancellation and/or Adjustment of Global Security. At such time
as all beneficial interests in a Global Security have either been exchanged for
Definitive Securities, redeemed, repurchased or cancelled, such Global Security
shall be returned to or retained and cancelled by the Trustee. At any time prior
to such cancellation, if any beneficial interest in a Global Security is
exchanged for Definitive Securities, redeemed, repurchased or cancelled, the
principal amount at maturity of Securities represented by such Global Security
shall be reduced and an endorsement shall be made on such Global Security, by
the Trustee or the Securities Custodian, at the direction of the Trustee, to
reflect such reduction.
(i) Obligations with respect to Transfers and Exchanges of Definitive
Securities. (i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Definitive Securities and
Global Securities at the Registrar's or co-Registrar's request.
(ii) No service charge shall be made for any registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any transfer tax, assessments, or similar governmental charge payable in
connection therewith (other than any such transfer taxes, assessments, or
similar governmental charge payable upon exchanges or transfers pursuant to
Section 2.02 (fourth paragraph), 2.10, 3.07, 4.15(8), 9.05, or 11.01 (final
paragraph)).
(iii) The Registrar or co-Registrar shall not be required to register
the transfer of or exchange of (a) any Definitive Security selected for
redemption in whole or in part pursuant to Article 3, except the unredeemed
portion of any Definitive Security being redeemed in part, or (b) any Security
for a period beginning 15 Business Days before the mailing of a notice of an
offer to repurchase pursuant to Article 11 or Section 4.15 hereof or the mailing
of a notice of redemption of Securities pursuant to Article 3 hereof and ending
at the close of business on the day of such mailing.
SECTION 2.07. Replacement Securities. If a mutilated Security is
----------------------
surrendered to the Trustee or if the Holder of a Security claims and submits an
affidavit or other evidence, satisfactory to the Trustee, to the Trustee to the
effect that the Security has been lost, destroyed or wrongfully taken, the
Company shall issue and the Trustee shall authenticate a replacement Security if
the Trustee's requirements are met. If required by the Trustee or the Company,
such Holder must provide an indemnity bond or other indemnity, sufficient in the
judgment of both the Company and the Trustee, to protect the Company, the
Guarantor, the Trustee or any Agent from any loss which any of them may suffer
if a Security is replaced. The Company may charge such Holder for its
reasonable, out-of-pocket expenses in replacing a Security.
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Every replacement Security is an additional obligation of the
Company and the Guarantor.
SECTION 2.08. Outstanding Securities. Securities outstanding at any
----------------------
time are all the Securities that have been authenticated by the Trustee
(including any Security represented by a Global Security) except those cancelled
by it, those delivered to it for cancellation, those reductions in the interest
in a Global Security effected by the Trustee hereunder and those described in
this Section 2.08 as not outstanding. A Security does not cease to be
outstanding because the Company, the Guarantor or an Affiliate of the Company
holds the Security, except as provided in Section 2.09.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than the Company or an Affiliate of a Company) holds cash sufficient to pay all
of the principal and interest due on the Securities payable on that date and
payment of the Securities called for redemption or payable on such Maturity Date
is not otherwise prohibited pursuant to this Indenture, then on and after that
date such Securities cease to be outstanding and interest on them ceases to
accrue.
SECTION 2.09. Treasury Securities. In determining whether the
-------------------
Holders of the required principal amount of Securities have concurred in any
direction, amendment, supplement, waiver or consent, Securities owned by the
Company, the Guarantor or Affiliates of the Company shall be disregarded, except
that, for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, amendment, supplement, waiver or consent, only
Securities that the Trustee knows are so owned shall be disregarded.
SECTION 2.10. Temporary Securities. Until definitive Securities are
--------------------
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company or the Guarantor
reasonably and in good faith consider appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities. Until
so exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as permanent Securities authenticated and
delivered hereunder.
SECTION 2.11. Cancellation. The Company at any time may deliver
------------
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward
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to the Trustee any Securities surrendered to them for transfer, exchange or
payment. The Trustee, or at the direction of the Trustee, the Registrar or the
Paying Agent (other than the Company or an Affiliate of the Company), and no one
else, shall cancel and, at the written direction of the Company, shall dispose
of all Securities surrendered for transfer, exchange, payment or cancellation.
Subject to Section 2.07, the Company may not issue new Securities to replace
Securities that have been paid or delivered to the Trustee for cancellation. No
Securities shall be authenticated in lieu of or in exchange for any Securities
cancelled as provided in this Section 2.11, except as expressly permitted in the
form of Securities and as permitted by this Indenture.
SECTION 2.12. Defaulted Interest. Interest on any Security which is
------------------
payable, and is punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the person in whose name that Security (or one or more
predecessor Securities) is registered at the close of business on Record Date
for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date plus, to the extent
lawful, any interest payable on the defaulted interest (herein called "Defaulted
Interest") shall forthwith cease to be payable to the registered holder on the
relevant Record Date, and such Defaulted Interest may be paid by the Company, at
its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the persons in whose names the Securities (or their respective
predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of cash equal to
the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such cash when
deposited to be held in trust for the benefit of the persons entitled to
such Defaulted Interest as provided in this clause (1). Thereupon the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days
prior to the date of the proposed payment and not less than 10 days after
the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date and,
in the name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor to be mailed, first-class postage prepaid, to each Holder at his
address as it appears in the Security register not less than 10 days prior
to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been mailed
as aforesaid, such Defaulted Interest shall be paid to the persons in
whose
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names the Securities (or their respective predecessor Securities) are
registered on such Special Record Date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Security shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Security.
ARTICLE 3.
REDEMPTION
SECTION 3.01. Right of Redemption. (a) Redemption of Securities, as
--------------------
permitted by any provision of this Indenture, shall be made in accordance with
such provision and this Article 3. The Company will not have the right to redeem
any Securities prior to August 1, 2002, except as provided in the next
succeeding paragraph. On or after August 1, 2002, the Company will have the
right to redeem all or any part of the Securities at the Redemption Prices
specified in the form of Security attached as Exhibit A set forth therein under
the caption "Redemption," in each case, including accrued and unpaid interest,
if any, to the applicable Redemption Date (subject to the right of Holders of
record on the relevant regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
Notwithstanding the foregoing paragraph, on or after August 1, 1998,
the Company will have the right to redeem all or any part of the Securities in
cash at 120.000% of the Accreted Value thereof, including accrued and unpaid
interest, if any, to the applicable Redemption Date (subject to the right of
Holders of record on the relevant regular record date to receive interest due on
an interest payment date that is on or prior to the Redemption Date); provided
that redemptions may be made only if the closing price of PCC Common Stock
equals or exceeds the prices specified in the form of Security attached as
Exhibit A set forth therein under the caption "Redemption" for the ten
consecutive trading days prior to the redemption date in each period.
(b) Notwithstanding subsection (a) of this section, all of the
Securities will be subject to a special redemption (the "Special Redemption")
on, or at any time prior to,
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December 31, 1997, if the Merger is not consummated on or before December 31,
1997 or if it appears, in the sole judgment of the Company, that the Merger will
not be consummated by December 31, 1997, at a redemption price (the "Special
Redemption Price") equal to 101% of the Accreted Value of the Securities on the
date of the Special Redemption (the "Special Redemption Date") minus $4,221,568.
SECTION 3.02. Notices to Trustee. If the Company elects to redeem
------------------
Securities pursuant to Paragraph 5 of the Securities, it shall notify the
Trustee in writing of the Redemption Date and the principal amount of Securities
to be redeemed and whether it wants the Trustee to give notice of redemption to
the Holders.
If the Company elects to reduce the principal amount at maturity of
Securities to be redeemed pursuant to Paragraph 5 of the Securities by crediting
against any such redemption Securities it has not previously delivered to the
Trustee for cancellation, it shall so notify the Trustee of the amount of the
reduction and deliver such Securities with such notice, provided that no Initial
Securities received by the Company in exchange for Exchange Securities may be
made the basis for such credit.
The Company shall give each notice to the Trustee provided for in
this Section 3.02 at least 45 days before each Redemption Date other than the
Special Redemption Date for which the Company shall give the Trustee notice at
least 8 Business Days prior to the Special Redemption Date (unless a shorter
notice shall be satisfactory to the Trustee). Any such notice may be cancelled
at any time prior to notice of such redemption being mailed to any Holder and
shall thereby be void and of no effect.
SECTION 3.03. Selection of Securities to Be Redeemed. If less than
--------------------------------------
all of the Securities are to be redeemed pursuant to Paragraph 5(a) thereof, the
Trustee shall select the Securities to be redeemed on a pro rata basis, by lot,
or by such other method as the Trustee shall determine to be fair and
appropriate and in such manner as complies with any applicable Depositary, legal
and stock exchange requirements.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Company
in writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities may be redeemed in part pursuant to Section 3.01(a) in
multiples of $1,000 only. The Trustee may select for redemption portions (equal
to $1,000 or any integral multiple thereof) of the principal of Securities that
have denominations larger than $1,000. Provisions of this Indenture that apply
to Securities called for redemption also apply to portions of Securities called
for redemption.
SECTION 3.04. Notice of Redemption. At least 30 days but not more
--------------------
than 60 days before a Redemption Date other than the Special Redemption Date,
the Company shall mail a notice of redemption by first class mail, postage
prepaid, to the Trustee and
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each Holder whose Securities are to be redeemed. In the event of the Special
Redemption, the Company shall mail by first class mail, postage prepaid, a
notice of redemption to each Holder at least 5 Business Days before the Special
Redemption Date. At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. Each notice for
redemption shall identify the Securities to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price, including the amount of accrued and unpaid
interest, if any, to be paid upon such redemption;
(c) the name, address and telephone number of the Paying Agent;
(d) that Securities called for redemption must be surrendered to the
Paying Agent at the address specified in such notice to collect the
Redemption Price or Special Redemption Price, as the case may be;
(e) that, unless (i) with respect to a redemption pursuant to
Paragraph 5(a) of the Securities, the Company defaults in its obligation
to deposit cash with the Paying Agent in accordance with Section 3.06
hereof or (ii) such redemption payment is prohibited pursuant to any
agreement or by operation of law, the interest on Securities (or portion
thereof) called for redemption ceases to accrue on and after the
Redemption Date and the only remaining right of the Holders of such
Securities is to receive payment of the Redemption Price, as the case may
be, including any accrued and unpaid interest to the Redemption Date, upon
surrender to the Paying Agent of the Securities called for redemption and
to be redeemed;
(f) if any Security is being redeemed in part, the portion of the
principal amount at maturity equal to $1,000 or any integral multiple
thereof, of such Security to be redeemed and that, after the Redemption
Date, and upon surrender of such Security, a new Security or Securities in
aggregate principal amount at maturity equal to the unredeemed portion
thereof will be issued;
(g) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of such Securities to
be redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption;
(h) the CUSIP number of the Securities to be redeemed; and
(i) that the notice is being sent pursuant to this Section 3.04 and
pursuant to the optional redemption provisions of Paragraph 5(a) of the
Securities or the special redemption provisions of Paragraph 5(b) of the
Securities, as the case may be.
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SECTION 3.05. Effect of Notice of Redemption. Once notice of
------------------------------
redemption is mailed in accordance with Section 3.04, Securities called for
redemption become due and payable on the Redemption Date and at the Redemption
Price including any accrued and unpaid interest to the Redemption Date, if any.
Upon surrender to the Trustee or Paying Agent, such Securities called for
redemption shall be paid at the Redemption Price, including interest, if any,
accrued and unpaid to the Redemption Date; provided that if the Redemption Date
is after a regular Record Date and on or prior to the Interest Payment Date, the
accrued interest shall be payable to the Holder of the redeemed Securities
registered on the relevant Record Date; and provided further, that if a
Redemption Date is a Legal Holiday, payment shall be made on the next succeeding
Business Day and no interest shall accrue for the period from such Redemption
Date to such succeeding Business Day.
SECTION 3.06. Deposit of Redemption Price. On or prior to any
---------------------------
Redemption Date, other than the Special Redemption Date, the Company shall
deposit with the Paying Agent (other than the Company or an Affiliate of the
Company) cash sufficient to pay the Redemption Price of, including any accrued
and unpaid interest on, all Securities to be redeemed on such Redemption Date
(other than Securities or portions thereof called for redemption on that date
that have been delivered by the Company to the Trustee for cancellation). The
Paying Agent shall promptly return to the Company any cash so deposited which is
not required for that purpose upon the written request of the Company.
On, or one Business Day prior to, the Special Redemption Date, the
Trustee on behalf of the Company shall withdraw from the Collateral Account and
deliver to the Paying Agent an amount equal to the Special Redemption Price of
the Securities, and the Paying Agent shall on behalf of the Issuer apply that
amount to the redemption of the Securities on the Special Redemption as provided
by Section 3.01(b). The Trustee shall liquidate any investments held through the
Collateral Account sufficiently in advance of the Special Redemption Date to
enable payment of the Special Redemption Price to be made on such date.
If the Company complies with the preceding paragraph and the other
provisions of this Article 3 and payment of the Securities called for redemption
is not prohibited under this Indenture, interest on the Securities to be
redeemed will cease to accrue on the applicable Redemption Date, whether or not
such Securities are presented for payment. Notwithstanding anything herein to
the contrary, if any Security surrendered for redemption in the manner provided
in the Securities shall not be so paid upon surrender for redemption because of
the failure of the Company to comply with the preceding paragraph, interest
shall continue to accrue and be paid from the Redemption Date until such payment
is made on the unpaid principal, and, to the extent lawful, on any interest not
paid on such unpaid principal, in each case at the rate and in the manner
provided in Section 4.02 hereof and the Securities.
SECTION 3.07. Securities Redeemed in Part. Upon surrender of a
---------------------------
Security that is to be redeemed in part, the Company shall execute and the
Trustee shall
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authenticate and deliver to the Holder, without service charge to the Holder, a
new Security or Securities equal in principal amount at maturity to the
unredeemed portion of the Security surrendered.
ARTICLE 4.
COVENANTS
SECTION 4.01. Transactions Not Subject to Covenants. Notwithstanding
-------------------------------------
anything to the contrary in this Indenture, the following transactions shall not
be prohibited by the Indenture (regardless of the form or substance of the
transaction or series of transactions effecting the same):
(a) the Merger, including, without limitation, (i) payments made by
PCW to fund (x) the cash consideration payable in the Merger (including,
whether or not required by the Merger Agreement, pursuant to statutory
appraisal rights and any settlement thereof) to security holders of Palmer
and (y) fees and expenses incurred in connection with the Merger, (ii) the
Incurrence, as a result of the Merger, of any Indebtedness of Palmer or
any subsidiary of Palmer, which Indebtedness was in existence immediately
prior to the Merger and not incurred in contemplation thereof, (iii) the
assumption or the suffering to exist of any consensual encumbrance or
restriction on the ability of Palmer or any Subsidiary thereof to pay
dividends or make other distributions on the Capital Stock of any
Subsidiary or to pay or satisfy any obligation to Palmer or any of its
Subsidiaries or to otherwise transfer assets or make or pay loans or
advances to Palmer or any of its Subsidiaries, which encumbrance or
restriction was contained in an instrument that was in effect immediately
prior to the Merger and not put into place in contemplation thereof and
(iv) the Incurrence or the suffering to exist of any Lien upon any of the
property or assets of Palmer or any of its Subsidiaries which Liens were
in existence immediately prior to the effectiveness of the Merger and not
imposed in contemplation thereof;
(b) the dividend, distribution or other payment by the Company of an
amount sufficient to redeem the PIK Preferred Stock and certain warrants
to purchase PCC Common Stock made directly or indirectly to PCC; and
(c) any transaction involving FMT Ltd. (the partnership that holds
the system serving Ft. Myers) or any subsidiary of FMT Ltd. or any of
their assets or PCW's partnership interest in FMT Ltd. (each "FMT-Related
Assets") provided that, in the case of this clause (c), no such
transaction shall (i) in and of itself cause or result in an increase in
the consolidated Indebtedness of the Company and its Restricted
Subsidiaries on and after the 45th day after the Merger Date from that
existing immediately prior to such transaction, (ii) cause or result in
the sale of any
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asset of the Company other than FMT-Related Assets, (iii) cause or result
in the imposition of any Lien on any property or assets of the Company or
any of its Restricted Subsidiaries other than solely upon an FMT-Related
Asset, (iv) cause or result in the imposition of any encumbrance or
restriction on the ability of any Restricted Subsidiary of the Company
(other than FMT Ltd. or any subsidiary thereof) to pay dividends or make
other distributions on the Capital Stock of any Restricted Subsidiary of
the Company or pay or satisfy any obligation to the Company or any of its
Restricted Subsidiaries or otherwise transfer assets or make or pay loans
or advances to the Company or any of its Restricted Subsidiaries or (v)
cause or result in any dividend or distribution by the Company or any
Investment in any Person except a Restricted Subsidiary or a subsidiary of
FMT Ltd.; provided, however, that prior to the 45th day after the Merger
Date the Company's consolidated Indebtedness may increase as a result of
such transaction by no more than $169 million (plus accrued interest
thereon). Notwithstanding the foregoing provisions of this covenant,
neither the Company nor any of its Restricted Subsidiaries (other than FMT
Ltd. or any of its Subsidiaries) shall make any Investment in FMT Ltd. or
any of its Subsidiaries.
In addition, the Merger shall not constitute a Change of Control and
no transaction described in Section 4.01(b) or (c) above, shall be taken into
account in any calculation under Section 4.04.
SECTION 4.02. Payment of Securities. The Company shall pay the
---------------------
principal of and interest on the Securities on the dates and in the manner
provided in the Securities. An installment of principal of or interest on the
Securities shall be considered paid on the date it is due if the Trustee or
Paying Agent (other than the Company or an Affiliate of the Company) holds for
the benefit of the Holders, on or before 10:00 a.m. New York City time on that
date, cash deposited and designated for and sufficient to pay the installment.
The Company shall pay interest on overdue principal and on overdue
installments of interest at the rate specified in the Securities compounded
semiannually, to the extent lawful.
SECTION 4.03. Maintenance of Office or Agency. The Company shall
-------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Securities may be presented or surrendered for payment, where Securities
may be surrendered for registration of transfer or exchange and where notices
and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 15.02.
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The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York, for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency. The
Company hereby initially designates the Corporate Trust Office of the Trustee as
such office.
SECTION 4.04. Limitation on Restricted Payments. The Company shall
---------------------------------
not, and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly after the Issue Date, make any Restricted Payment, if, immediately
prior or after giving effect thereto (a) a Default or an Event of Default would
exist, (b) the Company's Annualized Operating Cash Flow Ratio for the Reference
Period would exceed 8.5 to 1, or (c) the aggregate amount of all Restricted
Payments made by the Company and its Restricted Subsidiaries, including such
proposed Restricted Payment (if not made in cash, then the fair market value of
any property used therefor, as determined in good faith by the Board of
Directors) from and after the Issue Date and on or prior to the date of such
Restricted Payment, shall exceed the sum of (i) the amount determined by
subtracting (x) 2.0 times the aggregate Consolidated Interest Expense of the
Company for the period (taken as one accounting period) from the Issue Date to
the last day of the last full fiscal quarter prior to the date of the proposed
Restricted Payment (the "Computation Period") from (y) Operating Cash Flow of
the Company for the Computation Period, plus (ii) the aggregate Net Proceeds
(other than with respect to the proceeds of a contribution to equity from PCC of
cash or Palmer common stock) received by the Company from the sale (other than
to a Subsidiary of the Company) of its Qualified Capital Stock after the Issue
Date and on or prior to the date of such Restricted Payment, plus (iii) to the
extent not otherwise included in clause (i) or (ii), above, an amount equal to
the net reduction in Investments in Unrestricted Subsidiaries resulting from
payments of dividends, repayments of loans or advances, or other transfers of
assets, in each case to the Company or any Wholly Owned Restricted Subsidiary of
the Company from Unrestricted Subsidiaries, or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of "Investments"), not to exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made by the
Company and any Restricted Subsidiary in such Unrestricted Subsidiary.
Notwithstanding the foregoing, the provisions set forth in clause
(b) or (c) of the immediately preceding paragraph will not prohibit (i) the use
of an aggregate of $10,000,000 for Restricted Payments not otherwise permitted
by this Section 4.04, (ii) the distribution of amounts to the Company sufficient
to pay (x) the scheduled interest owed by the Company on the Securities as such
interest becomes due and payable and (y) amounts required to redeem the PIK
Preferred Stock and certain warrants to purchase PCC Common Stock and (iii) any
dividend, distribution or other payment by any Restricted Subsidiary on
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shares of its Capital Stock that is paid pro rata to all holders of such Capital
Stock, and notwithstanding the foregoing paragraph, the provisions set forth in
clause (a), (b) or (c) of the immediately preceding paragraph will not prohibit
(iv) the payment of any dividend within 60 days after the date of its
declaration if such dividend could have been made on the date of its declaration
in compliance with the foregoing provisions, or (v) the redemption, defeasance,
repurchase or other acquisition or retirement of any Indebtedness or Capital
Stock of the Company or its Restricted Subsidiaries either in exchange for or
out of the Net Proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of Qualified Capital Stock (in the case of any
redemption, defeasance, repurchase or other acquisition or retirement of any
Junior Indebtedness or Capital Stock of the Company or its Restricted
Subsidiaries) or Junior Indebtedness (in the case of any redemption, defeasance,
repurchase or other acquisition or retirement of any Indebtedness of the Company
or its Restricted Subsidiaries) of the Company.
In determining the aggregate amount expended for Restricted Payments
in accordance with clause (c) of the first paragraph of this Section 4.04, 100%
of the amounts expended under clauses (i) through (v) of the immediately
preceding paragraph shall be deducted.
None of the transactions described in Section 4.01 (c) above, shall
be taken into account in any calculation under this Section 4.04.
SECTION 4.05. Corporate Existence. Subject to Article 5, the Company
-------------------
and the Guarantor shall do or cause to be done all things necessary to preserve
and keep in full force and effect their corporate existence and the corporate or
other existence of each of the Company's Restricted Subsidiaries in accordance
with the respective organizational documents of each of them and the rights
(charter and statutory) and corporate franchises of the Company and each of the
Company's Restricted Subsidiaries; provided, however, that the Company shall not
be required to preserve, with respect to itself, any right or franchise, and
with respect to any Restricted Subsidiaries of the Company, any such existence,
right or franchise, if (a) the Board of Directors of the Company shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of such entity and (b) the loss thereof is not disadvantageous in any
material respect to the Holders; provided further, that the foregoing shall not
apply to the merger of PCW with and into Palmer pursuant to the terms of the
Merger Agreement.
SECTION 4.06. Payment of Taxes and Other Claims. Except with respect
---------------------------------
to immaterial items, the Guarantor and the Company shall, and the Company shall
cause each of its Restricted Subsidiaries to, pay or discharge or cause to be
paid or discharged, before the same shall become delinquent, (i) all taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon the Guarantor
or the Company or any of the Company's Restricted Subsidiaries or any of their
respective properties and assets and (ii) all lawful claims, whether for labor,
materials, supplies, services or anything else, which have become due
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and payable and which by law have or may become a Lien upon the property and
assets of the Company or any of its Restricted Subsidiaries; provided, however,
that the Company shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which disputed amounts adequate reserves have been
established in accordance with GAAP.
SECTION 4.07. Maintenance of Properties and Insurance. The Company
---------------------------------------
shall cause all material properties used or useful to the conduct of its
business and the business of each of its Restricted Subsidiaries to be
maintained and kept in good condition, repair and working order (reasonable wear
and tear excepted) and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in its reasonable
judgment may be necessary, so that the business carried on in connection
therewith may be properly conducted at all times; provided, however, that
nothing in this Section 4.07 shall prevent the Company from discontinuing any
operation or maintenance of any of such properties, or disposing of any of them,
if such discontinuance or disposal is (a) in the judgment of the Board of
Directors of the Company, desirable in the conduct of the business of such
entity and (b) not disadvantageous in any material respect to the Holders.
The Company shall provide, or cause to be provided, for itself and
each of its Restricted Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the reasonable,
good faith opinion of the Company is adequate and appropriate for the conduct of
the business of the Company and such Restricted Subsidiaries in a prudent
manner, with (except for self-insurance) reputable insurers or with the
government of the United States of America or an agency or instrumentality
thereof, in such amounts, with such deductibles, and by such methods as shall be
customary, in the reasonable, good faith opinion of the Company and adequate and
appropriate for the conduct of the business of the Company and such Restricted
Subsidiaries in a prudent manner for entities similarly situated in the
industry, unless failure to provide such insurance (together with all other such
failures) would not have a material adverse effect on the financial condition or
results of operations of the Company or such Restricted Subsidiary.
SECTION 4.08. Compliance Certificate; Notice of Default. The Company
-----------------------------------------
shall deliver to the Trustee within 120 days after the end of its fiscal year an
Officers' Certificate complying with Section 314(a)(4) of the TIA and stating
that a review of its activities and the activities of its Subsidiaries during
the preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled their obligations under this Indenture and further
stating, as to each such Officer signing such certificate, whether or not the
signer knows of any failure by the Company or any Subsidiary of the Company to
comply with any conditions or covenants in this Indenture and, if such signor
does know of such a failure to comply, the certificate shall describe such
failure with particularity. The Officers' Certificate shall also notify the
Trustee should the relevant fiscal year end on any date other than the current
fiscal year end date.
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The Company shall, so long as any of the Securities are outstanding,
deliver to the Trustee, promptly upon becoming aware of any Default, Event of
Default or fact which would prohibit the making of any payment to or by the
Trustee in respect of the Securities, an Officers' Certificate specifying such
Default, Event of Default or fact and what action the Company is taking or
proposes to take with respect thereto. The Trustee shall not be deemed to have
knowledge of any Default, any Event of Default or any such fact unless one of
its Trust Officers receives notice thereof from the Company or any of the
Holders.
SECTION 4.09. Reports. Whether or not the Company is subject to the
-------
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall deliver to the Trustee and to each Holder and to prospective purchasers of
Securities identified to the Company by an Initial Purchaser, within 15 days
after it files or would have been required to file such with the SEC, annual and
quarterly financial statements substantially equivalent to financial statements
that the Company would have been required to file with the SEC if the Company
were subject to the requirements of Section 13 or 15(d) of the Exchange Act,
including, with respect to annual information only, a report thereon by the
Company's certified independent public accountants as such would be required in
such reports to the SEC, and, in each case, together with a management's
discussion and analysis of financial condition and results of operations which
would be so required.
SECTION 4.10. Limitation on Status as Investment Company. The
------------------------------------------
Company and the Guarantor shall not become, nor shall the Company permit any of
its Restricted Subsidiaries to become an "investment company" (as that term is
defined in the Investment Company Act of 1940, as amended), or otherwise become
subject to regulation under the Investment Company Act.
SECTION 4.11. Limitation on Transactions with Related Persons. The
-----------------------------------------------
Company will not, and will not permit any of its Restricted Subsidiaries or
Unrestricted Subsidiaries to, after the Issue Date, enter into any contract,
agreement, arrangement or transaction with any Related Person (each a "Related
Person Transaction"), or any series of Related Person Transactions, except for
transactions made in good faith, the terms of which are (i) fair and reasonable
to the Company or such Subsidiary, as the case may be, and (ii) are at least as
favorable as the terms which could be obtained by the Company or such
Subsidiary, as the case may be, in a comparable transaction made on an arm's
length basis with Persons who are not Related Persons.
Without limiting the foregoing, (a) any Related Person Transaction
or series of Related Person Transactions with an aggregate value in excess of
$1,000,000 must first be approved by a majority of the Board of Directors of the
Company who are disinterested in the subject matter of the transaction pursuant
to a Board Resolution, and (b) with respect to any Related Person Transaction or
series of Related Person Transactions with an aggregate value in excess of
$5,000,000, the Company must first obtain a favorable written opinion from an
independent financial advisor of national reputation as to the fairness from a
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financial point of view of such transaction to the Company or such Subsidiary,
as the case may be.
Notwithstanding the foregoing, the following shall not constitute
Related Person Transactions: (i) reasonable and customary payments on behalf of
directors, officers or employees of the Company or any of its Restricted
Subsidiaries, or in reimbursement of reasonable and customary payments or
reasonable and customary expenditures made or incurred by such Persons as
directors, officers or employees, (ii) any contract, agreement, arrangement, or
transaction solely between or among the Company and any of its Restricted
Subsidiaries or between or among Restricted Subsidiaries of the Company, (iii)
any Restricted Payment of the type described by clauses (i) and (ii) of the
definition thereof made to all stockholders on a pro rata basis and not
prohibited by Section 4.04, (iv) any loan or advance by the Company or a
Restricted Subsidiary to employees of the Company or a Restricted Subsidiary in
the ordinary course of business, in an aggregate amount at any one time
outstanding not to exceed $500,000 and (v) any payment pursuant to a tax-sharing
agreement between the Company and any other Person with which the Company is
required or permitted to file a consolidated tax return or with which the
Company is or could be part of a consolidated group for tax purposes, which
payments are not in excess of the tax liabilities attributable solely to the
Company and its Restricted Subsidiaries (as a consolidated group).
SECTION 4.12. Limitation on Incurrence of Additional Indebtedness.
---------------------------------------------------
The Company will not, and will not permit any of its Restricted Subsidiaries to,
after the Issue Date, directly or indirectly, issue, create, incur, assume,
guarantee or otherwise directly or indirectly become liable for (including as a
result of an acquisition), or otherwise become responsible for, contingently or
otherwise (individually or collectively, to "Incur" or, as appropriate, an
"Incurrence"), any Indebtedness. Neither the accrual of interest (including the
issuance of "pay in kind" securities or similar instruments in respect of such
accrued interest) pursuant to the terms of Indebtedness Incurred in compliance
with this covenant, nor the accretion of original issue discount, nor the mere
extension of the maturity of any Indebtedness shall be deemed to be an
Incurrence of Indebtedness.
Notwithstanding the foregoing, if there exists no Default or Event
of Default immediately prior and subsequent thereto, (x) the Company may incur
Indebtedness if the Company's Annualized Operating Cash Flow Ratio, after giving
effect to the Incurrence of such Indebtedness, would have been less than 8.5 to
1 and (y) PCW may incur Indebtedness if PCW's Annualized Operating Cash Flow
Ratio, after giving effect to the Incurrence of such Indebtedness, would have
been less than 8.0 to 1.
In addition, if there exists no Default or Event of Default
immediately prior and subsequent thereto, the foregoing limitations will not
apply to the Incurrence of (i) Indebtedness by the Company or any of its
Restricted Subsidiaries constituting Existing Indebtedness, reduced by
repayments of and permanent reductions in commitments in satisfaction of the Net
Cash Proceeds application requirement set forth in Section 4.15 and
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by repayments and permanent reductions in amounts outstanding pursuant to
scheduled amortizations and mandatory prepayments in accordance with the terms
thereof, (ii) Indebtedness, in an aggregate principal amount not in excess of
$525,000,000, permitted under the Credit Agreement, reduced by (a) repayments of
and permanent reductions in commitments in satisfaction of the Net Cash Proceeds
application requirement set forth in Section 4.15 and (b) an amount equal to the
aggregate amount of Indebtedness Incurred pursuant to clause (x) below, so long
as such amounts incurred pursuant to clause (x) remain outstanding; provided
that, if there exists a Default or an Event of Default immediately prior or
subsequent thereto, the Company and its Restricted Subsidiaries may Incur
Indebtedness pursuant to this clause (ii) so long as the proceeds from such
Incurrence are not used directly or indirectly to pay any amounts owing in
respect of any Indebtedness, including, without limitation, principal, interest
and commitment fees, other than with respect to the Securities, (iii)
Indebtedness of the Company evidenced by the Securities and of PCW evidenced by
the Senior Subordinated Notes, (iv)(A) Permitted Acquisition Indebtedness of the
Company or PCW that satisfies the provisions of clause (x) of the definition
thereof or (B) Permitted Acquisition Indebtedness of any Restricted Subsidiary
that satisfies the provisions of clause (y) of the definition thereof, (v)
Indebtedness between the Company and any Restricted Subsidiary of the Company or
between Restricted Subsidiaries of the Company, provided that, in the case of
Indebtedness of the Company, such obligations shall be unsecured and
subordinated in all respects to the Holders' rights pursuant to the Securities,
and the date of any event that causes a Restricted Subsidiary no longer to be a
Restricted Subsidiary shall be an Incurrence Date with respect to such
Indebtedness, (vi) Capitalized Lease Obligations and Purchase Money Indebtedness
in an aggregate amount or aggregate principal amount, as the case may be,
outstanding at any time not to exceed in the aggregate $15,000,000, provided
that in the case of Purchase Money Indebtedness, such Indebtedness shall not
constitute less than 75% nor more than 100% of the cost (determined in
accordance with GAAP) to the Company or such Restricted Subsidiary of the
property purchased or leased with the proceeds thereof, (vii) Indebtedness of
the Company or any Restricted Subsidiary arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of the Company or its Restricted Subsidiaries pursuant to such
agreements, in any case Incurred in connection with the disposition of any
business, assets or Restricted Subsidiary of the Company to the extent none of
the foregoing results in the obligation to repay an obligation for money
borrowed by any Person and are limited in aggregate amount to no greater than
10% of the fair market value of such business, assets or Restricted Subsidiary
so disposed of, (viii) Indebtedness of the Company or any Restricted Subsidiary
under standby letters of credit or reimbursement obligations with respect
thereto issued in the ordinary course of business and consistent with industry
practices (other than under the Credit Agreement) limited in aggregate amount to
$5,000,000 at any one time outstanding, (ix) Indebtedness of the Company or PCW
(other than Indebtedness permitted by clauses (i) through (viii) or (x) hereof)
not to exceed $100,000,000 at any one time outstanding and (x) Refinancing
Indebtedness Incurred to extend, renew, replace or refund Indebtedness permitted
under clauses (i) (as so reduced in amount), (ii) (as so reduced in amount),
(iii), (iv) and (x) of this paragraph.
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Indebtedness of any Person that is not a Restricted Subsidiary of
the Company (or that is a Non-Recourse Restricted Subsidiary designated to be a
Restricted Subsidiary, but no longer a Non-Recourse Restricted Subsidiary),
which Indebtedness is outstanding at the time such Person becomes such a
Restricted Subsidiary of the Company or is merged with or into or consolidated
with the Company or a Restricted Subsidiary of the Company shall be deemed to
have been Incurred, as the case may be, at the time such Person becomes such a
Restricted Subsidiary of the Company, or is merged with or into or consolidated
with the Company or a Restricted Subsidiary of the Company.
SECTION 4.13. Limitations on Restricting Subsidiary Dividends. The
-----------------------------------------------
Company will not, and will not permit any of its Restricted Subsidiaries to,
with respect to securities issued directly thereby or with respect to which they
are obligors, directly or indirectly, create, assume or suffer to exist any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary of the Company to pay dividends or make other distributions on the
Capital Stock of any Restricted Subsidiary of the Company or pay or satisfy any
obligation to the Company or any of its Restricted Subsidiaries or otherwise
transfer assets or make or pay loans or advances to the Company or any of its
Restricted Subsidiaries, except encumbrances and restrictions existing under (i)
any Indebtedness permitted by the Indenture to be incurred by PCW or any of its
Subsidiaries that are Restricted Subsidiaries, (ii) the indentures governing the
Securities and the Senior Subordinated Notes, (iii) any Existing Indebtedness,
(iv) the Credit Agreement, (v) any applicable law or any governmental or
administrative regulation or order, (vi) Refinancing Indebtedness permitted
under the Indenture, provided that the restrictions contained in the instruments
governing such Refinancing Indebtedness are no more restrictive in the aggregate
than those contained in the instruments governing the Indebtedness being
refinanced immediately prior to such refinancing, (vii) restrictions with
respect solely to a Restricted Subsidiary of the Company imposed pursuant to a
binding agreement which has been entered into for the sale or disposition of all
or substantially all of the Capital Stock or assets of such Restricted
Subsidiary, provided such restrictions apply solely to the Capital Stock or
assets being sold of such Restricted Subsidiary, (viii) restrictions contained
in any agreement relating to the financing of the acquisition of a Person or
real or tangible personal property after the Issue Date which are not applicable
to any Person or property, other than the Person or property so acquired and
which either (A) were not put in place in anticipation of or in connection with
such acquisition or (B) constituted Permitted Acquisition Indebtedness of a
Person satisfying the provisions of clause (y) of the definition thereof, or
(ix) any agreement (other than those referred to in clause (viii)) of a Person
acquired by the Company or a Restricted Subsidiary of the Company, which
restrictions existed at the time of acquisition and were not put in place in
anticipation of or in connection with such acquisition. Notwithstanding the
foregoing, neither (a) customary provisions restricting subletting or assignment
of any lease entered into the ordinary course of business, consistent with past
practices nor (b) Liens on assets securing Indebtedness, shall in and of
themselves be considered a restriction on the ability of the applicable
Restricted Subsidiary to transfer such agreement or assets, as the case may be.
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SECTION 4.14. Limitations on Liens. The Company will not and will
--------------------
not permit any Restricted Subsidiary to, directly or indirectly, Incur, or
suffer to exist any Lien (other than Permitted Liens) upon any of its property
or assets, whether now owned or hereafter acquired.
SECTION 4.15. Limitation on Asset Sales and Sales of Subsidiary
-------------------------------------------------
Stock. The Company will not, and will not permit any of its Restricted
- -----
Subsidiaries to, after the Issue Date, in one or a series of related
transactions, convey, sell, transfer, assign or otherwise dispose of, directly
or indirectly, any of its property, businesses or assets, including by merger or
consolidation, and including any sale or other transfer or issuance of any
Capital Stock of any Restricted Subsidiary of the Company, whether by the
Company or a Restricted Subsidiary (an "Asset Sale"), unless (1) (a) within 360
days after the date of such Asset Sale, an amount equal to the Net Cash Proceeds
therefrom are applied to the optional redemption of the Securities in accordance
with the terms of the first paragraph of Section 3.01(a) and Sections 3.02,
3.03, 3.04, 3.05 and 3.06 of this Indenture and Paragraph 5(a) of the Securities
and other Indebtedness of the Company ranking on a parity with the Securities
from time to time outstanding with similar provisions requiring the Company to
make an offer to purchase or to redeem such Indebtedness with the proceeds from
asset sales, pro rata in proportion to the respective principal amounts (or
accreted values in the case of Indebtedness issued with an original issue
discount) of the Securities and such other Indebtedness then outstanding or to
the repurchase of the Securities and such other Indebtedness pursuant to an
irrevocable, unconditional offer (pro rata in proportion to the respective
principal amounts (or accreted values in the case of Indebtedness issued with an
original issue discount) of the Securities and such other Indebtedness then
outstanding) (the "Asset Sale Offer") to repurchase such Indebtedness at a
purchase price (the "Asset Sale Offer Price") of 100% of the Accreted Value
thereof in the case of the Securities or 100% of the principal amount of such
other Indebtedness (or accreted value in the case of Indebtedness issued with an
original issue discount) plus, in each case, accrued interest to the date of
payment, made within 330 days of such Asset Sale, or (b) within 330 days of such
Asset Sale, the Asset Sale Offer Amount is (i) invested (or committed, pursuant
to a binding commitment subject only to reasonable, customary closing
conditions, to be invested, and in fact is so invested, within an additional 90
days) in tangible assets and property (other than notes, obligations or
securities), which in the good faith reasonable judgment of the Board of
Directors of the Company are of a type used in a Related Business, or Capital
Stock of a Person (which, if such Person becomes a Subsidiary of the Company by
virtue of such Asset Sale, shall initially be designated a Restricted
Subsidiary) all or substantially all of whose assets and property (in the good
faith reasonable judgment of the Board of Directors of the Company) are of a
type used in a Related Business (provided that, with respect to such Capital
Stock, all of the requirements of the last proviso of clause (v) of the
following paragraph shall have been satisfied) or (ii) used to retire
permanently Indebtedness of a Restricted Subsidiary, (2) with respect to any
transaction or related series of transactions of securities, property or assets
with an aggregate fair market value in excess of $1,000,000, at least 75% of the
value of consideration for the assets disposed of in such Asset Sale (excluding
(a) pari passu Indebtedness (and any Refinancing
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Indebtedness issued to refinance any such Indebtedness) or Indebtedness of any
Restricted Subsidiary assumed by a transferee which assumption permanently
reduces the amount of Indebtedness outstanding on the Issue Date and permitted
to have been Incurred pursuant to Section 4.12 (including that in the case of a
revolver or similar arrangement that makes credit available, such commitment is
permanently reduced by such amount), (b) Purchase Money Indebtedness secured
exclusively by the assets subject to such Asset Sale which is assumed by a
transferee and (c) marketable securities that are promptly converted into cash
or Cash Equivalents, provided that any cash or Cash Equivalents received within
12 months following any such Asset Sale upon conversion of any property or
assets (other than in the form of cash or Cash Equivalents) received in
consideration of such Asset Sale shall be applied promptly in the manner
required of Net Cash Proceeds of any such Asset Sale as set forth above, (3) no
Default or Event of Default shall occur or be continuing after giving effect to,
on a pro forma basis, such Asset Sale, unless such Asset Sale is in
consideration solely of cash or Cash Equivalents and such consideration is
applied immediately to the permanent reduction of the principal amount of
Indebtedness outstanding pursuant to the Credit Agreement, and (4) the Board of
Directors of the Company determines in good faith that the Company or such
Restricted Subsidiary, as applicable, would receive fair market value in
consideration of such Asset Sale.
An Asset Sale Offer may be deferred until the accumulated Net Cash
Proceeds from Asset Sales not applied to the uses set forth in (1) (b) above
exceeds $5,000,000 and each Asset Sale Offer shall remain open for 20 Business
Days following its commencement and no longer, except as otherwise required by
applicable law (the "Asset Sale Offer Period"). Upon expiration of the Asset
Sale Offer Period, the Company shall apply the Asset Sale Offer Amount, plus an
amount equal to accrued interest to the purchase of all Indebtedness properly
tendered (on a pro rata basis as described above if the Asset Sale Offer Amount
is insufficient to purchase all Indebtedness so tendered) at the Asset Sale
Offer Price (together with accrued interest).
Notwithstanding the foregoing provisions of the prior paragraph:
(i) the Company and its Restricted Subsidiaries may, in the ordinary
course of business, convey, sell, lease, transfer, assign or otherwise
dispose of assets acquired and held for resale in the ordinary course of
business;
(ii) the Company and its Restricted Subsidiaries may convey, sell,
lease, transfer, assign or otherwise dispose of assets pursuant to and in
accordance with Section 5.01;
(iii) the Company and its Restricted Subsidiaries may sell or dispose
of damaged, worn out or other obsolete property in the ordinary course of
business so long as such property is no longer necessary for the proper
conduct of the business of the Company or such Restricted Subsidiary, as
applicable;
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(iv) the Company and its Restricted Subsidiaries may convey, sell,
lease, transfer, assign or otherwise dispose of assets to the Company or
any of its Restricted Subsidiaries; and
(v) the Company and its Restricted Subsidiaries may, in the ordinary
course of business (or, if otherwise than in the ordinary course of
business, upon receipt of a favorable written opinion by an independent
financial advisor of national reputation as to the fairness from a
financial point of view to the Company or such Restricted Subsidiary of
the proposed transaction), exchange all or a portion of its property,
businesses or assets for property, businesses or assets which, or Capital
Stock of a Person all or substantially all of whose assets, are of a type
used in a Related Business (provided that such Person shall initially be
designated a Restricted Subsidiary if such Person becomes a Subsidiary of
the Company by virtue of such Asset Sale), or a combination of any such
property, businesses or assets, or Capital Stock of such a Person and cash
or Cash Equivalents; provided that (i) there shall not exist immediately
prior or subsequent thereto a Default or an Event of Default, (ii) a
majority of the independent directors of the Board of Directors of the
Company shall have approved a resolution of the Board of Directors that
such exchange is fair to the Company or such Restricted Subsidiary, as the
case may be, and (iii) any cash or Cash Equivalents received pursuant to
any such exchange shall be applied in the manner applicable to Net Cash
Proceeds from an Asset Sale as set forth pursuant to the provisions of the
immediately preceding paragraph of this covenant; and provided, further,
that any Capital Stock of a Person received in an Asset Sale pursuant to
this clause (v) shall be owned directly by the Company or a Restricted
Subsidiary and, when combined with the Capital Stock of such Person
already owned by the Company and its Restricted Subsidiaries, shall
constitute a majority of the voting power and Capital Stock of such
Person, unless (A) (i) the Company has received a binding commitment from
such Person (or the direct or indirect parent of such Person) that such
Person (or the direct or indirect parent of such Person) will distribute
to the Company in cash an amount equal to the Company's Annualized
Operating Cash Flow (determined as of the date of such Asset Sale)
attributable to the property, business, or assets of the Company and its
Restricted Subsidiaries exchanged in connection with such Asset Sale
during each consecutive 12-month period subsequent to such Asset Sale
(unless and until the Company shall have sold all of such Capital Stock,
provided that the provisions of clause (B) below, if applicable, shall
have been satisfied), (ii) immediately after such Asset Sale the aggregate
number of Net Pops of the wireless communications systems in which the
Company or any of its Restricted Subsidiaries has ownership interests
("Company Systems") that are owned directly by a Person or Persons a
majority of whose voting power and Capital Stock is owned directly or
indirectly by the Company is no less than 80% of the aggregate number of
Net Pops of Company Systems immediately prior to such Asset Sale and (iii)
upon consummation of such Asset Sale, on a pro forma basis, the ratio of
such Person's Annualized Operating Cash Flow to the product of
Consolidated Interest Expense for the Reference Period
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multiplied by four (but excluding from Consolidated Interest Expense all
amounts that are not required to be paid in cash on a current basis) shall
be at least 1 to 1, or (B) in the case of Capital Stock of a Person that
is not a Subsidiary of the Company owned by the Company or a Restricted
Subsidiary that is exchanged (the "Exchanged Capital Stock") for Capital
Stock of another Person all or substantially all of whose assets are of a
type used in a Related Business, either (i) the Exchanged Capital Stock
shall not have been acquired prior to such Asset Sale in reliance upon
clause (A) of this proviso or (ii) the requirements of subclauses (A)(i)
(based on the original guaranteed cash flow) and (A)(iii) shall be
satisfied with respect to any Capital Stock acquired in consideration of
the Exchanged Capital Stock.
Restricted Payments that are made in compliance with, and are
counted against amounts available to be made as Restricted Payments pursuant to
clause (c) of Section 4.04, without giving effect to clause (i) of the second
paragraph thereof, shall not be deemed to be Asset Sales.
The Company shall accumulate all Net Cash Proceeds and the aggregate
amount of such accumulated Net Cash Proceeds not used for the purposes permitted
and within the time provided by this Section 4.15 is referred to as the
"Accumulated Amount."
For purposes of this Section 4.15, "Minimum Accumulation Date" means
each date on which the Accumulated Amount exceeds $5,000,000. Not later than 10
Business Days after each Minimum Accumulation Date, the Company will commence an
Asset Sale Offer to the Holders and holders of other Indebtedness of the Company
ranking pari passu in right of payment with the Securities from time to time
outstanding with similar provisions requiring the Company to make an offer to
purchase or to redeem such Indebtedness with the proceeds from asset sales to
purchase, on a pro rata basis in proportion to the respective principal amounts
(or accreted values in the case of Indebtedness issued with an original issue
discount) of the Securities and such other Indebtedness then outstanding, for
cash, Securities and such other Indebtedness that will have an aggregate
principal amount (and accreted value, as applicable) (the "Asset Sale Offer
Amount") on the purchase date equal to the Accumulated Amount, at a purchase
price equal to the Asset Sale Offer Price, plus accrued but unpaid interest, if
any, to, and including, the date of purchase (the "Asset Sale Purchase Date"),
which date shall be no later than 30 Business Days after the first date on which
the Asset Sale Offer is required to be made. Notice of an Asset Sale Offer will
be sent 20 Business Days prior to the close of business on the earlier of (a)
the third Business Day prior to the Asset Sale Purchase Date and (b) the third
Business Day following the expiration of the Asset Sale Offer (such earlier date
being the "Final Put Date"), by first-class mail, by the Company to each Holder
at its registered address, with a copy to the Trustee. The notice to the Holders
will contain all information, instructions and materials required by applicable
law or otherwise material to such Holders' decision to tender Securities
pursuant to the Asset Sale Offer. The notice to Holders, which (to the extent
consistent with the Indenture) shall govern the terms of the Asset Sale Offer,
shall state:
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(1) that the Asset Sale Offer is being made pursuant to such notice
and this Section 4.15;
(2) the Asset Sale Offer Amount, the Asset Sale Offer Price
(including the amount of accrued and unpaid interest), the Final Put Date,
and the Asset Sale Purchase Date, which Asset Sale Purchase Date shall be
on or prior to 40 Business Days following the Minimum Accumulation Date;
(3) that any Security or portion thereof not tendered or accepted
for payment will continue to accrue interest;
(4) that, unless the Company defaults in depositing cash with the
Paying Agent in accordance with the penultimate paragraph of this Section
4.15 or such payment is otherwise prevented, any Security, or portion
thereof, accepted for payment pursuant to the Asset Sale Offer shall cease
to accrue interest after the Asset Sale Purchase Date;
(5) that Holders electing to have a Security, or portion thereof,
purchased pursuant to an Asset Sale Offer will be required to surrender
the Security, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Security completed, to the Paying Agent (which may
not for purposes of this Section 4.15, notwithstanding anything this
Indenture to the contrary, be the Company or any Affiliate of the Company)
at the address specified in the notice prior to the close of business on
the Final Put Date;
(6) that Holders will be entitled to withdraw their elections, in
whole or in part, if the Paying Agent (which may not for purposes of this
Section, notwithstanding any other provision of this Indenture, be the
Company or any Affiliate of the Company) receives, up to the close of
business on the Final Put Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
the Securities the Holder is withdrawing and a statement that such Holder
is withdrawing his election to have such principal amount of Securities
purchased;
(7) that if Indebtedness in a principal amount in excess of the
principal amount of Securities to be acquired pursuant to the Asset Sale
Offer is tendered and not withdrawn, the Company shall purchase
Indebtedness on a pro rata basis in proportion to the respective principal
amounts (or accreted values in the case of Indebtedness issued with an
original issue discount) thereof (with such adjustments as may be deemed
appropriate by the Company so that only Securities in denominations of
$1,000 or integral multiples of $1,000 shall be acquired);
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(8) that Holders whose Securities were purchased only in part will
be issued new Securities equal in principal amount at maturity to the
unpurchased portion of the Securities surrendered; and
(9) a brief description of the circumstances and relevant facts
regarding such Asset Sales.
Any such Asset Sale Offer shall comply with all applicable
provisions of Federal and state laws, including those regulating tender offers,
if applicable, and any provisions of this Indenture that conflict with such laws
shall be deemed to be superseded by the provisions of such laws.
On or before an Asset Sale Purchase Date, the Company shall (i)
accept for payment Securities or portions thereof properly tendered and not
properly withdrawn pursuant to the Asset Sale Offer on or before the Final Put
Date (on a pro rata basis if required pursuant to paragraph (7) hereof), (ii)
deposit with the Paying Agent cash sufficient to pay the Asset Sale Offer Price
for all Securities or portions thereof so tendered and accepted and (iii)
deliver to the Trustee Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof being purchased by the
Company. The Paying Agent shall on each Asset Sale Purchase Date mail or deliver
to Holders of Securities so accepted payment in an amount equal to the Asset
Sale Offer Price for such Securities, and the Trustee shall promptly
authenticate and mail or deliver to such Holders a new Security equal in
principal amount to any unpurchased portion of the Security surrendered. Any
Security not so accepted shall be promptly mailed or delivered by the Company to
the Holder thereof.
If the amount required to acquire all Indebtedness properly tendered
by Holders pursuant to the Asset Sale Offer (the "Acceptance Amount") made
pursuant to this Section 4.15 is less than the Asset Sale Offer Amount, the
excess of the Asset Sale Offer Amount over the Acceptance Amount may be used by
the Company for general corporate purposes without restriction, unless otherwise
restricted by the other provisions of the Indenture. Upon consummation of any
Asset Sale Offer made in accordance with the terms of the Indenture, the
Accumulated Amount will be reduced to zero irrespective of the amount of
Indebtedness tendered pursuant to the Asset Sale Offer.
SECTION 4.16. Waiver of Stay, Extension or Usury Laws. The Company
---------------------------------------
and the Guarantor covenant (to the extent that they may lawfully do so) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law which would prohibit or forgive the Company or the Guarantor from
paying all or any portion of the principal of, premium of, or interest on the
Securities as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of this
Indenture; and (to the extent that they may lawfully do so) the Company and the
Guarantor hereby expressly waive all benefit or advantage of any such law, and
covenant that they will
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not hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 4.17. Rule 144A Information Requirement. The Company shall
---------------------------------
furnish to the Holders of the Securities and prospective purchasers of
Securities designated by the Holders of Transfer Restricted Securities, upon
their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act until such time as the Company either
concludes an offer to exchange the Exchange Securities for the Initial
Securities or a registration statement relating to resales of the Securities has
become effective under the Securities Act. The Company shall also furnish such
information during the pendency of any suspension of effectiveness of the resale
registration statement.
SECTION 4.18. Limitation on Lines of Business. The Company shall
-------------------------------
not, nor shall it permit any of its Restricted Subsidiaries to, directly or
indirectly engage in any line or lines of business activity other than that
which, in the reasonable, good faith judgment of the Board of Directors of the
Company, is a Related Business.
SECTION 4.19. Restriction on Sale and Issuance of Subsidiary Stock.
----------------------------------------------------
The Company will not sell, and will not permit any of its Restricted
Subsidiaries to issue or sell, any shares of Capital Stock of any Restricted
Subsidiary of the Company other than Disqualified Capital Stock of PCW to any
Person other than the Company or a Wholly Owned Restricted Subsidiary of the
Company, except for shares of common stock with no preferences or special rights
or privileges and with no redemption or prepayment provisions ("Special
Rights"); provided that, in the case of a Restricted Subsidiary that is a
partnership or joint venture partnership (a "Restricted Partnership") the
Company or any of its Restricted Subsidiaries may sell or such Restricted
Partnership may issue or sell Capital Stock of such Restricted Partnership with
Special Rights no more favorable than those held by the Company or such
Restricted Subsidiary in such Restricted Partnership. Notwithstanding the
foregoing, the Company is required to own 100% of the capital stock of PCW.
SECTION 4.20. Deposit of Proceeds with Trustee Pending Consummation
-----------------------------------------------------
of the Merger. On the Issue Date, the Company shall deposit with the Trustee the
- -------------
net proceeds from the issuance of the Securities (the "Net Offering Proceeds")
and such other amount as, when added to the Net Offering Proceeds, equals
$85,341,341 million, representing an amount equal to 101% of the principal
amount of the Securities plus the interest that would accrue on the Securities
up to December 31, 1997 (the "Special Redemption Amount") as set forth in
Article 10.
SECTION 4.21. Negative Pledge. The Company will not be permitted to
---------------
pledge the capital stock of PCW except pursuant to the Credit Agreement.
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ARTICLE 5.
SUCCESSOR CORPORATION
SECTION 5.01. Limitation on Merger, Sale or Consolidation. (a)
-------------------------------------------
Neither the Company nor the Guarantor will consolidate with or merge with or
into another Person, or sell, lease, convey, transfer or otherwise dispose of
all or substantially all of its assets (computed on a consolidated basis),
whether in a single transaction or a series of related transactions, to another
Person or group of affiliated Persons, unless (i) either (a) the Company or the
Guarantor, as applicable, is the continuing entity or (b) the resulting,
surviving or transferee entity is a corporation organized under the laws of the
United States, any state thereof or the District of Columbia and expressly
assumes by supplemental indenture all of the obligations of the Company or the
Guarantor, as applicable, in connection with the Securities and the Indenture;
(ii) no Default or Event of Default shall exist or shall occur immediately after
giving effect on a pro forma basis to such transaction; (iii) (A) immediately
after giving effect to such transaction on a pro forma basis, the consolidated
resulting, surviving or transferee entity would immediately thereafter be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Annualized Operating Cash Flow Ratio provision set forth in the second paragraph
of Section 4.12 or (B), if the requirement of clause (A) is not satisfied, (x)
any Indebtedness of the resulting, surviving or transferee entity in excess of
the amount of the Company's Indebtedness immediately prior to such transaction
is Permitted Acquisition Indebtedness and (y) the requirement of clause (A) is
not satisfied solely due to the Incurrence of such Permitted Acquisition
Indebtedness; and (iv) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, if applicable, confirming
compliance with the requirements of this Section 5.01.
(b) For purposes of clause (a), the sale, lease, conveyance,
assignment, transfer, or other disposition of all or substantially all of the
properties and assets of one or more Restricted Subsidiaries of the Company,
which properties and assets, if held by the Company instead of such Restricted
Subsidiaries, would constitute all or substantially all of the properties and
assets of the Company on a consolidated basis, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
SECTION 5.02. Successor Corporation Substituted. Upon any
---------------------------------
consolidation or merger or any transfer of all or substantially all of the
assets of the Company in accordance with the foregoing, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such transfer is made, shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture with the
same effect as if such successor corporation had been named therein as the
Company, and when a successor corporation duly assumes all of the obligations of
the Company pursuant hereto and pursuant to the Securities, the predecessor
shall be released from such obligations.
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ARTICLE 6.
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be caused voluntarily or involuntarily or effected, without limitation, by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) failure to pay any installment of interest on the Securities as
and when the same becomes due and payable, and the continuance of such
failure for a period of 30 days;
(b) failure to pay all or any part of the Accreted Value, or
premium, if any, on the Securities when and as the same becomes due and
payable at maturity, redemption, by acceleration or otherwise, including,
without limitation, payment of the Change of Control Purchase Price in
accordance with Article 11 or the Asset Sale Offer Price in accordance
with Section 4.15;
(c) failure by the Company or the Guarantor to observe or perform
any covenant, agreement or warranty contained in the Securities or this
Indenture (other than a default in the performance of any covenant,
agreement or warranty which is specifically dealt with elsewhere in this
Section 6.01), or failure by the Company to cause each Unrestricted
Subsidiary to comply with clause (c) of the definition of "Unrestricted
Subsidiary," and continuance of such failure for a period of 30 days after
(subject to the following paragraph) there has been given, by registered
or certified mail, to the Company by the Trustee, or to the Company and
the Trustee by Holders of at least 25% in aggregate principal amount at
maturity of the outstanding Securities, a written notice specifying such
default or breach, requiring it to be remedied and stating that such
notice is a "Notice of Default" hereunder;
(d) the failure to pay at final stated maturity (giving effect to
any applicable grace periods and any extensions thereof) the principal
amount of any Indebtedness of the Company or any Restricted Subsidiary of
the Company or the acceleration of the final stated maturity of any
Indebtedness if the aggregate principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness in
default for failure to pay principal at final maturity or which has been
accelerated, aggregates $15,000,000 or more at any time;
(e) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudging the Company or any of its
Significant Restricted
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Subsidiaries as bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization of the Company or any of its Significant
Restricted Subsidiaries under any bankruptcy or similar law, and such
decree or order shall have continued undischarged and unstayed for a
period of 60 days; or a decree or order of a court of competent
jurisdiction over the appointment of a receiver, liquidator, trustee, or
assignee in bankruptcy or insolvency of the Company, any of its
Significant Restricted Subsidiaries, or of the property of any such
Person, or for the winding up or liquidation of the affairs of any such
Person, shall have been entered, and such decree, judgment, or order shall
have remained in force undischarged and unstayed for a period of 60 days;
(f) the Company or any of its Significant Restricted Subsidiaries
shall institute proceedings to be adjudicated a voluntary bankrupt, or
shall consent to the filing of a bankruptcy proceeding against it, or
shall file a petition or answer or consent seeking reorganization under
any bankruptcy or similar law or similar statute, or shall consent to the
filing of any such petition, or shall consent to the appointment of a
Custodian, receiver, liquidator, trustee, or assignee in bankruptcy or
insolvency of it or any of its assets or property, or shall make a general
assignment for the benefit of creditors, or shall admit in writing its
inability to pay its debts generally as they become due, or shall, within
the meaning of any Bankruptcy Law, become insolvent, fail generally to pay
its debts as they become due, or take any corporate action in furtherance
of or to facilitate, conditionally or otherwise, any of the foregoing; or
(g) final unsatisfied judgments not covered by insurance, or the
issuance of any warrant of attachment against any portion of the property
or assets of the Company or any of its Restricted Subsidiaries,
aggregating in excess of $5,000,000 at any one time rendered against the
Company or any of its Restricted Subsidiaries and not stayed, bonded or
discharged within a period (during which execution shall not be
effectively stayed) of 60 days (or, in the case of any such final judgment
which provides for payment over time, which shall so remain unstayed,
unbonded or undischarged beyond any applicable payment date provided
therein).
If a Default occurs and is continuing, the Trustee must, within 90
days after the occurrence of such default, give to the Holders notice of such
default.
SECTION 6.02. Acceleration of Maturity Date; Rescission and
---------------------------------------------
Annulment. If an Event of Default (other than an Event of Default specified in
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Section 6.01(e) or (f)) relating to the Company or any of its Restricted
Subsidiaries) occurs and is continuing then, and in every such case, unless the
Accreted Value of all of the Securities shall have already become due and
payable, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of then outstanding Securities, by notice in writing to the
Company (and to the Trustee if given by Holders) (an "ACCELERATION NOTICE"), may
declare the Accreted Value of the Securities (or the Change of Control Purchase
Price if the Event of Default
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includes failure to pay the Change of Control Purchase Price), determined as set
forth below, including in each case accrued interest thereon, if applicable, to
be due and payable and the same (i) shall become immediately due and payable or
(ii) if there are any amounts outstanding under the Credit Agreement and the
Company has guaranteed the repayment of principal and interest on the Credit
Agreement, shall become immediately due and payable upon the first to occur of
an acceleration under the Credit Agreement or five business days after receipt
by the Company and the representative of the holders of the Indebtedness under
the Credit Agreement of the Acceleration Notice, but only if such Event of
Default is then continuing. If an Event of Default specified in Section 6.01(e)
or (f) relating to the Company or any Significant Restricted Subsidiary occurs,
the Accreted Value (or the Change of Control Purchase Price, as applicable) and
accrued interest, if applicable, thereon will be immediately due and payable on
all outstanding Securities without any declaration or other act on the part of
Trustee or the Holders.
At any time after such a declaration of acceleration being made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article 6, the Holders of a majority
in aggregate principal amount at maturity of then outstanding Securities, by
written notice to the Company and the Trustee, may rescind, on behalf of all
Holders, any such declaration of acceleration if:
(1) the Company has paid or deposited with the Trustee cash
sufficient to pay
(A) all overdue interest on all Securities,
(B) the Accreted Value of (and premium, if any, applicable to)
any Securities which would become due otherwise than by such
declaration of acceleration, and interest thereon at the rate borne
by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate borne by the Securities,
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and
(2) all Events of Default, other than the non-payment of the
Accreted Value of, premium, if any, and interest on Securities which have
become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 6.12, including, if applicable, any Event of
Default relating to the covenants contained in Section 11.01.
Notwithstanding the previous sentence of this Section 6.02, no waiver shall be
effective against any Holder for any Event of Default or event which with notice
or lapse of time or
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both would be an Event of Default with respect to any covenant or provision
which cannot be modified or amended without the consent of the Holder of each
outstanding Security affected thereby, unless all such affected Holders agree in
writing, to waive such Event of Default or other event. No such waiver shall
cure or waive any subsequent default or impair an right consequent thereon.
In the event of a declaration of acceleration of the Securities
because an Event of Default has occurred and is continuing as a result of the
acceleration of any Indebtedness described in Section 6.01(d), the declaration
of acceleration of the Securities shall be automatically annulled if the holders
of all Indebtedness described in Section 6.01(d) (without any payment of any
holders of any such Indebtedness) have rescinded the declaration of acceleration
in respect of such Indebtedness within 30 days of the date of such declaration
and if (i) the annulment of the acceleration of the Securities would not
conflict with any judgment or decree of a court of competent jurisdiction and
(ii) all Events of Default, except nonpayment of principal or interest on the
Securities that became due solely because of the acceleration of the Securities,
have been cured or waived.
SECTION 6.03. Collection of Indebtedness and Suits for Enforcement
----------------------------------------------------
by Trustee. The Company covenants that if an Event of Default in payment of
- ----------
Accreted Value, premium, or interest specified in clause (a) or (b) of Section
6.01 occurs and is continuing, the Company shall, upon demand of the Trustee,
pay to it, for the benefit of the Holders of such Securities, the whole amount
then due and payable on such Securities for Accreted Value, premium (if any) and
interest, and, to the extent that payment of such interest shall be legally
enforceable, interest on any overdue principal (and premium, if any) and on any
overdue interest, at the rate borne by the Securities, and, in addition thereto,
such further amount as shall be sufficient to cover the reasonable costs and
expenses of collection, including compensation to, and expenses, disbursements
and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust in favor of the
Holders, may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company, the Guarantor or any other obligor
upon the Securities and collect the moneys adjudged or decreed to be payable in
the manner provided by law out of the property, of the Company, the Guarantor or
any other obligor upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
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SECTION 6.04. Trustee May File Proofs of Claim. In case of the
--------------------------------
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company, the Guarantor or any other obligor upon the
Securities or the property of the Company, or of the Guarantor or of such other
obligor or their creditors, the Trustee (irrespective of whether the principal
of the Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on the Company for the payment of overdue principal or interest)
shall be entitled and empowered, by intervention in such proceeding or otherwise
to take any and all actions under the TIA, including
(1) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the
Securities and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agent and counsel and of the Holders allowed
in such judicial proceeding), and
(2) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment, or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.05. Trustee May Enforce Claims Without Possession of
-----------------------------------------------
Securities. All rights of action and claims under this Indenture or the
- ----------
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust in favor of the Holders, and any
recovery of judgment shall, after provision for the payment of compensation to,
and expenses, disbursements and advances of the Trustee, its agents and counsel,
be for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
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SECTION 6.06. Priorities. Any money collected by the Trustee
pursuant to this Article 6 shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of such money on
account of principal, premium (if any) or interest, upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant to
Section 7.07;
SECOND: To the Holders in payment of the amounts then due and unpaid
for principal of, premium (if any) and interest on, the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according
to the amounts due and payable on such Securities for principal, premium
(if any) and interest, respectively; and
THIRD: To whomsoever may be lawfully entitled thereto, the
remainder, if any.
SECTION 6.07. Limitation on Suits. No Holder of any Security shall
have any right to order or direct the Trustee to institute any proceeding,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless
(A) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(B) the Holders of not less than 25% in principal amount of then
outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(C) such Holder or Holders have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities to be
incurred or reasonably probable to be incurred in compliance with such
request;
(D) the Trustee for 60 days after its receipt of such notice request
and offer of indemnity has failed to institute any such proceeding; and
(E) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority
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or preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all the Holders.
SECTION 6.08. Unconditional Right of Holders to Receive Principal,
---------------------------------------------------
Premium and Interest. Notwithstanding any other provision of this Indenture, the
- --------------------
Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the Accreted Value of, and premium (if any)
and accrued interest on, such Security on the Maturity Date of such payments as
expressed in such Security (in the case of redemption, the applicable Redemption
Price on the applicable Redemption Date, in the case of the Change of Control
Payment, on the applicable Change of Control Payment Date, and, in the case of
an Asset Sale Offer, the Asset Sale Offer Price on the Asset Sale Purchase Date)
and to institute suit for the enforcement of any such payment after such
respective dates, and such rights shall not be impaired without the consent of
such Holder.
SECTION 6.09. Rights and Remedies Cumulative. Except as otherwise
------------------------------
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities in Section 2.07, no right or remedy herein conferred
upon or reserved to the Trustee or to the Holders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 6.10. Delay or Omission Not Waiver. No delay or omission by
----------------------------
the Trustee or by any Holder of any Security to exercise any right or remedy
arising upon any Event of Default shall impair the exercise of any such right or
remedy or constitute a waiver of any such Event of Default. Every right and
remedy given by this Article 6 or by law to the Trustee or to the Holders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
SECTION 6.11. Control by Holders. The Holder or Holders of a
------------------
majority in aggregate principal amount of then outstanding Securities will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power conferred
upon the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture,
(2) the Trustee shall not determine that the action so directed
would be unjustly prejudicial to the Holders not taking part in such
direction, and
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
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SECTION 6.12. Waiver of Past Default. Subject to Section 6.08, the
----------------------
Holder or Holders of not less than a majority in aggregate principal amount of
the outstanding Securities may, on behalf of all Holders, prior to the
declaration of the acceleration of the maturity of the Securities, waive any
past default hereunder and its consequences, except a default
(A) in the payment of the Accreted Value of, premium, if any, or
interest on, any Security as specified in clauses (a) and (b) of Section
6.01 which has not been cured, or
(B) in respect of a covenant or provision hereof which, under
Article 9, cannot be modified or amended without the consent of the Holder
of each outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair the exercise of any right arising therefrom.
SECTION 6.13. Undertaking for Costs. All parties to this Indenture
---------------------
agree, and each Holder of any Security by his acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted to be taken by it
as Trustee, the filing by any party litigant in such suit of an undertaking to
pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section 6.13 shall not apply to any suit instituted by the Company, to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in aggregate principal amount of
the outstanding Securities, or to any suit instituted by any Holder for
enforcement of the payment of principal of, or premium (if any) or interest on,
any Security on or after the Maturity Date expressed in such Security
(including, in the case of redemption, on or after the Redemption Date).
SECTION 6.14. Restoration of Rights and Remedies. If the Trustee or
----------------------------------
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every case, subject to any determination in such proceeding, the Company,
the Trustee and the Holders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
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ARTICLE 7.
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this
Indenture and covenants and agrees to perform the same, as herein expressed.
SECTION 7.01. Duties of Trustee. (a) If a Default or an Event of
-----------------
Default has occurred and is continuing, the Trustee shall exercise such of the
rights and powers vested in it by this Indenture and use the same degree of care
and skill in their exercise as a prudent Person would exercise or use under the
circumstances in the conduct of his own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee need perform only those duties as are specifically
set forth in this Indenture and no others, and no covenants or obligations
shall be implied in or read into this Indenture which are adverse to the
Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.11.
(d) No provision of this Indenture shall require the trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or at the request, order or direction of the Holders or in
the exercise of any of its rights or powers if it shall
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have reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of this Section
7.01.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
SECTION 7.02. Rights of Trustee. Subject to Section 7.01:
-----------------
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 14.04 and 14.05. The Trustee
shall not be liable for any action it takes or omits to take in good faith
in reliance on such certificate or advice of counsel.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee will not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture.
(e) The Trustee will not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit.
(f) The Trustee will be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby.
(g) Unless otherwise specifically provided for in this Indenture,
any demand, request, direction or notice from the Company or the Guarantor
shall be
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sufficient if signed by an Officer of the Company or the Guarantor, as the
case may be.
(h) The Trustee shall have no duty to inquire as to the performance
of the covenants in Article 4 hereof. In addition, the Trustee shall not
be deemed to have knowledge of any Default or Event of Default except (i)
any Event of Default occurring pursuant to Sections 6.01(a), 6.01(b) and
4.02, or (ii) any Default or Event of Default of which the Trustee shall
have received written notification or obtained actual knowledge.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
----------------------------
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company, the Guarantor or any of the Company's
or the Guarantor's Subsidiaries, or their respective Affiliates, with the same
rights it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee makes no
--------------------
representation as to the validity or adequacy of this Indenture or the
Securities and it shall not be accountable for the Company's use of the proceeds
from the Securities, and it shall not be responsible for any statement in the
Securities, other than the Trustee's certificate of authentication, or the use
or application of any funds received by a Paying Agent other than the Trustee.
SECTION 7.05. Notice of Default. If a Default or an Event of Default
-----------------
occurs and is continuing and if it is known to the Trustee, the Trustee shall
mail to each Holder notice of the uncured Default or Event of Default within 90
days after such Default or Event of Default occurs. Except in the case of a
Default or an Event of Default in payment of principal (or premium, if any) of,
or interest on, any Security (including the payment of the Change of Control
Purchase Price on the Change of Control Payment Date, the payment of the
applicable Redemption Price on the applicable Redemption Date and the payment of
the Offer Price on the Purchase Date), the Trustee may withhold the notice if
and so long as a Trust Officer in good faith determines that withholding the
notice is in the interest of the Holders.
SECTION 7.06. Reports by Trustee to Holders. Within 60 days after
-----------------------------
each February 15 beginning with the February 15 following the date of this
Indenture, the Trustee shall, if required by law, mail to each Holder a brief
report dated as of such February 15 that complies with TIA ss. 313(a). The
Trustee also shall comply with TIA ss.ss. 313(b) and 313(c).
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or automatic quotation system.
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A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each stock exchange, if any, on
which the Securities are listed.
SECTION 7.07. Compensation and Indemnity. The Company and the
--------------------------
Guarantor, jointly and severally, agree to pay to the Trustee from time to time
reasonable compensation for its services. The Trustee's compensation shall not
be limited by any law on compensation of a trustee of an express trust. The
Company and the Guarantor, jointly and severally, shall reimburse the Trustee
upon request for all reasonable disbursements, expenses and advances incurred or
made by it. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents, accountants, experts and
counsel.
The Company and the Guarantor, jointly and severally, agree to
indemnify the Trustee (in its capacity as Trustee) and each of its officers,
directors, attorneys-in-fact and agents for, and hold it harmless against, any
claim, demand, expense (including but not limited to reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel), loss or
liability incurred by it without negligence or bad faith on its part, arising
out of or in connection with the administration of this trust and its rights or
duties hereunder including the reasonable costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder. The Trustee shall notify the Company and
the Guarantor promptly of any claim asserted against the Trustee for which it
may seek indemnity. The Company and the Guarantor, jointly and severally, shall
defend the claim and the Trustee shall provide reasonable cooperation at the
Company's and the Guarantor's joint and several expense in the defense. The
Trustee may have separate counsel and the Company and the Guarantor, jointly and
severally, shall pay the reasonable fees and expenses of such counsel; provided
that the Company and the Guarantor will not be required to pay such fees and
expenses if they assume the Trustee's defense and there is no conflict of
interest between the Company and the Guarantor on the one hand and the Trustee
on the other in connection with such defense. The Company and the Guarantor need
not pay for any settlement made without their written consent. The Company and
the Guarantor need not reimburse any expense or indemnify against any loss or
liability to the extent incurred by the Trustee through its negligence, bad
faith or willful misconduct.
To secure the Company's and the Guarantor's payment obligations in
this Section 7.07, the Trustee shall have a lien prior to the Securities on all
assets held or collected by the Trustee, in its capacity as Trustee, except
assets held in trust to pay principal and premium, if any, of or interest on
particular Securities, including, without limitation, assets held in the
Collateral Account.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01 (e) or (f) occurs, the expenses and the
compensation for
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the services are intended to constitute expenses of administration under any
Bankruptcy Law.
The Company's and the Guarantor's obligations under this Section
7.07 and any lien arising hereunder shall survive the resignation or removal of
the Trustee, the discharge of the Company's and the Guarantor's obligations
pursuant to Article 8 of this Indenture and any rejection or termination of this
Indenture under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign by so
----------------------
notifying the Company in writing. The Holder or Holders of a majority in
principal amount of the outstanding Securities may remove the Trustee by so
notifying the Company and the Trustee in writing and may appoint a successor
trustee with the Company's consent. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver, Custodian, or other public officer takes charge of
the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holder or
Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that
and provided that all sums owing to the Trustee provided for in Section 7.07
have been paid, the retiring Trustee shall transfer all property held by it as
Trustee (including the Collateral Account) to the successor Trustee, subject to
the lien provided in Section 7.07, the resignation or removal of the retiring
Trustee shall become effective, and the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Indenture. A successor
Trustee shall mail notice of its succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, the
Guarantor or the Holder or Holders of at least 10% in principal amount of the
outstanding Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
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If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08. the Company's and the Guarantor's obligations under Section 7.07 shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc. If the Trustee
--------------------------------
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to another corporation, the resulting,
surviving or transferee corporation without any further act shall, if such
resulting, surviving or transferee corporation is otherwise eligible hereunder,
be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
-----------------------------
all times satisfy the requirements of TIA ss.310(a)(1), (2) and (5). The Trustee
shall have a combined capital and surplus of at least $10,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA ss.310(b).
SECTION 7.11. Preferential Collection of Claims Against Company. The
-------------------------------------------------
Trustee shall comply with TIA ss.311(a), excluding any creditor relationship
listed in TIA ss.311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss.311(a) to the extent indicated.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. Option to Effect Legal Defeasance or Covenant
---------------------------------------------
Defeasance. The Company may, at its option at any time, elect to have Section
- ----------
8.02 or Section 8.03 applied to all outstanding Securities upon compliance with
the conditions set forth below in this Article 8.
SECTION 8.02. Legal Defeasance and Discharge. Upon the Company's
------------------------------
exercise under Section 8.01 of the option applicable to this Section 8.02, the
Company shall be deemed to have been discharged from its obligations with
respect to all outstanding Securities on the date the conditions set forth below
are satisfied (hereinafter, "LEGAL DEFEASANCE"). For this purpose, such Legal
Defeasance means that the Company shall be deemed to have paid and discharged
the entire Indebtedness represented by the outstanding Securities, which shall
thereafter be deemed to be "outstanding" only for the purposes of Section 8.05
and the other Sections of this Indenture referred to in (a) and (b) below, and
to have satisfied all its other obligations under such Securities and this
Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments
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acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Securities to receive solely from the trust fund described in
Section 8.04, and as more fully set forth in such Section 8.04, payments in
respect of the principal of, premium, if any, and interest on such Securities
when such payments are due, (b) the Company's obligations with respect to such
Securities under Sections 2.04, 2.06, 2.07, 2.10 and 4.03, (c) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (d) this Article 8. Subject to
compliance with this Article 8, the Company may exercise its option under this
Section 8.02 notwithstanding the prior exercise of its option under Section 8.03
with respect to the Securities.
SECTION 8.03. Covenant Defeasance. Upon the Company's exercise under
-------------------
Section 8.01 of the option applicable to this Section 8.03, the Company shall be
released from its obligations under the covenants contained in Sections 4.04,
4.06, 4.07, 4.08, 4.09, 4.11, 4.12, 4.13, 4.14, 4.15, 4.18, 4.19 and Article 5
(other than the obligation of any successor to assume the obligations of the
Company and the Guarantor, as the case may be, hereunder, and with regard to the
Guarantor only to the extent requiring that 100% of the equity interests in any
surviving Person be pledged by the successor to the Guarantor) with respect to
the outstanding Securities on and after the date the conditions set forth below
are satisfied (hereinafter, "COVENANT DEFEASANCE"), and the Securities shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"OUTSTANDING" for all other purposes hereunder. For this purpose, such Covenant
Defeasance means that, with respect to the outstanding Securities, the Company
need not comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document, but, except as specified above, the remainder of this
Indenture and such Securities shall be unaffected thereby.
SECTION 8.04. Conditions to Legal or Covenant Defeasance. The
------------------------------------------
following shall be the conditions to the application of either Section 8.02 or
Section 8.03 to the outstanding Securities:
(a) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 7.10 who shall agree to comply with the provisions of this
Article 8 applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (a)
cash in an amount, or (b) U.S. Government Obligations or U.S. Legal Tender
Equivalents, or (c) a combination thereof, in such amounts, as in each
case will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to
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pay and discharge and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge the principal of, premium, if
any, and interest on the outstanding Securities on the Stated Maturity or
on the applicable Redemption Date, as the case may be, of such principal
or installment of principal, premium, if any, or interest and the Holders
of Securities shall have a valid, perfected, exclusive security interest
in the assets of such trust; provided that the Trustee shall have been
irrevocably instructed to apply such cash and the proceeds of such U.S.
Government Obligations or U.S. Legal Tender Equivalents to said payments
with respect to the Securities;
(b) In the case of an election under Section 8.02, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (i) the Company has
received from, or there has been published by, the Internal Revenue
Service a ruling or (ii) since the date hereof, there has been a change in
the applicable Federal income tax law, in either case to the effect that,
and based thereon such opinion shall confirm that, the Holders of the
outstanding Securities will not recognize income, gain or loss for Federal
income tax purposes as a result of such Legal Defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance had
not occurred;
(c) In the case of an election under Section 8.03, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to such Trustee confirming that the Holders of the
outstanding Securities will not recognize income, gain or loss for Federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to Federal income tax in the same amount, in the same manner and
at the same times as would have been the case if such Covenant Defeasance
had not occurred;
(d) No Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit or,
insofar as Section 6.01(e) or 6.01(f) is concerned, at any time during the
period ending on the 91st day after the date of such deposit (it being
understood that this condition is a condition subsequent which shall not
be deemed satisfied until the expiration of such period, but in the case
of Covenant Defeasance, the covenants which are defeased under Section
8.03 will cease to be in effect unless an Event of Default under Section
6.01(e) or 6.01(f) occurs during such period);
(e) Such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under this Indenture or
any other material agreement or instrument to which the Company or any of
the Company's Subsidiaries is a party or by which any of them is bound;
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(f) In the case of an election under either Section 8.02 or 8.03,
the Company shall have delivered to the Trustee an Officers' Certificate
stating that the deposit made by the Company pursuant to its election
under Section 8.02 or 8.03 was not made by the Company with the intent of
preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors
of the Company or others; and
(g) The Company shall have delivered to the Trustee an Officers'
Certificate stating that all conditions precedent provided for or relating
to either the Legal Defeasance under Section 8.02 or the Covenant
Defeasance under Section 8.03 (as the case may be) have been complied with
as contemplated by this Section 8.04.
SECTION 8.05. Deposited U.S. Legal Tender Equivalents and U.S.
------------------------------------------------
Government Obligations to be Held in Trust; Other Miscellaneous Provisions.
- --------------------------------------------------------------------------
Subject to Section 8.06, all cash, U.S. Legal Tender Equivalents and U.S.
Government Obligations (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 in respect of the outstanding
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any Paying Agent as the Trustee may determine, to the
Holders of such Securities of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
SECTION 8.06. Repayment to the Company. Subject to any applicable
------------------------
escheat or abandoned property laws, any money deposited with the Trustee or any
Paying Agent, or then held by the Company, in trust for the payment of the
principal of, premium, if any, or interest on any Security and remaining
unclaimed for two years after such principal, and premium, if any, or interest
has become due and payable shall be paid to the Company on its request; and the
Holder of such Security shall thereafter look only to the Company and the
Guarantor for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money shall thereupon cease.
SECTION 8.07. Reinstatement. If the Trustee or Paying Agent is
-------------
unable to apply any cash, U.S. Legal Tender Equivalents or U.S. Government
Obligations in accordance with Section 8.02 or 8.03, as the case may be, by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
Company's and the Guarantor's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.02 or 8.03 until such time as the Trustee or Paying Agent
is permitted to apply such money in accordance with Sections 8.02 and 8.03, as
the case may be; provided, however, that if the Company or the Guarantor makes
any payment of principal of, premium, if any, or interest on any Security
following the reinstatement of its obligations,
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the Company or the Guarantor, as the case may be, shall be subrogated to the
rights of the Holders of such Securities to receive such payment from the cash
held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holder, the Company or the Guarantor, when authorized
by Board Resolutions, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory to
the Trustee, for any of the following purposes:
(1) to cure any ambiguity, defect, or inconsistency, or to make any
other provisions with respect to matters or questions arising under this
Indenture which shall not be inconsistent with the provisions of this
Indenture, provided such action pursuant to this clause (1) shall not
adversely affect the interests of any Holder in any respect;
(2) to add to the covenants of the Company or the Guarantor for the
benefit of the Holders, or to surrender any right or power herein
conferred upon the Company or the Guarantor or to make any other change
that does not adversely affect the rights of any Holder, provided that the
Company or the Guarantor, as the case may be, has delivered to the Trustee
an Opinion of Counsel stating that such change does not adversely affect
the rights of any Holder;
(3) to provide for collateral or additional guarantors for the
Securities;
(4) to evidence the succession of another Person to the Company, and
the assumption by any such successor of the obligations of the Company,
herein and in the Securities in accordance with Article 5;
(5) to comply with the TIA; or
(6) to provide for the issuance and authorization of the Exchange
Securities.
SECTION 9.02. Amendments, Supplemental Indentures and Waivers with
----------------------------------------------------
Consent of Holders. Subject to Section 6.08, with the consent of the Holders of
- ------------------
not less than a majority in aggregate principal amount at maturity of then
outstanding Securities, by written act of said Holders delivered to the Company
and the Trustee, the Company or the Guarantor, when authorized by Board
Resolutions, and the Trustee may amend or supplement this Indenture or the
Securities or enter into an indenture or indentures
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supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or the
Securities or of modifying in any manner the rights of the Holders under this
Indenture or the Securities. Subject to Section 6.08, the Holder or Holders of
not less than a majority in principal amount at maturity of then outstanding
Securities may waive compliance by the Company or the Guarantor with any
provision of this Indenture or the Securities. Notwithstanding any of the above,
however, no such amendment, supplemental indenture or waiver shall, without the
consent of the Holder of each outstanding Security affected thereby:
(1) reduce the percentage of principal amount of Securities whose
Holders must consent to an amendment, supplement or waiver of any
provision of this Indenture or the Securities;
(2) reduce the rate or extend the time for payment of interest on
any Security;
(3) reduce the principal amount at maturity of any Security, the
Change of Control Purchase Price, the Asset Sale Offer Price or the
Redemption Price;
(4) change the Stated Maturity of any Security;
(5) alter the security provisions of Section 4.20 or the redemption
provisions of Article 3 or paragraph 5 of the Securities or the terms or
provisions of Section 4.15 or the terms or provisions of Article 11 in any
case, in a manner adverse to any Holder;
(6) make any changes in the provisions concerning waivers of
Defaults or Events of Default by Holders of the Securities or the rights
of Holders to recover the principal or premium of, interest on, or
redemption payment with respect to, any Security, including without
limitation any changes in Section 6.08, 6.12 or this third sentence of
this Section 9.02;
(7) impair the right of Holders to institute suit for the
enforcement of any payment of the principal of, premium, if any, or
accrued interest on any Securities on or after the Stated Maturity
thereof;
(8) make the principal of, or the interest on, any Security payable
with anything or in any manner other than as provided for in this
Indenture (including changing the place of payment where, or the coin or
currency in which, any Security or any premium or the interest thereon is
payable) and the Securities as in effect on the date hereof; or
(9) make the Securities subordinated in right of payment to any
extent or under any circumstances to any other indebtedness.
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With the consent of Holders of two-thirds of the outstanding
aggregate principal amount of the Securities, the Company and the Trustee may
change the Change of Control Purchase Date and the Asset Sale Offer Period.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture or
waiver.
After an amendment, supplement or waiver under this Section 9.02 or
Section 9.04 becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under this
Article 9, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
SECTION 9.03. Compliance with TIA. Every amendment, waiver or
supplement of this Indenture or the Securities shall comply with the TIA as then
in effect.
SECTION 9.04. Revocation and Effect of Consents. Until an amendment,
waiver or supplement becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder's
Security, even if notation of the consent is not made on any Security. However,
any such Holder or subsequent Holder may revoke the consent as to his Security
or portion of his Security by written notice to the Company or the Person
designated by the Company as the Person to whom consents should be sent if such
revocation is received by the Company or such Person before the date on which
the Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Securities have consented (and not theretofore
revoked such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date, and only those Persons (or
their duly designated proxies), shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
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record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (1)
through (9) of Section 9.02, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security; provided that any such waiver shall
not impair or affect the right of any Holder to receive payment of principal and
premium of and interest on a Security, on or after the respective dates set for
such amounts to become due and payable expressed in such Security, or to bring
suit for the enforcement of any such payment on or after such respective dates.
SECTION 9.05. Notation on or Exchange of Securities. If an
-------------------------------------
amendment, supplement or waiver changes the terms of a Security, the Trustee may
require the Holder of the Security to deliver it to the Trustee or require the
Holder to put an appropriate notation on the Security. The Trustee may place an
appropriate notation on the Security about the changed terms and return it to
the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms. Any failure to make
the appropriate notation or to issue a new Security shall not affect the
validity of such amendment, supplement or waiver.
SECTION 9.06. Trustee to Sign Amendments, Etc. The Trustee shall
-------------------------------
execute any amendment, supplement or waiver authorized pursuant to this Article
9; provided that the Trustee may, but shall not be obligated to, execute any
such amendment, supplement or waiver which affects the Trustee's own rights,
duties or immunities under this Indenture. The Trustee shall be entitled to
receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of any amendment, supplement or waiver authorized
pursuant to this Article 9 is authorized or permitted by this Indenture.
ARTICLE 10.
COLLATERAL ACCOUNT AND RELEASES
SECTION 10.01. Collateral Account. (a) Prior to the Issue Date of
------------------
the Securities, the Trustee shall open with Harris Trust and Savings Bank (the
"Bank") and shall require the Bank to establish on its books and maintain, a
trust account (the "Collateral Account") into which the Trustee shall deposit
the Special Redemption Amount when received from the Company pursuant to Section
4.20. In order to secure the full and punctual payment of the Securities in
accordance with the terms hereof (but subject to the provisions of this Article
10 governing release of funds held in the Collateral Account), the Company
hereby grants to the Trustee a continuing security interest in and to all of its
right,
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title and interest in and to the Collateral Account, all cash deposited therein
and the Treasury Bills held therein pursuant to Section 10.02 and all proceeds
of any of the foregoing, whether now existing or hereafter acquired or arising.
The Collateral Account shall relate solely to the Units and the Collateral
securing the Units, and funds in such account shall not be commingled with any
other moneys. All payments to be made from time to time by the Trustee to the
Holders of Securities out of funds in the Collateral Account pursuant to this
Indenture shall be made by the Trustee as paying agent of the Company. All
moneys deposited from time to time in the Collateral Account pursuant to this
Indenture shall be held by the Trustee in trust hereunder as Collateral as
herein provided. The Collateral Account shall be titled "Price Communications
Cellular Holdings, Inc., Pledgor, Bank of Montreal Trust Company, Trustee,
Pledgee, Collateral Account."
(b) The Collateral Account shall be maintained with the Bank until
the earliest of (i), (ii) or (iii) of this subparagraph (b) to occur: (i) (A)
the closing of the Merger; (B) the borrowing by the Company of an aggregate of
at least $425.0 million pursuant to the Credit Agreement; (C) the receipt by the
Company of the a contribution; to equity of approximately $48 million from PCC
(in cash or stock of Palmer) and (D) the receipt by the Trustee of an order from
the Company requesting that the Trustee release the Collateral to the order of
the Company, (ii) the Business Day prior to the Special Redemption Date or (iii)
the date on which no Securities remain outstanding.
Any payments of principal of or interest on, or proceeds from the
sale of, Treasury Bills held in the Collateral Account shall be credited to the
Collateral Account.
SECTION 10.02. Eligible Investments. Upon written order from the
--------------------
Company, the Trustee shall invest any funds in the Collateral Account in
Treasury Bills, provided that:
(a) any such investment and the proceeds therefrom are held through
the Collateral Account and
(b) concurrently with making such investment, the Trustee ensures
that (i) the Bank credits the Treasury Bills to the Collateral Account and
(ii) the Bank causes a corresponding position to be credited to its
securities account (A) at the Federal Reserve Bank of New York or (B) at a
securities intermediary (as defined in 31 C.F.R. ss.357.2) that has a
Participant's Securities Account with the Federal Reserve Bank of New York
and also credited to such Participant's Securities Account, in each case
pursuant to Treasury Regulations and the New York Uniform Commercial Code
(the "UCC"), to the extent such laws are applicable.
The Trustee shall not be liable for any loss incurred on any funds
invested in Treasury Bills pursuant to the provisions of this section.
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SECTION 10.03. Release of Collateral. Upon written order from the
---------------------
Company to the Trustee pursuant to clause (i) of Section 10.01(b), all
properties in the Collateral Account shall be released to the Company and the
security interests in the Collateral created under Section 10.01 shall
terminate; and upon the Special Redemption, the Trustee shall apply all funds in
the Collateral Account (i) first, to pay the Special Redemption Price on the
Special Redemption Date in respect of the Special Redemption with respect to the
Securities and to pay $4,221,568 to the Warrant Agent in respect of the Special
Redemption of the Warrants (ii) second, to make payment to the Company, on
behalf of Parent, for the redemption by Parent of the Senior PIK Preferred Stock
and warrants held by NatWest Capital Markets Limited and (iii) third,
immediately after the Special Redemption Date, to return any remaining funds in
the Collateral Account to the Company. The Trustee, when required by the
provisions of the foregoing sentence, shall execute instruments to release the
Collateral from the lien of this Indenture, or convey the Trustee's interest in
the same, in a manner and under circumstances which are not inconsistent with
the provisions of this Indenture, and shall have the power to effect any sale of
the Treasury Bills or any portion thereof at such time. The Trustee shall not be
liable for any loss incurred upon the sale of Treasury Bills prior to maturity
in accordance with this Section and Section 3.06. No party relying upon an
instrument executed by the Trustee as provided in this Article 10 shall be bound
to ascertain the Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys. No party relying
upon an instrument executed by the Trustee as provided in this Article 10 shall
be bound to ascertain the Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any moneys.
ARTICLE 11.
RIGHT TO REQUIRE REPURCHASE
SECTION 11.01. Repurchase of Securities at Option of the Holder Upon
-----------------------------------------------------
a Change of Control. (a) In the event that a Change of Control occurs, each
- -------------------
Holder will have the right, at such Holder's option, to require the Company to
repurchase all or any part of such Holder's Securities pursuant to an
unconditional, irrevocable offer by the Company (provided that the principal
amount of such Securities at stated maturity must be $1,000 or an integral
multiple thereof) on the date that is no later than 45 Business Days after the
occurrence of such Change of Control (the "CHANGE OF CONTROL PURCHASE DATE"), at
a cash price (the "CHANGE OF CONTROL PURCHASE PRICE") equal to 101% of the
Accreted Value thereof, plus accrued and unpaid interest, if any, to and
including the Change of Control Purchase Date.
(b) So long as the Company has guaranteed the repayment of principal
and interest on the Credit Agreement, prior to the commencement of a Change of
Control Offer, but in any event within 30 days following any Change of Control,
the Company shall, if at such time the terms of the Credit Agreement require
repayment upon a Change of Control, (i) repay in full and terminate all
commitments and Indebtedness under the Credit
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Agreement or, (ii)(A) offer to repay in full and terminate all commitments and
Indebtedness under the Credit Agreement and (B) repay the Indebtedness owed to
each such lender that has accepted such offer or (iii) obtain the requisite
consents under the Credit Agreement to waive the provisions of this sentence.
The Company's failure to comply with the preceding sentence shall constitute an
Event of Default described in Section 6.01(c) and not in Section 6.01(b).
(c) In the event that, pursuant to this Section 11.01, the Company shall
be required to commence such an offer to purchase Securities (a "CHANGE OF
CONTROL OFFER"), the Company shall follow the procedures set forth in this
Section 11.01 as follows:
(1) the Change of Control Offer shall commence within 20 Business
Days following the Change of Control date;
(2) the Change of Control Offer shall remain open for 20 Business
Days, except to the extent that a longer period is required by applicable
law (the "CHANGE OF CONTROL OFFER PERIOD");
(3) upon the expiration of a Change of Control Offer Period, the
Company shall purchase all of the properly tendered and not properly
withdrawn Securities in response to the Change of Control Offer;
(4) the Company shall provide the Trustee with notice of the Change
of Control Offer at least 5 Business Days before the commencement of any
Change of Control Offer; and
(5) on or before the commencement of any Change of Control Offer,
the Company or the Trustee (upon the request and at the expense of the
Company) shall send, by first-class mail, a notice to each of the Holders,
which (to the extent consistent with this Indenture) shall govern the
terms of the Change of Control Offer and shall state:
(i) that the Change of Control Offer is being made pursuant to
such notice and this Section 11.01 and that all Securities, or
portions thereof, tendered will be accepted for payment;
(ii) the Change of Control Purchase Price (including the amount of
accrued and unpaid interest), the Change of Control Purchase Date
and the Change of Control Put Date (as defined below);
(iii) that any Security, or portion thereof, not tendered or
accepted for payment will continue to accrue interest;
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(iv) that, unless the Company defaults in depositing cash with the
Paying Agent in accordance with the last paragraph of this clause
(b) or such payment is prevented, any Security, or portion thereof,
accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Purchase Date;
(v) that Holders electing to have a Security, or portion thereof,
purchased pursuant to a Change of Control Offer will be required to
surrender the Security, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Security completed, to the
Paying Agent (which may not for purposes of this Section 11.01,
notwithstanding anything in this Indenture to the contrary, be the
Company or any Affiliate of the Company) at the address specified in
the notice prior to the close of business on the earlier of (a) the
third Business Day prior to the Change of Control Purchase Date and
(b) the third Business Day following the expiration of the Change of
Control Offer (such earlier date being the "Change of Control Put
Date");
(vi) that Holders will be entitled to withdrawn their election, in
whole or in part, if the Paying Agent (which may not for purposes of
this Section 11.01. notwithstanding anything in this Indenture to
the contrary be the Company or any Affiliate of the Company)
receives, up to the close of business on the Change of Control Put
Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Securities
the Holder is withdrawing and a statement that such Holder is
withdrawing his election to have such principal amount of Securities
purchased; and
(vii) a brief description of the events resulting in such Change of
Control.
Any such Change of Control Offer shall comply with all applicable
provisions of Federal and state securities laws, including those regulating
tender offers, if applicable, and any provisions of this Indenture which
conflict with such laws shall be deemed to be superseded by the provisions of
such laws.
On or before the Change of Control Purchase Date, the Company will
(i) accept for payment Securities or portions thereof properly tendered and not
properly withdrawn pursuant to the Change of Control Offer, (ii) deposit with
the Paying Agent cash sufficient to pay the Change of Control Purchase Price
(including accrued and unpaid interest) for all Securities or portions thereof
so tendered and (iii) deliver to the Trustee Securities so accepted together
with an Officers' Certificate listing the Securities or portions thereof being
purchased by the Company. The Paying Agent will on the Change of Control
Purchase Date promptly deliver to Holders of Securities so accepted payment in
an amount
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equal to the Change of Control Purchase Price for such Securities, together with
any accrued but unpaid interest, and the Trustee shall promptly authenticate and
mail or deliver to such Holders a new Security equal in principal amount at
maturity to any unpurchased portion of the Security surrendered. Any Securities
not so accepted shall be promptly mailed or delivered by the Company to the
Holder thereof. The Company will announce publicly the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Purchase
Date.
ARTICLE 12.
GUARANTEE OF SECURITIES
SECTION 12.01. Guarantee. (a) The Guarantor hereby irrevocably and
---------
unconditionally guarantees, as a primary obligor and not a surety, to each
Holder of a Security now or hereafter authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Securities or the Obligations of the
Company hereunder or thereunder, (i) the due and punctual payment of the
principal of, premium, if any, interest (including post-petition interest in any
proceeding under any bankruptcy law whether or not an allowed claim in such
proceeding) and interest (including post-petition interest in any proceeding
under any bankruptcy law whether or not an allowed claim in such proceeding) on
overdue principal, premium, if any, and interest, if lawful on such Security,
and (ii) all other monetary Obligations payable by the Company under this
Indenture (including under Section 7.07 hereof) and the Securities (all of the
foregoing being hereinafter collectively called the "Guaranteed Obligations"),
when and as the same shall become due and payable, whether by acceleration
thereof, call for redemption or otherwise (including amounts that would become
due but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code), in accordance with the terms of any such Security and of this
Indenture. The Guarantor hereby agrees that its Obligations hereunder shall be
absolute and unconditional, irrespective of, and shall be unaffected by, any
failure to enforce the provisions of any such Security or this Indenture, any
waiver, modification or indulgence granted to the Company with respect thereto,
by the Holders or the Trustee, or any other circumstances which may otherwise
constitute a legal or equitable discharge of a surety or guarantor. The
Guarantor hereby waives diligence, presentment, filing of claims with a court in
the event of a merger or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest or notice with respect to any such
Security or the Indebtedness evidenced thereby and all demands whatsoever, and
covenants that this Guarantee shall not be discharged as to any such Security
except by payment in full of the principal thereof, premium, if any, and all
accrued interest thereon.
(b) The Guarantor further agrees that its guarantee herein
constitutes a guarantee of payment, performance and compliance when due (and not
a guarantee of collection)
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and waives any right to require that any resort be had by any Holder or the
Trustee to any security held for payment of the Guaranteed Obligations.
(c) The Guarantor agrees that it shall not be entitled to, and
hereby irrevocably waives, any right of subrogation in relation to the Holders
or the Trustee in respect of any Guaranteed Obligations until the Guaranteed
Obligations are discharged in full. The Guarantor further agrees that, as
between the Guarantor, on the one hand, and the Holders and the Trustee, on the
other hand, (x) the maturity of the Guaranteed Obligations may be accelerated as
provided in Article 6 for the purposes of the Guarantor's guarantee herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Guaranteed Obligations, and (y) in the event of
any declaration of acceleration of such Guaranteed Obligations as provided in
Article 6, such Guaranteed Obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantor for the purpose of this
Article 12.
(d) The Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees) incurred by the Trustee or any Holder in
enforcing any rights under this Article 12 or succeeding Article 13.
(e) The Guarantee set forth in this Article 12 shall not be valid or
become obligatory for any purpose with respect to a Security until the
certificate of authentication on such Security shall have been signed by or on
behalf of the Trustee.
SECTION 12.02. Execution and Delivery of Guarantee. (a) To evidence
-----------------------------------
the Guarantee set forth in this Article 12, the Guarantor hereby agrees that a
notation of the Guarantee shall be placed on each Security authenticated and
delivered by the Trustee.
(b) This Indenture shall be executed on behalf of the Guarantor, and
an Officer of the Guarantor shall sign the notation of Guarantee on the
Securities by manual or facsimile signature. If an Officer whose signature is on
this Indenture or the notation of Guarantee no longer holds that office at the
time the Trustee authenticates the Security on which the Guarantee is endorsed,
the Guarantee shall be valid nevertheless. The Guarantor hereby agrees that the
Guarantee set forth in Section 12.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Security a notation of the
Guarantee.
(c) The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Guarantee
set forth in this Indenture on behalf of the Guarantor.
SECTION 12.03. Successors and Assigns. This Article 12 shall be
----------------------
binding upon the Guarantor and its successors and assigns and shall inure to the
benefit of the successors and assigns of the Trustee and the Holders and, in the
event of any transfer or assignment of rights by any Holder or the Trustee, the
rights and privileges conferred upon
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that party in this Indenture and in the Securities shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions of this Indenture.
SECTION 12.04. Guarantee Unconditional, Etc. Upon failure of payment
----------------------------
when due of any Guaranteed Obligation for whatever reason, the Guarantor will be
obligated to pay the same immediately. The Guarantor hereby agrees that its
obligations hereunder shall be continuing, absolute and unconditional,
irrespective of: any delays in obtaining or realizing upon or failure to obtain
or realize upon Collateral; the recovery of any judgment against the Company or
the Guarantor; any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of the Company under this Indenture or any
Security, by operation of law or otherwise; any modification or amendment of or
supplement to this Indenture or any Security; any change in the corporate
existence, structure or ownership of the Company, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting the Company or its assets
or any resulting release or discharge of any obligation of the Company contained
in this Indenture or any Security; the existence of any claim, set-off or other
rights which the Guarantor may have at any time against the Company, the Parent,
the Trustee, any Holder or any other Person, whether in connection herewith or
any unrelated transactions; provided, that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory counterclaim; any
invalidity or unenforceability relating to or against the Company for any reason
of this Indenture or any Security, or any provision of applicable law or
regulation purporting to prohibit the payment by the Company of the principal of
or interest on any Security or any other Guaranteed Obligation; or any other act
or omission to act or delay of any kind by the Company, the Trustee, any Holder
or any other Person or any other circumstance whatsoever which might, but for
the provisions of this paragraph, constitute a legal or equitable discharge of
the Guarantor's obligations hereunder. The Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demand whatsoever and covenants
that this Guarantee will not be discharged except by the complete performance of
the obligations contained in the Securities, this Indenture and in this Article
12. The Guarantor's obligations hereunder shall remain in full force and effect
until the Indenture shall have terminated and the principal of and interest on
the Securities and all other Guaranteed Obligations shall have been paid in
full. If at any time any payment of the principal of or interest on any Security
or any other payment in respect of any Guaranteed Obligation is rescinded or
must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, the Guarantor's obligations
hereunder with respect to such payment shall be reinstated as though such
payment had been due but not made at such time, and this Article 12, to the
extent theretofore discharged, shall be reinstated in full force and effect.
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SECTION 12.05. Covenants of the Guarantor. The Guarantor hereby
--------------------------
covenants and agrees that as of the Issuance Date, and thereafter for so long as
this Indenture is in effect and the Securities, together with interest, and all
other Obligations under this Indenture are paid in full, it:
(i) shall engage in no business other than the ownership of 100% of
the Capital Stock of the Company and to acquire licenses pending before
the FCC in respect of television stations on the date hereof and related
television stations and properties;
(ii) shall not and shall not permit its Subsidiaries to take any
action or omit to take any action which action or omission could
reasonably be expected to have or would have the effect of impairing the
security interest in favor of the Trustee on behalf of the Holders with
respect to the Collateral;
(iii) shall not incur or permit to exist any Indebtedness of the
Guarantor (other than pursuant to the Guarantee);
(iv) shall not create, incur or permit to exist any Liens on its
assets other than Liens securing the Guarantee;
(v) shall not sell, transfer or otherwise dispose of any of its
assets other than Qualified Capital Stock and television licenses and
related television stations and properties acquired pursuant to clause (i)
of this Section 12.05;
(vi) shall not make Investments in any Person (other than common
equity contributions to the Company) except for Guarantor Permitted
Investments; and
(vii) shall at all times cause 100% of the issued and outstanding
shares of Capital Stock of the Company to be pledged as Collateral
pursuant to Article 13 of this Indenture.
ARTICLE 13.
SECURITY AND PLEDGE OF COLLATERAL
SECTION 13.01. Grant of Security Interest. To secure the full and
--------------------------
punctual payment when due and the full and punctual performance of the
Guaranteed Obligations, the Guarantor hereby grants to the Trustee, for the
benefit of the Trustee and the Holders, a security interest in all of its
rights, title and interest in and to the following (the "Collateral"):
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(i) all of the shares of Capital Stock of the Company, now owned or
hereafter acquired by the Guarantor (collectively, the "Pledged Shares");
(ii) all certificates representing any of the Pledged Shares; and
(iii) subject to Section 13.05, all dividends, cash, instruments and
other property and proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any of the
foregoing.
13.02. Delivery of Collateral. Any and all certificates or
----------------------
instruments representing or evidencing Collateral shall be delivered to and held
by or on behalf of the Trustee pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to the
Trustee. The Trustee shall have the right (but not the obligation), at any time
in its discretion and without notice to the Guarantor, to transfer to or to
register in the name of the Trustee or any of its nominees any or all of the
Collateral. In addition, the Trustee shall have the right at any time to
exchange certificates or instruments representing or evidencing Collateral for
certificates or instruments of different denominations.
SECTION 13.03. Representations and Warranties. The Guarantor (also
------------------------------
referred to herein as the "Pledgor") hereby represents and warrants as follows:
(i) the Pledgor is, and at the time of delivery of the Collateral to
the Trustee pursuant hereto will be, the record and beneficial owner of
the Pledged Shares described on Schedule I as being owned by the Pledgor,
free and clear of any Lien, except for the Lien created by this Indenture;
(ii) the Pledgor has full corporate power, authority and legal right
to pledge all of the Pledged Shares described on Schedule I as being owned
by the Pledgor and all Collateral pledged by the Pledgor pursuant to this
Indenture;
(iii) this Indenture has been duly authorized, executed and delivered
by the Pledgor and constitutes the legal, valid and binding obligation of
the Pledgor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, or other similar
laws affecting the rights of creditors generally or by the application of
general equity principles;
(iv) no consent of any other party (including creditors of the
Pledgor), and no authorization, consent, approval, or other action by, and
no notice to or filing with, any governmental authority or agency by the
Pledgor is required either (i) for the pledge by the Pledgor of the
Collateral pursuant to this Indenture or for the execution, delivery or
performance of this Indenture by the Pledgor or (ii) for the exercise by
the Trustee of the voting or other rights provided for in this Indenture
or
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the remedies in respect of the Collateral pursuant to this Indenture (it
being understood that such exercise of voting or other rights or remedies
may lead to a termination of all or some of the Company's franchise or
license agreements), except as may be required in connection with the
disposition of the Collateral by laws affecting the offering and sale of
securities generally;
(v) the Pledged Shares described on Schedule I as being owned by the
Pledgor have been duly authorized and are validly issued, fully paid and
nonassessable;
(vi) the pledge in accordance with the terms of this Indenture of the
Pledged Shares described on Schedule I as being owned by the Pledgor
creates a valid and perfected first priority Lien on the Collateral,
securing payment of the Guaranteed Obligations;
(vii) Schedule I hereto sets forth a description of all of the Pledged
Shares owned by the Pledgor as of the date hereof;
(viii) the Pledgor is the sole owner of all of the issued and
outstanding shares of Capital Stock of the Company listed on Schedule I
hereto. There are no existing options, warrants, calls or commitments of
any character relating to any authorized and unissued Capital Stock of the
Company; and
(ix) as of the Issuance Date, the shares of Capital Stock of the
Company listed on Schedule I hereto constitute 100% of the issued and
outstanding Capital Stock of the Company.
SECTION 13.04. Further Assurances. The Pledgor agrees that at any
------------------
time and from time to time, at the expense of the Pledgor, the Pledgor will
promptly execute and deliver all further instruments and documents and take all
further action that may be necessary or desirable or that the Trustee may
reasonably request in order to perfect and protect any Lien granted or purported
to be granted hereby or to enable the Trustee to exercise and enforce its rights
and remedies hereunder with respect to any Collateral.
SECTION 13.05. Voting Rights; Dividends; Etc. (a) The Pledgor shall
-----------------------------
be entitled to receive and retain any and all cash dividends paid in respect of
the Pledged Shares owned by the Pledgor, but only if the payment of the
respective cash dividend is permitted to be made in accordance with the
requirements of Section 4.04 of this Indenture. Unless the Trustee receives
written notice to the contrary from the Company or the Holders of 25% in
aggregate principal amount at maturity of the outstanding Securities, or unless
otherwise notified pursuant to Section 4.08 or 4.09, the Trustee may assume,
without investigation, that the Pledgor shall be entitled to receive and retain
any and all cash dividends.
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(b) Except as otherwise provided in the preceding clause (a) and
the following sentence, the Trustee shall be entitled to receive and retain as
Collateral all dividends paid and distributions made in respect of the Pledged
Shares. Any such dividends shall, if received by the Pledgor, be segregated from
the other property or funds of the Pledgor, and be forthwith returned to the
Company in the same form as so received (with any necessary endorsement) within
30 days and, if not so returned to the Company, forthwith delivered to the
Trustee as Collateral.
(c) As long as no declaration of acceleration as set forth in
Section 6.02 or an Event of Default specified in 6.01(e) or (f) shall have
occurred and be continuing with respect to the Company, the Pledgor shall be
entitled to exercise any and all voting and other consensual rights relating to
the Pledged Shares owned by the Pledgor or any part thereof for any purpose not
inconsistent with the terms of this Indenture. The Trustee shall execute and
deliver (or cause to be executed and delivered) to the Pledgor all such proxies
and other instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and other rights which it is
entitled to exercise pursuant to the preceding sentence.
(d) Upon a declaration of acceleration as set forth in Section 6.02
and during the continuance of an Event of Default specified in 6.01(e) or (f),
at the option of the Trustee (or upon the direction of the holders of at least
25% in aggregate principal amount of the then outstanding Securities), all
rights of the Pledgor to exercise the voting and other consensual rights that it
would otherwise be entitled to exercise pursuant to Section 13.05(c) shall cease
and all such rights shall thereupon be vested in the Trustee who shall thereupon
have the sole right to exercise such voting and other consensual rights, subject
to obtaining any required approvals or authorizations from the Federal
Communications Commission ("FCC") or any other material approvals or
authorizations from any other governmental authority.
(e) In order to permit the Trustee to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section
13.05(d), and to receive dividends and distributions, if any, which it may be
entitled to receive under Section 13.05(b), the Pledgor shall, if necessary,
upon written notice of the Trustee, from time to time execute and deliver to the
Trustee appropriate dividend payment orders and such other instruments as the
Trustee may reasonably request, and shall use its best efforts to assist the
Trustee in, and shall bear all costs of, obtaining any required FCC approvals or
authorizations to enable the Trustee to exercise such voting and other
consensual rights.
SECTION 13.06. Trustee Appointed Attorney-in-Fact. The Pledgor
----------------------------------
hereby appoints the Trustee as its attorney-in-fact, with full authority in the
place and stead of the Pledgor and in the name of the Pledgor or otherwise, from
time to time in the Trustee's discretion, to take any action and to execute any
instrument which the Trustee may deem necessary or advisable in order to
accomplish the purposes of this Indenture, including to receive, endorse and
collect all instruments made payable to the Pledgor representing any
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dividend, interest payment or other distribution in respect of the Collateral or
any part thereof and to give full discharge for the same. This power, being
coupled with an interest, is irrevocable.
SECTION 13.07. Trustee May Perform. If the Pledgor fails to perform
-------------------
any agreement contained herein, the Trustee may itself perform, or cause
performance of, such agreement, and the expenses of the Trustee incurred in
connection therewith shall be payable by the Pledgor under Section 7.07.
Whenever in the administration of its responsibilities with respect to the
Collateral the Trustee shall deem it necessary or desirable that a matter be
proved or established by the Pledgor or any other party in connection with the
taking, suffering or omitting any action by the Trustee, such matter may be
conclusively proved or established by an Officers' Certificate of the Pledgor,
and such certificate shall be full warranty to the Trustee for any action taken,
suffered or omitted in reliance thereon.
SECTION 13.08. Trustee's Duties. The powers conferred on the
----------------
Trustee under this Article 13 are solely to protect the interest of the Trustee
and the Holders in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Trustee shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral, including, without limitation, for the attachment,
petition, priority or enforceability of any lien created or purported to be
created hereunder with respect to the Collateral, or the adequacy, sufficiency
or effectiveness of Section 13.01, or the value of the Collateral granted
pursuant to that Section.
SECTION 13.09. Remedies Upon Event of Default. (a) Upon a
------------------------------
declaration or acceleration as set forth in Section 6.02 and during the
continuance of an Event of Default specified in 6.01(e) or (f), the Trustee may
exercise in respect of the Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the rights and remedies
provided a secured party upon the default of a debtor under the Uniform
Commercial Code at that time, and the Trustee may also, without notice except as
specified below or required by law, sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any exchange, broker's board
or at any of the Trustee's offices or elsewhere, for cash, on credit or for
future delivery, upon such terms as the Trustee may determine to be commercially
reasonable, and the Trustee or any Holder may be the purchaser of any or all of
the Collateral so sold and thereafter hold the same, absolutely, free from any
right or claim of whatsoever kind. The Pledgor agrees that, to the extent notice
of sale shall be required by law, at least 10 days' notice to the Pledgor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Trustee shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Trustee may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. The
Trustee shall incur no liability as a result of the sale of the
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Collateral, or any part thereof, at any private sale. The Pledgor hereby waives
any claims against the Trustee arising by reason of the fact that the price at
which any Collateral may have been sold at such a private sale was less than the
price which might have been obtained at a public sale, even if the Trustee
accepts the first offer received and does not offer such Collateral to more than
one offeree.
(b) The Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, the
Trustee may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who will agree, among other things, to
acquire such securities for their own account, for investment, and not with a
view to the distribution or resale thereof. Furthermore, the Trustee may be
compelled to limit purchasers to those who can obtain any required
authorizations or approvals of the FCC. The Pledgor acknowledges and agrees that
any such sale may result in prices and other terms less favorable to the seller
than if such sale were a public sale without such restrictions and,
notwithstanding such circumstances, agrees that any such sale shall be deemed to
have been made in a commercially reasonable manner. The Trustee shall be under
no obligation to delay the sale of any of the Pledged Shares for the period of
time necessary to permit the Pledgor to register such securities for public sale
under the Securities Act, or under applicable state securities laws, or to
identify and negotiate a sale with a purchaser who has obtained or can obtain
any required FCC approvals or authorizations, even if such Pledgor would agree
to do so.
SECTION 13.10. Application of Proceeds. Any cash held by the
Trustee as Collateral and all cash proceeds received by the Trustee in respect
of any sale of, collection from, or other realization upon, all or any part of
the Collateral, shall be applied by the Trustee in the manner specified in
Section 6.06.
SECTION 13.11. Pledgor's Obligations Absolute. The obligations of
------------------------------
the Pledgor under this Indenture shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by:
(i) any renewal, extension, amendment or modification of or addition
or supplement to or deletion from this Indenture;
(ii) any waiver, consent, extension, indulgence or other action or
inaction under or in respect of this Indenture;
(iii) any furnishing of any additional security to the Trustee or its
assignee or any acceptance thereof or any release of any security by the
Trustee or its assignee; or
(iv) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to
the Pledgor or any
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Subsidiary of the Pledgor, or any action taken with respect to this
Indenture by any trustee or receiver, or by any court, in any such
proceeding, whether or not the Pledgor shall have notice or knowledge of
any of the foregoing.
SECTION 13.12. Continuing Lien. This Indenture shall create a
---------------
continuing Lien on the Collateral that shall (i) remain in full force and effect
until payment in full of the Securities or earlier defeasance pursuant to
Article 8, (ii) be binding upon the Pledgor and its successors and assigns and
(iii) inure to the benefit of the Trustee and its successors, transferees and
assigns. Upon satisfaction by the Company of the conditions set forth in Article
8 to its legal defeasance option or its covenant defeasance option, the Trustee
shall upon request of the Pledgor return the Collateral to the Pledgor, and
shall acknowledge in writing the discharge of the Lien on the Collateral created
by this Article 13.
SECTION 13.13. Certificates and Opinions. The Pledgor shall comply
-------------------------
with (a) TIA ss. 314(b), relating to Opinions of Counsel regarding the Lien of
this Indenture and (b) TIA ss. 314(d), relating to the release of Collateral
from the Lien of this Indenture and Officers' Certificates or other documents
regarding fair value of the Collateral, to the extent such provisions are
applicable. Any certificate or opinion required by TIA ss. 314(d) may be
executed and delivered by an Officer of the Pledgor to the extent permitted by
TIA ss. 314(d).
ARTICLE 14.
MISCELLANEOUS
SECTION 14.01. TIA Controls. If any provision of this Indenture
------------
limits, qualifies, or conflicts with the duties imposed by operation of the TIA,
the imposed duties, upon qualification of this Indenture under the TIA, shall
control.
SECTION 14.02. Notices. Any notices or other communications to the
-------
Company, the Guarantor or the Trustee required or permitted hereunder shall be
in writing, and shall be sufficiently given if made by hand delivery, by telex,
by telecopier or registered or certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Parent, the Guarantor or the Company:
Price Communications Corporation
Price Communications Cellular Inc.
Price Communications Cellular Holdings, Inc.
45 Rockefeller Plaza
New York, New York 10020
Attention: Chief Financial Officer
Telecopy: (212) 397-3755
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with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036-8299
Attention: Peter G. Samuels, Esq.
Telecopy: (212) 969-2900
if to the Trustee:
Bank of Montreal Trust Company
77 Water Street
4th Floor
New York, New York 10005
Attention: Corporate Trust Department
Telecopy: (212) 701-7684
Any party, by notice to each other party may designate additional or
different addresses as shall be furnished in writing by such party. Any notice
or communication to any party shall be deemed to have been given or made as of
the date so delivered, if personally delivered; when answered back, if telexed;
when receipt is acknowledged, if telecopied; and five Business Days after
mailing if sent by registered or certified mail, postage prepaid (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed to
him by first class mail or other equivalent means at his address as it appears
on the registration books of the Registrar and shall be sufficiently given to
him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 14.03. Communications by Holders with Other Holders. Holders
--------------------------------------------
may communicate pursuant to TIA ss. 312(b) with other Holders with respect to
their rights under this Indenture or the Securities. The Company, the Guarantor,
the Trustee, the Registrar and any other Person shall have the protection of TIA
ss. 312(c).
SECTION 14.04. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company and/or the Guarantor to the
Trustee to take any action under this Indenture, such Person shall furnish to
the Trustee:
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(1) an Officers' Certificate (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 14.05. Statements Required in Certificate or Opinion. Each
---------------------------------------------
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with;
provided however, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 14.06. Rules by Trustee, Paying Agent, Registrar. The
-----------------------------------------
Trustee may make reasonable rules for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 14.07. Legal Holidays. A "Legal Holiday" is a Saturday, a
--------------
Sunday or a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close. If a payment date is
a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 14.08. Governing Law. THIS INDENTURE AND THE
-------------
SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE
OF NEW YORK. EACH OF THE
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0000G54P.W51
<PAGE>
COMPANY AND THE GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK
OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK
IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
INDENTURE AND THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
COURTS. EACH OF THE COMPANY AND THE GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY HOLDER TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE COMPANY OR THE GUARANTOR IN ANY OTHER
JURISDICTION.
SECTION 14.09. No Adverse Interpretation of Other Agreements. This
---------------------------------------------
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or the Guarantor or any of their respective Subsidiaries. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 14.10. No Recourse Against Others. No direct or indirect
--------------------------
employee, stockholder (except the Guarantor as a party hereto), director or
officer, as such, past, present or future of the Company, or the Guarantor, or
any successor entity to the Company or the Guarantor, shall have any personal
liability in respect of the obligations of the Company or the Guarantor under
the Securities or this Indenture by reason of his or its status as such
stockholder, employee, director or officer. Each Holder by accepting a Security
waives and releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Securities.
SECTION 14.11. Successors. All agreements of the Company and the
----------
Guarantor in this Indenture and the Securities shall bind their successors. All
agreements of the Trustee in this Indenture shall bind its successor.
SECTION 14.12. Duplicate Originals. All parties may sign any number
-------------------
of copies or counterparts of this Indenture. Each signed copy or counterpart
shall be an original, but all of them together shall represent the same
agreement.
SECTION 14.13. Severability. In case any one or more of the
------------
provisions in this Indenture or in the Securities shall be held invalid, illegal
or unenforceable, in any
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<PAGE>
respect for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions shall not in
any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
SECTION 14.14. Table of Contents, Headings, Etc. The Table of
--------------------------------
Contents, Cross-Reference Table and headings of the Articles and the Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.
SECTION 14.15. Qualification of Indenture. The Company shall qualify
--------------------------
this Indenture under the TIA in accordance with the terms and conditions of the
Registration Rights Agreement and shall pay all costs and expenses (including
attorneys' fees for the Company, the Guarantor and the Trustee) incurred in
connection therewith, including, but not limited to, costs and expenses of
qualification of the Indenture and the Securities and printing this Indenture
and the Securities. The Trustee shall be entitled to receive from the Company
and the Guarantor any such Officers' Certificates, Opinions of Counsel or other
documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
SECTION 14.16. Registration Rights. Certain Holders of the
-------------------
Securities are entitled to certain registration rights with respect to such
Securities pursuant to, and subject to the terms of, the Registration Rights
Agreement.
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0000G54P.W51
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
PRICE COMMUNICATIONS CELLULAR
HOLDINGS, INC., a Delaware corporation
By:
---------------------------------
Name:
Title:
Attest:
-----------------------
Secretary
PRICE COMMUNICATIONS CELLULAR
INC., a Delaware corporation
By:
---------------------------------
Name:
Title:
Attest:
-----------------------
Secretary
BANK OF MONTREAL TRUST COMPANY,
Trustee
By:
---------------------------------
Name:
Title:
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<PAGE>
SCHEDULE I
----------
Pledged Shares
--------------
Description
of Shares Issuer Owner
--------- ------ -----
100 shares Price Communications Price Communications
of Common Stock Cellular Holdings, Inc. Cellular Inc.
0000G54P.W51
<PAGE>
EXHIBIT A
[FORM OF SECURITY]
13 1/2% SERIES [A/B] SENIOR SECURED DISCOUNT NOTE DUE 2007
No. $___________
CUSIP No.
Price Communications Cellular Holdings, Inc., a Delaware corporation
(hereinafter called the "Company," which term includes any successors under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to ___________________, or registered assigns, the principal sum of $___________
Dollars, on August 1, 2007.
Interest Payment Dates: February 1 and August 1; commencing February
1, 2003.
Record Dates: January 15 and July 15.
Reference is made to the further provisions of this Security on the
reverse side, which will, for all purposes, have the same effect as if set forth
at this place.
IN WITNESS WHEREOF, the Company has caused this Instrument to be
duly executed.
Dated:
PRICE COMMUNICATIONS CELLULAR
HOLDINGS, INC., a Delaware corporation
By:
--------------------------------
Name:
Title:
Attest:
-----------------------
Secretary
0000G54P.W51
<PAGE>
EXHIBIT A
Page 2
PRICE COMMUNICATIONS CELLULAR INC.,
a Delaware corporation
By:
---------------------------------
Name:
Title:
Attest:
------------------------
Secretary
0000G54P.W51
<PAGE>
EXHIBIT A
Page 3
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned Indenture.
BANK OF MONTREAL TRUST COMPANY,
as Trustee
By:
-------------------------------
Authorized Signatory
Dated:
0000G54P.W51
<PAGE>
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
13 1/2% Series [A/B] Senior Secured Discount Note due 2007
Unless and until it is exchanged in whole or in part for Securities
in definitive form, this Security may not be transferred except as a whole by
the Depository to a nominee of the Depository or by a nominee of the Depository
to the Depository or another nominee of the Depository or by the Depository or
any such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Company
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein./1/
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN
THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST
HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS
AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON, IS NOT ACQUIRING THIS NOTE FOR THE
ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES
THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) (TAKING
INTO ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE SECURITIES ACT, IF
APPLICABLE) UNDER THE
- --------
/1/ This paragraph should only be added if the Security is issued in global
form.
0000G54P.W51
<PAGE>
SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO PRICE COMMUNICATIONS CELLULAR
HOLDINGS, INC. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON WHOM
THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
TO A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF
NOTES AT THE TIME OF TRANSFER OF LESS THAN $250,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE,
AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY), (F) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (G) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY)
AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S PERSON"
HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER A TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID"). YOU MAY
CONTACT THE SECRETARY OF PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC. AT (212)
757-5600 FOR INFORMATION REGARDING THE ISSUE PRICE, THE AMOUNT OF OID, THE ISSUE
DATE AND THE YIELD TO MATURITY WITH RESPECT TO THE NOTE.
1. Interest.
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0000G54P.W51
<PAGE>
Price Communications Cellular Holdings, Inc., a Delaware corporation
(hereinafter called the "Company," which term includes any successors under the
Indenture hereinafter referred to), promises to pay interest on the principal
amount of this Security at the rate and in the manner specified below. Interest
will accrue at 13 1/2% per annum and will be payable semi-annually in cash on
each February 1 and August 1, commencing February 1, 2003, or if any such day is
not a Business Day on the next succeeding Business Day (each an "Interest
Payment Date") to Holders of record of the Securities at the close of business
on the immediately preceding January 15 or July 15, whether or not a Business
Day. Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Interest shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance. To the extent lawful, the Company shall pay interest on overdue
principal at the rate of the then applicable interest rate on the Securities; it
shall pay interest on overdue installments of interest (without regard to any
applicable grace periods) at the same rate to the extent lawful.
2. Method of payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the Persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date. Holders must
surrender Securities to a Paying Agent to collect principal payments. Except as
provided below, the Company shall pay principal and interest in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal and interest by wire transfer of Federal
funds, or interest by its check payable in such U.S. Legal Tender. The Company
may deliver any such interest payment to the Paying Agent or the Company may
mail any such interest payment to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Bank of Montreal Trust Company (the "Trustee") will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders. The Company, Price
Communications Cellular Inc. (the "Guarantor") or any Subsidiary of the Company
may, subject to certain exceptions, act as Paying Agent, Registrar or
co-Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as of
August 11, 1997 (the "Indenture"), among the Company, the Guarantor and the
Trustee.
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0000G54P.W51
<PAGE>
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act, as in effect on the date of the Indenture. The Securities are
subject to all such terms, and Holders of Securities are referred to the
Indenture and said Act for a statement of them. The Securities are general
unsecured obligations of the Company limited in aggregate principal amount at
maturity to $153,400,000.
5. Redemption.
(a) Except as set forth in the next succeeding paragraph, the
Company will not have the right to redeem any Securities prior to August 1,
2002. On or after August 1, 2002, the Company will have the right to redeem all
or any part of the Securities in cash at the redemption prices (expressed as a
percentage of the aggregate principal amount thereof) set forth below, in each
case including accrued and unpaid interest, if any, to the applicable Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date to receive interest due on an Interest Payment Date that is on or prior to
the Redemption Date) if redeemed during the 12- month period beginning August 1,
of the years indicated below:
Year Redemption Price
---- ----------------
2002 106.750%
2003 104.500%
2004 102.250%
2005 and thereafter 100.000%
Notwithstanding the optional redemption provisions described in the
preceding paragraph, on or after August 1, 1998, the Company will have the right
to redeem all or any part of the Notes in cash at 120.000% of the Accreted Value
thereof, including accrued and unpaid interest, if any, to the applicable
Redemption Date (subject to the right of Holders of record on the relevant
regular record date to receive interest due on an interest payment date that is
on or prior to the Redemption Date) if redeemed during the 12-month period
beginning August 1, of the years indicated below; provided that redemptions may
be made only if the closing price of the Parent's Common Stock
-4-
0000G54P.W51
<PAGE>
equals or exceeds the prices set forth below for the 10 consecutive trading days
prior to the redemption date in each period:
Parent's
Year Stock Price
---- -----------
1998...................................$15.00
1999...................................$20.00
2000...................................$25.00
2001...................................$30.00
In the case of a partial redemption, the Trustee shall select the
Securities or portions thereof for redemption on a pro rata basis or in such
other manner as it deems appropriate and fair. The Securities may be redeemed in
part in multiples of $1,000 only.
The Securities will not have the benefit of a sinking fund.
Any such redemption will comply with Article III of the Indenture.
(b) The Securities will be subject to a special redemption (the
"Special Redemption") on, or at any time prior to, December 31, 1997 if the
Merger is not consummated on or before December 31, 1997 or if it appears, in
the sole judgment of the Company, that the Merger will not be consummated by
December 31, 1997. The amount payable to Holders of the Securities to redeem all
of the Securities pursuant to the Special Redemption shall be equal to 101% of
the Accreted Value of the Securities minus $4,221,568.
6. Notice of Redemption.
Notice of redemption will be sent by first class mail, at least 30
days and not more than 60 days prior to a Redemption Date other than the Special
Redemption Date, and with respect to the Special Redemption Date, not less than
5 business days prior to the Special Redemption Date, to the Holder of each
Security to be redeemed at such Holder's last address as then shown upon the
registry books of the Registrar.
Any notice which relates to a Security to be redeemed in part only
must state the portion of the principal amount to be redeemed and must state
that on and after the date fixed for redemption, upon surrender of such
Security, a new Security or Securities in a principal amount equal to the
unredeemed portion thereof will be issued. On and after the date fixed for
redemption, interest will cease to accrue on the portions of the Securities
called for redemption.
-5-
0000G54P.W51
<PAGE>
7. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may register
the transfer of, or exchange Securities in accordance with, the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by, the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption prior to 15 days after the
notice of redemption.
8. Persons Deemed Owners.
The registered Holder of a Security may be treated as the owner of
it for all purposes.
9. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed
for one year, the Trustee and the Paying Agent(s) will pay the money back to the
Company at its written request. After that, all liability of the Trustee and
such Paying Agent(s) with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
Except as set forth in the Indenture, if the Company irrevocably
deposits with the Trustee, in trust, for the benefit of the Holders, cash, U.S.
Legal Tender Equivalents, U.S. Government Obligations or a combination thereof,
in such amounts as will be sufficient in the opinion of a nationally recognized
firm of independent public accountants selected by the Trustee, to pay the
principal of, premium, if any, and interest on the Securities to redemption or
maturity and comply with the other provisions of the Indenture relating thereto,
the Company will be discharged from certain provisions of the Indenture and the
Securities (including the financial covenants, but excluding their obligation to
pay the principal of and interest on the Securities). Upon satisfaction of
certain additional conditions set forth in the Indenture, the Company may elect
to have its obligations discharged with respect to outstanding Securities.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may
be amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any,
Holder, the parties thereto may amend or supplement
-6-
0000G54P.W51
<PAGE>
the Indenture or the Securities to, among other things, cure any ambiguity,
defect or inconsistency, or make any other change that does not adversely affect
the rights of any Holder of a Security.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries to, among other things, incur additional
Indebtedness and Disqualified Capital Stock, pay dividends or make certain other
restricted payments, enter into certain transactions with Affiliates, incur
Liens, sell assets, merge or consolidate with any other Person or transfer (by
lease, assignment or otherwise) substantially all of the properties and assets
of the Company. The limitations are subject to a number of important
qualifications and exceptions. The Company must periodically report to the
Trustee on compliance with such limitations.
13. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required
to offer to purchase on the Change of Control Payment Date all outstanding
Securities at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the Change of Control Payment Date.
Holders of Securities will receive a Change of Control Offer from the Company
prior to any related Change of Control Payment Date and may elect to have such
Securities purchased by completing the form entitled "Option of Holder to Elect
Purchase" appearing below.
(b) The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries to sell assets. In the event the
proceeds from a permitted Asset Sale exceed certain amounts, as specified in the
Indenture, the Company will be required either to reinvest the proceeds of such
Asset Sale as described in the Indenture or to make an offer to purchase each
Holder's Securities at 100% of the principal amount thereof, plus accrued
interest, if any, to the purchase date.
14. Successors.
When a successor assumes all the obligations of its predecessor
under the Securities and the Indenture, the predecessor will be released from
those obligations.
15. Defaults and Remedies.
If an Event of Default occurs and is continuing (other than as Event
of Default relating to certain events of bankruptcy, insolvency or
reorganization), then in every such case, unless the principal of all of the
Securities shall have already become due and payable, either the Trustee or the
Holders of 25% in aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable immediately
-7-
0000G54P.W51
<PAGE>
in the manner and with the effect provided in the Indenture. The Holders of
Securities may not enforce the Indenture or the Securities except as provided in
the Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Securities. Subject to certain limitations,
Holders of a majority in aggregate principal amount of the Securities then
outstanding may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Securities notice of any continuing Default
or Event of Default (except a Default in payment of principal or interest), if
it determines that withholding notice is in their interest.
16. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company, the Guarantor or any Affiliate of the Company, and may otherwise deal
with the Company, the Guarantor or their respective Affiliates as if it were not
the Trustee.
17. No Recourse Against Others.
No stockholder (except the Guarantor), director, officer or
employee, as such, past, present or future, of the Company, the Guarantor or any
successor corporation shall have any personal liability in respect of the
obligations of the Company or the Guarantor under the Securities or the
Indenture by reason of his or its status as such stockholder, director, officer
or employee. Each Holder of a Security by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities.
18. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Security.
19. Guarantee; Security.
The Guarantor has irrevocably and unconditionally guaranteed the
payment of principal, premium, if any, and interest (including interest on
overdue principal and overdue interest, if lawful) on the Securities. Pursuant
to the Indenture, the Guarantor will assign and pledge to the Trustee, for its
benefit and the benefit of the Holders, a security interest in 100% of the
issued and outstanding Capital Stock of the Company and certain proceeds from
time to time received, receivable or otherwise distributed in respect thereof
(the "Collateral"). The Guarantor will also agree to assign and pledge to the
Trustee as part of the Collateral all shares of Capital Stock of the Company at
any time acquired by it. The security interest in the Collateral will be a first
priority security interest. However, absent any acceleration notice or
bankruptcy default, the Guarantor will be able to vote, as it sees fit in its
sole discretion, the Capital Stock of the Company.
-8-
0000G54P.W51
<PAGE>
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (=joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Additional Rights of Holders of Transfer Restricted Securities.
In addition to the rights provided to Holders of Securities under
the Indenture, Holders of Securities shall have all the rights set forth in the
Registration Rights Agreement.
-9-
0000G54P.W51
<PAGE>
[FORM OF] ASSIGNMENT
I or we assign this Security to
- -----------------------------------------------------------
- -----------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee
- -----------------------------------------------------------
and irrevocably appoint _____________ agent to transfer this Security on the
books of the Company. The agent may substitute another to act for him.
Date:____________________ Signed:_______________________________________
(Sign exactly as your name appears on
the other side of this Security)
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0000G54P.W51
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company,
pursuant to Section 4.15 or Article III of the Indenture, check the appropriate
box:
|_| Section 4.15 |_| Article III
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.15 or Article III of the Indenture, as the case
may be, state the principal amount you want to be purchased:
Date:____________________ Signed:_______________________________________
(Sign exactly as your name appears on
the other side of this Security)
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0000G54P.W51
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES/2/
The following exchanges of a part of this Global Security for Definitive
Securities have been made:
Amount of
decrease in Amount of Principal Amount Signature of
Principal increase in at maturity authorized
Amount Principal Amount of this Global representative
at maturity at maturity Security following of Trustee or
Date of of this Global of this Global such decrease (or Securities
Exchange Security Security increase) Custodian
- --------------------------------------------------------------------------------
- ------------------
/2/ This schedule should only be added if Security is issued in global form.
-12-
0000G54P.W51
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF SECURITIES3
Re: 13 1/2% SERIES A SENIOR SECURED DISCOUNT NOTES DUE 2007 OF PRICE
COMMUNICATIONS CELLULAR HOLDINGS, INC.
This Certificate relates to $_______ principal amount of Securities held
in________ book-entry or________ definitive form by _________ (the
"Transferor").
1. The Transferor:
|_| (a) has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Security held by the Depository a Security
or Securities in definitive, registered form of authorized denominations and an
aggregate principal amount at maturity equal to its beneficial interest in such
Global Security (or the portion thereof indicated above); or
|_| (b) has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
2. In connection with any such request prior to the date which is two
years after the later of the issuance of this Security (or any predecessor
Security) and the sale hereof by an Affiliate (as defined in Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act")) of the Company
(computed in accordance with paragraph (d) of Rule 144 under the Securities Act)
or by a Transferor that was at the date of such transfer or during the three
months preceding such date of transfer an Affiliate of the Company, and in
respect of each such Security, the Transferor does hereby certify that
Transferor is familiar with the Indenture relating to the above-captioned
Securities and as provided in Section 2.06 of such Indenture, the transfer of
this Security does not require registration under the Securities Act because:*
|_| (a) Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section
2.06(d)(i)(A) of the Indenture).
|_| (b) Such Security is being transferred to a person who the Transferor
reasonably believes is a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) purchasing for its own account or for the account
of a qualified institutional buyer over which it exercises sole investment
discretion that is aware that the transfer is being made in
- --------
3 The following should be included only for Initial Securities.
*Check applicable box
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reliance on Rule 144A (in satisfaction of Section 2.06(a)(ii)(B). Section 2.06
(b)(i) or Section 2.06(d)(i)(B) of the Indenture).
|_| (c) Such Security is being transferred pursuant to an exemption from
registration in accordance with Regulation S under the Securities Act (in
satisfaction of Section 2.06(a)(ii)(C) or Section 2.06(d)(i)(C) of the
Indenture).
|_| (d) Such Security is being transferred to an institutional investor that is
an "accredited investor" within the meaning of Rule 501(a)(1),(2),(3) or (7)
under the Securities Act which delivers a certificate in the form of Exhibit B
to the Indenture to the Trustee (in satisfaction of Section 2.06(a)(ii)(D) or
Section 2.06(d)(i)(D) of the Indenture).
|_| (e) Such Security is being transferred in reliance on and in compliance with
another exemption from the registration requirements of the Securities Act. An
Opinion of Counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate (in
satisfaction of Section 2.06(a)(ii)(E) or Section 2.06(d)(i)(E) of the
Indenture).
----------------------------------
[INSERT NAME OF TRANSFEROR]
By:_______________________________
Date:__________________________________
3. Affiliation with the Company [check if applicable]
[ ] (a) The undersigned represents and warrants that it is, or at some
time during which it held this Security was, an Affiliate of the
Company.
(b) If 3(a) above is checked and if the undersigned was not an Affiliate
of the Company at all times during which it held this Security,
indicate the periods during which the undersigned was an Affiliate
of the Company:
----------------------------------
(c) If 3(a) above is checked and if the Transferee will not pay the full
purchase price for the transfer of this Security on or prior to the
date of transfer indicate when such purchase price will be paid:
----------------------------------
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TO BE COMPLETED BY TRANSFEREE IF 2(b) ABOVE IS CHECKED AND THE TRANSFEROR IS NOT
A QUALIFIED INSTITUTIONAL BUYER:
The undersigned represents and warrants that it is a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act of 1933,
as amended, and acknowledges that it has received such information regarding the
Company, as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information.
Dated:______________________ ________________________________________________
NOTICE: To be executed by an officer.
TO BE COMPLETED BY TRANSFEREE IF 2(c) ABOVE IS CHECKED:
The undersigned represents and warrants that it is not a "U.S. Person" (as
defined in Regulation S under the Securities Act of 1933, as amended).
Dated:______________________ _______________________________________________
NOTICE: To be executed by an officer.
If none of the boxes under Section 2 of this certificate is checked or if any of
the above representations required to be made by the Transferee is not made, the
Registrar shall not be obligated to register this Security in the name of any
person other than the Holder hereof.
THE UNDERSIGNED HEREBY AGREES THAT, UNLESS THE BOX ABOVE UNDER ITEM 3(a) IS
CHECKED, THE UNDERSIGNED SHALL BE DEEMED TO HAVE REPRESENTED THAT IT IS NOT NOR
HAS IT BEEN AT ANY TIME DURING WHICH IT HELD THIS SECURITY AN AFFILIATE, AS
DEFINED IN RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OF THE
COMPANY.
Dated:______________________ ______________________________________________
NOTICE: The signature of the Holder to this
assignment must correspond with the name as
written upon the face of this Security particular,
without alteration or enlargement or any change
whatsoever.
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EXHIBIT B
Bank of Montreal Trust Company
Dear Sirs:
In connection with our proposed purchase of $ _____ principal amount
of 13-1/2% Senior Secured Discount Notes due 2007 (the "Notes") of Price
Communications Cellular Holdings, Inc. (the "Issuer"), we confirm that:
1. We acknowledge that we have been informed that the Notes were
originally issued and sold to purchasers who have received a copy of the
Offering Memorandum dated August 1, 1997, as supplemented by the Offering
Memorandum Supplement dated August 6, 1997, and Cumulative Offering Memorandum
Supplement dated August 7, 1997 relating to the Notes and understand that the
Notes have not been, and will not be, registered under the Securities Act of
1933, as amended (the "Securities Act") and may not be sold except as permitted
in the following sentence. We agree, on our own behalf and on behalf of any
accounts for which we are acting as hereinafter stated, that if we should sell,
pledge or otherwise transfer any Notes prior to the second anniversary of the
later of the original issuance of the Notes or the sale thereof by the Issuer or
an affiliate (within the meaning of Rule 144 under the Securities Act or any
successor rule thereto, an "Affiliate") of the Issuer (computed in accordance
with paragraph (d) of Rule 144 under the Securities Act) or if we are at the
proposed date of such transfer or were during the three months preceding such
proposed date of transfer an Affiliate of the Issuer, we will do so in
compliance with any applicable state securities or "Blue Sky" laws and only (A)
to the Issuer, (B) in accordance with Rule 144A under the Securities Act (as
indicated by the box checked by the transferor on the form of assignment on the
reverse of the Note), (C) pursuant to any exemption from registration in
accordance with Regulation S under the Securities Act (as indicated by the box
checked by the transferor on the form of assignment on the reverse of the Note),
(D) to an institutional investor that is an "accredited investor" within the
meaning of Rule 501 (a)(1), (2), (3) or (7) under the Securities Act which
delivers a certificate in the form hereof to the trustee under the Indenture
dated as of August 11, 1997 between the Issuer and Bank of Montreal Trust
Company, as trustee (the "Indenture Trustee"), or (E) pursuant to any other
applicable exemption under the securities laws, and we further agree, in the
capacities stated above, to provide to any person purchasing any of the Notes
from us a notice advising such purchaser that resales of the Notes are
restricted as stated herein.
In addition, we understand that, upon any proposed resale of any
Note prior to the second anniversary of the later of the original issuance of
such Note (or any predecessor Note thereof) or the sale of such Note (or any
predecessor Note thereof) by the Issuer or an Affiliate of the Issuer (computed
in accordance with paragraph (d) of Rule 144 under the Securities Act) or if we
are at the proposed date of such transfer or were during
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<PAGE>
EXHIBIT B
Page 2
the three months preceding such proposed date of transfer an Affiliate of the
Issuer, we will be required to furnish to the Indenture Trustee, such
certification and other information (including, without limitation, an opinion
of counsel) as the Indenture Trustee, or the Issuer may reasonably require us to
confirm that the proposed sale complies with the foregoing restrictions. We
further understand that certificates evidencing Notes purchased by us will bear
a legend to the foregoing effect until the second anniversary of the later of
the original issuance of the Notes (or any predecessor Notes thereof) or the
sale thereof by the Issuer or an Affiliate of the Issuer (computed in accordance
with paragraph (d) of Rule 144 under the Securities Act) and for so long as we
are or during the preceding three months have been an Affiliate of the Issuer.
2. We are an institutional investor and an "accredited investor"
(within the meaning of Rule 501 (a)(1), (2), (3) or (7) under the Securities
Act) and have such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of our investment in the Notes,
and we and any account for which we are acting are each able to bear the
economic risk of our or its investment and can afford the complete loss of such
investment.
3. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion and for
each of which we are acquiring not less than $250,000 aggregate principal amount
of Notes.
4. We have received such information as we deem necessary in order
to make our investment decision.
You and the Issuer are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
[Purchaser]
By:
-------------------------------
Name:
Title:
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<PAGE>
EXHIBIT 4.2
13 1/2% SENIOR SECURED DISCOUNT NOTES DUE 2007
REGISTRATION RIGHTS AGREEMENT
Dated August 11, 1997
by and among
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
as the Company,
PRICE COMMUNICATIONS CELLULAR INC.
as the Guarantor,
and
NATWEST CAPITAL MARKETS LIMITED
and
WASSERSTEIN PERELLA SECURITIES, INC.,
as Purchasers
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<PAGE>
This Registration Rights Agreement is made and entered into this
August 11, 1997, by and between Price Communications Cellular Holdings, Inc., a
Delaware corporation (the "Company"), Price Communications Cellular Inc. (the
"Guarantor"), and NatWest Capital Markets Limited ("NatWest"), on behalf of
itself and Wasserstein Perella Securities, Inc. (together with NatWest, the
"Purchasers")
This Agreement is made pursuant to the Purchase Agreement, dated
July 31, 1997, among the Company, the Guarantor, Price Communications
Corporation ("PCC"), and each of the Purchasers (the "Purchase Agreement"),
relating to the issuance of units consisting of the Notes (as defined) and the
Warrants (as defined). In order to induce the Purchasers to enter into the
Purchase Agreement, the Company has agreed to provide the registration rights
provided for in this Agreement to the Purchasers and their respective direct and
indirect transferees. The execution of this Agreement is a condition to the
closing of the transactions contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions As used in this Agreement, the following terms shall
-----------
have the following meanings:
Advice: As defined in the last paragraph of Section 5 hereof.
------
Affiliate of any specified person shall mean any other person
---------
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For the purposes of this definition,
"control," when used with respect to any person, means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and the terms
"affiliated," "controlling" and "controlled" have meanings correlative to the
foregoing.
Agreement: This Registration Rights Agreement, as the same may be
---------
amended, supplemented or modified from time to time in accordance with the terms
hereof.
Business Day: Any day except Saturday, Sunday and any day which
------------
shall be a legal holiday or a day on which banking institutions in the State of
New York generally are
0000G54F.W51
<PAGE>
authorized or required by law or other government actions to close.
Consummate or consummate: When used to qualify the term "Exchange
------------------------
Offer" shall mean validly and lawfully to issue and deliver the Exchange Notes
pursuant to the Exchange Offer for all Transfer Restricted Securities validly
tendered and not validly withdrawn pursuant thereto in accordance with the terms
of this Agreement.
Consummation Date: The date that is 30 days immediately following
-----------------
the date that a Registration Statement relative to an Exchange Offer, commenced
pursuant to this Agreement, shall have been declared effective by the SEC.
Effective Date: The date that is 150 days immediately following
---------------
the date of issuance of the Notes.
Effectiveness Period: As defined in Section 3 hereof.
--------------------
Event Date: As defined in Section 4(a) hereof.
----------
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations promulgated by the SEC pursuant thereto.
Exchange Date: As defined in Section 2(d) hereof.
-------------
Exchange Notes: The 13 1/2% Senior Secured Discount Notes due 2007
--------------
of the Company that are identical to the Notes in all material respects, except
that the provisions regarding restrictions on transfer shall be modified, as
appropriate, and the issuance thereof pursuant to the Exchange Offer shall have
been registered pursuant to an effective Registration Statement in compliance
with the Securities Act.
Exchange Offer: An offer to issue, in exchange for any and all of
--------------
the Transfer Restricted Securities, a like aggregate principal amount at
maturity of Exchange Notes, which offer shall be made by the Company pursuant to
Section 2 hereof.
Holder: Each registered holder from time to time of any Transfer
------
Restricted Securities.
Indemnified Person: As defined in Section 7(a) hereof.
------------------
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Indenture: The Indenture, dated the date hereof, between the
---------
Company, the Guarantor and the Trustee thereunder, pursuant to which the Notes
are being issued, as amended or supplemented from time to time in accordance
with the terms thereof.
Liquidated Damages: As defined in Section 4(a) hereof.
------------------
Notes: $153,400,000 aggregate principal amount at maturity of
-----
13 1/2% Senior Secured Discount Notes due 2007 of the Company being issued
pursuant to the Indenture.
Participating Broker-Dealer: As defined in Section 2(d) hereof.
---------------------------
Paying Agent: As defined in the Indenture.
------------
Proceeding: An action, claim, suit or proceeding (including,
----------
without limitation, an investigation or partial proceeding, such as a deposi-
tion), whether commenced or threatened.
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated pursuant to the Securities
Act), as amended or supplemented by any prospectus supplement, with respect to
the terms of the offering of any portion of the Transfer Restricted Securities
or the Exchange Notes covered by such Registration Statement, and all other
amendments and supplements to any such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference, if any, in such prospectus.
Purchasers: As defined in the preamble hereof.
----------
Registration Statement: Any registration statement of the Company
----------------------
that covers any of the Notes or the Exchange Notes pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference, if any, in such registration statement.
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Rule 144: Rule 144 promulgated by the SEC pursuant to the Securities
--------
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 144A: Rule 144A promulgated by the SEC pursuant to the
---------
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 158: Rule 158 promulgated by the SEC pursuant to the Securities
--------
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 174: Rule 174 promulgated by the SEC pursuant to the Securities
--------
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 415: Rule 415 promulgated by the SEC pursuant to the Securities
--------
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 424: Rule 424 promulgated by the SEC pursuant to the Securities
--------
Act, as such Rule may be amended form time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated by the SEC thereunder.
Shelf Registration: As defined in Section 3 hereof.
------------------
Special Counsel: At any time, the special counsel to the Holders of
---------------
Transfer Restricted Securities, the fees and expenses of which will be
reimbursed to such Holder pursuant to Section 6.
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<PAGE>
TIA: The Trust Indenture Act of 1939, as amended.
---
Transfer Restricted Securities: The Notes, upon original issuance
------------------------------
thereof, and at all times subsequent thereto, until, in the case of any such
Note, (i) the date on which such Note has been exchanged for an Exchange Note
pursuant to the Exchange Offer, (ii) the date on which such Note has been
registered effectively pursuant to the Securities Act and disposed of in
accordance with the Registration Statement relating to it, (iii) the date on
which such Note is distributed to the public pursuant to Rule 144 (or any
similar provisions then in effect) or is saleable pursuant to Rule 144(k)
promulgated by the SEC pursuant to the Securities Act or (iv) the date on which
such Note ceases to be outstanding.
Trustee: Bank of Montreal Trust Company.
-------
underwritten registration or underwritten offering: A registration
--------------------------------------------------
in connection with which securities of the Company are sold to an underwriter
for reoffering to the public pursuant to an effective Registration Statement.
Warrants: Warrants to purchase 527,696 shares of Common Stock,
--------
$.01 par value per share, of PCC.
2. Exchange Offer. (a) To the extent not prohibited by applicable
--------------
law or interpretation of the staff of the SEC, the Company shall use its
reasonable best efforts to file with the SEC a Registration Statement relating
to the Exchange Offer and have declared effective by the SEC such Registration
Statement no later than on or prior to the Effective Date. The offer and sale of
the Exchange Notes pursuant to the Exchange Offer shall be registered pursuant
to the Securities Act on the appropriate form and duly registered or qualified
under all applicable state securities or Blue Sky laws and will comply with all
applicable tender offer rules and regulations of the Exchange Act and state
securities or Blue Sky laws. The Exchange Offer shall not be subject to any
condition, other than that the Exchange Offer does not violate any applicable
law or interpretation of the staff of the SEC. No securities shall be included
in the Registration Statement covering the Exchange Offer other than the Notes
and the Exchange Notes.
(b) The Company may require each Holder of Transfer Restricted
Securities as a condition to its participation in the Exchange Offer to
represent to the Company and its counsel in writing (which may be contained in
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<PAGE>
the applicable letter of transmittal) that at the time of the consummation of
the Exchange Offer (i) any Exchange Notes received by such Holder will be
acquired in the ordinary course of its business, (ii) such Holder will have no
arrangement or understanding with any person to participate in the distribution
of the Notes or the Exchange Notes within the meaning of the Securities Act,
(iii) if the Holder is not a broker-dealer or is a broker-dealer but will not
receive Exchange Notes for its own account in exchange for Notes, neither the
Holder nor any such other Person is engaged in or intends to participate in a
distribution of the Exchange Notes and (iv) that such Holder is not an Affiliate
of the Company. If the Holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Notes, it will represent that the
Notes to be exchanged for the Exchange Notes were acquired by it as a result of
market-making activities or other trading activities, and acknowledge that it
will deliver a prospectus meeting the requirements of the Act in connection with
any resale of such Exchange Notes. It is understood that by acknowledging that
it will deliver and by delivering a prospectus meeting the requirements of the
Act in connection with any resale of such Exchange Notes, the Holder is not
admitting that it is an "underwriter" within the meaning of the Act.
(c) Unless the Exchange Offer would not be permitted by any
applicable law or interpretation of the staff of the SEC, the Company shall
commence the Exchange Offer (within the time periods set forth herein) by
mailing the related exchange offer prospectus and appropriate accompanying
documents to each Holder of Transfer Restricted Securities providing, in
addition to such other disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Notes validly tendered will be accepted for
exchange;
(ii) the dates of acceptance for exchange (the "Exchange Date"),
which date shall in no event be later than the Consummation Date;
(iii) that Holders of Transfer Restricted Securities electing to have
a Note exchanged pursuant to the Exchange Offer will be required to
surrender such Note or $1,000 integral multiple principal amount at
maturity portion thereof, together with the enclosed letters of
transmittal, to the institution and at the address (located in the Borough
of Manhattan, The City of New
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York) specified in the notice prior to the close of business on the
Exchange Date; and
(iv) that Holders of Transfer Restricted Securities that do not
tender all such securities pursuant to the Exchange Offer will no longer
have any registration rights hereunder with respect to securities not
tendered.
Promptly after the Exchange Date, the Company shall:
(i) accept for exchange all Notes or portions thereof validly
tendered and not validly withdrawn pursuant to the Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes or portions thereof so accepted for exchange by the
Company, and issue, or cause the Trustee under the Indenture to
authenticate and mail to each Holder, an Exchange Note equal in principal
amount at maturity to the principal amount at maturity of the Notes
surrendered by such Holder.
(d) The Company and each Purchaser acknowledges that the staff of
the SEC has taken the position that any broker-dealer that owns Exchange Notes
that were received by such broker-dealer for its own account in the Exchange
Offer (a "Participating Broker-Dealer") may be deemed to be an "underwriter"
within the meaning of the Securities Act and must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such
Exchange Notes (other than a resale of an unsold allotment resulting from the
original placement of the Notes).
The Company and each Purchaser also acknowledges that it is the SEC
staff's position that if the Prospectus contained in the Registration Statement
includes a plan of distribution containing a statement to the above effect and
the means by which Participating Broker-Dealers may resell the Exchange Notes,
without naming the Participating BrokerDealers or specifying the amount of
Exchange Notes owned by them, such Prospectus may be delivered by Participating
Broker-Dealers to satisfy their prospectus delivery obligations under the
Securities Act in connection with resales of Exchange Notes for their own
accounts, so long as the Prospectus otherwise meets the requirements of the
Securities Act.
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In light of the above, notwithstanding the other provisions of this
Agreement, the Company agrees that the provisions of this Agreement as they
relate to a Shelf Registration shall also apply to an Exchange Offer to the
extent, and with such reasonable modifications thereto as may be reasonably
requested by any Participating Broker-Dealer or the Company, in each case as
provided in clause (ii) below, as appropriate to expedite or facilitate the
disposition of any Exchange Notes by Participating Broker-Dealers consistent
with the positions of the staff recited in this Section 2(d); provided that:
-------- ----
(i) the Company shall not be required to amend or supplement the
Prospectus contained in the Registration Statement, as would otherwise be
contemplated by this Agreement, for a period exceeding 90 days after the
Consummation Date (as such period may be extended pursuant to the terms of
this Agreement relating to a Shelf Registration) and Participating
Broker-Dealers shall not be authorized by the Company to deliver and shall
not deliver such Prospectus after such period in connection with the
resales contemplated by this Section 2(d); and
(ii) the application of the Shelf Registration procedures set forth
in this Section 2(d) of this Agreement to an Exchange Offer, to the extent
not otherwise required by the positions of the staff of the SEC or the
Securities Act, will be in conformity with the reasonable request to the
Company by anyone who certifies to the Company in writing in a reasonably
timely manner that they anticipate that they will be a Participating
Broker-Dealer; and provided, further, that in connection with such
-------- -------
application of the Shelf Registration procedures set forth in Section 3 to
an Exchange Offer, the Company shall be obliged (x) to deal only with one
entity representing the Participating Broker-Dealers, which shall be
NatWest unless it elects not to act as such representative, (y) to pay the
fees and expenses of only one counsel representing the Participating
Broker-Dealers and (z) to cause to be delivered, if requested, customary
"cold comfort" letters with respect to the Prospectus in the form existing
on the Exchange Date and with respect to any subsequent amendment or
supplement, if any, effected during the period specified in clause (i)
above.
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(e) The Purchasers shall have no liability to any person with
respect to any request made pursuant to Section 2(d).
3. Shelf Registration. (a) If the Company determines not to effect
------------------
the Exchange Offer as contemplated by Section 2 hereof or if, prior to the 90th
day after the date of this Agreement, any Holder of Transfer Restricted
Securities shall notify the Company in writing that, based on the advice of
counsel, it is not eligible to participate in the Exchange Offer (other than
because it has an understanding or arrangement with any person to participate in
a distribution of the Exchange Notes) and such Holder has not received a written
opinion from counsel to the Company, reasonably acceptable to such Holder, to
the effect that such Holder is legally permitted to participate in the Exchange
Offer, the Company shall cause to be filed with the SEC pursuant to Rule 415 a
shelf registration statement, which may be an amendment to a registration
statement filed in connection with the Exchange Offer, relating to all such
Transfer Restricted Securities the Holders of which have provided the
information required pursuant to Section 3(b) hereof, and shall use its
reasonable best efforts to have such Registration Statement declared effective
by the SEC on or prior to the Effective Date. In such circumstances, the Company
shall use its reasonable best efforts to cause the Shelf Registration to remain
continuously effective under the Securities Act, until (A) 24 months following
the date on which the Shelf Registration was initially declared effective
(subject to extension pursuant to the last paragraph of Section 5 hereof) or (B)
if sooner, the date immediately following the date that all Transfer Restricted
Securities covered by the Shelf Registration have been sold pursuant thereto
(the "Effectiveness Period"); provided that the Effectiveness Period shall be
--------
extended to the extent required to permit dealers to comply with the applicable
prospectus delivery requirements of Rule 174 and as otherwise provided herein.
(b) No Holder of Transfer Restricted Securities may include any of
its Transfer Restricted Securities in any shelf registration statement pursuant
to this Agreement unless and until such Holder furnishes to the Company in
writing, within 15 Business Days after receipt of a request therefor, such
information as the Company may reasonably request for use in connection with any
shelf registration statement or Prospectus or preliminary prospectus included
therein. No Holder of Transfer Restricted Securities shall be entitled to
liquidated damages pursuant to Section 4
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<PAGE>
hereof unless and until such Holder shall have provided all such reasonably
requested information. Each Holder as to which any shelf registration statement
is being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading.
4. Liquidated Damages. (a) The parties hereto agree that the Holders
------------------
of Transfer Restricted Securities will suffer damages if the Company fails to
fulfill its obligations pursuant to Section 2 or Section 3, as applicable, and
that it would not be feasible to ascertain the extent of such damages.
Accordingly, if (i) the applicable Registration Statement referred to in either
Section 2 or Section 3 has not been declared effective by the SEC on or prior to
the Effective Date or (ii) either (A) the Exchange Offer has not been
consummated on or prior to the later of the Consummation Date or 180 days
immediately following the date of the issuance of the Notes, or (B) at any time
prior to the end of the Effectiveness Period the Shelf Registration shall have
ceased to be continuously effective without being succeeded within 30 days by an
additional Shelf Registration having been filed with and declared effective by
the SEC (each such event referred to in clauses (i) and (ii), an "Event Date"),
then the Company agrees to pay, as liquidated damages, and not as a penalty, to
each Holder of a Transfer Restricted Security, an additional amount (the
"Liquidated Damages") equal to (a) during the first 90-day period beginning on,
and including, the Event Date, $0.05 per calendar week (or partial calendar
week), per $1,000 principal amount at maturity of Transfer Restricted Securities
held by such Holder and (b) during each subsequent 90-day period immediately
following the final day of the prior 90-day period, an additional $0.05 per
calendar week (or partial calendar week) per $1,000 of Accreted Value of
Transfer Restricted Securities held by such Holder, up to a maximum amount of
Liquidated Damages of $0.25 per calendar week (or partial calendar week) per
$1,000 principal amount at maturity of Transfer Restricted Securities, and, in
all cases, ending on, but excluding, (x) in the case of clause (i) above, the
date on which the Registration Statement is declared effective, (y) in the case
of clause (ii)(A) above, the date on which the Exchange offer is consummated and
(z) in the case of clause (ii)(B) above, the date the Shelf Registration again
becomes effective under the Securities Act.
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<PAGE>
(b) The Company shall notify the Trustee and Paying Agent under the
Indenture immediately upon the happening of each and every Event Date. The
Company shall pay the Liquidated Damages due on the Transfer Restricted
Securities by depositing with the Paying Agent (which shall not be the Company
for these purposes), in trust, for the benefit of the Holders thereof, at least
one Business Day prior to the next interest payment date specified by the
Indenture, sums sufficient to pay the Liquidated Damages then due. The
Liquidated Damages due shall be payable on each interest payment date specified
by the Indenture to the record Holder entitled to receive the interest payment
to be made on such date. Each obligation to pay Liquidated Damages shall be
deemed to accrue from and including the applicable Event Date.
(c) The parties hereto agree that the Liquidated Damages provided
for in this Section 4 constitute a reasonable estimate of the damages that will
be suffered by Holders of Transfer Restricted Securities by reason of the
failure of the Exchange Offer to be consummated or the Shelf Registration to
remain effective, as the case may be, in accordance with this Agreement.
5. Registration Procedures. In connection with the Company's
-----------------------
registration obligations hereunder, the Company shall effect such registrations
on the appropriate form available for the sale of the Transfer Restricted
Securities or Exchange Notes, as applicable, to (i) permit the sale of Exchange
Notes and (ii) in the case of a Shelf Registration, permit the sale of Transfer
Restricted Securities in accordance with the method or methods of disposition
thereof specified by the Holders of a majority in aggregate principal amount at
maturity of Transfer Restricted Securities, and pursuant thereto the Company
shall as expeditiously as possible:
(a) In the case of a Shelf Registration, no fewer than five Business
Days prior to the initial filing of a Registration Statement or Prospectus
and no fewer than two Business Days prior to the filing of any amendment
or supplement thereto (including any document that would be incorporated
or deemed to be incorporated therein by reference), furnish to the Holders
of the Transfer Restricted Securities, their Special Counsel and the
managing underwriters, if any, copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such
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<PAGE>
Holders, their Special Counsel and such underwriters, if any, and cause
the officers and directors of the Company, counsel to the Company and
independent certified public accountants to the Company to respond to such
inquiries as shall be necessary, in the opinion of respective counsel to
such Holders and such underwriters, to conduct a reasonable investigation
within the meaning of the Securities Act; provided, however, that the
-------- -------
Company shall not be deemed to have kept a Registration Statement
effective during the applicable period if it voluntarily takes or fails to
take any action that results in selling Holders of the Transfer Restricted
Securities covered thereby not being able to sell such Transfer Restricted
Securities pursuant to Federal securities laws during that period (and the
time period during which such Registration Statement is required to remain
effective hereunder shall be extended by the number of days during which
such selling Holders of Transfer Restricted Securities are not able to
sell Transfer Restricted Securities). The Company shall not file any such
Shelf Registration Statement or related Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Transfer
Restricted Securities, their Special Counsel, or the managing
underwriters, if any, shall reasonably object on a timely basis;
(b) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be
necessary to keep such Registration Statement continuously effective for
the applicable time period; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 (or any similar provisions then in force)
under the Securities Act; and comply with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all securities
covered by such Registration Statement during such period in accordance
with the intended methods of disposition by the sellers thereof set forth
in such Registration Statement as so amended or in such Prospectus as so
supplemented;
(c) Notify the Holders of Transfer Restricted Securities to be sold
or, in the case of an Exchange offer, tendered for, their Special Counsel
and the managing underwriters, if any, promptly (and in the case of an
event specified by clause (i)(A) of this paragraph in no event fewer than
two Business Days prior to such
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<PAGE>
filing), and (if requested by any such Person), confirm such notice in
writing, (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment is proposed to be filed, and, (B) with respect to
a Registration Statement or any post-effective amendment, when the same
has become effective, (ii) in the case of a Shelf Registration, of any
request by the SEC or any other Federal or state governmental authority
for amendments or supplements to a Registration Statement or related
Prospectus or for additional information, (iii) of the issuance by the
SEC, any state securities commission, any other governmental agency or any
court of any stop order, order or injunction suspending or enjoining the
use or the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (iv) if at any time any of the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby cease to be
true and correct in all material respects, (v) of the receipt by the
Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Transfer
Restricted Securities or Exchange Notes for sale in any jurisdiction, or
the initiation or threatening of any proceeding for such purpose, and (vi)
in the case of a Shelf Registration, of the happening of any event that
makes any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the
making of any changes in such Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading;
(d) Use its reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of any order enjoining or suspending the use
or effectiveness of a Registration Statement or the lifting of any
suspension of the qualification (or exemption from qualification) of any
of the Transfer Restricted
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<PAGE>
Securities or Exchange Notes for sale in any Jurisdiction, at the
earliest practicable moment;
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriters, if any, or the Holders of a
majority in aggregate principal amount at maturity of the Transfer
Restricted Securities being sold in connection with such offering, (i)
promptly incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters, if any, and such
Holders agree should be included therein, and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as
soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment; provided, however, that the Company shall not be required to
-------- -------
take any action pursuant to this Section 5(e) that would, in the opinion
of counsel for the Company, violate applicable law;
(f) Furnish to each Holder of Transfer Restricted Securities and
Exchange Notes, their Special Counsel and each managing underwriter, if
any, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein
by reference, and all exhibits to the extent requested by each Holder
(including those previously furnished or incorporated by reference) as
soon as practicable after the filing of such documents with the SEC;
(g) Deliver to each Holder of Transfer Restricted Securities and
Exchange Notes, their Special Counsel, and the underwriters, if any,
without charge, as many copies of the Prospectus or Prospectuses
(including each form of prospectus) and each amendment or supplement
thereto as such Persons reasonably request; and the Company hereby
consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Transfer Restricted Securities
and the underwriters, if any, in connection with the offering and sale of
the Transfer Restricted Securities covered by such Prospectus and any
amendment or supplement thereto;
(h) Prior to any public offering of Transfer Restricted Securities
and prior to the consummation of
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<PAGE>
the Exchange Offer, use its reasonable best efforts to register or qualify
or cooperate with the Holders of Transfer Restricted Securities to be sold
or tendered for, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Transfer Restricted Securities or
Exchange Notes for offer and sale under the securities or Blue Sky laws of
such jurisdictions within the United States as any Holder or underwriter
reasonably requests in writing; keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all
other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Transfer Restricted Securities or Exchange Notes
covered by the applicable Registration Statement; provided, however, that
-------- -------
the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action
that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
tax in any such jurisdiction where it is not then so subject;
(i) In connection with any sale or transfer of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the Holders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Securities or Exchange Notes
to be sold, which certificates shall not bear any restrictive legends and
shall be in a form eligible for deposit with The Depository Trust Company
and to enable such Transfer Restricted Securities or Exchange Notes to be
in such denominations and registered in such names as the managing
underwriters, if any, or Holders may request in writing to the Company at
least two Business Days prior to any sale of Transfer Restricted
Securities or Exchange Notes;
(j) Use its reasonable best efforts to cause the offering of the
Transfer Restricted Securities and Exchange Notes covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities within the United States, except as
may be required as a consequence of the nature of such selling Holder's
business, in which
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<PAGE>
case the Company will cooperate in all reasonable respects with the filing
of such Registration Statement and the granting of such approvals as may
be necessary to enable the seller or sellers thereof or the underwriters,
if any, to consummate the disposition of such Transfer Restricted
Securities and Exchange Notes; provided, however, that the Company shall
-------- -------
not be required to register the Transfer Restricted Securities and
Exchange Notes in any jurisdiction that would subject it to general
service of process in any such jurisdiction where it is not then so
subject or subject it to any tax in any such jurisdiction where it is not
then so subject or to require it to qualify to do business in any
jurisdiction where it is not then so qualified;
(k) Upon the occurrence of any event contemplated by Paragraph
5(c)(vi), as promptly as practicable, prepare a supplement or amendment,
including, if appropriate, a post-effective amendment, to each
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference,
and file any other required document so that, as thereafter delivered,
such Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading;
(l) Prior to the effective date of the first Registration Statement
relating to the Transfer Restricted Securities or Exchange Notes, as
applicable, to provide a CUSIP number for the Transfer Restricted
Securities and Exchange Notes, as applicable;
(m) If a Shelf Registration is filed pursuant to Section 3, enter
into such agreements (including an underwriting agreement in form, scope
and substance as is customary in underwritten offerings) and take all such
other reasonable actions in connection therewith (including those
reasonably requested by the managing underwriters, if any, or the Holders
of a majority in aggregate principal amount at maturity of the Transfer
Restricted Securities being sold) in order to expedite or facilitate the
disposition of such Transfer Restricted Securities, and in such
connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten
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<PAGE>
registration, (i) make such representations and warranties to the Holders
of such Transfer Restricted Securities and the underwriters, if any, with
respect to the business of the Company and its subsidiaries (including
with respect to businesses or assets acquired or to be acquired by any of
them), and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each
case, in form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
requested; (ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall
be reasonably satisfactory to the managing underwriters, if any, and
Special Counsel to the Holders of the Transfer Restricted Securities being
sold), addressed to each selling Holder of Transfer Restricted Securities
and each of the underwriters, if any, covering the matters customarily
covered in opinions requested in underwritten offerings and such other
matters as may be reasonably requested by such Special Counsel and
underwriters; (iii) use its best efforts to obtain customary "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any business which may hereafter be
acquired by the Company for which financial statements and financial data
are required to be included in the Registration Statement), addressed
(where reasonably possible) to each selling Holder of Transfer Restricted
Securities and each of the underwriters, if any, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings; (iv) if
an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the selling
holders and the underwriters, if any, than those set forth in Section 7
hereof (or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount at maturity of Transfer Restricted
Securities covered by such Registration Statement and the managing
underwriters); and (v) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority in aggregate principal
amount at maturity of the Transfer Restricted Securities being sold, their
Special Counsel and the managing
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0000G54F.W51
<PAGE>
underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to clause 5(m)(i) above and
to evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company;
(n) In the case of a Shelf Registration, make available for
inspection by a representative of the Holders of Transfer Restricted
Securities being sold, any underwriter participating in any such
disposition of Transfer Restricted Securities, if any, and any attorney,
consultant or accountant retained by such selling Holders or underwriter,
at the offices where normally kept, during reasonable business hours, all
pertinent financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries (including with respect to
business and assets acquired or to be acquired to the extent that such
information is available to the Company), and cause its subsidiaries
(including with respect to business and assets acquired or to be acquired
to the extent that such information is available to the Company) to supply
such pertinent information in each case reasonably requested by any such
representative, underwriter, attorney, consultant or accountant in
connection with such Shelf Registration, provided, however, that such
-------- -------
Persons shall first agree in writing with the Company that any information
that is reasonably and in good faith designated by the Company in writing
as confidential at the time of delivery of such information shall be kept
confidential by such Persons, unless (i) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (ii) disclosure of such information
is required by law (including any disclosure requirements pursuant to
Federal Securities Laws in connection with the filing of any Registration
Statement or the use of any prospectus referred to in this Agreement),
(iii) such information becomes generally available to the public other
than as a result of a disclosure or failure to safeguard by such Person or
(iv) such information becomes lawfully available to such Person from a
source other than the Company and such source lawfully obtained such
information and is not otherwise bound by a confidentiality agreement;
(o) Provide an indenture trustee for the Transfer Restricted
Securities and the Exchange Notes, as the
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<PAGE>
case may be, and cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement relating
to the Transfer Restricted Securities or the Exchange Notes, as
applicable; and in connection therewith, cooperate with the trustee under
the Indenture and the Holders of the Transfer Restricted Securities and
the Exchange Notes, to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the
terms of the TIA; and execute, and use its reasonable efforts to cause
such trustee to execute, all customary documents as may be required to
effect such changes, and all other forms and documents required to be
filed with the SEC to enable the Indenture to be so qualified in a timely
manner;
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to their securityholders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act),
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm commitment or reasonable
efforts underwritten offering and (ii) if not sold to underwriters in such
an offering, commencing on the first day of the first fiscal quarter after
the effective date of a Registration Statement, which statement shall
cover said period, consistent with the requirements of Rule 158; and
(q) If an Exchange Offer is to be consummated, upon delivery of the
Transfer Restricted Securities by such Holders to the Company in exchange
for the Exchange Notes, the Company shall mark, or caused to be marked, on
such Transfer Restricted Securities that such Transfer Restricted
Securities are being cancelled in exchange for the Exchange Notes; in no
event shall such Transfer Restricted Securities be marked as paid or
otherwise satisfied.
The Company may require each seller of Transfer Restricted
Securities as to which any registration is being effected to furnish to the
Company such information regarding the distribution of such Transfer Restricted
Securities as is required by law to be disclosed in the applicable
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<PAGE>
Registration Statement and the Company may exclude from such registration the
Transfer Restricted Securities of any seller who unreasonably fails to furnish
such information within a reasonable time after receiving such request.
If any such Registration Statement refers to any Holder by name or
otherwise as the Holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Company, or (ii) in the event
that such reference to such Holder by name or otherwise is not required by the
Securities Act or any similar Federal statute then in force, the deletion of the
reference to such Holder in any amendment or supplement to the Registration
Statement filed or prepared subsequent to the time that such reference ceases to
be required.
In the case of a Shelf Registration pursuant to Section 3 hereof,
each Holder of Transfer Restricted Securities agrees by acquisition of such
Transfer Restricted Securities that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 5(c)(ii),
5(c)(iii), 5(c)(v) or 5(c)(vi) hereof, such Holder will forthwith discontinue
disposition of such Transfer Restricted Securities covered by such Registration
Statement or Prospectus until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until
it is advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies
of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus. If the Company shall give any such
notice, the Effectiveness Period shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each seller of Transfer Restricted Securities covered by
such Registration Statement shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y)
the Advice, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
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<PAGE>
6. Registration Expenses. (a) All fees and expenses incident to the
---------------------
performance of or compliance with this Agreement by the Company shall be borne
by it whether or not any Registration Statement is filed or becomes effective
and whether or not any securities are issued or sold pursuant to any
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the National Association of Securities Dealers, Inc.
and (B) in compliance with securities or Blue Sky laws (including, without
limitation and in addition to that provided for in (b) below, fees and
disbursements of counsel for the underwriters or Holders in connection with Blue
Sky qualifications of the Transfer Restricted Securities or Exchange Notes and
determination of the eligibility of the Transfer Restricted Securities or
Exchange Notes for investment under the laws of such jurisdictions as the
managing underwriters, if any, or Holders of a majority in aggregate principal
amount at maturity of Transfer Restricted Securities may designate), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Transfer Restricted Securities or Exchange Notes in a form
eligible for deposit with The Depository Trust Company and of printing
Prospectuses if the printing of Prospectuses is requested by the managing
underwriters, if any, or by the Holders of a majority in principal amount of the
Transfer Restricted Securities included in or tendered for in connection with
any Registration Statement), (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company and Special Counsel for
the Holders (plus any local counsel, deemed appropriate by the Holders of a
majority in aggregate principal amount of the Transfer Restricted Securities),
in accordance with the provisions of Section 6(b) hereof, (v) fees and
disbursements of all independent certified public accountants referred to in
Section 5(m)(iii) (including, without limitation, the expenses of any special
audit and "cold comfort" letters required by or incident to such performance),
(vi) Securities Act liability insurance, if the Company so desires such
insurance, and (vii) fees and expenses of all other persons retained by the
Company. In addition, the Company shall pay its internal expenses (including,
without limitation, all salaries and expenses of their officers and employees
performing legal or accounting duties), the expense of any annual audit, and the
fees and expenses incurred in connection with the listing of the securities to
be registered on any securities exchange. Notwithstanding the
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<PAGE>
foregoing or anything in this Agreement to the contrary, each Holder shall pay
all underwriting discounts and commissions of any underwriters with respect to
any Notes or Exchange Notes sold by it.
(b) In connection with any Registration hereunder, the Company shall
reimburse the Holders of the Transfer Restricted Securities being registered or
tendered for in such registration for the reasonable fees and disbursements of
not more than one firm of attorneys representing the selling Holders (in
addition to any local counsel) chosen by the Holders of a majority in aggregate
principal amount at maturity of the Transfer Restricted Securities.
7. Indemnification. (a) The Company agrees to indemnify and hold
---------------
harmless (i) each of the Purchasers, each Holder of Transfer Restricted
Securities, each holder of Exchange Notes, each Participating Broker-Dealer and
(ii) each person, if any, who controls (within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act) any of the foregoing (any of the persons
referred to in this clause (ii) being hereinafter referred to as a "controlling
person"), and (iii) the respective officers, directors, partners, employees
representatives and agents of the Purchasers, each Holder of Transfer Restricted
Securities, each Holder of Exchange Notes, each Participating Broker- Dealer or
any controlling person (any person referred to in clause (i), (ii) or (iii) may
hereinafter be referred to as an "Indemnified Person"), from and against any and
------------------
all losses, claims, damages, liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or form of Prospectus or in any amendment or
supplement thereto or in any preliminary Prospectus, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of Prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Indemnified Person furnished in writing to the
Company by or on behalf of such Indemnified Person expressly for use therein;
provided that the foregoing indemnity with respect to any preliminary prospectus
- --------
shall not inure to the benefit of any Indemnified Person from whom the person
asserting such losses, claims, damages, liabilities and judgments purchased
securities if such untrue
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<PAGE>
statement or omission or alleged untrue statement or omission made in such
preliminary prospectus is eliminated or remedied in the Prospectus and a copy of
the Prospectus shall not have been furnished to such person in a timely manner
due to the wrongful action or wrongful inaction of such Indemnified Person.
(b) In case any action shall be brought against any Indemnified
Person, based upon any Registration Statement or any such Prospectus or any
amendment or supplement thereto and with respect to which indemnity may be
sought against the Company, such Indemnified Person shall promptly notify the
Company in writing and the Company shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Person and
payment of all fees and expenses. Any Indemnified Person shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person, unless (i) the employment of such counsel shall have
been specifically authorized in writing by the Company, (ii) the Company shall
have failed to assume the defense and employ counsel or (iii) the named parties
to any such action (including any impleaded parties) include both such
Indemnified Person and the Company and such Indemnified Person shall have been
advised by counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the Company (in
which case the Company shall not have the right to assume the defense of such
action on behalf of such Indemnified Person, it being understood, however, that
the Company shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys (in addition to any
local counsel) for all such Indemnified Persons, which firm shall be designated
in writing by such Indemnified Persons, and that all such fees and expenses
shall be reimbursed as they are incurred). The Company shall not be liable for
any settlement of any such action effected without its written consent but if
settled with the written consent of the Company, the Company agrees to indemnify
and hold harmless any Indemnified Person from and against any loss or liability
by reason of such settlement. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is or could
have been a party and indemnity
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<PAGE>
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
(c) In connection with any Registration Statement in which a Holder
of Transfer Restricted Securities is participating, such Holder of Transfer
Restricted Securities agrees, severally and not jointly, to indemnify and hold
harmless the Company, its directors, its officers, employees, representatives
and agents and any person controlling the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to each Indemnified Person but only with
reference to information relating to such Indemnified Person furnished in
writing by or on behalf of such Indemnified Person expressly for use in such
Registration Statement. In case any action shall be brought against the Company,
any of its directors, any such officer or any person controlling the Company
based on such Registration Statement and in respect of which indemnity may be
sought against any Indemnified Person, the Indemnified Person shall have the
rights and duties given to the Company (except that if the Company shall have
assumed the defense thereof, such Indemnified Person shall not be required to do
so, but may employ separate counsel therein and participate in defense thereof
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Person), and the Company, its directors, any such officers and any
person controlling the Company shall have the rights and duties given to the
Indemnified Person, by Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and each
Indemnified Person on the other hand from the offering of the Notes or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
each such Indemnified Person in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or judgments, as
well as
-24-
0000G54F.W51
<PAGE>
any other relevant equitable considerations. The relative fault of the Company
and each such Indemnified Person shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
Company or such Indemnified Person and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Indemnified Person were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Indemnified Person shall be
required to contribute any amount in excess of the amount by which the total net
profit received by it in connection with the sale of the Notes pursuant to this
Agreement exceeds the amount of any damages which such Indemnified Person has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Indemnified Persons' obligations to contribute pursuant
to this Section 7(d) are several in proportion to the respective amount of Notes
included in any such Registration Statement by each Indemnified Person and not
joint.
8. Rules 144 and 144A. The Company shall use its best efforts to
------------------
file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time it is not required to file
such reports but in the past had been required to or did file such reports, it
will, upon the request of any Holder of Transfer Restricted Securities, make
available other information as required by, and so long as necessary to permit,
sales of its Transfer Restricted Securities pursuant to Rule 144A.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
-25-
0000G54F.W51
<PAGE>
9. Underwritten Registrations. If any of the Transfer Restricted
--------------------------
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders of a majority
in aggregate principal amount of such Transfer Restricted Securities included in
such offering, subject to the consent of the Company (which will not be
unreasonably withheld or delayed).
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous.
-------------
(a) Remedies. In the event of a breach by the Company, or by a
--------
Holder of Transfer Restricted Securities, of any of their obligations under this
Agreement, each Holder of Transfer Restricted Securities or the Company, as the
case may be, in addition to being entitled to exercise all rights granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under this Agreement. Subject to Section 4 hereof, the Company and
each Holder of Transfer Restricted Securities agree that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of any of the provisions of this Agreement and hereby further agrees that, in
the event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not enter into any
--------------------------
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders of Transfer Restricted Securities in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not previously
entered into any agreement granting any registration rights with respect to any
of its debt securities to any person except for agreements with holders of
registration rights granted prior to the date hereof (from whom all necessary
consents or waivers have been obtained). Without limiting the generality of the
foregoing, without the
-26-
0000G54F.W51
<PAGE>
written consent of the Holders of a majority in aggregate principal amount at
maturity of the then outstanding Transfer Restricted Securities, the Company
shall not grant to any person the right to request it to register any of its
debt securities under the Securities Act unless the rights so granted are
subject in all respects to the prior rights of the Holders of Transfer
Restricted Securities set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.
(c) No Piggyback on Registrations. The Company shall not grant to
-----------------------------
any of its securityholders (other than the Holders of Transfer Restricted
Securities in such capacity) the right to include any securities of the Company
in any Shelf Registration or Exchange Offer other than Transfer Restricted
Securities.
(d) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless they have obtained the written consent of the Holders
of a majority of the then outstanding aggregate principal amount of Transfer
Restricted Securities; provided, however, that, for the purposes of this
Agreement, Transfer Restricted Securities that are owned, directly or
indirectly, by the Company or an Affiliate of the Company are not deemed
outstanding. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Transfer Restricted Securities whose securities are being
sold pursuant to a Registration Statement and that does not directly or
indirectly affect the rights of other Holders of Transfer Restricted Securities
may be given by Holders of a majority in aggregate principal amount of the
Transfer Restricted Securities being sold by such Holders pursuant to such
Registration Statement, provided, however, that the provisions of this sentence
-------- -------
may not be amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(e) Notices. All notices and other communications provided for
-------
herein shall be made in writing by hand- delivery, next-day air courier,
certified first-class mail, return receipt requested, telex or facsimile:
(i) if to the Company, as provided in the Purchase
Agreement,
-27-
0000G54F.W51
<PAGE>
(ii) if to the Purchasers, as provided in the Purchase Agreement, or
(iii) if to any other Person who is then the registered Holder of any
Transfer Restricted Securities, to the address of such Holder as it
appears in the Note register of the Company.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; one business day after being timely delivered to a
next-day air courier; five business days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.
(f) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder of Transfer Restricted
Securities. The Company may not assign its rights or obligations hereunder
without the prior written consent of each Holder of any Transfer Restricted
Securities. Notwithstanding the foregoing, no transferee shall have any of the
rights granted under this Agreement until such transferee shall acknowledge its
rights and obligations hereunder by a signed written statement of such
transferee's acceptance of such rights and obligations.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same Agreement.
(h) Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
---------------------------------------------------------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE
STATE OF NEW YORK. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
-28-
0000G54F.W51
<PAGE>
(i) Severability. The remedies provided herein are cumulative and
------------
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(j) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof. All
references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.
(k) Attorneys' Fees. In any action or proceeding brought to enforce
---------------
any provision of this Agreement, or where any provision hereof or thereof is
validly asserted as a defense, the prevailing party, as determined by the court,
shall be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
-29-
0000G54F.W51
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
PRICE COMMUNICATIONS CELLULAR
HOLDINGS, INC.,
By:
-----------------------------------
Name:
Title:
PRICE COMMUNICATIONS CELLULAR
INC.,
By:
-----------------------------------
Name:
Title:
NATWEST CAPITAL MARKETS LIMITED
on behalf of
the Purchasers
By:______________________________
Name:
Title:
0000G54F.W51
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
PRICE COMMUNICATIONS CELLULAR
HOLDINGS, INC.,
By:
-------------------------------
Name: Robert Price
Title: President
PRICE COMMUNICATIONS CELLULAR
INC.,
By:
-------------------------------
Name: Robert Price
Title: President
NATWEST CAPITAL MARKETS LIMITED
on behalf of
the Purchasers
By:/s/Gregory B. Bowes
--------------------------
Name: Gregory B. Bowes
Title: Managing Director
0000G54F.W51
<PAGE>
EXHIBIT 12.1
PALMER WIRELESS, INC.
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(1)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE
MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------ ---------------
1992 1993 1994 1995 1996 1996 1997
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense....... $ 8,326 $ 9,027 $12,769 $21,424 $31,524 $23,654 $24,468
Portion of rent expense
representative of
Interest.............. 227 384 531 821 1,172 879 1,023
-------- ------- ------- ------- ------- ------- -------
Total Fixed Charges..... $ 8,553 $ 9,411 $13,300 $22,245 $32,696 $24,533 $25,491
======== ======= ======= ======= ======= ======= =======
Earnings:
Income From operations
before minority
interest share of
income and income
taxes................. $(12,605) $(7,435) $ 2,298 $ 4,682 $ 9,286 $ 7,876 $13,737
Fixed Charges per
above................. 8,553 9,411 13,300 22,245 32,696 24,533 25,491
-------- ------- ------- ------- ------- ------- -------
Total Earnings.......... $ (4,052) $ 1,976 $15,598 $26,927 $41,982 $32,409 $39,228
======== ======= ======= ======= ======= ======= =======
Ratio of Earnings to
Fixed Charges(2)....... -- -- 1.17 1.21 1.28 1.32 1.54
</TABLE>
- --------
(1) The following data is presented on a historical basis and does not reflect
the pro forma effects of the Acquisition or the indebtedness of the Company
used to fund the Acquisition.
(2) The ratio of earnings to fixed charges is determined by dividing the sum
of earnings before extraordinary items and accounting changes, interest
expense, taxes and a portion of rent expense representative of interest by
the sum of interest expense and a portion of rent expense representative
of interest. The ratio of earnings to fixed charges is not meaningful for
periods that result in a deficit. For the years ended December 31, 1992
and 1993 the deficit of earnings to fixed charges was $12,605 and $7,435,
respectively.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF PRICE COMMUNICATIONS CELLULAR INC.
Name Name Under Which
State of Incorporation Subsidiary Does Business
- --------------------------------------------------------------------------------
Price Communications Delaware
Cellular Holdings, Inc.
- --------------------------------------------------------------------------------
Price Communications Delaware
Wireless, Inc.
- --------------------------------------------------------------------------------
Price Communications Delaware
Wireless II, Inc.
- --------------------------------------------------------------------------------
Price Communications Delaware
Wireless III, Inc.
- --------------------------------------------------------------------------------
Price Communications Delaware
Wireless IV, Inc.
- --------------------------------------------------------------------------------
Price Communications Delaware
Wireless V, Inc.
- --------------------------------------------------------------------------------
Price Communications Delaware
Wireless VI, Inc.
- --------------------------------------------------------------------------------
Price Communications Delaware
Wireless VII, Inc.
- --------------------------------------------------------------------------------
Price Communications Delaware
Wireless VIII, Inc.
- --------------------------------------------------------------------------------
Price Communications Delaware
Wireless IX, Inc.
- --------------------------------------------------------------------------------
Palmer Wireless Holdings, Delaware Cellular One
Inc.
- --------------------------------------------------------------------------------
CEI Communications, Inc. Delaware
- --------------------------------------------------------------------------------
Cellular Dynamics Georgia Cellular One
Telephone Company of
Georgia
- --------------------------------------------------------------------------------
Cellular Systems of Delaware Cellular One
Southeast Alabama, Inc.
- ------------------------------------------------------------------------------
Dothan Cellular Telephone Alabama Cellular One
Company, Inc.
- --------------------------------------------------------------------------------
Montgomery Cellular Delaware
Holding Co., Inc.
- --------------------------------------------------------------------------------
Montgomery Cellular Alabama Cellular One
Telephone Company, Inc.
- --------------------------------------------------------------------------------
Panama City Florida
Communications, Inc.
- --------------------------------------------------------------------------------
Albany Cellular Partners Georgia Cellular One
- --------------------------------------------------------------------------------
Columbus Cellular Georgia Cellular One
Telephone Company
- --------------------------------------------------------------------------------
Macon Cellular Telephone New Hampshire Cellular One
Systems Limited Partnership
- --------------------------------------------------------------------------------
Panama City Cellular Florida Cellular One
Telephone Company, Ltd.
- --------------------------------------------------------------------------------
Panhandle Cellular Florida
Partnership
- --------------------------------------------------------------------------------
Savannah Cellular Limited Delaware Cellular One
Partnership
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Price Communications, Wireless, Inc.
(formerly Palmer Wireless, Inc.)
We consent to the inclusion of our report dated January 30, 1997, except for
Note 10 which is as of February 1, 1997, with respect to the consolidated
balance sheets of Palmer Wireless, Inc. and subsidiaries, as of December 31,
1996 and 1995 and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1996, which report appears in the Form S-4 of Price
Communications Cellular Holdings, Inc. and Price Communications Cellular Inc.
and to the reference to our firm under the heading "Experts" in the Prospectus.
KPMG Peat Marwick LLP
Des Moines, Iowa
November 26, 1997
<PAGE>
EXHIBIT 25.1
________________________________________________________________________________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a trustee Pursuant to
Section 305(b) ____
BANK OF MONTREAL TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
New York 13-4941093
(JURISDICTION OF INCORPORATION OR ORGANIZATION (I.R.S. EMPLOYER
IF NOT A US NATIONAL BANK) IDENTIFICATION NO.)
88 Pine Street
New York, New York 10005
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Mark F. McLaughlin
Bank of Montreal Trust Company
88 Pine Street, New York, NY 10005
(212) 701-7602
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
____________________________________
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
Delaware 13-3956940
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
45 Rockefeller Center
New York, New York 10020
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
______________________________________
13-1/2% SERIES B SENIOR SECURED DISCOUNT NOTES DUE 2007
(TITLE OF THE INDENTURE SECURITIES)
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
- 2 -
ITEM 1. GENERAL INFORMATION.
--------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York
33 Liberty Street, New York NY 10045
State of New York Banking Department
2 Rector Street, New York, NY 10006
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
------------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
ITEM 16. LIST OF EXHIBITS.
-----------------
List below all exhibits filed as part of this statement of eligibility.
1. Copy of Organization Certificate of Bank of Montreal Trust Company to
transact business and exercise corporate trust powers; incorporated
herein by reference as Exhibit "A" filed with Form T-1 Statement,
Registration No. 33-46118.
2. Copy of the existing By-Laws of Bank of Montreal Trust Company;
incorporated herein by reference as Exhibit "B" filed with Form T-1
Statement, Registration No. 33-80928.
3. The consent of the Trustee required by Section 321(b) of the Act;
incorporated herein by reference as Exhibit "C" with Form T-1
Statement, Registration No. 33-46118.
4. A copy of the latest report of condition of Bank of Montreal Trust
Company published pursuant to law or the requirements of its
supervising or examining authority, attached hereto as Exhibit "D".
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Bank of Montreal Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New
York, on the 25th day of November, 1997.
BANK OF MONTREAL TRUST COMPANY
By /s/ Amy Roberts
----------------------------
Amy Roberts
Vice President
<PAGE>
EXHIBIT "D"
STATEMENT OF CONDITION
BANK OF MONTREAL TRUST COMPANY
NEW YORK
------------------------------
ASSETS
Due From Banks $ 594,897
-----------
Investment Securities:
State & Municipal 17,099,800
Other 100
-----------
TOTAL SECURITIES 17,099,900
Loans and Advances
Federal Funds Sold 2,000,000
Overdrafts 17,218
-----------
TOTAL LOANS AND ADVANCES 2,017,218
-----------
Investment in Harris Trust, NY 8,036,150
Premises and Equipment 122,818
Other Assets 2,721,789
-----------
10,880,757
-----------
TOTAL ASSETS $30,592,772
===========
LIABILITIES
Trust Deposits $ 6,408,362
Other Liabilities 659,021
-----------
TOTAL LIABILITIES 7,067,383
-----------
CAPITAL ACCOUNTS
Capital Stock, Authorized, Issued and
Fully Paid - 10,000 Shares of $100 Each 1,000,000
Surplus 4,222,188
Retained Earnings 18,298,208
Equity - Municipal Gain/Loss 4,993
-----------
TOTAL CAPITAL ACCOUNTS 23,525,389
-----------
TOTAL LIABILITIES
AND CAPITAL ACCOUNTS $30,592,772
===========
I, Mark F. McLaughlin, Vice President, of the above-named bank do hereby
declare that this Report of Condition is true and correct to the best of my
knowledge and belief.
Mark F. McLaughlin
June 30, 1997
We, the undersigned directors, attest to the correctness of this
statement of resources and liabilities. We declared that it has been examined
by us, and to the best of our knowledge and belief has been prepared in
conformance with the instructions and is true and correct.
Sanjiv Tandon
Kevin O. Healey
Steven R. Rothbloom
<PAGE>
EXHIBIT 25.2
________________________________________________________________________________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a trustee Pursuant to
Section 305(b) ____
BANK OF MONTREAL TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
New York 13-4941093
(JURISDICTION OF INCORPORATION OR ORGANIZATION (I.R.S. EMPLOYER
IF NOT A US NATIONAL BANK) IDENTIFICATION NO.)
88 Pine Street
New York, New York 10005
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Mark F. McLaughlin
Bank of Montreal Trust Company
88 Pine Street, New York, NY 10005
(212) 701-7602
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
____________________________________
PRICE COMMUNICATIONS CELLULAR INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
Delaware 13-3504402
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
45 Rockefeller Center
New York, New York 10020
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
______________________________________
Guarantee of the 13-1/2% Series B Senior Secured Discount Notes due 2007
of Price Communications Cellular Holdings, Inc.
(TITLE OF THE INDENTURE SECURITIES)
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
- 2 -
ITEM 1. GENERAL INFORMATION.
--------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York
33 Liberty Street, New York NY 10045
State of New York Banking Department
2 Rector Street, New York, NY 10006
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
------------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
ITEM 16. LIST OF EXHIBITS.
-----------------
List below all exhibits filed as part of this statement of eligibility.
1. Copy of Organization Certificate of Bank of Montreal Trust Company to
transact business and exercise corporate trust powers; incorporated
herein by reference as Exhibit "A" filed with Form T-1 Statement,
Registration No. 33-46118.
2. Copy of the existing By-Laws of Bank of Montreal Trust Company;
incorporated herein by reference as Exhibit "B" filed with Form T-1
Statement, Registration No. 33-80928.
3. The consent of the Trustee required by Section 321(b) of the Act;
incorporated herein by reference as Exhibit "C" with Form T-1
Statement, Registration No. 33-46118.
4. A copy of the latest report of condition of Bank of Montreal Trust
Company published pursuant to law or the requirements of its
supervising or examining authority, attached hereto as Exhibit "D".
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Bank of Montreal Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New
York, on the 25th day of November, 1997.
BANK OF MONTREAL TRUST COMPANY
By /s/ Amy Roberts
-----------------------------
Amy Roberts
Vice President
<PAGE>
EXHIBIT "D"
STATEMENT OF CONDITION
BANK OF MONTREAL TRUST COMPANY
NEW YORK
------------------------------
ASSETS
Due From Banks $ 594,897
-----------
Investment Securities:
State & Municipal 17,099,800
Other 100
-----------
TOTAL SECURITIES 17,099,900
Loans and Advances
Federal Funds Sold 2,000,000
Overdrafts 17,218
-----------
TOTAL LOANS AND ADVANCES 2,017,218
-----------
Investment in Harris Trust, NY 8,036,150
Premises and Equipment 122,818
Other Assets 2,721,789
-----------
10,880,757
-----------
TOTAL ASSETS $30,592,772
===========
LIABILITIES
Trust Deposits $ 6,408,362
Other Liabilities 659,021
-----------
TOTAL LIABILITIES 7,067,383
-----------
CAPITAL ACCOUNTS
Capital Stock, Authorized, Issued and
Fully Paid - 10,000 Shares of $100 Each 1,000,000
Surplus 4,222,188
Retained Earnings 18,298,208
Equity - Municipal Gain/Loss 4,993
-----------
TOTAL CAPITAL ACCOUNTS 23,525,389
-----------
TOTAL LIABILITIES
AND CAPITAL ACCOUNTS $30,592,772
===========
I, Mark F. McLaughlin, Vice President, of the above-named bank do hereby
declare that this Report of Condition is true and correct to the best of my
knowledge and belief.
Mark F. McLaughlin
June 30, 1997
We, the undersigned directors, attest to the correctness of this
statement of resources and liabilities. We declared that it has been examined
by us, and to the best of our knowledge and belief has been prepared in
conformance with the instructions and is true and correct.
Sanjiv Tandon
Kevin O. Healey
Steven R. Rothbloom
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
13 1/2% SERIES B SENIOR SECURED DISCOUNT NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
13 1/2% SERIES A SENIOR SECURED DISCOUNT NOTES DUE 2007
OF
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON , 1997
(THE "EXPIRATION DATE")
UNLESS EXTENDED BY PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
EXCHANGE AGENT:
BANK OF MONTREAL TRUST COMPANY
BY MAIL, BY OVERNIGHT
COURIER OR BY HAND:
Bank of Montreal Trust Company
Wall Street Plaza
88 Pine Street, 19th floor
Attn: Amy Roberts,
Corporate Trust Department
New York, NY 10005
BY FACSIMILE:
(212) 701-7698
CONFIRM BY TELEPHONE:
(212) 701-7653
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated , 1997
(the "Prospectus") of Price Communications Cellular Holdings, Inc. (the
"Company") which, together with this Letter of Transmittal (the "Letter of
Transmittal"), describes the Company's offer (the "Exchange Offer") to
exchange $1,000 in principal amount at maturity of 13 1/2% Series B Senior
Secured Discount Notes due 2007 (the "New Notes") for each $1,000 in principal
amount at maturity of outstanding 13 1/2% Series A Senior Secured Discount
Notes due 2007 (the "Old Notes"). The terms of the New Notes are identical in
all material respects (including principal amount, interest rate and maturity)
to the terms of the Old Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the offering of the New Notes will have been
registered under the Securities Act of 1933, as amended (the "Securities Act")
and, therefore, the New Notes will not bear legends restricting the transfer
thereof.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
<PAGE>
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE
AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL
AMOUNT PRINCIPAL
NAME(S) AND ADDRESS(ES) AT MATURITY AMOUNT
OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED AT MATURITY-
(PLEASE FILL IN) NUMBER(S)* BY NOTES* TENDERED**
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL
</TABLE>
- -------------------------------------------------------------------------------
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, the Holder will be deemed to have tendered
the full aggregate principal amount represented by Old Notes. See
Instruction 2.
2
<PAGE>
This Letter of Transmittal is to be used either if certificates for Old
Notes are to be forwarded herewith or if delivery of Old Notes is to be made
by book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company ("DTC"), pursuant to the procedures set forth in "The
Exchange Offer--Book-Entry Transfer" in the Prospectus. Delivery of documents
to a book-entry transfer facility does not constitute delivery to the Exchange
Agent.
Unless the context requires otherwise, the term "Holder" for purposes of
this Letter of Transmittal means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder or any person whose
Old Notes are held of record by DTC who desires to deliver such Old Notes by
book-entry transfer at DTC.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent
on or prior to the Expiration Date may tender their Old Notes according to the
guaranteed delivery procedure set forth in the Prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures."
[_]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
----------------------------------------------------------------------------
The Depository Trust Company:
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
[_]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):_______________________________________________
----------------------------------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery: _____________________
----------------------------------------------------------------------------
IF DELIVERED BY BOOK-ENTRY TRANSFER:
Account Number: ____________________________________________________________
[_]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
----------------------------------------------------------------------------
3
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal amount
of Old Notes. Subject to, and effective upon, the acceptance for exchange of
the Old Notes tendered herewith, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, the Company all right, title and interest
in and to such Old Notes. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent as the true and lawful agent and attorney-in-fact
of the undersigned (with full knowledge that said Exchange Agent acts as the
agent of the undersigned in connection with the Exchange Offer) to cause the
Old Notes to be assigned, transferred and exchanged. The undersigned
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Old Notes and to acquire New Notes issuable
upon the exchange of such tendered Old Notes, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The undersigned also
warrants that it will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Old
Notes or transfer ownership of such Old Notes on the account books maintained
by DTC.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under "The Exchange Offer." The undersigned recognizes that as a
result of these conditions (which may be waived, in whole or in part, by the
Company), as more particularly set forth in the Prospectus, the Company may
not be required to exchange any of the Old Notes tendered hereby and, in such
event, the Old Notes not exchanged will be returned to the undersigned at the
address shown below the signature of the undersigned.
By tendering, each Holder of Old Notes represents to the Company that (i)
the New Notes acquired pursuant to the Exchange Offer are being obtained in
the ordinary course of business of the person receiving such New Notes,
whether or not such person is such Holder, (ii) neither the Holder of Old
Notes nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such New Notes, (iii) if the
Holder is not a broker-dealer or is a broker-dealer but will not receive new
Notes for its own account in exchange for Old Notes, neither the Holder nor
any such other person is engaged in or intends to participate in a
distribution of the New Notes and (iv) neither the Holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act. If the tendering Holder is a broker-dealer (whether or not
it is also an "affiliate") that will receive New Notes for its own account in
exchange for Old Notes, it represents that the Old Notes to be exchanged for
the New Notes were acquired by it as a result of market-making activities or
other trading activities, and acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale
of such New Notes. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Notes, the undersigned is not deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
All authority herein conferred or agreed to be conferred shall survive the
death, bankruptcy or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned. Tendered Old Notes
may be withdrawn at any time prior to the Expiration Date.
Certificates for all New Notes delivered in exchange for tendered Old Notes
and any Old Notes delivered herewith but not exchanged, in each case
registered in the name of the undersigned, shall be delivered to the
undersigned at the address shown below the signature of the undersigned.
4
<PAGE>
TENDERING HOLDER(S) SIGN HERE
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated: _____________________, 199
(Must be signed by registered Holder(s) exactly as name(s) appear(s) on
certificate(s) for Old Notes or by any person(s) authorized to become
registered Holder(s) by endorsements and documents transmitted herewith or,
if the Old Notes are held of record by DTC, the person in whose name such
Old Notes are registered on the books of DTC. If signature by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative
capacity, please set forth the full title of such person.) See Instruction
3.
Name(s):____________________________________________________________________
----------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):______________________________________________________
Address:____________________________________________________________________
----------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.: _______________________________________________
Taxpayer Identification No.: _______________________________________________
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTION 3)
Authorized Signature: ______________________________________________________
Name: ______________________________________________________________________
Title: _____________________________________________________________________
Address: ___________________________________________________________________
Name of Firm: ______________________________________________________________
Area Code and Telephone No.: _______________________________________________
Dated: _____________________, 199
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES. Certificates for
all physically delivered Old Notes or confirmation of any book-entry transfer
to the Exchange Agent's account at DTC of Old Notes tendered by book-entry
transfer, as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile thereof, and any other documents required
by this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth herein on or prior to the Expiration Date.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ANY
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER AND, EXCEPT
AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS
SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, BE USED.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other required documents to the Exchange Agent on or
prior to the Expiration Date or comply with book-entry transfer procedures on
a timely basis may tender their Old Notes pursuant to the guaranteed delivery
procedure set forth in the Prospectus under "The Exchange Offer--Guaranteed
Delivery Procedures." Pursuant to such procedure: (i) such tender must be made
by or through an Eligible Institution (as defined therein); (ii) on or prior
to the Expiration Date the Exchange Agent must have received from such
Eligible Institution a properly completed and duly executed Letter of
Transmittal, a letter, telegram or facsimile transmission setting forth the
name and address of the tendering Holder, the names in which such Old Notes
are registered, the amount of Old Notes tendered, and, if possible, the
certificate numbers of the Old Notes to be tendered; and (iii) all tendered
Old Notes (or a confirmation of any book-entry transfer of such Old Notes into
the Exchange Agent's account at DTC) and all other documents required by this
Letter of Transmittal must be received by the Exchange Agent within five New
York Stock Exchange trading days after the date of execution of such letter,
telegram or facsimile transmission, all as provided in the Prospectus under
"The Exchange Offer--Guaranteed Delivery Procedures."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal
(or facsimile thereof), shall waive any right to receive notice of the
acceptance of the Old Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS. Tenders of Old Notes will be accepted in
all denominations of $1,000 and integral multiples in excess thereof. If less
than the entire principal amount at maturity of Old Notes evidenced by a
submitted certificate is tendered, the tendering Holder must fill in the
principal amount at maturity tendered in the box entitled "Principal Amount At
Maturity Tendered." A newly issued certificate for the principal amount at
maturity of Old Notes submitted but not tendered will be sent to such Holder
as soon as practicable after the Expiration Date. All Old Notes delivered to
the Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
Tenders of Old Notes pursuant to the Exchange Offer are irrevocable, except
that Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date. To be effective, a written, telegraphic or
facsimile transmission notice of withdrawal must be timely received by the
Exchange Agent. Any such notice of withdrawal must specify the person named in
the Letter of Transmittal as having tendered Old Notes to be withdrawn, the
certificate numbers of the Old Notes to be withdrawn, the principal amount at
maturity of Old Notes delivered for exchange, a statement that such a Holder
is withdrawing its election to have such Old Notes exchanged, and the name of
the registered Holder of such Old Notes, and must be signed by the Holder in
the same manner as the original signature on the Letter of Transmittal
(including any required signature guarantees) or be accompanied by evidence
satisfactory to the Company that the person withdrawing the tender has
succeeded to the beneficial ownership of the Old Notes being withdrawn. The
Exchange Agent will return the properly withdrawn Old Notes promptly following
receipt of notice of withdrawal. If Old Notes have been tendered pursuant to
the procedure for book-entry transfer, any notice of withdrawal must specify
the name and number of the account at DTC to be credited with the withdrawn
Old Notes or otherwise comply with DTC's procedures.
6
<PAGE>
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered Holder(s) of the Old Notes tendered hereby, the signature
must correspond with the name(s) as written on the face of certificates
without alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it will
be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Old Notes.
When this Letter of Transmittal is signed by the registered Holder or
Holders of Old Notes listed and tendered hereby, no endorsements of
certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered Holder or Holders of the Old Notes listed, such Notes must be
endorsed or accompanied by separate written instruments of transfer or
exchange in form satisfactory to the Company and duly executed by the
registered Holder, in either case signed exactly as the name or names of the
registered Holder or Holders appear(s) on the Old Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should
so indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by
an Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Old Notes are tendered: (i) by a registered
Holder of such Old Notes and the certificates for New Notes to be issued in
exchange therefor are to be issued (or any untendered amount of Old Notes are
to be reissued) to the registered Holder; or (ii) for the account of any
Eligible Institution.
4. TRANSFER TAXES. The Company shall pay all transfer taxes, if any,
applicable to the transfer and exchange of Old Notes to it or its order
pursuant to the Exchange Offer. If, however, New Notes are to be delivered to,
or are to be registered or issued in the name of, any person other than the
registered Holder of the Old Notes tendered hereby, or if a transfer tax is
imposed for any reason other than the transfer of Old Notes to the Company or
its order pursuant to the Exchange Offer, the amount of any such transfer
taxes (whether imposed on the registered Holder or any other person) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exception therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering Holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
5. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive,
in whole or in part, any of the conditions to the Exchange Offer set forth in
the Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any Holder whose Old Notes
have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated below for further instructions.
7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange
Agent at the address and telephone number set forth below. In addition, all
questions relating to the Exchange Offer, as well as requests for assistance
or additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Company at 45 Rockefeller Plaza, New York, New York 10020.
Attention: Ashley B. Dixon (212) 757-5600.
7
<PAGE>
8. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of Letters of Transmittal or Old
Notes will be resolved by the Company, whose determination will be final and
binding. The Company reserves the absolute right to reject any or all Letters
of Transmittal or tenders that are not in proper form or the acceptance of
which would, in the opinion of the Company's counsel, be unlawful. The Company
also reserves the right to waive any irregularities or conditions of tender as
to the particular Old Notes covered by any Letter of Transmittal or tendered
pursuant to such letter. None of the Company, the Exchange Agent or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. The Company's interpretation of the terms and conditions of the
Exchange Offer shall be final and binding.
9. DEFINITIONS. Capitalized terms used in this Letter of Transmittal and not
otherwise defined have the meanings given in the Prospectus.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
CERTIFICATES FOR OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL
OTHER REQUIRED DOCUMENTS OR A NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED
BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
8
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
OFFER TO EXCHANGE
13 1/2% SERIES B SENIOR SECURED DISCOUNT NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
13 1/2% SERIES A SENIOR SECURED DISCOUNT NOTES DUE 2007
OF
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
Registered holders of outstanding 13 1/2% Series A Senior Secured Discount
Notes due 2007 (the "Old Notes") who wish to tender their Old Notes in
exchange for a like principal amount of 13 1/2% Series B Senior Secured
Discount Notes due 2007 (the "New Notes") and, in each case, whose Old Notes
are not immediately available or who cannot deliver their Old Notes (or any
other documents required by the Letter of Transmittal) to Bank of Montreal
Trust Company (the "Exchange Agent") prior to the Expiration Date, may use
this Notice of Guaranteed Delivery or one substantially equivalent hereto.
This Notice of Guaranteed Delivery together with a properly completed and duly
executed Letter of Transmittal may be delivered by hand or sent by facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight delivery) or mail to the Exchange Agent. See "The
Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus.
The Exchange Agent for the Exchange Offer is:
BANK OF MONTREAL TRUST COMPANY
BY MAIL, BY OVERNIGHT
COURIER OR BY HAND:
Bank of Montreal Trust Company
Wall Street Plaza
88 Pine Street, 19th Floor
Attn: Amy Roberts,
Corporate Trust Department
New York, NY 10005
BY FACSIMILE:
(212) 701-7698
CONFIRM BY TELEPHONE:
(212) 701-7653
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of instructions via a facsimile transmission
to a number other than as set forth above will not constitute a valid
delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on the Letter of Transmittal is required to be
guaranteed by an Eligible Institution, such signature guarantee must appear in
the applicable space provided on the Letter of Transmittal for Guarantee of
Signatures.
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office, branch, agency or
correspondent in the United States, hereby guarantees to deliver to the
Exchange Agent at its address set forth above, the certificates representing
the Old Notes, with any required signature guarantees, and any other documents
required by the Letter of Transmittal within five New York Stock Exchange,
Inc. trading days after the date of execution of this Notice of Guaranteed
Delivery.
Name of Firm: ____________________________ _________________________________
(AUTHORIZED SIGNATURE)
Address: _________________________________
Title: __________________________
- ------------------------------------------
(ZIP CODE) Name: ___________________________
(PLEASE TYPE OR PRINT)
Area Code and Telephone Number: __________
Date: ___________________________
NOTE: DO NOT SEND NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. NOTES SHOULD
BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE>
EXHIBIT 99.3
INSTRUCTION TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER OF PARTICIPANT FROM OWNER
OF
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
13 1/2% SERIES A SENIOR SECURED DISCOUNT NOTES DUE 2007
TO REGISTERED HOLDER AND/OR PARTICIPANT OF THE BOOK-ENTRY TRANSFER FACILITY:
The undersigned hereby acknowledges receipt of the Prospectus dated ,
1997 (the "Prospectus") of Price Communications Cellular Holdings, Inc., a
Delaware corporation (the "Company"), and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), that together constitute the
Company's offer (the "Exchange Offer"). Capitalized terms used but not defined
herein have the meaning as ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Old Notes held by you for the account of
the undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (fill in amount):
$ of the 13 1/2% Series A Senior Secured Discount Notes due 2007.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] To TENDER the following Old Notes held by you for the account of
the undersigned (insert principal amount of Old Notes to be tendered,
if any):
$ of the 13 1/2% Series A Senior Secured Discount Notes due 2007.
[_] NOT to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for the
account of the undersigned, it is understood that you are authorized to make,
on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i)
the New Notes acquired pursuant to the Exchange Offer are being obtained in
the ordinary course of business of the undersigned, (ii) neither the
undersigned nor any such other person has an arrangement or understanding with
any person to participate in the distribution of such New Notes, (iii) if the
undersigned is not a broker-dealer, or is a broker-dealer but will not receive
New Notes for its own account in exchange for Old Notes, neither the
undersigned nor any such other person is engaged in or intends to participate
in the distribution of such New Notes and (iv) neither the undersigned nor any
such person is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act of 1933, as amended (the "Securities Act"). If the
undersigned is a broker-dealer (whether or not it is also an "affiliate") that
will receive New Notes for its own account in exchange for Old Notes, it
represents that such old Notes were acquired as a result of market-making
activities or other trading activities, and it acknowledges that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, the
undersigned is not deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
<PAGE>
SIGN HERE
Name of beneficial owner(s): __________________________________
Signature(s): _________________________________________________
Name(s) (please print): _______________________________________
Address: ______________________________________________________
Telephone Number: _____________________________________________
Taxpayer Identification or Social Security Number: ____________
Date: _________________________________________________________
2
<PAGE>
EXHIBIT 99.4
OFFER TO EXCHANGE
13 1/2% SERIES B SENIOR SECURED DISCOUNT NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
13 1/2% SERIES A SENIOR SECURED DISCOUNT NOTES DUE 2007
OF
PRICE COMMUNICATIONS
CELLULAR HOLDINGS, INC.
To Our Clients:
We are enclosing herewith a Prospectus, dated , 1997, of Price
Communications Cellular Holdings, Inc. (the "Company"), a Delaware
corporation, and a related Letter of Transmittal (which together constitute
the "Exchange Offer") relating to the offer by the Company to exchange its 13
1/2% Series B Senior Secured Discount Notes due 2007 (the "New Notes"),
pursuant to an offering registered under the Securities Act of 1933, as
amended (the "Securities Act"), for a like principal amount of its issued and
outstanding 13 1/2% Series A Senior Secured Discount Notes due 2007 (the "Old
Notes") upon the terms and subject to the conditions set forth in the Exchange
Offer.
PLEASE NOTE THAT THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME ON , 1997, UNLESS EXTENDED.
The Offer is not conditioned upon any minimum number of Old Notes being
tendered.
We are the holder of record and/or participant in the book-entry transfer
facility of Old Notes held by us for your account. A tender of such Old Notes
can be made only by us as the record holder and/or participant in the book-
entry transfer facility and pursuant to your instructions. The Letter of
Transmittal is furnished to you for your information only and cannot be used
by you to tender Old Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of the
Old Notes held by us for your account pursuant to the terms and conditions of
the Exchange Offer. We also request that you confirm that we may on your
behalf make the representations contained in the Letter of Transmittal.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired in the Exchange Offer
are being obtained in the ordinary course of business of the person receiving
such New Notes, whether or not such person is such holder, (ii) neither the
holder of the Old Notes nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Notes, (iii) if the holder is not a broker-dealer or is a broker-dealer but
will not receive New Notes for its own account in exchange for Old Notes,
neither the holder nor any such other person is engaged in or intends to
participate in a distribution of the New Notes and (iv) neither the holder nor
any such other person is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act. If the tendering holder is a broker-dealer
(whether or not it is also an "affiliate") that will receive New Notes for its
own account in exchange for Old Notes, we will represent on behalf of such
broker-dealer that the Old Notes to be exchanged for the New Notes were
acquired by it as a result of market-making activities or other trading
activities, and acknowledge on behalf of such broker-dealer that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, such broker-
dealer is not deemed to admit that it is an "underwriter" within the meaning
of the Securities Act.
Very truly yours,
<PAGE>
EXHIBIT 99.5
OFFER TO EXCHANGE
13 1/2% SERIES B SENIOR SECURED DISCOUNT NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
13 1/2% SERIES A SENIOR SECURED DISCOUNT NOTES DUE 2007
OF
PRICE COMMUNICATIONS
CELLULAR HOLDINGS, INC.
To Registered Holders and Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to the offer by
Price Communications Cellular Holdings, Inc. (the "Company"), a Delaware
corporation, to exchange its 13 1/2% Series B Senior Secured Discount Notes
due 2007 (the "New Notes"), pursuant to an offering registered under the
Securities Act of 1933, as amended (the "Securities Act"), for a like
principal amount of its issued and outstanding 13 1/2% Series A Senior Secured
Discount Notes due 2007 (the "Old Notes") upon the terms and subject to the
conditions set forth in the Company's Prospectus, dated , 1997, and the
related Letter of Transmittal (which together constitute the "Exchange
Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated , 1997;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Registered Holder and/or Book-Entry Transfer
Participant from Owner; and
5. Letter which may be sent to your clients for whose account you hold
Old Notes in your name or in the name of your nominee, to accompany the
instruction form referred to above, for obtaining such client's instruction
with regard to the Exchange Offer.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE EXCHANGE
OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS
EXTENDED.
The Offer is not conditioned upon any minimum number of Old Notes being
tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired in the Exchange Offer
are being obtained in the ordinary course of business of the person receiving
such New Notes, whether or not such person is such holder, (ii) neither the
holder of the Old Notes nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Notes, (iii) if the holder is not a broker-dealer or is a broker-dealer but
will not receive New Notes for its own account in exchange for Old Notes,
neither the holder nor any such other person is engaged in or intends to
participate in a distribution of the New Notes and (iv) neither the holder nor
any such other person is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act. If the tendering holder is a broker-dealer
that will receive New Notes for its own account in exchange for Old Notes, you
will represent on behalf of such broker-dealer that the Old Notes to be
exchanged for the New Notes were acquired by it as a result of market-making
activities or other trading activities, and acknowledge on behalf of such
broker-dealer that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such New Notes. By
acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes, such broker-dealer is not deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
The enclosed Instruction to Registered Holder and/or Book-Entry Transfer
Participant from Owner contains an authorization by the beneficial owners of
the Old Notes for you to make the foregoing representations.
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The Company will not pay any fee or commission to any broker or dealer or to
any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Offer. The Company will
pay or cause to be paid any transfer taxes payable on the transfer of Old
Notes to it, except as otherwise provided in Instruction 4 of the enclosed
Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
Bank of Montreal Trust Company
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC. OR BANK OF MONTREAL
TRUST COMPANY OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON
THEIR BEHALF IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS
ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
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