<PAGE>
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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 CORPORATION
PRICE HOLDINGS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 4832 13-2991700
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION
JURISDICTION OF CLASSIFICATION NO.)
INCORPORATION OR CODE NUMBER)
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 CORPORATION
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:
PETER G. SAMUELS, ESQ.
PROSKAUER ROSE LLP
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 969-3000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING PRICE REGISTRATION
REGISTERED REGISTERED PER SHARE(1)(2) (1)(3) FEE
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<S> <C> <C> <C> <C>
Common Stock, $.01 par
value.................. 5,011,281 shares $8.125 $40,716,658.13 $12,338.38*
</TABLE>
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(1)Estimated solely for the purpose of calculating the registration fee.
(2)Based on the average of high and low prices reported on August 8, 1997.
(3) Represents the number of shares to be registered multiplied by the market
price of the securities being cancelled in the transaction, as determined
in accordance with Rule 457(f)(1).
* Previously paid with the Preliminary Schedule 14A submitted by Price
Communications Corporation on a confidential basis on June 27, 1997.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
PRICE COMMUNICATIONS CORPORATION
CROSS-REFERENCE SHEET TO FORM S-4
ITEM OF FORM S-4 CAPTION IN PROXY STATEMENT AND PROSPECTUS
A.INFORMATION ABOUT THE
TRANSACTION
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus....... Facing Page; Cross Reference Sheet;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus...... Available Information
3. Risk Factors, Ratio of
Earnings to Fixed Charges and
Other Information.............. Introduction; Risk Factors; The Company
4. Terms of the Transaction....... Introduction; Approval of the Stock
Issuance; Approval of the Amendment
Authorizing Additional Shares; Approval
of a Holding Company
5. Pro Forma Financial
Information.................... Unaudited Pro Forma Condensed
Consolidated Financial Statements
6. Material Contacts with the
Company Being Acquired......... The Acquisition
7. Additional Information
Required for Reoffering by
Persons and Parties Deemed to
be Underwriters................ Not Applicable
8. Interests of Named Experts and
Counsel........................ Legal Matters; Experts
9. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities.................... N/A
B. INFORMATION ABOUT THE
REGISTRANT
10. Information with Respect to S-
3 Registrants.................. Not Applicable
11. Incorporation of Certain
Information by Reference....... Not Applicable
12. Information with Respect to S-
2 or S-3 Registrants........... Not Applicable
13. Incorporation of Certain
Information by Reference....... Not Applicable
14. Information with Respect to
Registrants Other than S-3 or
S-2 Registrants................ Introduction; Information Concerning the
Company; Market for the Company's Common
Stock; The Company Selected Consolidated
Financial Data; Palmer Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Index to Financial Statements
I-1
<PAGE>
ITEM OF FORM S-4 CAPTION IN PROXY STATEMENT AND PROSPECTUS
C.INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-
3 Companies.................... Not Applicable
16. Information with Respect to S-
2 or S-3 Companies............. Not Applicable
17. Information with Respect to
Companies Other than S-3 or S-
2 Companies.................... Introduction; Information Concerning
Palmer; Palmer Selected Consolidated
Financial Data; Palmer Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Market for Palmer's Common Stock; Index
to Financial Statements.
D.VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies,
Consents or Authorizations are
to be Solicited................ Introduction; Approval of the Stock
Issuance; Approval of the Amendment
Authorizing Additional Shares; Approval
of a Holding Company Principal
Shareholders of the Company; Security
Ownership of the Company's Management
19. Information if Proxies,
Consents or Authorizations are
not to be Solicited or in an
Exchange Offer................. Not Applicable
I-2
<PAGE>
PRICE COMMUNICATIONS CORPORATION
45 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
----------------
To the shareholders of PRICE COMMUNICATIONS CORPORATION
NOTICE IS HEREBY GIVEN that a Special Meeting (the "Special Meeting") of the
shareholders of Price Communications Corporation (the "Company") will be held
at the offices of Proskauer Rose LLP, 1585 Broadway, New York, New York on
Friday, September 5, 1997 at 10:00 a.m. Eastern Daylight Time for the
following purposes:
1. To approve the issuance of up to 10,000,000 authorized but unissued
shares of the Company's Common Stock, par value $.01 per share (the "Common
Stock"), to be used to pay all or a portion of the purchase price of (i)
the acquisition by the Company of Palmer Wireless, Inc. or (ii) possible
future acquisitions.
2. To approve an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of Common Stock from 40,000,000
shares to 60,000,000 shares.
3. To approve the creation of a holding company by adopting the Agreement
and Plan of Merger among the Company, Price Holdings Corporation
("Holdings") and PCC Sub, Inc. ("Sub") which provides for the merger of Sub
into the Company (the "Holding Company Merger"). As a result of the Holding
Company Merger, Holdings will be owned by the shareholders of the Company
immediately prior to the Holding Company Merger, and the Company will
become a wholly-owned subsidiary of Holdings. Holdings, which will then be
a publicly held company, will change its name to Price Communications
Corporation.
4. To transact such other business related to the foregoing as may
properly be brought before the meeting.
The Board of Directors has fixed the close of business on July 18, 1997, as
the record date for the determination of shareholders entitled to notice of,
and to vote at, the Special Meeting.
By order of the Board of Directors
ASHLEY B. DIXON
Vice President and Corporate
Secretary
August 12, 1997
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND SIGN
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
INSURE THAT YOUR SHARES ARE VOTED.
<PAGE>
PRICE COMMUNICATIONS CORPORATION
45 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
----------------
PROXY STATEMENT AND PROSPECTUS
----------------
This Proxy Statement and Prospectus (the "Proxy Statement") is furnished in
connection with the solicitation of proxies on behalf of the Board of
Directors of Price Communications Corporation (the "Company") to be voted at
the Special Meeting of shareholders of the Company (the "Special Meeting"),
which will be held at the offices of Proskauer Rose LLP, 1585 Broadway, New
York, New York on September 5, 1997 at 10:00 a.m. Eastern Daylight Time. The
purposes of the Special Meeting are as follows:
(i) to approve the issuance (the "Stock Issuance") of up to 10,000,000
authorized but unissued shares of the Company's Common Stock, par value
$.01 per share (the "Common Stock") to be used to pay a portion of the
purchase price of the acquisition by the Company of Palmer Wireless, Inc.
(the "Acquisition") or possible future acquisitions;
(ii) to approve an amendment to the Company's Certificate of
Incorporation (the "Amendment Authorizing Additional Shares") to increase
the number of authorized shares of Common Stock from 40,000,000 shares to
60,000,000 shares; and
(iii) to approve the creation of a holding company by adopting the
Agreement and Plan of Merger (the "Plan of Merger") among the Company,
Price Holdings Corporation ("Holdings") and PCC Sub, Inc. ("Sub"), which
provides for the merger (the "Holding Company Merger") of Sub into the
Company. As a result of the Holding Company Merger, Holdings will be owned
by the shareholders of the Company immediately prior to the Holding Company
Merger and the Company will become a wholly-owned subsidiary of Holdings.
Holdings, which will then be a publicly held company, will change its name
to Price Communications Corporation.
If not otherwise specified, all proxies received pursuant to this
solicitation will be voted FOR each proposal. Each proposal is independent of
the other proposals, and the failure of the shareholders to approve any one
proposal will not impact the other proposals.
Shareholders who execute proxies may revoke them at any time before they are
exercised by delivering a written notice to the Secretary of the Company
stating that the proxy is revoked, by executing a subsequent proxy and
presenting it to the Secretary of the Company at the above address, or by
attending the Special Meeting and voting in person.
The Board of Directors does not know of any matters other than those
specified in the Notice of Special Meeting of Shareholders that will be
presented for consideration at the meeting. However, if other matters properly
come before the meeting, it is the intention of the persons named in the
enclosed proxy to vote thereon in accordance with their judgment.
As of July 18, 1997, the record date for the Special Meeting, the Company
had outstanding and entitled to vote at the Special Meeting 4,999,281 shares
of Common Stock, with each such share being entitled to one vote, 728,133
shares of Series A Preferred Stock, with each such share being entitled to one
vote, and 364,066 shares of Series B Preferred Stock, with each such share
being entitled to one-half vote (such Series A Preferred Stock and Series B
Preferred Stock, collectively the "Preferred Stock"). Only shareholders of
record at the close of business on July 18, 1997 will be entitled to vote at
the Special Meeting, and this Proxy Statement and the accompanying proxy are
being sent to such shareholders on or about August 12, 1997.
(continued on following page)
----------------
i
<PAGE>
(continued from previous page)
Holdings has filed a Registration Statement on Form S-4 (the "Registration
Statement") pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), covering the shares of its Common Stock, $.01 par value
("Holdings Common Stock"), issuable in connection with the Holding Company
Merger. Upon the consummation of the Holding Company Merger, each share of
Common Stock outstanding will automatically and without any further action of
the holder be converted into one share of Holdings Common Stock. This Proxy
Statement also constitutes the Prospectus of Holdings filed as part of the
Registration Statement.
The Board of Directors of the Company unanimously recommends that
shareholders vote in favor of the proposal to approve the Stock Issuance, the
proposal to approve the Amendment Authorizing Additional Shares and the
proposal to adopt the Plan of Merger. The directors and executive officers of
the Company intend to vote their shares of Common Stock and Preferred Stock in
favor of each of these proposals.
The Company has engaged Morrow & Co., Inc. to solicit proxies in connection
with the Special Meeting. The Company has agreed to pay Morrow & Co., Inc. a
fee of $5,000 and to reimburse Morrow & Co., Inc. for its reasonable out-of-
pocket expenses. Solicitation may also be made by directors, officers and
employees of the Company; however, such persons will not receive any
additional compensation for such solicitation. Proxies may be solicited in
person or by mail, telephone, telegram or other means. Brokers, nominees,
fiduciaries and other custodians have been requested to forward such
soliciting material to the beneficial owners of shares held of record by such
custodians. Such custodians may be reimbursed for their expenses in accordance
with rules promulgated by the National Association of Securities Dealers.
Under New York law and the Company's Certificate of Incorporation and By-
laws, the holders of a majority of the voting power of the outstanding shares
entitled to vote, present in person or represented by proxy constitutes a
quorum. If a quorum is established, the affirmative vote of a majority of the
voting power of the outstanding shares of Common Stock and Preferred Stock
present in person or represented by proxy at the Special Meeting is required
to approve the Stock Issuance. The affirmative vote of a majority of the
voting power of the outstanding shares of Common Stock and Preferred Stock is
required to approve the Amendment Authorizing Additional Shares. The
affirmative vote of two-thirds of the voting power of the outstanding shares
of Common Stock and Preferred Stock is required to approve the Plan of Merger.
Abstentions and broker non-votes will be counted only for purposes of
determining a quorum. Under New York law, appraisal rights are not available
to the shareholders of the Company who object to the Stock Issuance, the
Amendment Authorizing Additional Shares or the Plan of Merger.
SEE "RISK FACTORS" BEGINNING ON PAGE 20 FOR A DISCUSSION OF CERTAIN MATTERS
WHICH SHOULD BE CONSIDERED BY SHAREHOLDERS.
No person is authorized to give any information or to make any
representations, other than those contained in this Proxy Statement, in
connection with the offering and solicitation made hereby and, if given or
made, such information or representations should not be relied upon as having
been authorized. This Proxy Statement does not constitute an offer to sell, or
a solicitation of an offer to buy, the securities to which it relates, or the
solicitation of a proxy, in any jurisdiction in which, or to any person to
whom, it is unlawful to make such offer or solicitation. Neither the delivery
of this Proxy Statement nor any distribution of the securities offered
pursuant to this Proxy Statement shall, under any circumstances, create any
implication that there has been no change in the information contained herein
or in the affairs of the Company or Holdings since the date of this Proxy
Statement.
THE SHARES OF HOLDINGS COMMON STOCK HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE
----------------
THIS PROXY STATEMENT IS DATED AUGUST 12, 1997
ii
<PAGE>
PROXY STATEMENT
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Introduction............................................................. 1
The Acquisition.......................................................... 1
Approval of the Stock Issuance........................................... 11
Approval of the Amendment Authorizing Additional Shares.................. 12
Approval of a Holding Company............................................ 13
Risk Factors............................................................. 20
Unaudited Pro Forma Condensed Consolidated Financial Statements.......... 26
Information Concerning the Company....................................... 34
Principal Shareholders of the Company.................................... 36
Security Ownership of the Company's Management........................... 37
Market for the Company's Common Stock.................................... 38
The Company Selected Consolidated Financial Data......................... 39
Company Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 40
Information Concerning Palmer............................................ 46
Market for Palmer's Common Stock......................................... 55
Palmer Selected Consolidated Financial Data.............................. 56
Palmer Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 58
Legal Matters............................................................ 66
Experts.................................................................. 66
Available Information.................................................... 66
Other Matters............................................................ 66
Index to Financial Statements............................................ F-1
</TABLE>
<PAGE>
INTRODUCTION
THE COMPANY
The Company has historically been a nationwide communications company owning
and then disposing of a number of television, radio, newspaper, cellular
telephone and other communications and related properties. The Company's
business strategy is to acquire communications properties at prices it
considers attractive, finance such properties on terms satisfactory to it,
manage such properties in accordance with its operating strategy and dispose
of them if and when the Company determines such dispositions to be in its best
interest. As used herein, if the Holding Company Merger is approved by
shareholders, then, with respect to periods after the Holding Company Merger,
the term "Company" shall be deemed to refer to Holdings and the term "Common
Stock" will be deemed to refer to Holdings' common stock.
PALMER WIRELESS, INC.
Palmer Wireless, Inc. ("Palmer") is engaged in the construction,
development, management and operation of cellular telephone systems in the
southeastern United States. At March 31, 1997 (after giving effect to the
Acquisition (as defined below)), Palmer provided cellular telephone service to
274,498 subscribers in Georgia, Alabama, Florida and South Carolina in a total
of 17 licensed service areas composed of eight Metropolitan Statistical Areas
("MSAs") and nine Rural Service Areas ("RSAs"), with an aggregate estimated
population of 3.5 million. Palmer sells its cellular telephone service as well
as a full line of cellular products and accessories principally through its
network of retail stores. Palmer markets all of its products and services
under the CELLULAR ONE service mark.
THE ACQUISITION
GENERAL
On May 23, 1997, the Company, Price Communications Wireless, Inc., a wholly-
owned indirect subsidiary of the Company ("PCW"), and Palmer entered into an
Agreement and Plan of Merger (the "Palmer Merger Agreement") which provides,
among other things, for the merger of PCW with and into Palmer, with Palmer as
the surviving corporation (the "Palmer Merger"). At or subsequent to the
Palmer Merger, Palmer will change its name to "Price Communications Wireless,
Inc." Pursuant to the Palmer Merger Agreement, the Company has agreed to
acquire each issued and outstanding share of common stock of Palmer for a
purchase price of $17.50 per share in cash and to purchase outstanding options
and rights under Palmer's employee and director stock purchase plans for an
aggregate purchase price of $488.9 million. In addition, the Company has
agreed to repay the outstanding indebtedness of Palmer estimated to be up to
approximately $389 million ("Palmer Existing Indebtedness"). In connection
with this transaction, PCW has entered into an agreement to sell (subject to
the satisfaction of certain conditions) at the effective time of the Palmer
Merger, Palmer's Fort Myers, Florida MSA for $168 million (which will generate
proceeds to the Company of approximately $166.3 million) (the "Fort Myers
Sale" and, together with the Palmer Merger, the "Acquisition"). The proceeds
of the Fort Myers Sale will be used to fund a portion of the Acquisition. The
purchaser of the Fort Myers MSA is Wireless One Network, L.P. ("Wireless
One"), the operator of cellular telephone systems including three RSA's
adjacent to the Fort Myers MSA. Wireless One, which had unsuccessfully sought
to acquire Palmer shortly before the Company entered into the Palmer Merger
Agreement, made an unsolicited offer to the Company to purchase the Fort Myers
system. The Company believes that in part because of the geographic importance
of Fort Myers to Wireless One, it was able to achieve a high sales price for
Fort Myers (approximately $440 per Pop in comparison to an average acquisition
price of approximately $198 per Pop paid by the Company in the Acquisition).
The consummation of the Acquisition is subject to the satisfaction of
certain conditions contained in the Palmer Merger Agreement, including, among
other things, Federal Communications Commission ("FCC") and Palmer shareholder
approval. The Company also entered into an agreement with Palmer
Communications Incorporated ("PCI"), which is the majority shareholder of
Palmer, pursuant to which PCI has agreed to vote its shares of common stock of
Palmer in favor of the Palmer Merger. The Company expects the Acquisition to
be consummated in October 1997.
1
<PAGE>
In order to fund the Acquisition and pay related fees and expenses, PCW
issued $175 million aggregate principal amount of 11 3/4% Senior Subordinated
Notes due 2007 (the "PCW Offering") and will enter into a syndicated senior
loan facility providing for term loan borrowings in the aggregate principal
amount of approximately $325 million and revolving loan borrowings of $200
million (the "New Credit Facility"). Although the PCW Offering has been
consummated, the notes issued thereunder are subject to mandatory redemption
if the Acquisition has not occurred by December 31, 1997 or if in the sole
judgment of the Company it appears that the Acquisition will not be
consummated by December 31, 1997. At the effective time of the Palmer Merger,
PCW is expected to borrow all term loans available under the New Credit
Facility and up to approximately $100 million of revolving loans. The
remaining revolving loans will, subject to a borrowing base and certain other
conditions, be available to fund the working capital requirements of PCW. On
July 2, 1997, the Company received an executed commitment letter from a
financial institution to provide the New Credit Facility. The commitment is
subject to significant conditions, including the absence of material adverse
change in the business of Palmer, and negotiation, execution and delivery of
definitive documentation and consummation of the Fort Myers Sale (or
arrangements satisfactory to the lenders under the New Credit Facility for
short-term financing bridging such sale).
An additional $47.5 million of the purchase price has been raised through an
offering by Price Communications Cellular Holdings, Inc., a wholly-owned
indirect subsidiary of the Company and the direct parent of PCW ("Cellular
Holdings"), of units (the "Cellular Holdings Units") consisting of 13 1/2%
Senior Secured Discount Notes due 2007 and warrants (the "Unit Warrants") to
purchase shares of Common Stock of the Company (the "Cellular Holdings
Offering"). The Unit Warrants enable the holders thereof to purchase up to
527,696 shares of the Company's Common Stock, or approximately 9% of the fully
diluted common equity of the Company as of August 8, 1997, at an exercise
price of $0.01 per share. The Unit Warrants are exercisable at any time on or
after the earlier to occur of (i) the consummation of the Acquisition
(provided that if the Acquisition does not occur prior to December 31, 1997,
the Unit Warrants will be subject to the special mandatory redemption
described in the next sentence hereof) and (ii) the occurrence of a change of
Control (as such term is defined in the Indenture for the Cellular Holdings
notes). Although the Cellular Holdings Offering has been consummated, the
Cellular Holdings Units issued thereunder are subject to a special mandatory
redemption if the Acquisition has not occurred by December 31, 1997 or if in
the sole judgment of the Company it appears that the Acquisition will not be
consummated by December 31, 1997.
The Company intends to make, subject to approval by the Company's
shareholders of the Stock Issuance and the satisfaction of certain other
conditions, an exchange offer (the "Exchange Offer") of shares of the
Company's Common Stock for shares of Palmer common stock. The Exchange Offer
would be consummated immediately prior to the consummation of the Palmer
Merger and would reduce the number of shares of Palmer common stock to be
acquired in the Palmer Merger, thus reducing the aggregate cash consideration
to be paid in the Merger. In such event, the initial borrowings under the New
Credit Facility are expected to be reduced.
In the Exchange Offer, the Company will offer, for each share of Palmer
common stock that is purchased in the Exchange Offer, shares of the Company's
Common Stock with an aggregate market value of $18.00. For purposes of
determining the exchange ratio, the market value of the Company's Common Stock
will be determined by taking the average closing price per share of the
Company's Common Stock for the five trading days ending on September 25, 1997.
The Exchange Offer will be limited to up to that number of shares of Palmer
common stock that can be purchased with the 10,000,000 shares of the Company's
Common Stock to be issued in the Stock Issuance. Thus, for example, if the
average closing price per share of the Company's Common Stock for the five
trading days ending on September 25, 1997 is $8 1/16, the exchange ratio would
be 2.2326 shares of the Company's Common Stock for each share of Palmer common
stock, and the Exchange Offer would cover a maximum of up to 4,479,082 shares
of Palmer common stock, to be purchased with a maximum of 10,000,000 shares of
the Company's Common Stock. Assuming 100% acceptance of the Exchange Offer,
the cash consideration to be paid in the Palmer Merger would be reduced by
$80.6 million, and the Company's anticipated initial revolving loan borrowings
under the New Credit Facility would be reduced from $97.1 million to $16.5
million. With 50% acceptance of the Exchange Offer, the cash savings in the
Palmer Merger would be $40.3
2
<PAGE>
million, and the anticipated initial revolving loan borrowings under the New
Credit Facility would be $56.8 million. The actual cash savings in the Palmer
Merger will vary with the average closing price for the five trading days
ending on September 12, 1977 (which will determine the exchange ratio used in
the Exchange Offer) and the acceptance level in the Exchange Offer. See
"Unaudited Condensed Consolidated Pro Forma Financial Statements," and
"Company Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources." If the Stock Issuance
is not approved by the Company's shareholders, if the conditions to the Palmer
Merger have not been satisfied or waived by the parties thereto, or various
other conditions to the Exchange Offer are not fulfilled, the Exchange Offer
will not be consummated.
The Company has also purchased 1,677,700 shares of Class A Palmer common
stock in the open market through August 8, 1997, or approximately 16% of the
outstanding shares of Palmer Class A common stock. The majority of the
purchases took place in June and July, 1997 and the aggregate purchase price
was approximately $27.1 million. These purchases will reduce the aggregate
amount of consideration paid in the Palmer Merger by approximately $29.4
million.
The Company has no plans for significant changes in Palmer or its management
or operations after consummation of the Acquisition, and currently plans to
continue Palmer's business on substantially the same basis as it is currently
conducted.
The Acquisition is being accounted for as a purchase.
REASONS FOR THE ACQUISITION
The Company has historically been a nationwide communications company. Prior
to 1995 the Company owned a number of television, radio, newspaper, cellular
telephone and other communications and related properties all of which were
disposed of pursuant to the Company's long-standing policy of buying and
selling communications properties at times deemed advantageous by the
Company's Board of Directors.
On March 31, 1997, the Company had no debt and held current assets
consisting of approximately $63.0 million in cash and cash equivalents, and
short-term investments. During the period following the disposition of its
operating properties, the Company reviewed numerous potential acquisitions and
made various bids and offers in connection with possible acquisitions, but was
unable to make an acquisition at a price it deemed prudent.
The Board of Directors of the Company believes that the Acquisition is in
the best interests of the Company and its shareholders. Among the factors
taken into account by the Board in making such determination with respect to
the Acquisition were the significant operating income before depreciation and
amortization ("EBITDA") of Palmer; Palmer's strong EBITDA margin on service
revenue; Palmer's record of growth in revenues, subscribers and penetration
rate (the number of subscribers per population); Palmer's excellent management
team; and the strategic opportunity presented of permitting the Company to re-
enter the cellular telephone business. The Company's decision to purchase
Palmer was also influenced by the high prices prevailing in the broadcasting
industry (one of its principal areas of past operations) which made potential
broadcasting acquisitions unattractive to the Company, the Company's desire
not to make investments in industries in which the Company lacked expertise,
and the significant experience of the Company and its management in the
cellular telephone business. In making a determination to purchase Palmer
rather than other possible acquisition candidates, the Company took into
account that Palmer constituted a "pure" cellular business (i.e., it operated
traditional cellular telephone systems only, rather than systems involving
other technologies such as PCS which the Company believes to be economically
unproven in comparison to traditional cellular operations), that there are
very few "pure" cellular businesses potentially available as acquisition
candidates, and that Palmer's common stock was trading at a relatively low
level in comparison to its historic trading prices (the reported closing sale
price per share of Palmer Class A Common Stock on the NASDAQ National Market
on May 22, 1997, the last trading day before the public announcement of the
Acquisition, was $12.06; such stock traded in the range of $14.25 to $24.50
during 1995 and $10.25 to $22.50 during 1996). Among the factors taken into
account by the Board of Directors in making such determination with respect to
the Fort Myers Sale was the significant reduction in the need for financing
for the Acquisition resulting from the anticipated proceeds of the Fort Myers
Sale. See "Palmer Selected Consolidated Financial Data," "Palmer
3
<PAGE>
Management Discussion and Analysis of Financial Condition and Results of
Operations," "Unaudited Pro Forma Condensed Consolidated Financial
Statements," "Information Concerning the Company," "Risk Factors--Competition"
and "Market for Palmer's Common Stock," In reaching its determinations, the
Company's Board of Directors did not assign any relative or specific weights
to the factors considered.
BACKGROUND OF THE ACQUISITION
Early in 1997, PriCellular Corporation ("PriCellular"), a publicly traded
corporation with respect to which Robert Price, the Company's President then
served as President and a director (and now serves as Chairman of the Board),
was advised that Palmer was exploring means to maximize shareholder value,
including the possible sale of Palmer. During early 1997, PriCellular
expressed various indications of interest and made offers to acquire Palmer
for consideration to consist in part of cash and in part of PriCellular
securities which were rejected by Palmer because Palmer stated that it would
only consider all cash offers.
At a meeting held on May 14, 1997, the PriCellular Board of Directors
determined not to pursue further the possible acquisition of Palmer, because
of such Board's desire to effect any such acquisition with consideration
consisting in part of PriCellular securities which it believed to be
unacceptable to the Palmer Board as well as the PriCellular Board's desire to
continue PriCellular's historic policy of purchasing relatively underdeveloped
properties rather than a comparatively mature system such as Palmer. At the
May 14, 1997 meeting, the PriCellular Board and PriCellular's counsel
acknowledged that PriCellular's determination not to continue to pursue the
possible acquisition of Palmer would leave the Company free to pursue such an
acquisition.
In May 1997, Mr. Price wrote to Goldman Sachs & Co. ("Goldman Sachs"),
Palmer's financial advisors, setting forth the Company's offer of $17.50 per
share for Palmer shares.
On May 15, 1997, counsel to Palmer provided the Company's counsel with a
draft of the Palmer Merger Agreement, and negotiations between such respective
counsel followed. During the period commencing May 15, 1997, the Company and
its counsel conducted business and legal due diligence with respect to Palmer,
and the Company provided its directors with various information about Palmer
and the Company's potential financing of an acquisition of Palmer and various
informal conversations were held between the Company's management and its
directors with respect to Palmer. On May 21, 1997, the Company's Board of
Directors held a special meeting at which the acquisition of Palmer was
unanimously approved.
On May 22, 1997, the Palmer Board of Directors unanimously approved the
transaction. The definitive Palmer Merger Agreement was signed on May 23,
1997, providing for an all cash purchase price of $17.50 per share.
In June 1997, following execution of the Palmer Merger Agreement, certain
institutional and individual holders of Class A common stock of Palmer
approached the Company to express an interest in receiving consideration
consisting of the Company's Common Stock (or in part the Company's Common
Stock and in part cash) (the "Stock Alternative") as an alternative to the all
cash consideration provided under the Palmer Merger Agreement. The holders
explained that they were interested in maintaining an equity interest in the
cellular telephone business and that there were very few other publicly traded
companies whose businesses were focused solely on cellular telephone systems.
While it would be possible for such holders to acquire the Company's Common
Stock in the open market following the Palmer Merger, the number of
outstanding shares of the Company's Common Stock is relatively small and the
shares are relatively thinly traded. Accordingly, the holders expressed an
interest in receiving shares of the Company's Common Stock directly in
exchange for their Palmer shares. The Company thereupon informed Goldman Sachs
that it was interested in providing the Stock Alternative to Palmer
stockholders. Goldman Sachs and certain members of Palmer management stated
that so long as the Stock Alternative did not delay the closing or impair the
Palmer stockholders' ability to receive $17.50 in cash for their shares if
they so desired, Palmer would have no objection if a Stock Alternative were
presented directly by the Company to Palmer stockholders. The Company did not
suggest to Palmer amending the Palmer Merger Agreement to provide for the
Stock Alternative because the Company believed it could adequately present the
Stock Alternative directly to Palmer stockholders through the Exchange Offer.
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TERMS OF THE PALMER MERGER AGREEMENT
The following description of certain provisions of the Palmer Merger
Agreement is only a summary and does not purport to be complete. This
discussion is qualified in its entirety by reference to the complete text of
the Palmer Merger Agreement, which is attached to this Proxy Statement as
Annex I and incorporated by reference herein.
The Palmer Merger
On May 23, 1997, the Company, PCW and Palmer executed the Palmer Merger
Agreement, which provides, among other things, for the merger of PCW with and
into Palmer, with Palmer as the surviving corporation (the "Surviving
Corporation"). At or subsequent to the Palmer Merger, Palmer will change its
name to "Price Communications Wireless, Inc." At the effective time of the
Palmer Merger (the "Effective Time") , all of the issued and outstanding
shares of common stock of Palmer will be converted into the right to receive
$17.50 per share in cash, without interest. The Company has also agreed to
repay the Palmer Existing Indebtedness. In connection with this transaction,
PCW has entered into an agreement to sell (subject to the satisfaction of
certain conditions), at the Effective Time, Palmer's Fort Myers, Florida MSA
for $168 million (which will generate approximately $166.3 million of proceeds
to the Company). The proceeds of the Fort Myers Sale will be used to fund a
portion of the Acquisition.
Conversion of Palmer Common Stock in the Palmer Merger
At the Effective Time, all of the issued and outstanding shares of common
stock of Palmer will be converted into the right to receive $17.50 per share
in cash ("Per Share Amount"). All such shares of common stock shall cease to
be outstanding and shall automatically be canceled and retired. All shares of
capital stock of Palmer owned, directly or indirectly, by the Company, PCW or
any subsidiary of the Company, and all shares of capital stock of Palmer held
in its treasury shall be canceled and extinguished without any conversion
thereof and no cash shall be delivered or deliverable in exchange therefor.
Each share of common stock, par value $.01 per share, of PCW issued and
outstanding immediately prior to the Effective Time shall be converted into
and exchanged for one duly and validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation with the result that the
Surviving Corporation will be an indirect wholly-owned subsidiary of the
Company.
Certificate of Incorporation and Bylaws
The Palmer Merger Agreement provides that the Certificate of Incorporation
of PCW as in effect immediately prior to the Effective Time and as amended by
the Certificate of Merger, shall be the certificate of incorporation of the
Surviving Corporation. The Bylaws of PCW, as in effect immediately prior to
the Effective Time, shall be the bylaws of the Surviving Corporation.
Directors and Officers
The directors of PCW shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the certificate of
incorporation and bylaws of the Surviving Corporation. The officers of Palmer
shall continue as the officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed and qualified.
Robert Price is the sole director of PCW.
FCC Approval
The consummation of the Acquisition is subject to FCC approval of the
transfer of control of Palmer to the Company. The Fort Myers Sale is also
subject to FCC approval. The application for approval of the transfer of
control of Palmer to the Company and the application for the approval of Fort
Myers Sale are being reviewed by the FCC concurrently and simultaneous action
by the FCC on the applications is expected.
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Effective Time
The Effective Time of the Palmer Merger, at which time the closing of the
Palmer Merger will occur and the conversion of the shares of Palmer common
stock will become effective, will be the time of the filing of a Certificate
of Merger with the Secretary of State of the State of Delaware. This filing
will occur as soon as practicable following the satisfaction or waiver of the
closing conditions set forth in the Merger Agreement. The Effective Time is
currently expected to take place in October 1997. See "--Termination Rights"
and "--Conditions".
Payment
As of the Effective Time, the Company shall, on behalf of PCW, deposit with
a bank designated by Palmer and the Company (the "Paying Agent"), for the
benefit of the holders of shares of common stock of Palmer, for payment
through the Paying Agent, cash in an amount equal to the Per Share Amount
multiplied by the number of shares of common stock outstanding immediately
prior to the Effective Time (excluding any shares owned by the Company, PCW,
or a subsidiary of the Company, or shares held in the treasury) (such cash
being hereinafter referred to as the "Payment Fund") to Palmer stockholders.
The Company shall cause the Paying Agent to deliver cash out of the Payment
Fund.
Representations and Warranties
The Palmer Merger Agreement contains various customary representations and
warranties of Palmer relating to, among other things, organization and
qualification, certificate of incorporation and bylaws, capitalization,
authority to enter into the Palmer Merger Agreement, absence of conflicts
between the Palmer Merger Agreement and other agreements and documents,
receipt of required consents or approvals, documents filed with the SEC and
the accuracy of information contained therein, financial statements, absence
of material adverse changes since December 31, 1996, litigation, governmental
licenses and permits, compliance with laws, taxes, intellectual property,
material contracts, employee benefit plans, title to and condition of
properties and assets, labor relations, environmental matters, insurance, FCC
matters, governmental matters, board approval of the Palmer Merger, the
shareholders' vote required, opinion of the Palmer board's financial advisor,
and broker's or finder's fees.
PCW and the Company each have made various customary representations and
warranties relating to, among other things, organization and qualification,
certificate of incorporation and bylaws, authority to enter into the Palmer
Merger Agreement, absence of conflicts between the Palmer Merger Agreement and
other agreements, receipt of required consents or approvals, and the required
vote of the shareholder of PCW. In addition, the Company has made
representations and warranties relating to financing of the Palmer Merger,
qualification under the Communications Act of 1934, as amended, and FCC rules
and regulations, the absence of a requirement of the vote of the shareholders
of the Company, litigation, broker's or finder's fees, documents filed with
the SEC and the accuracy of information contained therein, financial
statements, and absence of material adverse changes since March 31, 1997.
Covenants and Obligations
Palmer has agreed, among other things, that during the period from the date
of the Palmer Merger Agreement until the Effective Time, Palmer shall: (i)
operate the business of Palmer only in the ordinary course; (ii) use
reasonable efforts to preserve its business organization, maintain its rights
and franchises, retain the services of its respective principal officers and
key employees and maintain its relationship with its respective principal
customers and suppliers; (iii) use reasonable efforts to maintain its
properties and assets; and (iv) use reasonable efforts to keep in full force
and effect insurance comparable to that currently maintained. Palmer has also
agreed that it will not during such period (i) increase the compensation of
directors, executive officers or employees except for increases in the
ordinary course of business and consistent with past practice, grant any
severance or termination pay, or adopt or amend any employee benefit plan or
arrangement; (ii) make any distributions or dividends; (iii) redeem or
otherwise reacquire any share of its capital stock, effect any reorganization
or recapitalization, or split, combine or reclassify any of its capital stock
or issue or authorize any
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other securities for shares of its capital stock; (iv) sell any shares of, or
any options, warrants, or other rights to acquire or convertible into any
shares of, its capital stock, except for the issuance of shares upon the
exercise of outstanding options and the issuance of shares under Palmer's
stock purchase plans or amend the terms of such rights, warrants, or options
in a manner inconsistent with the provisions of the Palmer Merger Agreement or
to make such terms more favorable to the holders thereof; (v) acquire, merge
or consolidate with, or purchase any equity interest in or a portion of the
assets of any business corporation, partnership, association or other business
organization or division, or make or commit any capital expenditures other
than in the ordinary course of business consistent with past practice; (vi)
sell, lease or otherwise dispose of any material assets except for the grant
of purchase money security interests not to exceed $500,000 in the aggregate
and dispositions in the ordinary course of business and consistent with past
practice; (vii) amend its certificate of incorporation, bylaws or other
governing documents in such a manner that would have an adverse impact on the
consummation of the Palmer Merger or would be adverse to the Company's
interests; (viii) change its methods of accounting, make or rescind any
election relating to taxes, settle or compromise any claim or suit relating to
taxes (except where the amount in question does not exceed $500,000), or
change its tax policies or procedures, except as may be required by law or to
comply with generally accepted accounting principles; (ix) incur any
obligation for borrowed money, other than purchase money indebtedness not to
exceed $500,000, indebtedness incurred in the ordinary course of business
under existing loan agreements, and capitalized leases not to exceed
$1,000,000 in the aggregate; (x) enter into or modify any material contracts
without the written consent of the Company; or (xi) agree in writing or
otherwise to do any of the foregoing.
No Solicitation
Palmer has agreed that it will not, and will not permit any of its officers,
directors, employees, representatives, agents, or direct or indirect
stockholders of Palmer, to directly or indirectly encourage or solicit any
proposal that constitutes an Acquisition Proposal (as defined below), engage
in any discussions or negotiations or provide any information to any person
relating thereto or in furtherance thereof or accept any Acquisition Proposal;
provided, however, that Palmer or its board of directors is permitted to make
any disclosure to its stockholders that, in the judgment of its board of
directors in accordance with, and based upon, the advice of outside counsel,
is required under applicable law. For purposes of the Palmer Merger Agreement,
"Acquisition Proposal" means any offer to acquire (or meaningful indication of
interest in the acquisition of) all or any substantial part of the business
and properties or capital stock of Palmer, whether by merger, consolidation,
sale of assets or stock, tender offer or similar transaction or series of
transactions involving Palmer or its direct or indirect stockholders.
Notwithstanding the foregoing, the board of directors of Palmer, in the
exercise of and as required by its fiduciary duties as determined in good
faith by the board of directors of Palmer in accordance with and based upon
the advice of outside counsel, may (i) furnish information (including, without
limitation, confidential information) concerning Palmer to a third party who
makes an unsolicited request for such information for the purpose of making an
Acquisition Proposal, provided that such third party executes and delivers a
confidentiality agreement in a customary form, and (ii) engage in discussions
or negotiations with a third party who submits in writing an interest in
making an Acquisition Proposal that the board of directors believes, based on
advice of its financial advisors, is reasonably capable of being consummated
and is reasonably likely to be superior to the transactions contemplated by
this Agreement from a financial point of view to all stockholders of Palmer,
provided, however, that in the case of clause (i) or (ii) hereof, Palmer shall
promptly notify the Company in writing of such request for information or
Acquisition Proposal, providing reasonable details with respect thereto, and
shall keep the Company informed as to the status of any discussions or
negotiations referred to in clause (ii) above.
Conditions
The respective obligations of the Company, PCW and Palmer to effect the
Palmer Merger and the other transactions contemplated by the Palmer Merger
Agreement are subject to the satisfaction at or prior to the Effective Time of
the following conditions, any or all of which may be waived, in whole or in
part, to the extent
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permitted by applicable law: (i) stockholder approval by the requisite vote of
the stockholders of Palmer in accordance with applicable law; (ii) the absence
of any action or proceeding which is then in effect and has the effect of
prohibiting the Palmer Merger or any of the transactions contemplated thereby;
(iii) termination of all applicable waiting periods under the HSR Act; and
(iv) all consents, waivers, approvals and authorizations required to be
obtained from the FCC (the "FCC Transfer Approvals"), and all filings or
notices required to be made with the FCC by the Company, PCW and Palmer prior
to consummation of the transactions contemplated in the Palmer Merger
Agreement. Each of the FCC Transfer Approvals shall have become a Final Order.
For purposes of the Palmer Merger Agreement, "Final Order" shall mean an
action by the FCC: (i) that is not reversed, stayed, enjoined, set aside,
annulled or suspended within the deadline, if any, provided by applicable
statute or regulation; (ii) with respect to which no request for stay, motion
or petition for reconsideration or rehearing, application or request for
review, or notice of appeal or other judicial petition for review that is
filed within such period is pending, and (iii) as to which the deadlines, if
any, for filing any such request, motion, petition, application, appeal or
notice, and for the entry of orders staying, reconsidering, or reviewing on
the FCC's own motion have expired. The Company may, at its option, waive on
behalf of the parties the requirement that the FCC Transfer Approvals shall
have become a Final Order.
The obligations of the Company to effect the Palmer Merger and the other
transactions contemplated in the Palmer Merger Agreement are also subject to
the following conditions, any or all of which may be waived, in whole or in
part, to the extent permitted by applicable law: (i) the representations and
warranties of Palmer made in the Palmer Merger Agreement shall be true and
correct in all material respects; (ii) the agreements and covenants of Palmer
required to be performed on or before the Effective Time shall have been
performed in all material respects; (iii) the Company shall have received
legal opinions in form and substance reasonably satisfactory to the Company;
(iv) the Dissenting Shares (as defined in "Dissenters and Appraisal Rights" of
this Proxy Statement) shall constitute not greater than ten percent (10%) of
the shares of Class A common stock outstanding on the Closing Date; and (v)
since the date of the Palmer Merger Agreement, Palmer has experienced no
material adverse change to its business. The legal opinions described in
clause (iii) above will be delivered by Hogan & Hartson L.L.P., counsel to
Palmer, and Lukas, McGowan, Nace & Gutierrez, Chartered, FCC counsel to
Palmer, and will cover such customary matters as due authorization of the
Palmer Merger Agreement by all necessary corporate action of Palmer, the
absence of conflicting agreements or laws, compliance as to form with the
Securities Exchange Act of 1934, as amended, of the proxy statement to be
submitted to Palmer stockholders in connection with the Palmer Merger
Agreement, the absence of litigation, and compliance with FCC rules.
The obligations of Palmer to effect the Palmer Merger and the other
transactions contemplated in the Palmer Merger Agreement are also subject to
the following conditions, any or all of which may be waived, in whole or in
part, to the extent permitted by applicable law: (i) the representations and
warranties of the Company and PCW made in the Palmer Merger Agreement shall be
true and correct in all material respects; (ii) the agreements and covenants
of the Company and PCW required to be performed on or before the Effective
Time shall have been performed in all material respects; (iii) Palmer shall
have received a legal opinion in form and substance reasonably satisfactory to
Palmer.
Regulatory Approvals
In addition to the federal and state approvals required in connection with
the effectiveness of this Proxy Statement, the Palmer Merger requires early
termination or lapse of waiting periods under the HSR Act.
Indemnification
The Palmer Merger Agreement provides that:
(a) The certificate of incorporation and bylaws of the Surviving
Corporation shall contain the provisions with respect to indemnification
set forth in the certificate of incorporation and bylaws of Palmer
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on the date of the Palmer Merger Agreement, which provisions shall not be
amended, repealed or otherwise modified for a period of six (6) years after
the Effective Time in any manner that would adversely affect the right
thereunder or persons who at any time prior to the Effective Time were
identified as prospective indemnities under the certificate of
incorporation or bylaws of Palmer in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation,
the transactions contemplated by the Palmer Merger Agreement), unless such
modification is required by applicable law.
(b) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers,
directors and employees of Palmer (collectively, the "Indemnified Parties")
against all losses, expenses, claims, damages, liabilities or amounts that
are paid in settlement of, with the approval of the Company and the
Surviving Corporation (which approval shall not be unreasonably withheld),
or otherwise in connection with, any claim, action, suit, proceeding or
investigation with respect to actions or omissions occurring at or prior to
the Effective Time (including, without limitation, the transactions
contemplated by the Palmer Merger Agreement).
Dissenters and Appraisal Rights
Notwithstanding any other provisions of the Palmer Merger Agreement to the
contrary, shares of common stock of Palmer that are issued and outstanding
immediately prior to the Effective Time and that are held by stockholders who
shall not have voted in favor of the Palmer Merger or consented thereto in
writing and who shall have demanded properly in writing appraisal for such
shares in accordance with Section 262 of Delaware Law (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the Per Share Amount. Such stockholders shall be entitled to receive
payment of the appraised value of such shares of common stock held by them in
accordance with the provisions of such Section 262, except that all Dissenting
Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
shares of common stock under such Section 262 shall thereupon be deemed to
have been converted into and to have become exchangeable, as of the Effective
Time, for the right to receive, without any interest thereon, the Per Share
Amount, upon surrender of the certificate or certificates that formerly
evidenced such shares of common stock.
Termination
The Palmer Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Palmer Merger
Agreement by the stockholders of Palmer. Termination may occur on the
following conditions:
(a) by mutual written consent of each of the Company and Palmer; (b) by
either the Company or Palmer if there is a material breach of any
representation or warranty in the Palmer Merger Agreement on the part of
the other which is not cured within thirty (30) business days following
receipt by the breaching party of notice of such breach; (c) by either the
Company or Palmer if any decree, permanent injunction, judgment, order or
other action by any court of competent jurisdiction or any governmental
entity prohibiting consummation of the Palmer Merger shall have become
final and nonappealable; (d) by either the Company or Palmer if the Palmer
Merger Agreement shall fail to receive the requisite vote for approval and
adoption by the stockholders of Palmer at a special meeting of the Palmer
stockholders and the Palmer Merger shall not have been consummated within
forty-five days (45) days thereafter; and (e) by either Palmer or the
Company if the Palmer Merger shall not have been consummated before
December 31, 1997 (the "Termination Date"); provided, however, that the
right to terminate the Palmer Merger Agreement shall not be available to
any party whose failure to fulfill any obligation under the Palmer Merger
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the Termination Date.
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Voting Agreement
Concurrently with the execution of the Palmer Merger Agreement, the Company
entered into a Voting Agreement with Palmer Communications Incorporated
("PCI"), the majority shareholder of Palmer, pursuant to which PCI has agreed
to vote its shares of common stock of Palmer in favor of the Palmer Merger.
PCI owns beneficially or of record 17,293,578 shares of Class B common stock
of Palmer, which represent 75% of the combined voting power of the Class A
common stock and Class B common stock of Palmer. The approval of the majority
of the votes cast by holders of Palmer common stock is required for the
approval of the Palmer Merger Agreement. The Voting Agreement also provides
that PCI shall not dispose of or encumber any shares of Palmer common stock
owned or acquired beneficially or of record by PCI, nor will PCI convert any
shares of Class B common stock of Palmer into shares of Class A common stock.
In addition, PCI granted to the Company an option to purchase all of the
common stock of Palmer owned by PCI at the cash exercise price of $17.50 per
share, which option is exercisable at any time prior to termination of the
Voting Agreement if PCI fails to vote its shares as required by the Voting
Agreement.
Certain Expenses
The Palmer Merger Agreement provides that each party will pay its own
expenses. All FCC annual regulatory fees which are due and payable prior to
Closing shall be pad by Palmer prior to Closing.
Palmer shall pay the Company a fee (the "Fee") of Fifteen Million Dollars
($15,000,000), if the Palmer Merger Agreement is (i) terminated either (A) by
the Company as a result of Palmer's material breach of its obligations under
the Palmer Merger Agreement, (B) by Palmer or the Company if the requisite
stockholder approval of the Palmer Merger is not obtained and (ii) either (x)
an Alternative Transaction (as defined below) has been publicly announced and
has not been withdrawn at the time of such termination (in which event the Fee
shall be paid simultaneously with such termination) or (y) an Alternative
Transaction is consummated on or prior to the date that is one (1) year after
the date of the Palmer Merger Agreement (in which event the Fee shall be paid
simultaneously with such consummation). As used herein, an "Alternative
Transaction" shall mean any transaction or proposed transaction or related
series of transactions (including without limitation any merger,
consolidation, sale of assets or stock, tender offer or other transaction)
providing for the receipt by Palmer and/or the holders of more than fifty
percent (50%) of its common stock of consideration equivalent to a value in
excess of $17.50 per share of Palmer common stock.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Holders of Palmer common stock who receive cash in the Palmer Merger in
exchange for their Palmer stock will, in general, recognize gain or loss upon
such exchange equal to the difference between the cash received and their tax
basis in the Palmer stock exchanged. Palmer holders who also participate in
the Exchange Offer will generally not recognize gain or loss on their receipt
of Holding Company Common Stock in the exchange. In the event that Company
Common Stock is received by a holder in the Exchange Offer, gain or loss will
generally be recognized by such holder on the exchange in an amount equal to
the difference between the fair market value of the Company Common Stock
received and the tax basis of such holder in the Palmer stock exchanged. In
certain circumstances, some or all of the cash received by Palmer holders who
also participate in the Exchange Offer may be treated as dividend income (to
the extent of applicable earnings and profits) rather than income from the
sale or exchange of a capital asset.
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APPROVAL OF THE STOCK ISSUANCE
GENERAL
At the Special Meeting the shareholders of the Company are being asked to
approve the Stock Issuance which provides for the issuance by the Company of
up to 10,000,000 authorized but unissued shares of the Company's Common Stock
to be used to pay, through the Exchange Offer, a portion of the purchase price
for the common stock of Palmer pursuant to the Acquisition. See "The
Acquisition." To the extent all of the shares of Common Stock so authorized
for issuance are not issued in the Exchange Offer, such shares may be issued
in the future to pay all or a portion of the purchase price of possible future
acquisitions. Assuming that the maximum of 10,00,000 shares of the Company's
Common Stock are issued to Palmer stockholders in the Exchange Offer, the
former Palmer stockholders will own approximately 66.6% of the outstanding
shares of Company's Common Stock.
The proposal to approve the Stock Issuance is being presented to the
Company's shareholders in accordance with Section 712 of the Listing
Standards, Policies and Requirements of the American Stock Exchange ("AMEX").
Section 712 requires shareholder approval (pursuant to a proxy solicitation
conforming to Securities and Exchange Commission proxy rules) as a
prerequisite to approval of applications to list additional shares to be
issued as sole or partial consideration for an acquisition of the stock or
assets of another company where the present or potential issuance of common
stock, or securities convertible into common stock, could result in an
increase in outstanding common shares of 20% or more.
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE IN FAVOR OF THE PROPOSAL TO APPROVE THE STOCK ISSUANCE. The
Directors and executive officers of the Company, who together hold
approximately 29.9% of the combined voting power of the Common Stock and
Preferred Stock, intend to vote their shares of Common Stock and Preferred
Stock in favor of this proposal.
VOTE REQUIRED
Under New York law and the Company's Certificate of Incorporation and By-
laws, the holders of a majority of the voting power of the outstanding shares
entitled to vote, present in person or represented by proxy constitutes a
quorum. If a quorum is established, the affirmative vote of a majority of the
voting power of the outstanding shares of Common Stock and Preferred Stock
present in person or represented by proxy at the Special Meeting is required
to approve the Stock Issuance. Abstentions and broker non-votes will be
counted only for the purposes of determining a quorum.
RIGHTS OF DISSENTING SHAREHOLDERS
Under New York law, shareholders of the Company who object to the Stock
Issuance will not be afforded appraisal rights.
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APPROVAL OF THE AMENDMENT AUTHORIZING ADDITIONAL SHARES
GENERAL
The Certificate of Incorporation of the Company currently authorizes the
issuance of up to 20,000,000 shares of Preferred Stock and up to 40,000,000
shares of Common Stock. The Board of Directors is proposing to amend the
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 40,000,000 shares to 60,000,000 shares. As of August 8, 1997
there were 2,221,199 shares of Preferred Stock and PIK Preferred Stock
outstanding and 5,011,281 shares of Common Stock outstanding.
RECOMMENDATION OF BOARD OF DIRECTORS
The additional authorized shares that would be available for issuance, if
the proposed Amendment Authorizing Additional Shares is approved, may be
issued for any proper corporate purpose by the Board of Directors at any time
without further shareholder approval (subject, however, to applicable statutes
and the rules of the AMEX which require shareholder approval for the issuance
of shares in certain circumstances). The Board of Directors believes it is
desirable to give the Company this flexibility in considering such matters as
stock dividends, raising additional capital, acquisitions, or other corporate
purposes. The authorization of such shares will enable the Company to act
promptly and without additional expense if appropriate circumstances arise
which require the issuance of such shares. Although the Company has engaged in
discussions from time to time regarding the issuance and sale of shares of
Common Stock, other than as described under "The Acquisition," the Company
currently has no present agreements or commitments to issue any additional
shares. Holders of Common Stock are not entitled to preemptive rights, and to
the extent that any additional shares of Common Stock or securities
convertible in Common Stock may be issued on other than a pro rata basis to
current shareholders, the present ownership portion of current shareholders
may be diluted.
The increase in the number of authorized shares of Common Stock has not been
proposed for any anti-takeover purpose, and the Board of Directors and
executive officers of the Company have no knowledge of any current effort to
obtain control of the Company or to accumulate large amounts of its Common
Stock. However, the availability of additional shares of Common Stock could
make any attempt to gain control of the Company or of the Board of Directors
more difficult. Shares of authorized but unissued Common Stock could be issued
in an effort to dilute the stock ownership and voting power of any person or
entity desiring to acquire control of the Company, which might have the effect
of discouraging or making less likely such a change of control. Such shares
could also be issued to other persons or entities who support the Board of
Directors in opposing a takeover attempt that the Board of Directors has
deemed not to be in the best interests of the Company and its shareholders.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE IN FAVOR OF THE PROPOSAL TO APPROVE THE AMENDMENT
AUTHORIZING ADDITIONAL SHARES. The Directors and executive officers of the
Company, who together hold approximately 29.9% of the combined voting power of
the Common Stock and Preferred Stock, intend to vote their shares of Common
Stock and Preferred Stock in favor of this proposal.
VOTE REQUIRED
The affirmative vote of a majority of the voting power of the outstanding
shares of Common Stock and Preferred Stock is required to approve the
Amendment Authorizing Additional Shares.
RIGHTS OF DISSENTING SHAREHOLDERS
Under New York law, shareholders of the Company who object to the proposal
to approve the Amendment Authorizing Additional Shares will not be afforded
appraisal rights.
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APPROVAL OF A HOLDING COMPANY
GENERAL
In order to facilitate the Company's access to sources of financing by
adding an additional potential borrower in the Company's holding company
structure, the Board of Directors of the Company has determined that it would
be in the best interests of the Company to create a holding company which will
own all of the outstanding securities of the Company. Although the holding
company structure to be created by the Holding Company Merger is intended to
facilitate the Company's access to sources of financing, the Holding Company
Merger is not otherwise expected to have any effect on the Company or its
shareholders, who will become shareholders of Holdings.
At the Special Meeting the shareholders of the Company are being asked to
approve the adoption of the Plan of Merger among the Company, Holdings and
Sub, which provides for the merger of Sub into the Company.
As a result of the Holding Company Merger, Holdings will be owned by the
shareholders of the Company immediately prior to the Holding Company Merger,
and the Company will become a wholly-owned subsidiary of Holdings. Holdings,
which will then be a publicly held company, will change its name to Price
Communications Corporation, and the Company will change its name to Price,
Inc. A vote in favor of the Holding Company Merger will also be a vote in
favor of the name changes.
It is anticipated that the Holding Company Merger will be accounted for as a
restructuring. The Holding Company Merger will not affect the ultimate
responsibility of corporate management for profitable growth and the creation
of shareholder value.
RECOMMENDATION OF BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE IN FAVOR OF THE PROPOSAL TO CREATE A HOLDING COMPANY BY
ADOPTING THE PLAN OF MERGER. The Directors and executive officers of the
Company, who together own approximately 29.9% of the combined voting power of
the Common Stock and Preferred Stock, intend to vote their shares of Common
Stock and Preferred Stock in favor of this proposal.
In recommending the approval of the Holding Company Merger to the
shareholders of the Company, the Board of Directors considered the following
points, among others;
. There will be no change in the state of incorporation, since both the
Company and Holdings are New York corporations.
. The Certificate of Incorporation and Bylaws of Holdings will be identical
in substance to the Company's Certificate of Incorporation and Bylaws
immediately prior to the Holding Company Merger, with a total of 60,000,000
shares Holdings Common Stock authorized. Therefore, Holdings will have the
same authorized capital stock as the Company with the same rights and
privileges (assuming that the Company's shareholders authorize the
Amendment Authorizing Additional Shares). Holdings will change its name to
Price Communications Corporation.
. Each share of Common Stock, each share of Preferred Stock and each share of
Senior Payment-In-Kind Increasing Rate Preferred Stock ("PIK Preferred
Stock") of the Company will be converted automatically into one share of
Holdings Common Stock, one share of Holdings Preferred Stock and one share
of Holdings PIK Preferred Stock, respectively, with the same rights and
privileges. Certificates for shares of Common Stock will automatically
represent shares of Holdings Common Stock. No exchange of stock
certificates will be required.
. The shares of Holdings Common Stock are expected to be listed for trading
on the AMEX, as the shares of Common Stock are currently. Holdings will be
a reporting company under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
. Immediately after the Holding Company Merger, Holdings will, on a
consolidated basis, have the same assets, liabilities and shareholders
equity as the Company. The business of the Company will remain unchanged.
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. Holdings will have the same directors and officers as the Company at the
time of the Holding Company Merger.
. The Holding Company Merger will not add "anti-takeover" protections or have
an anti-takeover effect.
. There will be no contractual restrictions or restrictions in the Company's
certificate of incorporation on the ability of the Company to pay dividends
to Holdings. See "Risk Factors--Limitations on Access to Cash Flow of
Subsidiaries."
PLAN OF MERGER
General. The Holding Company Merger will be accomplished through the Plan of
Merger, a copy of which is annexed hereto as Annex I. The information set
forth below is qualified in its entirety by reference to the Plan of Merger.
The Holding Company Merger will become effective upon the filing of a
certificate of merger with the Secretary of State of New York. The filing is
expected to occur prior to consummation of the Exchange Offer. The date of
such filing is referred to as the "Holding Company Merger Effective Date."
Conversion. In accordance with the Plan of Merger and subject to shareholder
approval and the fulfillment or waiver of certain other conditions described
herein, on the Holding Company Merger Effective Date each share of Common
Stock of the Company outstanding immediately prior to the Holding Company
Merger, each share of Preferred Stock of the Company outstanding immediately
prior to the Holding Company Merger and each share of PIK Preferred Stock of
the Company outstanding immediately prior to the Holding Company Merger will
be converted automatically into one share of Holdings Common Stock, one share
of Holdings Preferred Stock and one share of Holdings PIK Preferred Stock,
respectively. As a result of the Holding Company Merger, Sub will be merged
with and into the Company, and the Company's shareholders will become
shareholders of Holdings. In addition, the Unit Warrants will, pursuant to
their terms, entitle the holders thereof to purchase shares of Holdings Common
Stock upon the exercise thereof in lieu of shares of Company Common Stock.
Under the Plan of Merger, the approval of the Holding Company Merger will be
deemed to be approval of the assumption by Holdings of the Company's 1992
Long-Term Incentive Plan. The 1992 Long Term Incentive Plan, which was
approved by shareholders in 1992, authorizes the issuance of up to 1,250,000
shares of Common Stock to senior officers, senior management and other key
employees of the Company and its subsidiaries in the form of non-qualified or
incentive stock options, stock appreciation rights, restricted stock,
performance shares, performance units and other stock-based awards. An
aggregate of 784,330 shares have been issued or are reserved for issuance
pursuant to outstanding options under the 1992 Long Term Incentive Plan, while
an aggregate of 465,670 shares will remain available for issuance under the
Plan following the assumption of the Plan in the Holding Company Merger.
Conditions to the Holding Company Merger. The Holding Company Merger is
subject to the following conditions, among others:
(a) approval of the Plan of Merger by the holders of two-third of the
voting power of all outstanding shares of Common Stock and Preferred Stock
entitled to vote;
(b) approval for listing the shares of Holdings Common Stock issuable in
the Holding Company Merger for trading on the AMEX; and
(c) absence of an injunction or litigation relating to the Holding
Company Merger.
Amendment, Waiver or Termination of the Plan of Merger. The Plan of Merger
provides that the Company, Holdings and Sub may amend any of the terms of, or
waive any of the conditions to, the Plan of Merger before the consummation of
the Holding Company Merger and before or after shareholder approval, provided
that any such amendment will not, in the opinion of the Board of Directors of
the Company, have any materially adverse effect on the shareholders of the
Company. In addition, the Plan of Merger provides that the
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Plan of Merger may be terminated by the Board of Directors of the Company at
any time prior to the Holding Company Merger Effective Date notwithstanding
shareholder approval.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general description of certain of the federal income tax
consequences of the Holding Company Merger to holders of Common Stock without
consideration of the particular facts and circumstances of each holder's
situation. Although it is not anticipated that state or local income tax
consequences to shareholders will vary substantially from the federal income
tax consequences described below, shareholders are urged to consult their own
tax advisors with respect thereto. The following discussion may not apply to
holders of Common Stock who are not citizens or residents of the United States
or who are otherwise subject to special tax treatment under the Internal
Revenue Code of 1986, as amended (the "Code").
A shareholder will not recognize gain or loss upon the conversion of the
Common Stock into Holdings Common Stock, and a shareholder's tax basis in the
shares of Holdings Common Stock into which the shareholder's shares of Common
Stock are converted will be the same as that shareholder's basis in such
Common Stock. A shareholder's holding period in the shares of Holdings Common
Stock into which the shareholder's shares of Common Stock are converted will
include the holding period of such Common Stock, if the shareholder holds such
shares as capital assets at the time of the Holding Company Merger. Each
shareholder that receives Holdings Common Stock in the Holding Company Merger
will be required to retain records and file with such shareholder's Federal
income tax return a statement setting forth certain facts related to the
Holding Company Merger.
RIGHTS OF DISSENTING SHAREHOLDERS
Under New York law, shareholders of the Company who object to the proposal
to approve the creation of a holding company will not be afforded appraisal
rights.
DESCRIPTION OF CAPITAL STOCK
General. The Certificate of Incorporation of Holdings is identical in
substance to the Company's and, after the Holding Company Merger Effective
Date, Holdings will have issued the same number of shares of Holdings Common
Stock, Holdings Preferred Stock and Holdings PIK Preferred Stock as the
Company has issued shares of Common Stock, Preferred Stock and PIK Preferred
Stock immediately prior to the Holding Company Effective Date. Sub has issued
and outstanding 100 shares of common stock, $.01 par value, of Sub ("Sub
Common Stock"), all of which are owned by Holdings.
Common Stock and Holdings Common Stock. Holders of Common Stock and Holdings
Common Stock are entitled to one vote for each share held on all matters
submitted to a vote of shareholders and do not have cumulative voting rights.
Shareholders casting a plurality of votes of the shareholders entitled to vote
in an election of directors may elect all of the directors standing for
election. Holders of Common Stock and Holdings Common Stock are entitled to
receive ratably such dividends, if any, as may be declared by the applicable
Board of Directors out of funds legally available therefor, subject to any
preferential dividend rights of preferred stock that may be issued at such
future time or times. Upon the liquidation, dissolution or winding up of the
Company or Holdings, the holders of Common Stock and Holdings Common Stock are
entitled to receive ratably the net assets of the Company or Holdings, as the
case may be, available after the payment of all debts and other liabilities
and subject to the prior rights of PIK Preferred Stock and Preferred Stock or
Holdings PIK Preferred Stock and Holdings Preferred Stock, as the case may be,
that may be issued at such time. Holders of Common Stock and Holdings Common
Stock have no preemptive, subscription, redemption or conversion rights. The
outstanding shares of Common Stock and the shares of Holdings Common Stock to
be outstanding following the Holding Company Merger are fully paid and
nonassessable. The rights, preferences and privileges of holders of Common
Stock and Holdings Common Stock are subject to the rights of the holders of
shares of any series of preferred stock or Holdings preferred stock, as the
case may be, which the Company may designate and issue in the future.
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Rights Agreements. Each share of the Company's Common Stock currently
includes one right (a "Company Right") to purchase shares of Common Stock
under the circumstances contemplated by the Company's shareholders' rights
plan (the "Company Rights Agreement"). Prior to the Holding Company Merger,
Holdings will adopt a substantially identical shareholders' rights plan (the
"Holdings Rights Agreement" and, together with the Company Rights Agreement,
the "Rights Agreement"), and upon the Holding Company Merger, each Company
Right will be converted into one right (a "Holdings Right" and, together with
the Company Rights, the "Rights") to purchase shares of Holdings Common Stock
under the circumstances contemplated by the Rights Agreements.
Each Right initially represents the right, when exercisable, to purchase a
share of the Company's Common Stock or Holdings Common Stock, as the case may
be, at a purchase price of $18.00 per share. The Rights are not exercisable,
and cannot be transferred separately from the common stock until the first
date (the "Distribution Date") of a public announcement that a person or group
has acquired beneficial ownership of 20% or more of the outstanding shares of
common stock. A person or group whose acquisition of common stock causes a
Distribution is referred to as an "Acquiring Person." Certain shareholders,
who owned in excess of 20% of the Company's Common Stock on the date of
adoption of the Company Rights Agreement and certain of their affiliates and
permitted transferees are not deemed to be Acquiring Persons and their
ownership will not cause a Distribution Date unless they acquire an additional
one percent or more of the common stock. Prior to the consummation of the
Exchange Offer, the Rights Agreements will be amended to clarify that Palmer
stockholders who acquire the Company's Common Stock or Holdings Common Stock,
as the case may be, in the Exchange Offer will not be deemed Acquiring Persons
as a result of such acquisition.
If any person becomes an Acquiring Person, each holder of Rights (other than
Rights that have become void as described below) will thereafter have the
right (the "Flip-In Right") to receive, upon exercise of the Rights, the
number of shares of the Company's Common Stock or Holdings Common Stock, as
the case may be (or in certain circumstances, other securities or debt of the
Company or Holdings, as the case may be), having a value, immediately prior to
such triggering event, equal to two times the aggregate exercise price of such
Rights. The Company's or Holdings' Board of Directors, at its option, may
exchange the Flip-In Rights for shares of common stock or certain other
securities of the corporation, provided that (i) no person is the beneficial
owner of 50% or more of the common stock at the time of such exchange and (ii)
such exchange must be authorized by a majority of the Board and the
Disinterested Directors (as defined in the Rights Agreements). All Rights
owned by an Acquiring Person or an affiliate or associate thereof will be
void.
If, after there is an Acquiring Person, the Company or Holdings, as the case
may be, is acquired in a merger or other business combination transaction in
which the holders of all outstanding common stock immediately prior to the
consummation of the transaction are not the holders of all of the surviving
corporation's voting power, or in which more than 50% of the corporation's
assets or earning power is sold or transferred, then each holder of Rights
(except those owned by an Acquiring Person or an affiliate or associate
thereof) will thereafter have the right (the "Flip-Over Right") to receive,
upon exercise of such Rights, common stock of the acquiring company having a
value equal to two times the aggregate exercise price of the Rights. The
holder of a Right will continue to have the Flip-Over Right whether or not
such holder exercised or surrenders the Flip-In Right.
The exercise price per Right is subject to adjustment upon certain dividends
and upon certain subdivisions, combinations and reclassifications of the
shares of common stock. The Rights may also be redeemed, in whole but not in
part, at a price of $.01 per Right, payable in cash or common stock, at any
time prior to the earlier of a person becoming an Acquiring Person, or the
expiration of the Rights, if such redemption is approved by the majority of
the Board and the Disinterested Directors.
Preferred Stock and Holdings Preferred Stock. The Board of Directors of each
of the Company and Holdings is authorized, subject to any limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 20,000,000 shares of undesignated preferred stock
or Holdings preferred stock, as the case may be, in one or more series. Each
such series of Company preferred stock or Holdings preferred stock, as the
case may be, shall have the number of shares, designations, preferences,
powers,
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qualifications and special or relative rights or privileges as shall be
determined by the applicable Board of Directors, which may include, among
others, dividend rights, voting rights, redemption and sinking fund
provisions, liquidation preferences, conversion rights and preemptive rights.
The issuance of preferred stock or Holdings preferred stock, as the case may
be, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from acquiring, a majority of the outstanding voting stock of the Company or
Holdings, as the case may be. The Board of Directors of each of the Company
and Holdings has authorized the issuance of 728,133 shares of Series A
Preferred Stock and 364,066 shares of Series B Preferred Stock. All authorized
shares of the Company's Series A Preferred Stock and Series B Preferred Stock
have been issued to Mr. Robert Price, the President of the Company. Pursuant
to the Holding Company Merger, each such share will be converted into one
share of Holdings Series A Preferred Stock or Holdings Series B Preferred
Stock, as the case may be. Each share of Series A Preferred Stock of the
Company and Holdings is entitled to one vote per share, and to receive 1% of
the dividends and liquidation distributions payable with respect to a share of
Common Stock and Holdings Common Stock, respectively. Each share of Series B
Preferred Stock of the Company and Holdings is entitled to one-half vote per
share, and to receive 1% of the dividends and liquidation distributions
payable with respect to a share of Common Stock and Holdings Common Stock,
respectively.
In the event of (i) a merger of the Company, the sale or exchange of all or
substantially all of the Company's assets or the occurrence of any other
transaction or event as a result of which the holders of Common Stock receive
at least $22.00 per share in the case of the Series A Preferred Stock (or
$15.00 per share in the case of the Series B Preferred Stock) or (ii) the
acquisition of more than 50% of the voting power of the securities of the
Company then outstanding by any person, entity or group, provided the market
value of the Common Stock of the Company at such time is at least $22.00 per
share in the case of the Series A Preferred Stock (or $15.00 per share in the
case of the Series B Preferred Stock) (the amount per share received by
holders of Common Stock or the market price per share of Common Stock
described above being referred to as the "Transaction Price"), Mr. Price would
receive a payment per share of Series A Preferred Stock equal to the sum of
25% of the excess of the Transaction Price per share (up to a Transaction
Price of $32.00) over $9.125, 50% of the excess of the Transaction Price per
share (up to a Transaction Price of $42.00) over $32.00, 100% of the excess of
the Transaction Price per share (up to a Transaction Price of $52.00) over
$42.00, and 125% of the excess of the Transaction Price per share over $52.00,
and Mr. Price would receive a payment per share of Series B Preferred Stock
equal to the excess of the Transaction Price over $10.00. To illustrate the
foregoing, (A) in the event of a transaction described above resulting in a
Transaction Price to the holders of the Company's Common Stock equal to
$20.00, Mr. Price would receive no payment in respect of the Series A
Preferred Stock and would receive a payment per share of Series B Preferred
Stock equal to a $10.00; (B) in the event of a Transaction Price per share of
$30.00, Mr. Price would receive a payment per share of Series A Preferred
Stock equal to $5.22 (25% of the Transaction Price over $9.125) and a payment
per share of Series B Preferred Stock equal to $20.00; (C) in the event of a
Transaction Price per share of $40.00, Mr. Price would receive a payment per
share of Series A Preferred Stock equal to $9.72 (25% of the excess of $32.00
over $9.125 plus 50% of the excess of $40.00 over $32.00) and a payment per
share of Series B Preferred Stock equal to $30.00; and (D) in the event of a
Transaction Price per share of $50.00, Mr. Price would receive a payment per
share of Series A Preferred Stock equal to $18.72 (25% of the excess of $32.00
over $9.125 plus 50% of the excess of $42.00 over $32.00 plus 100% of the
excess of $50.00 over $42.00) and a payment per share of Series A Preferred
Stock equal to $40.00. Although the Board of Directors and Compensation
Committee of the Company believe that the provisions of the Series A and
Series B Preferred Stock provide the Company's President and Chief Executive
Officer with incentive to maximize shareholder value by providing such officer
with significant profit upon the consummation of various business combination
transactions providing the holders of the Company's Common Stock with a
payment per share significantly in excess of current trading prices, the
Series A Preferred Stock and Series B Preferred Stock may be viewed as having
the potential effect of discouraging a bidder's proposal to acquire control of
or merge with the Company in that such Preferred Stock would increase the cost
to a bidder of certain of such transactions. For example, a transaction
resulting in a Transaction Price of $30.00 per share to holders of the
Company's Common Stock would result in a total payment in respect of the
Series A Preferred
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Stock and Series B Preferred Stock equal to $11,082,174. In addition, the
votes cast by such shares of Preferred Stock (a total of 910,166 votes, or
14.8% of the total votes cast by all outstanding shares of the Company's
Common Stock and Preferred Stock as of August 8, 1997) would make it more
difficult for a bidder to elect directors or enact shareholder proposals
opposed by management of the Company.
The shares of Series A Preferred Stock will be repurchased by the Company in
the event of Mr. Price's death or termination of employment prior to a
transaction resulting in a payment as aforesaid, as follows:
(i) If his employment with the Company terminates because of death or
disability or termination by the Company not for cause, or his retirement
subsequent to the Company's Common Stock trading for an average of at least
$22.00 per share over a period of 10 consecutive trading days, the Company
will repurchase the Series A Preferred Stock at its then fair market value,
as determined by appraisal.
(ii) If his employment terminates for any reason except as aforesaid, the
Company will repurchase the Series A Preferred Stock at the lower of the
price paid by him for such stock or its then fair market value, as
determined by appraisal.
The shares of Series B Preferred Stock will be repurchased by the Company
upon Mr. Price's request provided that the trading price of the Company's
Common Stock during any period of 10 consecutive trading days prior to such
request was at least $15.00 per share, for a purchase price equal to its then
fair market value, as determined by appraisal. In addition, the shares of
Series B Preferred Stock will be repurchased by the Company in the event of
Mr. Price's death or termination of employment prior to a transaction
resulting in a payment as set forth in the second preceding paragraph, as
follows:
(i) If his employment with the Company terminates because of death or
disability or termination by the Company not for cause, or his retirement
subsequent to the Company's Common Stock trading for an average of at least
$15.00 per share over a period of 10 consecutive trading days, the Company
will repurchase the Series B Preferred Stock at its then fair market value,
as determined by appraisal.
(ii) If his employment terminates for any reason except as aforesaid, the
Company will repurchase the Series B Preferred Stock at the lower of the
price paid by him for such stock or its then fair market value, as
determined by appraisal.
The foregoing provisions with respect to the Series A and Series B Preferred
Stock are subject to appropriate adjustment in the event of a stock split,
stock dividend or similar event affecting the Company's Common Stock.
The Holdings Series A and Series B Preferred Stock will contain provisions
identical in substance to the foregoing. Neither the Holding Company Merger,
the Palmer Merger nor Exchange Offer will trigger any repurchase or other
rights to payment in respect of the Series A or Series B Preferred Stock.
PIK Preferred Stock and Holdings PIK Preferred Stock. The Company has had a
long-standing program of repurchasing shares of its Common Stock, which the
Company believes currently represents a good long term investment for the
Company and an appropriate use of its current cash resources. From time to
time, the Company engaged in discussions with the Franklin Funds concerning
the purchase of 2,291,953 shares of its Common Stock held by the Franklin
Funds, but the Company was unable to negotiate a purchase from the Franklin
Funds directly. In June 1997, NatWest Capital Markets Limited ("NatWest")
approached the Company with a proposal for a transaction, negotiated in June
and July, 1997, in which: (i) NatWest would purchase the shares owned by the
Franklin Funds directly from the Franklin Funds, (ii) NatWest would agree to
act as initial purchaser in the Cellular Holdings Offering, (iii) the Company
would issue the NatWest 1,129 units (the "PIK Units") of PIK Preferred Stock
and warrants ("PIK Warrants") to NatWest in exchange for the shares of Common
Stock acquired from the Franklin Funds and $3.0 million in fees payable to
NatWest in connection with the Cellular Holdings Offering and (iv) the PIK
Units would be redeemed out of the proceeds of the Cellular Holding Offering
following the consummation of the Palmer Merger. Each PIK Unit consists of
1,000 shares of PIK Preferred Stock, each with a liquidation value of $25.00
per share, and PIK Warrants to purchase 515.6 shares of the Company's Common
Stock per Unit (or an aggregate of 582,112 shares of the Company's Common
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Stock, representing in the aggregate 10% of the fully diluted shares of Common
Stock of the Company) at an exercise price of $0.01 per share. The PIK
Preferred Stock is callable at the Company's option, together with the PIK
Warrants, at any time in whole or in part on or prior to 90 days from the
issue date and at any time thereafter at the Company's option if NatWest or an
affiliate is the holder of all the PIK Preferred Stock, at a redemption price
equal to 100% of the liquidation preference of the PIK Preferred Stock, plus
accrued dividends. The Company has contractually agreed with NatWest to use a
portion of the proceeds of the Cellular Holdings Offering to redeem the PIK
Units. The transaction reflects a significant redemption premium represented
by the redemption price of the PIK Units (approximately $29.5 million) over
the per share trading values of the Common Stock at the time of the
transaction (approximately $6 5/16 to $9 1/4 per share during June and July
1997). The Company believes that the redemption premium was appropriate given
the size of the block of its Common Stock so purchased (approximately 30% of
then outstanding Common Stock) and the value contributed by NatWest in
connection with the Cellular Holdings Offering.
The Holdings PIK Preferred Stock will contain provisions comparable to the
foregoing. In addition, from and after the Holding Company Merger Effective
Date, the Warrants will, pursuant to their terms, entitle the holders thereof
to purchase shares of Holdings Common Stock upon the exercise thereof in lieu
of shares of Company Common Stock.
CERTAIN INFORMATION CONCERNING SUB AND HOLDINGS
Business of Sub and Holdings. Sub and Holdings are companies that were
formed in June 1997 at the direction of the Company for the purpose of
effecting the Holding Company Merger. Other than entering into the Plan of
Merger, they have undertaken no operations.
Market Price and Dividends on Common Stock of Sub and Holdings. All the
outstanding Sub Common Stock is owned by Holdings. Holdings has issued one
share of Holdings Common Stock to the Company which will be cancelled at the
Holding Company Merger Effective Date. The Sub Common Stock and the Holdings
Common Stock are not publicly traded. Holdings intends to apply for listing
the Holdings Common Stock to be issued in connection with the Holding Company
Merger for trading on the AMEX and it is a condition to effectiveness of the
Holding Company Merger that such listing application be approved. Neither Sub
nor Holdings has ever declared a dividend on its capital stock.
Selected Financial Data of Sub and Holdings. Sub and Holdings have no
operations or operating history and, on a consolidated basis, have no assets
and have never generated revenues.
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RISK FACTORS
In addition to the other matters described in this Proxy Statement, each
shareholder of the Company should consider the specific factors set forth
below.
This Proxy Statement contains statements which constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Those statements appear in a number of places in this Proxy Statement
and include statements regarding the intent, belief or current expectations of
the Company, its directors or its officers primarily with respect to the
future operating performance of the Company. Shareholders are cautioned that
any such forward looking statements are not guarantees of future performance
and may involve risks and uncertainties, and that actual results may differ
from those in the forward looking statements as a result of factors, many of
which are outside the control of the Company. The accompanying information
contained in this Proxy Statement, including without limitation the
information set forth below and the information under the headings "Company
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Palmer Management's Discussion and Analysis of Financial
Condition and Results of Operations", identifies important factors that could
cause such differences.
LEVERAGE AND LIQUIDITY
The Company will be highly leveraged upon consummation of the Acquisition.
See "Unaudited Pro Forma Condensed Consolidated Financial Statements". 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.
Upon consummation of the Acquisition, the Company's only committed source of
liquidity is expected to be the New Credit Facility. While the Company expects
to have sufficient availability under the New Credit Facility to meet its
liquidity needs, the terms of the New Credit Facility which determine the
availability thereunder are still under negotiation. Although PCW has received
a commitment to provide the New Credit Facility, the commitment is subject to
significant conditions, including the absence of material adverse change, the
negotiation, execution and delivery of definitive documentation, consummation
of the Fort Myers Sale (or arrangements satisfactory to the lenders under the
New Credit Facility for short-term financing bridging such sale), consummation
of the Merger, the repayment of the Palmer Existing Indebtedness with the
proceeds of the term loan to be provided under the New Credit Facility or
other financing, the receipt by PCW of an equity contribution in cash or
Palmer common stock from a subsidiary of the Company and application to the
Acquisition of the proceeds of the PCW Offering and a portion of proceeds from
the Cellular Holdings Offering. Therefore, there can be no assurances that the
New Credit Facility will be entered into. In addition, borrowings under the
New Credit Facility will be subject to significant conditions, including
compliance with certain financial ratios and the absence of any material
adverse change. If the Fort Myers Sale is not consummated, the Company will
need to obtain $166.3 million of additional financing to consummate the
acquisition of Palmer. There can be no assurances the Company will be able to
obtain such financing or as to the terms of any such financing, all of which
could be additional indebtedness. 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
issued pursuant to the PCW Offering or the Cellular Holdings Offering
(together, the "Notes") or the New Credit Facility will not restrict or
prohibit any such debt financing.
The Company's ability to borrow is also limited by the terms of the
outstanding PIK Preferred Stock, which limits the ability of the Company and
its subsidiaries to incur additional indebtedness and to make certain
restricted payments, including investments. A portion of the proceeds of the
Cellular Holdings Offering will be used to redeem the PIK Preferred Stock.
20
<PAGE>
The Company's ability to meet its debt service requirements, including those
represented by the Notes and the New Credit Facility, will require significant
and sustained growth in the Company's cash flow. 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.
LIMITATIONS ON ACCESS TO CASH FLOW OF SUBSIDIARIES
The Company does not have, and in the future may not have, any assets other
than the common stock of its subsidiaries. The New Credit Facility, the Notes
and other financing instruments to which the Company's subsidiaries are or may
in the future be a party impose, and in the future may impose, substantial
restrictions on the ability of the Company's subsidiaries to pay dividends to
the Company. Any payment of dividends to the Company will be subject to the
satisfaction of certain financial conditions set forth in the New Credit
Facility, the Notes and other financing documents as well as restrictions
under applicable state corporation law. Following the Holding Company Merger,
there will not be any contractual restrictions on the ability of the Company
to pay dividends to Holdings, although such dividends may be prohibited by the
New York Business Corporation Law. The Company has not in the past paid any
dividends to its common shareholders, and does not expect the Company to pay
any dividends to common shareholders in the foreseeable future. The ability of
the Company and its subsidiaries to comply with the conditions of its
financial obligations may be affected by events that are beyond the control of
the Company. The breach of any such conditions could result in a default under
the New Credit Facility and/or other financing agreements, and in the event of
any such default, the lenders under the New Credit Facility or the holders of
certain other indebtedness could elect to accelerate the maturity of the loans
under such facility or such other indebtedness. In the event of such
acceleration, all such outstanding debt would be required to be paid in full
before any cash could be distributed to the Company. There can be no assurance
that the assets of the Company and its subsidiaries would be sufficient to
repay all outstanding indebtedness or meet other financial obligations.
NET LOSSES
On a pro forma basis after giving effect to the Acquisition and the
financing thereof, the Company would have incurred net losses (after interest,
depreciation and amortization, minority interest and taxes) of approximately
$13.0 million for the three months ended March 31, 1997 and, excluding the
effect of the sale of the Company's television station properties in 1996, the
Company would have incurred net losses (after interest, depreciation and
amortization, minority interest and taxes) of approximately $80.6 million for
the year ended December 31, 1996. There can be no assurance that the Company's
future operations will generate sufficient earnings to pay its obligations.
See "Unaudited Pro Forma Condensed Consolidated Financial Statements."
ACQUISITION MAY NOT BE CONSUMMATED OR MAY NOT BE CONSUMMATED AS DESCRIBED
The consummation of the Acquisition is subject to the satisfaction of
certain conditions. In addition, the consummation of the financing related to
the Acquisition including the loans under the New Credit Facility, are subject
to certain conditions. The failure of any such conditions to be met could
result in the failure of the Company to consummate the Acquisition. There can
be no assurances that the Company will be successful in consummating the
Acquisition or in consummating the Acquisition in a timely manner or on the
terms described in this Proxy Statement. If the Fort Myers Sale is not
consummated, the Company will need to obtain $166.3 million of additional
financing to consummate the acquisition of Palmer. There can be no assurances
that the Company will be able to obtain such financing or as to the terms of
any such financing, most or all of which could be additional indebtedness. If
the Acquisition is not consummated because of insufficient financing, the
Company will be in breach of its obligations under the Palmer Merger Agreement
and could be liable to Palmer for damages in connection with such breach. In
addition, the Company would be required to redeem the Notes and warrants
issued in the PCW Offering and the Cellular Holdings Offering out of the
amounts currently held in escrow pending the closing of the Palmer Merger.
While the amounts held in escrow will be sufficient to cover the redemption
price for these Notes and warrants, the Company will have incurred substantial
financing costs without reaping any related benefits. The combined effect of
these and other acquisition expenses and the
21
<PAGE>
potential liability to Palmer would have a material adverse effect on the
Company. The Company would also be unable to redeem the PIK Preferred Stock
and the PIK Warrants out of the proceeds of the Cellular Holdings Offering.
FRAUDULENT CONVEYANCE STATUTES
Various laws enacted for the protection of creditors may apply to the
incurrence of indebtedness and other obligations by the Company and certain of
its subsidiaries in connection with the Acquisition. If a court were to find
in a lawsuit by an unpaid creditor or representative of creditors of the
Company or any such subsidiary that the Company or such subsidiary did not
receive fair consideration or reasonably equivalent value for incurring such
indebtedness or other obligation and, at the time of such incurrence, the
Company or such subsidiary (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 such subsidiary 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 such subsidiary.
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 a subsidiary thereof 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 become absolute and matured. On the basis of its
historical financial information, its recent operating history 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 and its subsidiaries will not be rendered insolvent,
they will have sufficient capital for the businesses in which they will be
engaged and they will be able to pay their debts as they mature; however,
management has not obtained any independent opinion regarding such issues.
There can be no assurances as to what standard a court would apply in making
such determinations.
To the extent that a subsidiary is deemed to have undertaken indebtedness or
other obligations for the benefit of a parent corporation or shareholder, such
indebtedness or other obligation also 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 such
subsidiary. In such case, the analysis set forth above would generally apply,
except that the indebtedness or other obligation could also be subject to the
claim that, since the indebtedness or other obligation was incurred for the
benefit of the parent corporation or shareholder, the obligations of the
subsidiary thereunder were incurred for less than reasonably equivalent value
or fair consideration. A court could, among other things, avoid the
subsidiary's obligation or subordinate the obligation to other indebtedness of
the subsidiary.
DILUTION
The approval of the Stock Issuance and the consummation of the Exchange
Offer may result in substantial dilution of the Common Stock. The initial
amount of such dilution will depend on the number of shares of the Company's
Common Stock issued in the Exchange Offer. Assuming the issuance in the
Exchange Offer of all 10,000,000 shares to be authorized for the Stock
Issuance, the total number of shares of Common Stock outstanding would be
increased from 5,011,281 shares outstanding as of August 8, 1997 to 15,011,281
shares. To the extent that the shares authorized for the Stock Issuance are
not issued in the Exchange Offer, such shares may be issued in connection with
other possible acquisitions. A total of 1,109,808 and 704,750 shares,
respectively, have been authorized for issuance under warrants and outstanding
employee stock options. The issuance of shares of Common Stock in the Exchange
Offer, in subsequent acquisitions or on the exercise of warrants or options
could have a material adverse effect on market prices for the Common Stock.
Depending on the number of Palmer shares tendered in the Exchange Offer and
the final exchange ratio in the Exchange Offer, former Palmer stockholders
could hold a substantial majority of the shares of the Company's Common Stock
outstanding following completion of the Exchange Offer, potentially affecting
future control of the Company.
22
<PAGE>
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 licensee
authorized to serve each cellular market in which Palmer 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. Following consummation of the
Acquisition, the Company will compete 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.
Upon consummation of the Acquisition, the Company will also face 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 will also face 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 Palmer in its business will not become obsolete at some
time in the future. See "Information Concerning Palmer--Competition."
After consummation of the Acquisition, the Company will also face
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 for an additional
term of up to 10 years each. 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).
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 of Palmer's licenses will be
renewed in due course. See "Information Concerning Palmer--Regulation."
FLUCTUATIONS IN MARKET VALUE OF LICENSES
After consummation of the Acquisition, a substantial portion of the
Company's assets will consist of its interests in cellular licenses. The
assignment of interests in such licenses is subject to prior FCC approval and
23
<PAGE>
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
such 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
Palmer currently uses the registered service mark CELLULAR ONE to market its
services. While Palmer's use of this service mark has historically been
governed by five-year contracts between Palmer and Cellular One Group, the
owner of the service mark. Palmer has recently renewed its contracts with
Cellular One Group to use the CELLULAR ONE service mark. If for some reason
beyond the Company's or Palmer's control, the name CELLULAR ONE were to suffer
diminished marketing appeal, the Company's or Palmer'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, a Director, the President, Chief Executive Officer and
Treasurer of the Company, 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 the Company. 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 expects that the executive officers of Palmer will continue as
the executive officers of the Company following the consummation of the Palmer
Merger with the exception of Robert G. Engelhardt, Palmer's Executive Vice
President, who is expected to retire prior to the consummation of the Palmer
Merger. The Company has entered into an employment contract with William J.
Ryan to remain as an officer following the consummation of the Palmer Merger
and expects to enter into a comparable employment contract with M. Wayne
Wisehart and employment contracts with other key employees prior to the
consummation of the Palmer Merger. 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.
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 Palmer, 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,
24
<PAGE>
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.
EQUIPMENT FAILURE; NATURAL DISASTER
Although Palmer carries "business interruption" insurance, a major equipment
failure or a natural disaster affecting any one of Palmer's central switching
offices or certain of its cell sites could have a significant adverse effect
on the Company's operations.
POTENTIAL ANTITAKEOVER EFFECT OF CLASS A AND CLASS B PREFERRED STOCK
Although the Board of Directors and Compensation Committee of the Company
believe that the provisions of the Company's Series A Preferred Stock and
Series B Preferred Stock provide the Company's President and Chief Executive
Officer with incentive to maximize shareholder value by providing such officer
with significant profit upon the consummation of various business combination
transactions providing the holders of the Company's Common Stock with a
payment per share significantly in excess of current trading prices, the
Series A Preferred Stock and Series B Preferred Stock may be viewed as having
the potential effect of discouraging a bidder's proposal to acquire control of
or merge with the Company in that such Preferred Stock would increase the cost
to a bidder of certain of such transactions. In addition, the votes cast by
such shares of Preferred Stock (a total of 910,166 votes, or 14.8% of the
total votes entitled to be cast by all outstanding shares of the Company's
Common Stock and Preferred Stock as of August 8, 1997) would make it more
difficult for a bidder to elect directors or enact shareholder proposals
opposed by management of the Company. See "Approval of a Holding Company--
Description of Capital Stock--Preferred Stock and Holdings Preferred Stock."
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<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheets of
the Company and Cellular Holdings as of March 31, 1997 give 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 three month period ended March 31, 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 will be used to pay Palmer
Existing Indebtedness);
(c) the issuance and sale of the Senior Subordinated Notes in the PCW
Offering;
(d) the financing under the New Credit Facility;
(e) the issuance and sale of the Units in the Cellular Holdings Offering;
(f) the equity contribution of Palmer common stock from the Company;
(g) the issuance and redemption of the PIK Preferred Stock and the PIK
Warrants; and
(h) the issuance of 5,000,000 shares of the Company's Common Stock in
exchange for 2,239,541 shares of Palmer common stock in the Exchange Offer,
immediately prior to the Palmer Merger.
The Acquisition will be recorded pursuant to the purchase method of
accounting.
The Exchange Offer will be limited to that number of shares of Palmer common
stock that can be purchased with 10,000,000 shares of the Company's Common
Stock at an exchange ratio determined based on the average closing price of
the Company's Common Stock for the five trading days ending September 25,
1997. The pro forma financial information given below assumes that the average
closing price during such period will be $8 1/16, and that there will be a 50%
acceptance level for the Exchange Offer. Based on these assumptions, the
Company will be able to purchase 2,239,541 shares of Palmer common stock in
the Exchange Offer, the cash consideration that paid in the Palmer Merger will
be $448.6 million, rather than the $448.09 million that would be required if
the Exchange Offer were not consummated, and the anticipated initial revolving
loan borrowings under the New Credit Facility will be $56.8 million, rather
than $97.1 million anticipated initial revolving loan borrowings that would be
required if the Exchange Offer were not consummated. If the average closing
price of the Company's Common Stock during the five trading days ending
September 25, 1997 is $8 1/16, and the acceptance level in the Exchange Offer
is 100%, the cash consideration paid in the Palmer Merger will be $408.3
million (a savings of $80.6 million over the amount which would be paid if the
Exchange Offer were not consummated) and the anticipated initial revolving
loan borrowings will be $16.5 million.
The unaudited pro forma condensed consolidated financial statements have
been prepared by the Company's management. The unaudited pro forma data is not
designed to represent and does not represent what the Company's or Cellular
Holdings'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 Company's or Cellular Holdings'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 the
Company, included elsewhere in this Proxy Statement.
The Acquisition is not expected to be consummated prior to October 1997 and
may occur as late as December 31, 1997. Accordingly, for the three to six
month period after the closing of the Cellular Holdings Offering, and prior to
the consummation of the Acquisition, Cellular Holdings will be incurring
interest expense on the Notes but not be 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
26
<PAGE>
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 March 31, 1997. In
addition, the pro forma condensed consolidated financial statements assume the
repayment of the $381.0 million of Palmer Existing Indebtedness and accrued
interest on Palmer Existing Indebtedness as of March 31, 1997. As a result of
the Palmer Merger, the Company will assume all Palmer Existing Indebtedness.
The Company intends to refinance all of the Palmer Existing Indebtedness
concurrently with the consummation of the Palmer Merger.
Although the unaudited pro forma condensed balance sheet reflects a $56.2
million current tax payable attributable to the Fort Myers 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. This tax planning strategy (among others) would be eliminated,
however, if certain proposals by the Joint Committee on Taxation were to be
adopted by Congress. There can be no assurances that the Company will be able
to implement this tax planning strategy before any of such proposals are
adopted or that the Company's tax position would be "grandfathered" under any
of such proposals if adopted. In addition, 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 will be immediately payable to
William J. Ryan as a severance payment pursuant to his existing employment
contract upon consummation of the Acquisition and approximately $2.6 million
of severance payments which could become payable over several years pursuant
to existing employment contracts between Palmer and its other executive
officers. The Company has entered into an employment contract with William J.
Ryan to continue as an officer after the consummation of the Acquisition and
it expects to enter into a comparable employment contract with M. Wayne
Wisehart and employment contracts with other key employees prior to the
consummation of the Acquisition. Except for $1.4 million payable to William J.
Ryan, there can be no assurances as to the amount of payments that may be made
to such officers, in recognition of such severance rights, whether or not they
continue with the Company after the consummation of the Acquisition.
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<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS FOR
FOR THE THE ACQUISITION PRO FORMA
FT. SALE OF PALMER AS CELLULAR AND THE RELATED CELLULAR
PALMER MYERS FT. MYERS ADJUSTED HOLDINGS FINANCINGS HOLDINGS COMPANY
-------- ------- ----------- --------- -------- --------------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents..... $ 2,091 $ 36 $166,320(a) $168,375 $ $(166,315)(d) $ 2,060 $41,202
Investments...... 24,462
Accounts
receivable,
net............. 21,013 2,248 18,765 18,765 79
Inventory........ 4,043 1,046 2,997 2,997
Prepaid expenses
and other
current assets.. 2,984 191 2,793 2,793 17
-------- ------- -------- -------- --- --------- -------- -------
Total current
assets......... 30,131 3,521 166,320 192,930 (166,315) 26,615 65,760
Property, plant
and equipment,
net.............. 148,121 11,347 136,774 136,774 147
Cellular licenses,
net.............. 400,620 7,467 393,153 412,444 (k) 805,597
Long-term
investments...... 23,947
Deferred costs,
net.............. 8,179 8,179 15,471 (e) 23,650
Other ............ 2,515 87 2,428 2,428 1,150
-------- ------- -------- -------- --- --------- -------- -------
Total assets.... $589,566 $22,422 $166,320 $733,464 $ $ 261,600 $995,064 $91,004
======== ======= ======== ======== === ========= ======== =======
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current
liabilities:
Accounts payable
and
accrued expenses
................ $ 10,510 $ $ $ 10,510 $ $ $ 10,510 $ 2,029
Notes payable.... 2,698 2,698 (2,698)(d,i)
Current tax
payable......... 56,170(b) 56,170 56,170
Other current
liabilities..... 14,641 1,126 13,515 (2,695)(d,h) 10,820 3,266
-------- ------- -------- -------- --- --------- -------- -------
Total current liabilities.. 27,849 1,126 56,170 82,893 (5,393) 77,500 5,295
Long-term debt.... 376,000 376,000 256,164 (f) 632,164
Deferred tax
liability........ 12,938 12,938 169,102 (g) 182,040
Other long-term
liabilities...... 6,672 (1,224) 7,896 7,896
-------- ------- -------- -------- --- --------- -------- -------
Total
liabilities.... 423,459 (98) 56,170 479,727 419,873 899,600 5,295
Putable preferred
stock.............
Stockholders'
equity........... 166,107 22,520 110,150(c) 253,737 (158,273)(j) 95,464 85,709
-------- ------- -------- -------- --- --------- -------- -------
Total
liabilities and
stockholders' equity.. $589,566 $22,422 $166,320 $733,464 $ $ 261,600 $995,064 $91,004
======== ======= ======== ======== === ========= ======== =======
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR ISSUANCE
OF UNITS,
THE ISSUANCE AND
REDEMPTION OF
THE PREFERRED
STOCK AND
WARRANTS TO
PURCHASE THE
COMPANY COMMON
STOCK AND
CONTRIBUTION TO PRO FORMA
CELLULAR HOLDINGS COMPANY
----------------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents..... $(42,349)(l) $ 913
Investments...... (24,462)(l)
Accounts
receivable,
net............. 18,844
Inventory........ 2,997
Prepaid expenses
and other
current assets.. 2,810
----------------- ----------
Total current
assets......... (66,811) 25,564
Property, plant
and equipment,
net.............. 136,921
Cellular licenses,
net.............. 805,597
Long-term
investments...... (13,154)(l) 10,793
Deferred costs,
net.............. 2,872 (o) 26,522
Other ............ 3,578
----------------- ----------
Total assets.... $(77,093) $1,008,975
================= ==========
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current
liabilities:
Accounts payable
and
accrued expenses
................ $ $ 12,539
Notes payable....
Current tax
payable......... 56,170
Other current
liabilities..... 14,086
----------------- ----------
Total current liabilities.. 82,795
Long-term debt.... 632,164
Deferred tax
liability........ 182,040
Other long-term
liabilities...... 7,896
----------------- ----------
Total
liabilities.... 904,895
Putable preferred
stock............. 35 (n) 35
Stockholders'
equity........... (77,128)(m) 104,045
----------------- ----------
Total
liabilities and
stockholders' equity.. $(77,093) $1,008,975
================= ==========
</TABLE>
28
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
PRICE COMMUNICATIONS CELLULAR HOLDINGS, 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 Company condensed consolidated balance sheet as of
March 31, 1997, the following adjustments have been made:
<TABLE>
<C> <S> <C>
(A) CASH AND CASH EQUIVALENTS
Cash proceeds from the sale of Ft. Myers.................... $ 166,320
=========
(B) CURRENT TAX PAYABLE
Tax payable resulting from gain on sale of Ft. Myers using a
39% effective tax rate (see the discussion on pages 26 and
27 of the Company's tax planning strategy to avoid the
payment of such tax)........................................ $ 56,170
=========
(C) STOCKHOLDERS' EQUITY
Represents the proceeds on the sale of Ft. Myers, net of
related tax payable on the gain............................. $ 110,150
=========
(D) CASH AND CASH EQUIVALENTS
Proceeds from New Credit Facility........................... $ 381,815**
Proceeds from issuance of PCW Senior Subordinated Notes..... 175,000
Proceeds from Unit Warrants Contributed to Cellular
Holdings.................................................... 4,651
Proceeds from sale of Cellular Holdings Senior Discount
Notes....................................................... 75,349
Net equity contributed from the Company..................... 80,000
Cash used to acquire Palmer outstanding stock and options... (448,587)
Cash used to retire current portion of Palmer notes
payable..................................................... (2,698)
Cash used to pay interest accrued through March 31, 1997 on
Palmer Existing Indebtedness................................ (2,695)
Cash used to retire Palmer Existing Indebtedness............ (376,000)
Cash used to pay estimated transaction fees and expenses.... (23,650)
Cash used to return capital to the Company.................. (29,500)
---------
$(166,315)
=========
(E) DEFERRED COSTS, NET
Estimated fees and expenses in connection with the
acquisition of Palmer ...................................... $ 9,650
Estimated fees and expenses in connection with the debt
financings.................................................. 14,000
To write off unamortized deferred financing costs of
Palmer...................................................... (8,179)
---------
$ 15,471
=========
(F) LONG-TERM DEBT
New Credit Facility......................................... $ 381,815
Senior Subordinated Notes................................... 175,000
Cellular Holdings Senior Discount Notes, net amount
allocated to warrant of $4,651.............................. 75,349
Repayment of Palmer Existing Indebtedness................... (376,000)
---------
$ 256,164
=========
(G) DEFERRED TAX LIABILITY
To record the deferred tax liability arising from the
acquisition of FCC license using a 41% effective tax rate... $ 169,102
=========
(H) OTHER CURRENT LIABILITIES
To record the repayment of accrued interest on Palmer
Existing Indebtedness....................................... $ (2,695)
=========
</TABLE>
29
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<S> <C> <C>
(I) NOTES PAYABLE
To record the repayment of Palmer notes payable............................. $ (2,698)
=========
(J) STOCKHOLDERS' EQUITY
To reflect equity contribution from the Company............................. $ 80,000
To reflect equity contribution of Palmer common stock from the Company...... 40,313**
To reflect equity contribution from the Company............................. 4,651
To eliminate the equity of adjusted Palmer in connection with the
acquisition by PCW.......................................................... (253,737)
To return Capital to the Company............................................ (29,500)
---------
$(158,273)
=========
(K) CELLULAR LICENSES, NET
Represents the increase in cellular licenses due to the acquisition of
Palmer...................................................................... $ 412,444
=========
(L) CASH AND CASH EQUIVALENTS
To reflect cash contribution to Cellular Holdings........................... $ (80,000)
To reflect cash contributed to Cellular Holdings............................ (4,651)
To reflect proceeds from the sale of certain Company investments............ 24,462
To reflect proceeds from the sale of certain Company long-term investments.. 13,154
To reflect proceeds from the issuance of putable Series A and Series B
preferred stock............................................................. 35
To reflect proceeds from the sale of Unit Warrants.......................... 4,651
Cash used to redeem the PIK Preferred Stock and Warrants to purchase the
Company Common Stock....................................................... (29,500)*
To reflect return of Capital from Cellular Holdings......................... 29,500
---------
$ (42,349)
=========
(M) STOCKHOLDERS' EQUITY
To reflect the elimination of Cellular Holdings' stockholders' equity....... $ (95,464)
To reflect the sale of the Unit Warrants.................................... 4,651
To reflect issuance of PIK Preferred Stock and warrants..................... 29,500
To reflect redemption of PIK Preferred Stock and warrants................... (29,500)
To reflect Company Common Stock purchased and retired....................... (26,628)
To reflect issuance of Company Common Stock in exchange for Palmer common
stock....................................................................... 40,313
---------
$ (77,128)
=========
(N) PUTABLE SERIES A AND SERIES B PREFERRED STOCK
Issuance of Series A and Series B preferred stock........................... $ 35
=========
(O) DEFERRED COSTS, NET
To record deferral of estimated fees and expenses in connection with the
offering of
Cellular Holdings Senior Discount Notes..................................... $ 2,872
=========
</TABLE>
- --------
* Assuming the acquisition of Palmer and the redemption of the PIK Preferred
Stock and certain warrants to purchase the Company Common Stock occur on
October 15, 1997.
** The issuance of 5.0 million shares of the Company Common Stock assumes that
half of the total allotted shares are issued in connection with this
Exchange Offer. If 10.0 million shares are issued, shareholders' equity of
the Company would increase by an additional $40,313 and accordingly, the New
Credit Facility would decrease by $40,313. If no Palmer shareholders of
common stock exchange for the Company Common Stock, then the stockholders'
equity would decrease by $40,313 and conversely, the New Credit Facility
would increase by $40,313.
30
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS ADJUSTMENTS FOR
FOR THE THE ACQUISITION PRO FORMA
SALE OF PALMER AS CELLULAR AND THE RELATED CELLULAR
PALMER FT. MYERS FT. MYERS ADJUSTED HOLDINGS FINANCINGS HOLDINGS COMPANY
-------- --------- ----------- --------- -------- --------------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.......... $159,743 $24,144 $ $135,599 $ $ $135,599 $ 2,962
Cost and expenses:
Cost of cellular
service/operating
expenses........ 28,717 5,441 23,276 23,276 2,233
Cost of
equipment....... 17,944 2,633 15,311 15,311
Selling, general
and
administrative.. 46,892 6,315 2,440 (p) 43,017 43,017 2,373
Depreciation and
amortization.... 25,013 1,558 23,455 12,241 (q) 35,696 467
-------- ------- ------- -------- ------ -------- -------- -------
Operating income
(loss)........... 41,177 8,197 (2,440) 30,540 (12,241) 18,299 (2,111)
Other income (ex-
pense):
Interest
(expense)....... (31,462) (300) (31,162) (35,522)(r) (66,684) (216)
Other income
(expense)....... (429) (63) (366) (366) 97,578
-------- ------- ------- -------- ------ -------- -------- -------
Total other
income
(expense)...... (31,891) (363) (31,528) (35,522) (67,050) 97,362 (u)
Minority interest
share of income.. 1,880 1,880 1,880
-------- ------- ------- -------- ------ -------- -------- -------
Income (loss)
before income tax
expense.......... 7,406 7,834 (2,440) (2,868) (47,763) (50,631) 95,251
Income tax expense
(benefit)........ 2,724 2,724 (4,228)(s) (1,504) 24,584
-------- ------- ------- -------- ------ -------- -------- -------
Net income
(loss)........... $ 4,682 $ 7,834 $(2,440) $ (5,592) $ $(43,535) $(49,127) $70,667
======== ======= ======= ======== ====== ======== ======== =======
Deficiency of
earnings to fixed
charges.......... $ 50,631
Net income per
share............ $ .18 $ 7.45
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR ISSUANCE
OF UNITS, THE
ISSUANCE AND
REDEMPTION OF
THE PREFERRED
STOCK AND
WARRANTS TO
PURCHASE THE
COMPANY COMMON
STOCK AND PRO
CONTRIBUTION TO FORMA
CELLULAR HOLDINGS COMPANY
----------------- ---------
<S> <C> <C>
Revenues.......... $ $138,561
Cost and expenses:
Cost of cellular
service/operating
expenses........ 25,509
Cost of
equipment....... 15,311
Selling, general
and
administrative.. 45,390
Depreciation and
amortization.... 36,163
----------------- ---------
Operating income
(loss)........... 16,188
Other income (ex-
pense):
Interest
(expense)....... (66,900)
Other income
(expense)....... (4,583)(v) 92,629
----------------- ---------
Total other
income
(expense)...... (4,583) 25,729
Minority interest
share of income.. 1,880
----------------- ---------
Income (loss)
before income tax
expense.......... (4,583) 40,037
Income tax expense
(benefit)........ 23,080
----------------- ---------
Net income
(loss)........... $(4,583) $ 16,957
================= =========
Deficiency of
earnings to fixed
charges..........
Net income per
share............ $ 1.17
</TABLE>
31
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR ISSUANCE
OF UNITS, THE
ISSUANCE AND
REDEMPTION OF
THE PREFERRED
STOCK AND
WARRANTS TO
PRO FORMA PRO FORMA PURCHASE THE
ADJUSTMENTS ADJUSTMENTS FOR COMPANY COMMON
FOR THE THE ACQUISITION PRO FORMA STOCK AND
SALE OF PALMER AS CELLULAR AND THE RELATED CELLULAR CONTRIBUTION TO
PALMER FT. MYERS FT. MYERS ADJUSTED HOLDINGS FINANCINGS HOLDINGS COMPANY CELLULAR HOLDINGS
------- --------- ----------- --------- -------- --------------- --------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.......... $44,683 $7,182 $ $37,501 $ $ $ 37,501 $ $
Cost and expenses:
Cost of cellular
service/operating
expenses........ 7,430 1,581 5,849 5,849
Cost of
equipment....... 5,807 845 4,962 4,962
Selling, general
and
administrative.. 13,360 2,067 610 (p) 11,903 11,903 909
Depreciation and
amortization.... 7,553 411 7,142 3,061 (q) 10,203 12
------- ------ ----- ------- ------- -------- -------- ------ -------
Operating income
(loss)........... 10,533 2,278 (610) 7,645 (3,061) 4,584 (921)
Other income (ex-
pense):
Interest
expense......... (7,872) 23 (7,895) (8,757)(r) (16,652) (18)
Other, net....... 71 71 71 1,111 (1,111)(v)
------- ------ ----- ------- ------- -------- -------- ------ -------
Total other
income
(expense)...... (7,801) 23 (7,824) (8,757) (16,581) 1,093 (1,111)
Minority interest
share of income.. 331 331 331
------- ------ ----- ------- ------- -------- -------- ------ -------
Income (loss) be-
fore income tax
expense.......... 2,401 2,301 (610) (510) (11,818) (12,328) 172 (1,111)
Income tax expense
(benefit)........ 1,224 (424)(t) 800 (1,057)(s) (257)
------- ------ ----- ------- ------- -------- -------- ------ -------
Net income
(loss)........... $ 1,177 $2,301 $(186) $(1,310) $ $(10,761) $(12,071) $ 172 $(1,111)
======= ====== ===== ======= ======= ======== ======== ====== =======
Deficiency of
earnings to fixed
charges.......... $ 12,328
Net income (loss)
per share........ $ .04 $ .02
<CAPTION>
PRO
FORMA
COMPANY
---------
<S> <C>
Revenues.......... $ 37,501
Cost and expenses:
Cost of cellular
service/operating
expenses........ 5,849
Cost of
equipment....... 4,962
Selling, general
and
administrative.. 12,812
Depreciation and
amortization.... 10,215
---------
Operating income
(loss)........... 3,663
Other income (ex-
pense):
Interest
expense......... (16,670)
Other, net....... 71
---------
Total other
income
(expense)...... (16,599)
Minority interest
share of income.. 331
---------
Income (loss) be-
fore income tax
expense.......... (13,267)
Income tax expense
(benefit)........ (257)
---------
Net income
(loss)........... $(13,010)
=========
Deficiency of
earnings to fixed
charges..........
Net income (loss)
per share........ $ (.96)
</TABLE>
32
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
For purposes of determining the pro forma effect of the transactions
described above on the Company condensed consolidated statements of operations
for the three months ended March 31, 1997 and the year ended December 31,
1996, the following adjustments have been made:
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
(P) SELLING, GENERAL AND ADMINISTRATIVE
Represents a portion of the operating expenses
(including monthly management fees; property and
equipment acquisitions and expenses; central
billing expenses and central accounts payable
expenses) charged to Ft. Myers by Palmer.......... $ 610 $ 2,440
======= ========
(Q) DEPRECIATION AND AMORTIZATION
Represents amortization of the FCC license over 40
years............................................. $ 2,578 $ 10,311
Represents amortization of the acquisition of
Palmer and costs of the Cellular Holdings Senior
Discount Notes offering over 5 years.............. 483 1,930
------- --------
$ 3,061 $ 12,241
======= ========
(R) INTEREST EXPENSE, NET
Interest expense on $381.8 million of New Credit
Facility at an assumed interest rate of 8.5% per
annum*............................................ $ 8,114 $ 32,454
Interest expense on $175 million of the Senior
Subordinated Notes at an assumed interest rate of
11.75% per annum.................................. 5,141 20,563
Interest expense on $80 million of the Holdings
Senior Discount Notes at an assumed interest rate
of 13.50%......................................... 2,700 11,165
Interest expense related to the accretion of
Cellular Holdings Senior Discount Notes due to
Unit Warrants value**............................. 116 465
Represents current amortization expense related to
deferred debt financing costs..................... 438 1,750
Represents current amortization expense related to
deferred Holdings Senior Discount Notes costs..... 72 287
Elimination of previously recorded interest
expense........................................... (7,824) (31,162)
------- --------
$ 8,757 $ 35,522
======= ========
--------
*An 1/8% change in the interest rate will increase
or decrease the interest expense per annum on the
bank debt by $477.
**Represents the accretion over 10 years of the
Cellular Holdings Senior Discount Notes resulting
from the allocation of proceeds of the Cellular
Holdings Offering between notes and warrants.
(S) INCOME TAX EXPENSE (BENEFIT)
To record deferred tax benefit resulting from the
amortization of the acquired FCC license.......... $(1,057) $ (4,228)
======= ========
(T) INCOME TAX EXPENSE (BENEFIT)
To record the elimination of a portion of the tax
expense as such amounts have been recorded as a
result of income generated by Ft. Myers........... $ (424)
=======
(U) OTHER INCOME (EXPENSE)
Primarily includes gain on sale of broadcast
properties.
(V) OTHER INCOME (EXPENSE)
To reduce interest income to reflect liquidation of
investments....................................... $(1,111) $ (4,583)
======= ========
</TABLE>
33
<PAGE>
INFORMATION CONCERNING THE COMPANY
GENERAL
The Company has historically been a nationwide communications company. Until
consummation of their sale in March and February 1996, the Company owned an
ABC affiliate, WHTM-TV (which was acquired by the Company during 1994),
serving Harrisburg/Lancaster/Lebanon/York, Pennsylvania and three NBC
affiliated television stations, KSNF-TV, serving Joplin, Missouri/Pittsburg,
Kansas; KJAC-TV, serving Beaumont/Port Arthur, Texas; and KFDX-TV, serving
Wichita Falls, Texas/Lawton, Oklahoma, respectively. Prior to 1995 the Company
owned a number of television, radio, newspaper, cellular telephone and other
communications and related properties which were disposed of pursuant to the
Company's long-standing policy of buying and selling communications properties
at times deemed advantageous by the Company's Board of Directors.
In 1992 the Company filed a Consensual Plan of Reorganization pursuant to
Chapter 11 of the United States Bankruptcy Code. Such Consensual Plan, as
amended, was confirmed on June 11, 1992, and became effective on December 30,
1992.
The Company's business strategy is to acquire communications properties at
prices it considers attractive, finance such properties on terms satisfactory
to it, manage such properties in accordance with its operating strategy, and
dispose of them if and when the Company determines such disposition to be in
its best interest. For the foregoing reasons, the results of the Company's
historical operations are not comparable to or indicative of results in the
future. See "Company Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Company has historically held interests in cellular telephone properties
and licenses, including through PriCellular Corporation, which currently owns
and operates FCC licensed cellular telephone systems, principally in the
Midwest and Mid-Atlantic Regions. Prior to the sale of such interest by the
Company in 1993, the Company held a 74% interest in PriCellular, and since
1995 the Company has purchased the warrants and common stock of PriCellular
described under "Information Concerning the Company--Developments from 1995
through 1997." Prior to execution of the Palmer Merger Agreement, the Company
from time to time unsuccessfully attempted to acquire telecommunications
businesses other than PriCellular. The Company believes that an acquisition
such as Palmer in the telecommunications business is in the best interests of
its shareholders in light of, among other reasons, the experience of its
management in owning and operating businesses regulated by the FCC and, in
particular, cellular telephone systems. The Company's specific decision to
make the Palmer acquisition was based, among other factors, on Palmer's
operating income before depreciation and amortization, its record of growth,
and its management team. See "The Acquisition--Reasons for the Acquisition,"
"Palmer Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Unaudited Pro Forma Condensed Consolidated
Financial Statements."
The Company was organized in New York in 1979 and began active operations in
1981. Its principal executive offices are located at 45 Rockefeller Plaza, New
York, New York 10020, and its telephone number is (212) 757-5600.
The Company owns 100% of the issued and outstanding capital stock of Price
Communications Cellular, Inc., which owns 100% of the issued and outstanding
capital stock of Cellular Holdings, which owns 100% of the issued and
outstanding capital stock of PCW. The Company owns the PriCellular warrants
and shares of common stock described under "Developments from 1995 through
1997" below (or aggregate beneficial ownership of 3,764,860 shares, or 9.3%,
of PriCellular common stock); Mr. Price has beneficial ownership, excluding
such shares beneficially owned by the Company, of an aggregate of 3,485,685
shares, or 8.9%, of PriCellular common stock (including shares owned directly
by Mr. Price, shares issuable pursuant to options held by Mr. Price and shares
held by Mr. Price as joint tenant with his adult children); and members of Mr.
Price's family beneficially own an additional 6,308,995 shares, or 16.3%, of
PriCellular common stock. PriCellular beneficially owns no shares of the
Company's capital stock, there are no business relationships between
PriCellular and the Company, and the Company has no plans, proposals or
arrangements for any possible future transaction or business combination
between the Company or PCW and PriCellular.
34
<PAGE>
DEVELOPMENTS FROM 1995 THROUGH 1997
On March 1, 1996, the Company sold substantially all of the assets, except
cash but including accounts receivable together with certain liabilities, of
its ABC affiliate serving the Harrisburg-York-Lebanon-Lancaster, Pennsylvania
television market for approximately $115 million in cash to Allbritton
Communications Company. The Company recognized a pre-tax gain of approximately
$65.6 million from this transaction.
On February 2, 1996, the Company sold substantially all of the assets,
except cash and accounts receivable, together with certain liabilities, of its
three NBC affiliates, KJAC-TV, Beaumont/Port Arthur, Texas, KFDX-TV, Wichita
Falls, Texas/Lawton, Oklahoma and KSNF-TV, Joplin, Missouri/Pittsburg, Kansas
for approximately $40.7 million in cash. The stations were sold to US
Broadcast Group, a newly organized acquirer of television properties. The
Company recognized a pre-tax gain of approximately $29.4 million from this
transaction.
Prior to 1995, the Company had written off its investment in Fairmont
Communications Corporation ("Fairmont"), with the result that the Company's
carrying value in such investment was zero. During 1994, the Company entered
into a settlement agreement with the various parties to the Fairmont
bankruptcy proceedings, although the exact amount was uncertain until 1995.
The Company received during 1995 and 1996 cash payments totaling approximately
$7.9 million and $62.5 thousand respectively, as a result of sales of
properties by Fairmont.
During December, 1995, the Company invested approximately $8.4 million in
warrants to acquire approximately 1.8 million shares of Class B Common Stock
of PriCellular, a publicly held cellular telephone company of which Mr. Robert
Price, the President of the Company, is Chairman. During 1996 and through
June 26, 1997, the Company purchased a total of 1,945,250 shares of
PriCellular Class A Common Stock for approximately $15 million.
For developments concerning financing, see "The Acquisition".
EMPLOYEES
As of March 31, 1997, the Company employed 4 full time persons at its
corporate headquarters in New York.
PROPERTIES
The Company leases office space for its headquarters in New York City. (See
Note 15 of the Notes to the Company's Consolidated Financial Statements for
information on minimum lease payments of the Company and its subsidiaries for
the next five years.)
LEGAL PROCEEDINGS
The Company is not currently involved in any pending legal proceedings
likely to have a material adverse impact on the Company.
35
<PAGE>
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following table reflects the beneficial ownership of the each class of
capital stock of the Company as of August 8, 1997 and as adjusted to give
effect to the Stock Issuance by each person known by the Company to be the
beneficial owner of more than 5% of each class of such stock.
<TABLE>
<CAPTION>
PERCENT
OF CLASS
NO. OF SHARES FOLLOWING
BENEFICIALLY PERCENT STOCK
NAME AND ADDRESS TITLE OF CLASS OWNED OF CLASS ISSUANCE (3)
<S> <C> <C> <C> <C>
Robert Price............ Common Stock 866,758 17.3% 5.8%
45 Rockefeller Plaza Series A Preferred Stock (1) 728,133 100% 100%
New York, New York Series B Preferred Stock (1) 364,066 100% 100%
10020
NatWest Capital Markets Common Stock (2) 582,112 10.0% 3.4%
Limited................ PIK Preferred Stock (1) 1,129,000 100% 100%
Mariners 777 Island
Blvd.
San Mateo, CA 94403
</TABLE>
- ---------------------
(1) The Series A Preferred Stock and the Series B Preferred Stock vote with
the Common Stock on a share for share basis for the Series A Preferred
Stock and on a one-half vote per share basis for the Series B Preferred
Stock. Shares of PIK Preferred Stock have no voting rights (other than as
required by law).
(2) Represents shares of Common Stock issuable upon exercise of the Warrants.
See "Approval of the Creation of a Holding Company--Description of Capital
Stock."
(3) Assumes the approval of the Stock Issuance by the shareholders at the
Special Meeting and the issuance of 10,000,000 shares of Common Stock to
fund a portion of the purchase price for the Palmer common stock in the
Acquisition.
36
<PAGE>
SECURITY OWNERSHIP OF THE COMPANY'S MANAGEMENT
The following table reflects the number of shares of each class of capital
stock of the Company beneficially owned as of June 26, 1997 by each director,
each executive officer and all executive officers and directors of the Company
as a group as of such date, and as adjusted to give effect to the Stock
Issuance.
<TABLE>
<CAPTION>
PERCENT
OF CLASS
NO. OF SHARES FOLLOWING
BENEFICIALLY PERCENT STOCK
NAME TITLE OF CLASS OWNED OF CLASS ISSUANCE(4)
<S> <C> <C> <C> <C>
Robert Price............ Common Stock 866,758 17.3% 5.8%
Series A Preferred Stock(1) 728,133 100% 100%
Series B Preferred Stock(1) 364,066 100% 100%
George H. Cadgene....... Common Stock 2,208(2) * *
Robert F. Ellsworth..... Common Stock 8 * *
Kim I. Pressman......... Common Stock 62,261(3) * *
All executive officers
and directors as a Common Stock 931,235(2)(3) 18.6% 6.2%
group (4 persons)...... Series A Preferred Stock(2) 728,133 100% 100%
Series B Preferred Stock(2) 364,066 100% 100%
</TABLE>
- ---------------------
* Less than 1%
(1) The Series A Preferred Stock and the Series B Preferred Stock vote with
the Common Stock on a share for share basis for the Series A Preferred
Stock and on a one-half vote per share basis for the Series B Preferred
Stock.
(2) Includes 332 shares held by Mr. Cadgene's wife, as to which Mr. Cadgene
disclaims beneficial ownership.
(3) Includes 11 shares Ms. Pressman owns in a self-directed IRA account.
Includes 62,250 shares subject to stock options exercisable within 60 days
of June 26, 1997.
(4) Assumes the approval of the Stock Issuance by the shareholders at the
Special Meeting and the issuance of 10,000,000 shares of Common Stock to
fund a portion of the purchase price for the Palmer common stock in the
Acquisition.
37
<PAGE>
MARKET FOR THE COMPANY'S COMMON STOCK
The Company's Common Stock is listed for trading on the AMEX under the
symbol "PR". The following table sets forth information regarding the high and
low sales prices for the periods indicated as adjusted to reflect the
Company's April, 1995 5 for 4 stock split:
<TABLE>
<CAPTION>
CALENDAR YEAR 1995 HIGH LOW
<S> <C> <C>
First Quarter....................................... $6 1/4 $ 4 7/8
Second Quarter...................................... $7 11/16 $ 5 5/16
Third Quarter....................................... $ 9 $ 6 7/8
Fourth Quarter...................................... $8 3/4 $ 7 1/2
<CAPTION>
CALENDAR YEAR 1996
<S> <C> <C>
First Quarter....................................... $8 5/8 $ 7 15/16
Second Quarter...................................... $9 3/16 $ 7 7/8
Third Quarter....................................... $8 3/8 $ 7 1/4
Fourth Quarter...................................... $7 15/16 $ 6 7/8
<CAPTION>
CALENDAR YEAR 1997
<S> <C> <C>
First Quarter....................................... $10 $ 8 3/8
Second Quarter...................................... $9 5/8 $ 6 5/16
Third Quarter (through August 7, 1997).............. $9 1/4 $ 7 1/2
</TABLE>
The Company, to date, has paid no cash dividends on its Common Stock. The
Board of Directors will determine future dividend policy based on the
Company's earnings, financial condition, capital requirements and other
circumstances. It is not anticipated that dividends will be paid on its Common
Stock in the foreseeable future.
38
<PAGE>
THE COMPANY SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain selected consolidated financial data
with respect to the Company for the periods presented derived, in the case of
the full-year data, from audited consolidated financial statements of the
Company and Notes thereto. On December 30, 1992, the Company's consensual Plan
of Reorganization became effective. A vertical black line has been placed to
separate pre-organization consolidated operating statement items from the
post-reorganization consolidated operating statement items since they are not
prepared on a comparable basis.
CONSOLIDATED OPERATING STATEMENT ITEMS
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS
YEAR ENDED DECEMBER 31 (1) ENDED
------------------------------------------------ MARCH 31, (1)
-----------------
PREDECESSOR REORGANIZED COMPANY
COMPANY ------------------------------------
1992 1993 1994 (2) 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Net Revenue.......................................... $ 53,957 $22,790 $ 24,039 $29,155 $ 2,962 2,962 --
Operating Expenses................................... 39,567 16,335 14,962 16,685 2,233 2,132 --
Corporate Expenses................................... 4,973 3,649 4,475 2,687 2,373 727 909
Other (Income) Expense -Net.......................... (35) 539 (16,245) (7,280) (98,372) (95,878) (1,438)
Interest Expense..................................... 17,768 1,485 813 2,099 216 212 18
Amortization of Debt Discount and Deferred Debt
Expense............................................. 1,004 766 646 460 -- -- --
Depreciation and Amortization........................ 4,873 2,343 3,312 3,459 468 430 12
Unrealized Noncash (Recovery)
(Gain) Loss on Marketable Securities (3)............. (146) 146 -- 166 794 -- 327
Share of Loss of Partially Owned Companies........... 2,934 1,118 -- -- -- -- --
-------- ------- -------- ------- -------- -------- -------
Income (Loss) Before
Reorganization Items, Income Taxes, and Extraordinary
Items............................................... (16,981) (3,591) 16,076 10,879 95,250 95,339 172
Reorganization Items................................. (5,983) -- -- -- -- -- --
-------- ------- -------- ------- -------- -------- -------
Income (Loss) Before Income Taxes and Extraordinary
Items............................................... (22,964) (3,591) 16,076 10,879 95,250 95,339 172
Income Tax (Expense) Benefits........................ (499) (124) (1,652) 247 (24,583) (25,021) --
-------- ------- -------- ------- -------- -------- -------
Income (Loss) Before Extraordinary Items............. (23,463) (3,715) 14,424 11,126 70,667 70,318 172
Extraordinary Items (Net of Income Taxes):
Gain on Early Extinguishments of Debt................ -- 2,010 -- -- -- -- --
Gain on Forgiveness of Debt and Partial Sale of
Subsidiary.......................................... 312,678 -- -- -- -- -- --
-------- ------- -------- ------- -------- -------- -------
Net Income (Loss).................................... $289,215 $(1,705) $ 14,424 $11,126 $ 70,667 $ 70,318 172
======== ======= ======== ======= ======== ======== =======
Per Share Amounts (4):
Income (Loss) Before Extraordinary Items............. $ (0.25) $ 1.15 $ 1.06 $ 7.45 $ 7.08 $ .02
Extraordinary Items.................................. -- 0.14 -- -- -- -- --
-------- ------- -------- ------- -------- -------- -------
Net Income (Loss).................................... N/A $ (0.11) $ 1.15 $ 1.06 $ 7.45 $ 7.08 $ .02
- --------------------------------------------------
======== ======= ======== ======= ======== ======== =======
</TABLE>
- ---------------------
(1) Due to the Acquisition and the acquisition and dispositions during 1994,
the borrowings incurred to effect such acquisition in 1994, the
consummation of the Plan of Reorganization and the adoption of Fresh Start
Reporting, the Company's historical results should not be regarded as
indicative of its future results.
(2) Reflects results of operations of WHTM-TV since its acquisition during
September 1994 through December 1994 and the results of the properties
disposed of through their respective dates of sale. See notes 3 and 4 to
Consolidated Financial Statements.
(3) See Note 2 of Notes to the Company's Consolidated Financial Statements.
(4) Per share amounts for the Predecessor Company are neither comparable nor
meaningful due to the forgiveness of debt, partial sale of subsidiary,
issuance of new common stock and adoption of Fresh Start Reporting. All
per share amounts prior to 1995 have been restated to reflect the April,
1995 5 for 4 stock split.
39
<PAGE>
CONSOLIDATED BALANCE SHEET ITEMS
(IN THOUSANDS, INCLUDING NOTES)
<TABLE>
<CAPTION>
UNAUDITED
AS OF DECEMBER 31 AS OF MARCH 31
---------------------------------------------- ----------------
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Total Current Assets.... $28,494 $ 8,925 $ 9,093 $10,047 $ 96,605 $127,010 $65,760
Total Assets............ 74,327 37,272 90,852 95,985 115,888 138,079 91,004
Total Current Liabili-
ties................... 11,373 3,292 9,076 36,309(1) 7,109 27,517 5,294
Long-Term Debt.......... 22,100(2) 3,200 21,310 -- -- -- --
Shareholders' Equity.... 40,646 30,705 39,079 40,876 108,779 110,562 85,709
</TABLE>
- ---------------------
(1) Includes $28,000 of a note payable to Bank of Montreal which was repaid
upon the sale of three television stations on February 2, 1996. See
"Business--Recent Developments."
(2) Net of unamortized original issue discount of $8,705 as of December 31,
1992.
COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company reorganized and emerged from bankruptcy proceedings on December
20, 1992 and adopted Fresh Start Reporting in accordance with the guidelines
established by the American Institute of Certified Public Accountants in
Statement of Position 90-7. Under Fresh Start Reporting, assets and
liabilities were recorded at their estimated fair market value and the
historical deficit was eliminated.
Due to the acquisition and dispositions discussed under "Information
Concerning the Company," the borrowings incurred to effect the acquisition,
the retirement of the Company's Secured Notes, the consummation of the Plan of
Reorganization and adoption of Fresh Start Accounting, the Company's
historical results of operations should not be regarded as indicative of its
future results. The following discussion should be read in conjunction with
the Company's Consolidated Financial Statements and the Notes thereto.
RESULTS OF OPERATIONS--GENERAL
The comparability of results for future periods will be affected by
dispositions during 1996 (see Note 4 of Notes to the Company's Consolidated
Financial Statements), by the Acquisition and by the nature and timing of any
future acquisitions or dispositions. The Company currently has disposed of all
of its operating properties. Consequently, until the completion of the
Acquisition, the Company will have no operating revenues and the Company's
future revenues will be derived from the investment of its funds. The
Acquisition will substantially increase the Company's operating expenses,
depreciation and amortization charges and interest expense, as well as
increasing revenues. For these reasons, the results of the Company's
historical operations may not be comparable from period to period or
indicative of results in the future.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31,
1996
The Company did not have any results from operations during the first
quarter of 1997, since the Company sold its television stations during 1996.
Other income for the three months ended March 31, 1997 principally includes
recoveries on accounts and notes receivable of approximately $449,000 and
interest income of $919,000. These revenues were partially offset by an
unrealized loss on marketable securities of approximately $327,000.
The Company's per share income was $0.02 for the quarter ended March 31,
1997, as compared to the income of $7.08 for the first quarter of 1996. The
1996 net income resulted primarily from gains on the sale of the Company's
television stations.
40
<PAGE>
1996 COMPARED TO 1995
The Company's net revenue, operating expenses, depreciation and
amortization, and interest expense for the year ended December 31, 1996 are
not comparable to the year ended December 31, 1995 due to the disposition of
all the Company's television properties during the first quarter of 1996 and
the subsequent retirement of all the Company's long-term debt. During 1996,
revenue decreased to only $3.5 million from $34.4 million while for the same
periods operating expenses decreased to $2.2 million from approximately $16.7
million. Interest expense and depreciation and amortization expense decreased
to $216,000 and $468,000 from $2.1 million and $3.5 million, respectively. All
of the above-mentioned items decreased as a result of the sales of all the
Company's operating properties. The sale of such properties resulted in
approximately a $95.0 million pretax gain which was the primary reason for the
Company's net income of $70.7 million for the year ended December 31, 1996
compared to $11.1 million in 1995.
The Company had net income per share of $7.45 as opposed to $1.06 for the
year ended December 31, 1995.
1995 COMPARED TO 1994
The Company's net revenue, operating expenses, depreciation and
amortization, and interest expense for the year ended December 31, 1995 are
not comparable to the year ended December 31, 1994 due to the acquisition of
WHTM-TV and the borrowings under the Amended Line of Credit to effect such
acquisition, and the dispositions of the Company's radio properties and other
assets (see Notes 3 and 4 of Notes to the Company's Consolidated Financial
Statements). During 1995, net revenue increased by approximately 21% to $29.2
million from $24.0 million. This increase was primarily due to the acquisition
of WHTM-TV the results of which were included in the Company's results for a
full year as opposed to only three months in 1994. Operating expenses of the
Company increased overall to $16.7 million in 1995 from $15.0 million in 1994
due to the acquisition of WHTM-TV which was owned for the full year.
Depreciation and amortization expense rose to $3.5 million in 1995 from $3.3
million in 1994 primarily as a result of the amortization of intangibles
associated with the acquisition of WHTM-TV, offset by a reduction in the
expense due to properties sold in 1994.
The Company recognized net income of approximately $11.1 million in 1995, as
compared to $14.4 million in 1994 primarily as a result of the recovery on the
Fairmont Notes of approximately $7.9 million in 1995. Net income in 1994 was
$14.4 million primarily due to the net gains on the sale of its radio
properties of $17.2 million. Additionally, interest expense was $2.1 million
in 1995 as opposed to $.8 million in 1994 as a result of the acquisition of
WHTM-TV in September 1994 and the related borrowings under the Amended Line of
Credit.
The Company had net income per share of $1.06 in 1995, as opposed to $1.15
in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company had approximately $65.7 million in current assets and working
capital of $60.5 million at March 31, 1997.
The Company's sources of funds to serve its debt and meet its other
obligations historically have been provided by its liquid assets, cash flow
from its operating and investment activities, proceeds from the sale of
properties and proceeds from loans and financings.
In March 1995, the Company's Board of Directors authorized the repurchase by
the Company of up to 1.3 million shares of its Common Stock in addition to
previous authorizations. The Company is authorized to make such purchases from
time to time in the market or in privately negotiated transactions. During the
year ended December 31, 1996, the Company repurchased approximately 644,000
shares pursuant to that authorization.
During the months of January and February 1997, the Company repurchased
approximately 1.9 million shares for a total of approximately $18.1 million,
including a block of approximately 1,000,000 shares from an
41
<PAGE>
institutional investor in a private transaction for approximately $10.6
million. During February, 1997, the Company's Board of Directors authorized
the purchase of up to 2 million additional shares of the Company's Common
Stock in addition to previous purchases.
In order to fund the Acquisition and pay related fees and expenses, PCW
issued $175 million aggregate principal amount of 11 3/4% Senior Subordinated
Notes due 2007 (the "PCW Notes"). Interest on the PCW Notes is payable semi-
annually commencing on January 15, 1998. The PCW Notes are unsecured
obligations of PCW and are subordinate in right of payment to senior
indebtedness of PCW, including indebtedness under the New Credit Facility. The
indenture under which the PCW Notes were issued imposes certain limitations
on, among other things, the ability of PCW and its subsidiaries to incur
indebtedness and to pay dividends to the Company. Upon certain acquisitions of
more than 50% of the ownership of the Company's equity and upon a change in
the majority of the Company's Board of Directors over any 12 month period that
was not approved by a majority of the directors at the beginning of such 12
month period, the holders of the PCW Notes will have the right to cause the
PCW Notes to be repurchased at 101% of the principal amount thereof, plus
accrued and unpaid interest thereon. The consummation of the Exchange Offer
will not give rise to such repurchase right. PCW has granted certain
registration rights with respect to the PCW Notes.
In order to fund the Acquisition and provide working capital following the
Acquisition, the Company and its subsidiaries will enter into the New Credit
Facility providing for term loan borrowings in the aggregate principal amount
of approximately $325 million and revolving loan borrowings of approximately
$200 million. At the effective time of the Palmer Merger, PCW is expected to
borrow all term loans available under the New Credit Facility and up to
approximately $100 million of revolving loans. The remaining revolving loans
will, subject to a borrowing base and certain other conditions, be available
to fund the working capital requirements of PCW. On July 2, 1997, the Company
received an executed commitment letter from a financial institution to provide
the New Credit Facility. The commitment is subject to significant conditions,
including the absence of material adverse change in the business of Palmer,
negotiation, execution and delivery of definitive documentation and
consummation of the Fort Myers Sale (or arrangements satisfactory to the
lenders under the New Credit Facility for short-term financing bridging such
sale). The Company believes that the Fort Myers Sale will take place as
contemplated in conjunction with the remainder of the Acquisition with the
result that the Company will not require short-term bridge financing. It is
anticipated that loans under the New Credit Facility will bear interest at a
floating rate between .25% and 1.50% above the lenders' prime borrowing rate
or between 1.25% to 2.50% above the lenders' Euro-dollar base rate, depending
on the ratio of the consolidated total debt to consolidated earnings before
interest, taxes, depreciation and amortization of the Company and its
subsidiaries. The New Credit Facility will be secured by liens on
substantially all of the real and personal property of the Company and its
subsidiaries. It is anticipated that the New Credit Facility will contain
limitations on, among other things, the ability of the Company to pay
dividends or incur additional indebtedness and will require the Company to
maintain compliance with certain financial ratios.
In order to provide financing for the Acquisition and the redemption of the
PIK Preferred Stock and PIK Warrants, Cellular Holdings has issued in the
Cellular Holdings Offering units consisting of $153.4 million in aggregate
principal amount of its 13 1/2% Senior Secured Discount Notes due 2007 (the
"Cellular Holdings Notes") together with warrants to purchase 527,696 shares
of Common Stock at an exercise price of $.01 per share. The issue price of the
Cellular Holdings Notes (approximately $80 million in the aggregate)
represents a yield to maturity of 13 1/2%; cash interest will not begin to
accrue on the Cellular Holdings Notes prior to August 2, 2002 and will be
first payable on February 1, 2003. Approximately $47.5 million of the proceeds
of the Cellular Holdings Offering will be used to fund the Acquisition, while
the remainder will be used to redeem the PIK Preferred Stock and the PIK
Warrants. The Cellular Holdings Notes are guaranteed by a subsidiary of the
Company and secured by a pledge of the stock of Cellular Holdings. The holders
of the Cellular Holdings Notes will have the right to cause Cellular Holdings
to repurchase such Notes at 101% of the accrued value thereof upon certain
change of control events parallel to those applicable to the PCW Notes. The
indenture under which the Cellular Holdings Notes were issued contains
restrictions on, among other things, the payment of dividends and the
incurrence of indebtedness. The holders of the Cellular Holdings Notes have
certain registration rights.
42
<PAGE>
The following table sets forth the estimated cash sources and uses of funds
for the Acquisition, the contemplated redemption of the PIK Preferred Stock
and the PIK Warrants and related fees and expenses, assuming that 5,000,000
shares of the Company's Common Stock are issued in exchange for 2,239,541
shares of Palmer common stock in the Exchange Offer. The alternative
consequences of 10,000,000 shares of the Company's Common Stock being issued
in the Exchange Offer for 4,479,082 shares of Palmer common stock, or no
shares of the Company's Common Stock being issued in the Exchange Offer, are
disclosed in a footnote to the table. The maximum number of shares of Palmer
common stock that can be purchased with 10,000,000 shares of the Company's
Common Stock will be determined based on the average closing price per share
of Common Stock during the five trading days ending September 25, 1997. The
numbers set forth in the table and footnotes below assume an average closing
price of $8 1/16.
<TABLE>
<CAPTION>
TOTAL SOURCES (IN MILLIONS)
<S> <C>
New Credit Facility
Term Loan................................................... $325.0
Revolving Loan.............................................. 56.8*
11 3/4% Senior Subordinated Notes due 2007.................... 175.0
Units......................................................... 80.0
Equity contributions by the Company+.......................... 80.0
Proceeds from Fort Myers Sale................................. 166.3
------
Total cash sources.......................................... $883.1*
======
TOTAL USES:
Cash consideration for Palmer common stock.................... $448.6*
Palmer Existing Indebtedness (as of March 31, 1997)........... 381.4
Estimated transaction fees and expenses....................... 23.6
Cash for Redemption of PIK Preferred Stock and PIK Warrants... 29.5**
------
Total uses.................................................. $883.1*
======
</TABLE>
- --------
+ Payable either in cash or by delivery of shares of Palmer common stock.
* If 10,000,000 shares of the Company's Common Stock are issued in exchange
for 4,479,082 shares of Palmer common stock, the cash considerations for
the Palmer shares would be reduced to $408.3 million, and the amount
initially borrowed under the revolving loan under the New Credit Facility
would be reduced to $19.4 million. If the Exchange Offer is not
consummated, then the cash consideration for the Palmer common stock would
be increased to $488.9 million, and the amount initially borrowed under the
revolving loan under the New Credit Facility will be increased to $100.0
million.
** Assuming the consummation of the Acquisition and the redemption of the PIK
Preferred Stock and the PIK Warrants occur on October 15, 1997.
The foregoing table does not reflect any provision for any taxes payable in
connection with the Fort Myers Sale. The Company has a tax planning strategy
which it believes will avoid the payment of the $56.2 million tax which would
otherwise be payable in connection with the Fort Myers 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
then Arthur Andersen LLP) that, under existing laws, it is more likely than
not that the Company's position will prevail if challenged. This tax planning
strategy (among others) would be eliminated, however, if certain proposals by
the Joint Committee on Taxation were to be adopted by Congress. There can be
no assurances that the Company will be able to implement this tax planning
strategy before any of such proposals are adopted or that the Company's tax
position would be "grandfathered" under any of such proposals, if adopted.
The foregoing table also does not reflect $1.4 million which will be
immediately payable to William J. Ryan as a severance payment pursuant to his
existing employment contract upon consummation of the Acquisition and
approximately $2.6 million of severance payments which could become payable
over several years pursuant to existing employment contracts between Palmer
and its other executive officers. The Company has entered into
43
<PAGE>
an employment contract with William J. Ryan to continue as an officer after
the consummation of the Acquisition and expects to enter into a comparable
employment contract with M. Wayne Wisehart and employment contracts with other
key employees prior to the consummation of the Acquisition. Except for the
$1.4 million payable to William J. Ryan, there can be no assurances as to the
amount of payments that may be made to such officers, in recognition of such
severance rights, whether or not they continue with the Company after the
consummation of the Acquisition.
If the Company were unable to borrow under the New Credit Facility and the
Company also failed to find alternative sources of financing, the Company
would be unable to consummate the Acquisition and would be in breach of its
obligations under the Palmer Merger Agreement. Although the PCW Offering and
Cellular Holdings Offering have been consummated, the notes issued thereunder
are subject to mandatory redemption of 101% of the principal amount thereof,
plus accrued interest thereon, if the Acquisition has not occurred by December
31, 1997 or if in the sole judgment of the Company it appears that the
Acquisition will not be consummated by December 31, 1997. Pending the
consummation of the Acquisition, the proceeds from these offerings, plus cash
sufficient to pay principal, premium and interest through December 31, 1997,
are being held in escrow by the trustee for the holders of such notes.
Following the Acquisition, the Company's principal sources of liquidity are
expected to be cash flow from operations and borrowings under the New Credit
Facility. The Company's principal uses of cash will be debt service
requirements, capital expenditures and working capital.
If shareholders of the Company approve the Stock Issuance, the number of
shares of Palmer common stock to be acquired in the Palmer Merger will be
reduced and the aggregate cash consideration required for the Palmer Merger
will be correspondingly reduced. In such event, the initial borrowings under
the New Credit Facility will be reduced.
The following table sets forth the Company's scheduled estimated payments of
principal and interest on a pro forma basis as if the Acquisition had occurred
on January 1, 1997, assuming (i) an Exchange Offer in which 2,239,541 shares
of the Palmer common stock are purchased prior to the Palmer Merger (50%
acceptance of an Exchange Offer at which the maximum amount of 4,479,082
shares of Palmer common stock could have been purchased with 10,000,000 shares
of the Company's Common Stock valued at $8 1/16 per share), (ii) the entry
into the New Credit Facility with an interest rate of [8.5]% and (iii) the
redemption of the PIK Preferred Stock with a portion of the proceeds of the
Cellular Holdings Offering.
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Principal(1).......................... $ 0 $ 0 $38,182 $42,955 $45,102
Interest (excluding amortization of
original issue discount)(2).......... 53,017 53,017 49,772 46,125 42,287
------- ------- ------- ------- -------
$53,017 $53,017 $87,954 $89,076 $87,389
======= ======= ======= ======= =======
</TABLE>
(1) If no shares of Palmer common stock were purchased in the Exchange Offer,
principal payments in 1997, 1998, 1999, 2000 and 2001 would have been $0,
$0, $42.2 million, $47.5 million and $49.7 million, respectively. If
4,479,082 shares of Palmer common stock were purchased in the Exchange
Offer, the principal payments in 1997, 1998, 1999, 2000 and 2001 would have
been $0, $0, $34.2 million, $38.4 million and $40.3 million, respectively.
(2) If no shares of Palmer common stock were purchased in the Exchange Offer,
interest payments in 1997, 1998, 1999, 2000 and 2001 would have been $56.4
million, $56.4 million, $52.4 million, $98.8 million and $39.1 million,
respectively. If 4,479,082 shares of Palmer common stock were purchased in
the Exchange Offer, the interest payments in 1997, 1998, 1999, 2000 and 2001
would have been $49.6 million, $49.6 million, $46.6 million, $43.4 million
and $34.6 million, respectively.
44
<PAGE>
During the five years ended December 31, 1996, Palmer generated operating
income (loss) of $(4.3 million), $2.16 million, $15.1 million, $26.6 million
and $41.2 million in the years ended 1992, 1993, 1994, 1995 and 1996,
respectively.
The Company will be highly leveraged upon consummation of the Acquisition.
The Company's ability to meet its debt service requirements, including those
represented by the Notes and the New Credit Facility, will require significant
and sustained growth in the Company's cash flow. Based on the historical
growth in Palmer's cash flow from operations and the Company's assessment of
Palmer's potential ability to increase market penetration while controlling
costs, the Company believes that Palmer's cash flow from operations will be
sufficient to enable the Company to meet its debt service requirements. If
Palmer's cash flow from operations does not meet the Company's current
expectations, the Company could seek alternative debt or equity financing.
There can be no assurance, however, 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.
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. Upon consummation of the Acquisition, the Company's only
committed source of liquidity is expected to be the New Credit Facility. While
the Company expects to have sufficient availability under the New Credit
Facility to meet its liquidity needs, the terms of the New Credit Facility
which determine the availability thereunder are still under negotiation. The
Company has availability under the New Credit Facility for general corporate
purposes and, if the Company's tax planning strategy is unsuccessful, to
finance the $56.2 million tax payment due with respect to the Fort Myers Sale.
There can be no assurances, however, that the New Credit Facility will be
entered into. In addition, borrowings under the New Credit Facility will be
subject to significant conditions, including compliance with certain financial
ratios and the absence of any material adverse change.
In 1996, Palmer spent approximately $38.5 million for capital expenditures.
The Company expects to spend approximately $35 million and $25 million for
capital expenditures 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.
45
<PAGE>
INFORMATION CONCERNING PALMER
GENERAL
Palmer is engaged in the construction, development, management and operation
of cellular telephone systems in the southeastern United States. At March 31,
1997, after giving effect to the Acquisition, Palmer provided cellular
telephone service to 274,498 subscribers in Georgia, Alabama, Florida and
South Carolina in a total of 17 licensed service areas composed of eight
Metropolitan Statistical Areas ("MSAs") and nine Rural Service Areas ("RSAs"),
with an aggregate estimated population of 3.5 million. Palmer sells its
cellular telephone service as well as a full line of cellular products and
accessories principally through its network of retail stores. Palmer markets
all of its products and services under the service mark CELLULAR ONE.
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 Proxy Statement, 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 Palmer owns in the entity licensed
in such service area. MSAs and RSAs are also referred to as "Markets".
MARKETS AND SYSTEMS
Palmer's cellular telephone systems serve contiguous licensed service areas
in Georgia, Alabama and South Carolina. Palmer also has cellular service areas
in Georgia-1 RSA and 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 Palmer owns a cellular telephone
system, the estimated population, Palmer'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 OWNERSHIP DATE SYSTEM
POPULATION(2) PERCENTAGE NET POPS OPERATIONAL
<S> <C> <C> <C> <C>
Albany, GA....................... 118,527 82.7% 98,061 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-1 RSA.................... 223,098 100.0 223,098 10/92
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 82.7 121,942 --
Dothan, AL....................... 136,160 94.4 128,535 2/89
Montgomery, AL................... 318,371 92.8 295,430 8/88
Alabama-8 RSA.................... 171,993 100.0 171,993 7/93
--------- ---------
Subtotal....................... 3,378,622 3,247,800
Panama City, FL.................. 146,018 78.4 114,493 9/88
--------- ---------
Total.......................... 3,524,640 3,362,293
========= =========
</TABLE>
46
<PAGE>
- ---------------------
(1) Does not include Alabama-5 RSA, South Carolina-7 RSA and South Carolina-8
RSA where Palmer has interim operating authority. Palmer has no
subscribers in 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 for the Alabama-5 RSA
and South Carolina-8 RSA on May 20, 1997. Such third parties are required
to complete construction of their respective RSA within 18 months. After
completing construction, such third party may give Palmer ten days prior
written notice, at which point Palmer would be required to sell its
subscribers to such third party 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 Donnelly Market
Information Service.
OPERATIONS
General
Palmer 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 March 31, 1997, after
giving effect to the Acquisition, Palmer provided cellular telephone service
to 274,498 subscribers in a total of 17 licensed service areas composed of
eight MSAs and nine RSAs.
The following table sets forth information, at the dates indicated after
giving effect to the Acquisition, regarding Palmer's subscribers, penetration
rate, cost to add a net subscriber, average monthly churn rate and average
monthly service revenue per subscriber.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED
--------------------------------------------- MARCH 31,
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Subscribers at end of
period (1)............. 29,869 54,382 99,626 187,870 245,396 274,498
Penetration at end of
period (2)............. 2.23% 3.57% 4.54% 6.41% 7.28% 7.78%
Cost to add a net sub-
scriber (3)............ $ 272 $ 198 $ 247 $ 275 $ 434 $ 474
Average monthly churn
(4).................... 1.58% 1.32% 1.54% 1.51% 1.89% 1.87%
Average monthly service
revenue per subscriber
(5).................... $59.65 $56.70 $56.64 $53.80 $50.37 $45.51
</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 Palmer 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 each 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 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 each period by dividing total subscribers discontinuing
service during such period by the average number of subscribers for such
period, divided by the number of months in the relevant period.
(5) Determined for each 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 the relevant period.
SUBSCRIBERS AND SYSTEM USAGE
Palmer's subscribers, after giving effect to the Acquisition, have increased
from 17,148 at January 1, 1992 to 274,498 at March 31, 1997. Reductions in the
cost of cellular telephone services and equipment at the retail
47
<PAGE>
level have led to an increase in cellular telephone usage by general consumers
for non-business purposes. As a result, the management of Palmer believes that
there is an opportunity for significant growth in each of its existing service
areas. Palmer's intention is to 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 Palmer's total revenues, with equipment sales and installation
representing the balance.
MARKETING
Palmer'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. Palmer'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. Palmer's
management believes that its internal sales force is more likely than
independent agents to successfully select and screen new subscribers. In
addition, Palmer motivates its direct sales force to sell appropriate rate
plans to subscribers, thereby reducing churn, by linking payment of
commissions to subscriber retention. Palmer 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 three-month period ended March 31, 1997, Palmer's cost to add a net
subscriber was $474.
Palmer's sales force works principally out of retail stores in which Palmer
offers its cellular products and services. As of March 31, 1997, Palmer
maintained 30 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 Palmer as "Superstores". Each Superstore has
an authorized warranty repair center and provides cellular telephone
installation and maintenance services. Most of Palmer's larger markets
currently have at least one Superstore. In addition, to enhance convenience
for its customers, Palmer has begun to open smaller stores in locations such
as shopping malls.
Palmer markets all of its products and services under the name CELLULAR ONE.
See "--Service Marks". Palmer believes it obtains substantial marketing
benefits from the name recognition associated with this widely used service
mark, both with existing subscribers traveling outside Palmer's service areas
and with potential new subscribers moving into Palmer's service areas. In
addition, Palmer believes that travelers who subscribe to CELLULAR ONE service
in other markets may be more likely to use Palmer's service when they travel
in Palmer's service areas. Palmer is currently negotiating the renewal of a
majority of its contracts with CELLULAR ONE. See "Risk Factors--Reliance on
Use of Third Party Service Marks."
PRODUCTS AND SERVICES
In addition to providing cellular telephone service in each of its markets,
Palmer 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. 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 the subscriber while enhancing air time use and revenues for Palmer. 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 Palmer's competitiveness. As
appropriate, revisions to pricing of service plans and equipment are made to
meet the demands of the local marketplace.
48
<PAGE>
The following table sets forth a breakdown of Palmer's revenues from the
sale of its services and equipment for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31
----------------------------------------- ---------------
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 $ 105,415 $23,948 $29,001
Roaming (2)............ 2,231 3,075 5,884 11,157 13,741 3,290 4,010
Long distance (3)...... 992 1,309 2,218 3,634 6,781 1,424 1,835
Other (4).............. 680 1,230 2,745 2,585 2,600 749 654
------- ------- ------- ------- --------- ------- -------
Total service revenue.. $15,724 $25,938 $47,870 $78,983 $ 128,537 $29,411 $35,500
Equipment sales and in-
stallation (5)......... 3,558 5,238 6,381 6,830 7,062 1,663 2,001
------- ------- ------- ------- --------- ------- -------
Total.................. $19,282 $31,176 $54,251 $85,813 $ 135,599 $31,074 $37,501
======= ======= ======= ======= ========= ======= =======
</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 Palmer's service areas.
(3) Long distance revenue is derived from long distance telephone calls placed
by Palmer'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 Palmer'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. Roaming revenue is a substantial source of incremental
revenue for Palmer. For 1996, roaming revenues accounted for 10.7% of Palmer's
service revenues and 10.1% of Palmer's total revenue.
Palmer provides retail distribution of cellular telephones and maintains
inventories of cellular telephones. Palmer negotiates volume discounts for the
purchase of cellular telephones and, in many cases, passes such discounts on
to its customers. Palmer 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.
SYSTEM DEVELOPMENT AND EXPANSION
Palmer 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, Palmer 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).
49
<PAGE>
The following table sets forth, by market, at the dates indicated, the
number of Palmer's operational cell sites.
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------ AT MARCH 31,
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 than were purchased in the Horizon and USCOC acquisitions.
(5) Includes two existing cell sites in Alabama-5 RSA where Palmer has interim
operating authority.
Palmer estimates that in 1996 the capacity of its existing cellular
telephone systems increased 42.0%. During 1996, Palmer spent approximately
$38.5 million and, based on projected growth in subscriber demand, expects to
spent 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. Palmer has constructed 20 cell sites to date in 1997
and plans to construct 10 additional cell sites with respect to its existing
cellular systems during 1997 to meet projected subscriber demand and improve
the quality of service.
Microwave networks enable Palmer 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, Palmer
spend $1.0 million to build additional microwave connections. In addition, in
1996 Palmer 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 the capacity.
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.
Palmer began offering TDMA (Time Division Multiple Access) standard digital
service during 1997. This digital network allows Palmer to offer advanced
cellular features and services such as caller-ID, short message paging and
extended battery life. Palmer presently plans to roll out TDMA digital
cellular services in the rest of its major markets during 1997. Where cell
sites are not yet at their maximum capacity of radio channels, Palmer 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
50
<PAGE>
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 Palmer'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.
COMPETITION
The cellular telephone service industry in the United States is highly
competitive. Cellular telephone systems compete principally on the basis of
service and enhancements offered, the technical quality of the cellular
system, customer service, coverage capacity and price of service and
equipment. Currently, Palmer'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 Palmer'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-1 RSA.......................... BellSouth
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.
Palmer also faces competition from broadband personal communications
services ("PCS"). PCS is a digital, wireless communications system supported
by high-density call transmitters. 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.
Palmer also faces competition from other existing communications
technologies such as conventional mobile telephone service, SMR and enhanced
specialized mobile radio ("ESMR") systems and paging services.
51
<PAGE>
Palmer also faces competition from "resellers". The FCC requires all
cellular licensees to provide service to resellers that meet certain terms and
conditions. 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 airtime from a licensed carrier and resells
service through its own distribution network to the public.
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.
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. Palmer 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, Palmer 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
Palmer to provide cellular telephone service to its customers, and to maintain
a certain minimum overall customer satisfaction rating in surveys commissioned
by the Licensor. Palmer's customer satisfaction ratings have consistently far
exceeded this required minimum. While the licensing agreements which Palmer
has entered have historically been for five-year terms, the majority of these
contracts have expired. Palmer is currently negotiating to renew these
contracts and in the interim has month-to-month agreements to use the service
mark. See "Risk Factors--Reliance on Use of Third Party Service Mark."
REGULATION
As a provider of cellular telephone services, Palmer 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
(one); 2001 (five); 2002 (three) and 2006 (one). 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. Palmer believes
that the licenses controlled by it will be renewed in a timely manner upon
application.
52
<PAGE>
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 has no material unserved areas in
any of its cellular telephone systems that have been licensed for more than
five years.
Palmer 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 Palmer 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 Palmer will be approved or acted upon in a
timely manner by the FCC, based upon its experience to date, Palmer 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 Palmer'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 Palmer 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 Palmer 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 Palmer, 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. Palmer 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. LEC's and state regulators filed appeals of the FCC Order, which have
been consolidated in the U.S. 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.
Palmer is currently negotiating with the incumbent local exchange carriers
and has already renegotiated certain inter-connection agreements with LECs in
most of Palmer's markets and believes that these negotiations will result in a
substantial decrease in interconnection expenses incurred by Palmer.
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. The Telecom Act provides that
state and local authority over the placement, construction and modification of
53
<PAGE>
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.
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 in May 1997, 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 March 31, 1997 Palmer had 565 full-time employees (excluding Fort Myers),
none of whom is represented by a labor organization. Management considers its
relations with employees to be good.
PROPERTIES
For each market served by Palmer's operations, Palmer maintains at least one
sales or administrative office and operates a number of cell transmitter and
antenna sites. As of March 31, 1997, Palmer had approximately 35 leases for
retail stores used in conjunction with its operations and 3 leases for
administrative offices. Palmer also had approximately 130 leases to
accommodate cell transmitters and antennas as of July 8, 1997.
LEGAL PROCEEDINGS
Palmer is not currently involved in any pending legal proceedings likely to
have a material adverse impact on it.
54
<PAGE>
MARKET FOR PALMER'S COMMON STOCK
Palmer's common stock is traded on the NASDAQ Stock Market's National Market.
The following table sets forth information regarding the high and low sales
prices for the periods indicated:
<TABLE>
<CAPTION>
CALENDAR YEAR 1995 HIGH LOW
<S> <C> <C>
First Quarter (1)........................................... $15.88 $14.25
Second Quarter.............................................. $18.88 $14.25
Third Quarter............................................... $24.50 $16.50
Fourth Quarter.............................................. $24.25 $19.75
<CAPTION>
CALENDAR YEAR 1996
<S> <C> <C>
First Quarter............................................... $22.50 $16.25
Second Quarter.............................................. $22.81 $18.75
Third Quarter............................................... $20.38 $16.00
Fourth Quarter.............................................. $18.00 $10.25
<CAPTION>
CALENDAR YEAR 1997
<S> <C> <C>
First Quarter............................................... $15.25 $ 9.25
Second Quarter.............................................. $16.75 $10.25
Third Quarter (through August 7, 1997)...................... $16.88 $
</TABLE>
- --------
(1) Trading commenced March 1995.
Palmer has not paid any dividends on its common stock since its inception.
55
<PAGE>
PALMER 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 three months ended March 31, 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 "Palmer 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>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------- ------------------
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 $ 34,915 $ 42,220
Equipment sales and
installation........... 4,284 6,285 7,958 8,220 8,624 2,035 2,463
--------- -------- -------- -------- -------- -------- --------
Total revenue...... 27,301 41,458 68,979 104,906 159,743 36,950 44,683
--------- -------- -------- -------- -------- -------- --------
Engineering, technical
and other direct
expenses............... 5,395 7,343 12,776 18,184 28,717 7,683 7,430
Cost of equipment....... 5,071 7,379 11,546 14,146 17,944 3,931 5,807
Selling, general and
administrative
expenses................ 9,458 13,886 19,757 30,990 46,892 10,924 13,360
Depreciation and
amortization............ 11,687 10,689 9,817 15,004 25,013 5,898 7,553
--------- -------- -------- -------- -------- -------- --------
Operating income
(loss).................. (4,310) 2,161 15,083 26,582 41,177 8,514 10,533
--------- -------- -------- -------- -------- -------- --------
Other income (expense):
Interest, net.......... (8,290) (9,006) (12,715) (21,213) (31,462) (7,945) (7,872)
Other, net............. (5) (590) (70) (687) (429) 0 71
--------- -------- -------- -------- -------- -------- --------
Total other
expense............ (8,295) (9,596) (12,785) (21,900) (31,891) (7,945) (7,801)
--------- -------- -------- -------- -------- -------- --------
Minority interest share
of (income) losses...... 377 83 (636) (1,078) (1,880) (452) (331)
Income taxes............ 0 0 0 (2,650) (2,724) (41) (1,224)
--------- -------- -------- -------- -------- -------- --------
Net income (loss)....... $ (12,228) $ (7,352) $ 1,662 $ 954 $ 4,682 $ 76 $ 1,177
========= ======== ======== ======== ======== ======== ========
OTHER DATA:
Capital expenditures.... $ 3,835 $ 13,304 $ 22,541 $ 36,564 $ 41,445 $ 6,618 $ 16,987
Interest Taxes
("EBITDA") (4)......... $ 7,377 $ 12,850 $ 24,900 $ 41,586 $ 66,190 $ 14,412 $ 18,086
EBITDA margin on service
revenue................ 32.1% 36.5% 40.8% 43.0% 43.8% 41.3% 42.8%
Penetration(5).......... 2.20% 3.48% 4.58% 6.41% 7.45% 6.84% 7.94%
Subscribers at end of
period (6)............. 37,209 65,761 117,224 211,985 279,816 227,400 310,823
Cost to add a net
subscriber (7).......... $ 283 $ 203 $ 247 $ 276 $ 407 $ 357 $ 476
Average monthly service
revenue per
subscriber(8).......... $ 68.30 $ 62.69 $ 60.02 $ 56.68 $ 52.20 $ 53.73 $ 47.70
Average monthly churn
(9)..................... 1.69% 1.37% 1.55% 1.55% 1.84% 1.51% 1.87%
Ratio of earnings to
fixed charges (10)...... 1.17x 1.21x 1.28x 1.07x 1.33x
CONSOLIDATED BALANCE
SHEET DATA:
Cash.................... $ 443 $ 1,670 $ 2,998 $ 3,436 $ 1,698 $ 4,553 $ 2,091
Working capital
(deficit)............... (740) 799 2,490 (1,435) 296 (2,542) 2,282
Property, plant and
equipment, net......... 17,371 23,918 51,884 100,936 132,438 103,885 148,121
Licenses and other
intangibles, net....... 103,901 114,955 199,265 332,850 387,067 333,284 411,314
Total assets............ 127,867 150,054 273,020 462,871 549,942 466,041 589,566
Total debt.............. 106,811 131,361 245,609 350,441 343,662 352,603 378,698
Stockholders' equity.... 10,659 3,244 4,915 74,553 164,930 74,629 166,107
</TABLE>
56
<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 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.
57
<PAGE>
PALMER MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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.
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 310,823 as of March 31, 1997. During the same period,
Palmer's penetration rate in its cellular telephone systems increased from
1.45% at the beginning of 1992 to 7.94% as of March 31, 1997. Palmer also made
several acquisitions between 1992 and 1996, as later described.
On average, new subscribers use less air time and generate less revenue per
subscriber than existing subscribers. Therefore, air time 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 have decreased over time as new
subscribers have been added. Palmer expects these trends to continue in its
existing cellular telephone systems as its penetration rate increases.
Palmer 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 to slowly reverse itself.
Palmer anticipates that its cost to add a net subscriber will continue to
increase 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.
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.
58
<PAGE>
PALMER HISTORICAL RESULTS OF OPERATIONS
The following table sets forth the percentage which certain amounts bear to
Palmer's total revenue.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------- --------------------
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% 94.5% 94.5%
Equipment Sales and
Installation......... 15.7 15.2 11.5 7.8 5.4 5.5 5.5
----- ----- ----- ----- ----- --------- ---------
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 9.0 7.9
Other direct costs
of services (2).... 9.4 8.9 10.5 9.7 10.1 11.8 8.7
Cost of equipment
(3).................. 18.6 17.8 16.7 13.5 11.2 10.6 13.0
Selling, general and
administrative:
Sales and marketing
(4)................ 10.3 9.4 8.8 8.7 8.6 8.6 8.6
Customer service
(5)................ 7.0 7.2 5.6 6.0 5.9 5.8 6.7
General and adminis-
trative (6)........ 17.4 16.9 14.2 14.9 14.9 15.2 14.6
Depreciation and amor-
tization............. 42.8 25.8 14.2 14.3 15.7 16.0 16.9
----- ----- ----- ----- ----- --------- ---------
Total operating ex-
penses............. 115.8 94.8 78.1 74.7 74.3 77.0 76.4
----- ----- ----- ----- ----- --------- ---------
Operating income
(loss)................. (15.8)% 5.2% 21.9% 25.3% 25.7% 23.0% 23.6%
===== ===== ===== ===== ===== ========= =========
Operating income before
depreciation and
amortization (7)....... 27.0% 31.0% 36.1% 39.6% 41.4% 39.0% 40.5%
===== ===== ===== ===== ===== ========= =========
</TABLE>
- ---------------------
(1) Consists of costs of 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.
(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 three months ended March 31, 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.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31,
1996
REVENUE. Service revenues totaled $42.2 million for the first quarter of
1997, an increase of 20.9% over $34.9 million for the first quarter of 1996.
This increase was primarily due to a 34.4% increase in the average number of
subscribers to 295,320 for the first quarter of 1997 versus 219,693 for the
first quarter of 1996. The increase in subscribers is the result of internal
growth, which Palmer attributes primarily to its strong sales and marketing
efforts, and recent acquisitions.
Average monthly revenue per subscriber decreased 11.2% to $47.70 for the
first quarter of 1997 from $53.73 for the first quarter of 1996. This is in
part due to the trend, common in the cellular telephone industry, where, on
average, new subscribers are using less air time than existing subscribers.
Therefore, service revenues
59
<PAGE>
generally do not increase proportionately with the increase in subscribers. In
addition, the decline reflects more competitive rate plans introduced into
Palmer's markets.
Equipment sales and installation revenue, which consists primarily of
cellular subscriber equipment sales, increased by 21.0% to $2.5 million for
the first quarter of 1997 compared to $2.0 million for the first quarter of
1996. The increase is due to the 28.8% increase in gross subscriber
activations in the first quarter of 1997 compared to 1996. As a percentage of
revenue, equipment sales and installation revenue remained flat at 5.5% for
the first quarter of 1997 and 1996.
OPERATING EXPENSES. Engineering and technical expenses increased by 7.1% to
$3.5 million for the first quarter of 1997 from $3.3 million in the first
quarter of 1996, due primarily to the increase in subscribers and recent
acquisitions. As a percentage of revenue, engineering and technical expenses
decreased to 7.9% from 9.0% for the first quarter of 1997 and 1996,
respectively. Palmer 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 to $3.9 million for the first
quarter of 1997 from $4.4 million for the first quarter of 1996 reflecting the
decrease in interconnection costs as a result of Palmer's renegotiation of
interconnection agreements with the local exchange carriers ("LECs") in most
of Palmer's markets. As a percentage of revenue, these costs of services
declined to 8.7% from 11.8% reflecting improved interconnection agreements
with LECs, as well as efficiencies gained from the growing subscriber base.
The cost of equipment increased 47.7% to $5.8 million of the first quarter
of 1997 from $3.9 million for the first quarter of 1996, due primarily to the
increase in gross subscriber activations for the same period. The equipment
sales margin decreased to (135.8%) for the first quarter of 1997 from (93.2%)
for the first quarter of 1996. In an effort to address market competition and
improve market share, Palmer sold more telephones below cost in the first
quarter of 1997, on average, than in the same period of 1996.
Sales and marketing costs increased 21.1% to $3.9 million for the first
quarter of 1997 from $3.2 million for the same period in 1996. This increase
is primarily due to the 28.8% increase in gross subscriber activations and the
resulting increase in commissions. As a percentage of total revenue, sales and
marketing costs remained flat at 8.6% for the first quarter of 1997 and 1996.
Palmer's cost to add a net subscriber, including loss on telephone sales,
increased to $476 for the first quarter of 1997 from $357 for the first
quarter of 1996. This increase in cost to add a net subscriber was caused
primarily by increased losses from Palmer's sales of cellular telephones and
an increase in commissions.
Customer service costs increased 40.2% to $3.0 million for the first quarter
of 1997 from $2.1 million for the first quarter of 1996. As a percentage of
revenue, customer service costs increased to 6.7% from 5.8% for the first
quarter of 1997 and 1996, respectively. The increase was due primarily to
higher costs for billing support services.
General and administrative expenditures increased 16.2% to $6.5 million for
the first quarter of 1997 from $5.6 million for the first quarter of 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 14.6% in the first quarter of 1997 from 15.2% in the first quarter
of 1996. As Palmer 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 28.1% to $7.6 million for the first
quarter of 1997 from $5.9 million for the first quarter of 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 remained flat at 16.9% and 16.0% for the first
quarter of 1997 and 1996, respectively.
60
<PAGE>
Operating income increased 23.7% to $10.5 million in the first quarter of
1997, from $8.5 million for the first quarter of 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
remained flat at $7.9 million for the first quarter of 1997 and 1996.
Income tax expense was $1.2 million in the first quarter of 1997 due
primarily to the increase in income before income taxes. Income tax expense
was immaterial in the first quarter of 1996.
Net income for the first quarter of 1997 was $1.2 million, or $0.04 per
share, compared to net income of $0.1 million, or $0.00 per share, for the
first quarter of 1996. The increase in net income is primarily attributable to
increases in revenue which exceeded increases in operating expenses and income
tax expense.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenue. Service revenue totaled $151.l million for l996, 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 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 air time and generate less revenue per subscriber than
existing subscribers as is customary in the cellular telephone industry.
Therefore, air time 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
61
<PAGE>
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.
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 in 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.
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, and the Georgia Acquisition (as defined herein).
62
<PAGE>
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.
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 air time and generate less revenue per subscriber than
existing subscribers as is customary in the cellular telephone industry.
Therefore, air time 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
63
<PAGE>
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.
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 Palmer 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
64
<PAGE>
primarily to debt incurred for the Georgia Acquisition and 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 (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
basis 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
Palmer's long-term capital requirements consist of funds for capital
expenditures, acquisitions and debt service. Historically, Palmer has met its
capital requirements primarily through equity contributions, bank and
intercompany debt and, to a lesser extent, through operating cash flow.
In 1996, Palmer spent approximately $41.4 million for capital expenditures.
Palmer expects to spend $50 million and $25 million to $30 million for capital
expenditures for the years ended December 31, 1997 and 1998, respectively.
Palmer expects to use net cash provided by operating activities and borrowings
available under the New Credit Facility to fund such capital expenditures.
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
Palmer believes that inflation affects its business no more than it
generally affects other similar businesses.
RECENT DEVELOPMENTS
On July 28, 1997 Palmer reported preliminary unaudited operating results for
the three months ended June 30, 1997 (which include results of Palmer's Fort
Myers, Florida MSA). Palmer reported service revenue of $45.9 million for the
second quarter of 1997, an increase of 21.4% over service revenue of $37.8
million for the second quarter of 1996. Palmer reported operating cash flow of
$21.3 million for the second quarter of 1997, an increase of 23.6% over
operating cash flow of $17.3 million for the second quarter of 1996. Palmer
reported net income of $2.5 million for the second quarter of 1997, an
increase of 47.0% over $1.7 million for the second quarter of 1996.
65
<PAGE>
LEGAL MATTERS
The legality of the issuance of the Holdings Common Stock to be issued in
the Merger and pursuant to the Stock Issuance will be passed on by Proskauer
Rose LLP, New York, New York.
EXPERTS
The Consolidated Financial Statements and Schedule of Price Communications
Corporation as of and for the years ended December 31, 1995 and 1996, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
The consolidated statements of operations, cash flows, and shareholders'
equity of Price Communications Corporation and subsidiaries for the year ended
December 31, 1994, have been included in this Proxy Statement/Prospectus in
reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of Palmer Wireless, Inc and
subsidiaries as of December 31, 1995 and 1996 and for each of the years in the
three-year period ended December 31, 1996 have been included herein in
reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, appearing herein, and upon the authority of said firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company and Holdings have filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-4 (the
"Registration Statement") under the Securities Act with respect to the
Holdings Common Stock offered hereby. This Proxy Statement does not contain
all of the information included in the Registration Statement and the exhibits
and schedules thereto. For further information with respect to the Company and
Holdings, reference is hereby made to the Registration Statement, including
the exhibits and schedules thereto. Statements contained in this Proxy
Statement concerning the provisions or contents of any contract, agreement or
other document referred to herein are not necessarily complete. With respect
to each such contract, reference is made to such exhibit for a more complete
description of the matters involved, and each such statement shall be deemed
qualified in its entirety by such reference to the copy of the applicable
document filed with the Commission. The Registration Statement, including the
exhibits and schedules thereto, may be inspected without charge at the public
reference facilities maintained by the Commission at room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies of such material or any part
thereof may be obtained from such office upon payment of the fees prescribed
by the Commission. Documents can also be retrieved from the Commission's Web
site at http://www.sec.gov.
OTHER MATTERS
It is not anticipated that any matter other than the approval of the Stock
Issuance will be brought before the Special Meeting. If other matters are
properly brought before the meeting, proxies for shares of Common Stock will
be voted in accordance with the best judgment of the proxy holders.
Representatives of Arthur Andersen LLP, the Company's independent auditors,
are expected to be present at the Special Meeting and available to respond to
appropriate questions, and will also have the opportunity to make a statement
if they so desire.
BY ORDER OF THE BOARD
OF DIRECTORS
ASHLEY B. DIXON
Vice President and Corporate
Secretary
66
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Auditors' Reports....................................................... F-2
Consolidated Balance Sheets at December 31, 1996 and 1995............... F-4
Consolidated Statements of Operations for the Years Ended December 31,
1996, 1995 and 1994.................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1996, 1995 and 1994.................................................... F-6
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1996, 1995
and 1994............................................................... F-7
Notes to Consolidated Financial Statements.............................. F-8
Consolidated Balance Sheets at December 31, 1996 and March 31, 1997
(Unaudited)............................................................ F-18
Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 1996 and 1997 (Unaudited).............................. F-19
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1996 and 1997 (Unaudited).............................. F-20
Notes to Consolidated Financial Statements (unaudited) for the Three
Months Ended March 31, 1996 and 1997 (Unaudited)....................... F-21
PALMER WIRELESS, INC. AND SUBSIDIARIES
Independent Auditors' Report............................................ F-23
Consolidated Balance Sheets, December 31, 1995 and 1996 ................ F-24
Consolidated Statements of Operations, Years Ended December 31, 1994,
1995 and 1996 ......................................................... F-25
Consolidated Statements of Stockholders' Equity, Years Ended December
31, 1994, 1995
and 1996 .............................................................. F-26
Consolidated Statements of Cash Flows, Years Ended December 31, 1994,
1995 and 1996 ......................................................... F-27
Notes to Consolidated Financial Statements ............................. F-29
Condensed Consolidated Balance Sheets, December 31, 1996 and March 31,
1997 (Unaudited) ...................................................... F-38
Condensed Consolidated Statements of Operations, Three Months Ended
March 31, 1996 and 1997 (Unaudited) ................................... F-42
Condensed Consolidated Statements of Stockholders' Equity, Year Ended
December 31, 1996 and Three Months Ended March 31, 1997 (Unaudited) ... F-43
Condensed Consolidated Statements of Cash Flows, Three Months Ended
March 31, 1996 and 1997 (Unaudited) ................................... F-44
Notes to Condensed Consolidated Financial Statements (Unaudited) ....... F-45
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Price Communications Corporation:
We have audited the accompanying consolidated balance sheets of Price
Communications Corporation (a New York corporation) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, shareholders' equity and cash flows for the years then ended.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and schedules 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 financial statements referred to above present fairly,
in all material respects, the financial position of Price Communications
Corporation and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
New York, New York
February 24, 1997
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Price Communications Corporation:
We have audited the accompanying consolidated statements of operations, cash
flows, and shareholders' equity of Price Communications Corporation and
subsidiaries for the year ended December 31, 1994. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Price Communications Corporation and subsidiaries for the year ended
December 31, 1994 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
January 20, 1995
F-3
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................ $ 83,356,748 $ 1,206,557
Investment securities (Note 2):
Trading securities.................................. 4,045,628 237,975
Available-for-sale securities....................... 8,694,966 --
Accounts receivable, net of allowance for doubtful
accounts of $473,579 in 1996 and $294,554 in 1995... 488,882 6,096,446
Film broadcast rights................................ -- 1,764,468
Prepaid expenses and other current assets............ 18,672 741,307
------------ -----------
Total current assets.............................. 96,604,896 10,046,753
------------ -----------
PROPERTY AND EQUIPMENT, AT COST LESS ACCUMULATED
DEPRECIATION (Note 7)................................ 159,000 11,308,808
BROADCAST LICENSES AND OTHER INTANGIBLES, less
accumulated amortization of $2,559,354 in 1995 (Note
2)................................................... -- 65,434,705
FILM BROADCAST RIGHTS................................. -- 231,225
LONG-TERM INVESTMENTS (Note 6)........................ 18,204,429 8,350,000
DEFERRED TAX ASSET (Note 10).......................... 350,000 --
NOTES RECEIVABLE (Note 5)............................. 540,000 540,000
OTHER ASSETS.......................................... 29,500 73,907
------------ -----------
Total assets...................................... 115,887,825 $95,985,398
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses................ $ 2,755,497 $ 3,197,471
Accrued interest..................................... -- 510,119
Current portion of long-term debt (Note 9)........... -- 28,000,000
Deferred tax liability (Note 10)..................... 1,042,862 --
Other current liabilities (Note 8)................... 3,310,774 4,601,409
------------ -----------
Total current liabilities......................... 7,109,133 36,308,999
------------ -----------
DEFERRED TAX EFFECT OF BASIS DIFFERENCE ARISING ON
ACQUISITION (Note 10)................................ -- 17,971,028
OTHER LIABILITIES (Note 8)............................ -- 829,689
COMMITMENTS AND CONTINGENCIES (Note 15)
SHAREHOLDERS' EQUITY (Notes 13 and 14):
Preferred Stock, par value $.01 per share; authorized
20,000,000, no shares outstanding................... -- --
Common Stock, par value $.01 per share; authorized
40,000,000 shares; outstanding 9,038,808 shares in
1996 and 9,579,842 shares in 1995................... 90,388 95,798
Additional paid-in capital........................... 12,240,133 16,935,009
Unrealized gain on marketable equity securities, net
of tax effect (Note 2).............................. 1,936,743 --
Retained earnings.................................... 94,511,428 23,844,875
------------ -----------
Total shareholders' equity........................ 108,778,692 40,875,682
------------ -----------
Total liabilities and shareholders' equity........ $115,887,825 $95,985,398
============ ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
F-4
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Revenue.............................. $ 3,491,441 $34,377,543 $ 28,053,341
Agency and representatives' commis-
sions............................... 529,577 5,222,273 4,014,209
------------ ----------- ------------
Net revenue...................... 2,961,864 29,155,270 24,039,132
------------ ----------- ------------
Operating expenses................... 2,233,347 16,684,608 14,961,399
Corporate expenses................... 2,373,045 2,687,064 4,474,787
Other income, net (Notes 4, 5 and
11)................................. (98,372,359) (7,280,215) (16,244,568)
Interest expense..................... 216,389 2,099,365 813,493
Amortization of debt discount and
deferred debt expense............... -- 460,000 645,835
Depreciation and amortization........ 467,413 3,459,320 3,312,049
Realized loss on marketable securi-
ties, net........................... 793,641 166,211 --
------------ ----------- ------------
Income before income taxes........... 95,250,388 10,878,917 16,076,137
Income tax (expense) benefit (Note
10)................................. (24,583,835) 247,000 (1,652,588)
------------ ----------- ------------
Net income....................... $ 70,666,553 $11,125,917 $ 14,423,549
============ =========== ============
Net income per share (Note 2)........ $ 7.45 $ 1.06 $ 1.15
============ =========== ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-5
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................... $ 70,666,553 $ 11,125,917 $ 14,423,549
------------ ------------ ------------
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Items not affecting cash--
Amortization of debt discount and
deferred debt expense............. -- 100,000 645,835
Depreciation and amortization...... 467,413 3,459,320 3,312,049
Loss on disposition of equipment... -- -- 47,529
Loss on mark-down of long-term
investment, net of tax effect..... 650,000 -- --
Change in assets and liabilities,
net of effects of reorganization--
Decrease (increase) in net
accounts receivable............... 3,191,494 (1,022,996) 307,979
Decrease in prepaid expenses and
other assets...................... 392,243 83,180 1,581,117
Decrease in film broadcast
rights............................ 333,800 1,862,277 536,910
Decrease in goodwill............... -- 295,477 --
(Decrease) increase in accounts
payable and accrued expenses...... (936,802) (405,263) 1,563,455
(Decrease) increase in accrued
interest payable, net of
forgiveness....................... (510,119) 510,119 (1,023,932)
Increase (decrease) in other
liabilities....................... 402,825 (2,267,942) 1,013,375
Reclassification of transactions to
investing and financing
activities--
Gain on sale of properties, net.... (94,998,417) -- (17,219,231)
Loss on purchase of common stock... -- 1,185,662 --
Gain on sale of trading
securities........................ (2,121,897) -- --
Loss on sale of trading
securities........................ 2,915,538 166,211 --
Purchase of trading securities,
net............................... (4,601,295) -- --
(Recovery) reserve on notes
receivable, net................... -- (7,884,884) 737,500
------------ ------------ ------------
Total adjustments................. (94,815,217) (3,918,839) (8,497,414)
------------ ------------ ------------
Net cash (used in) provided by
operating activities............. (24,148,664) 7,207,078 5,926,135
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of businesses and equipment,
net of cash retained............... 155,706,330 -- 32,451,283
Investment in businesses, net of
cash acquired...................... -- -- (50,270,793)
Capital expenditures................ (137,399) (1,469,505) (751,965)
Purchase of available-for-sale
securities and long-term
investments........................ (16,569,790) (10,567,300) --
Proceeds from sale of marketable
securities......................... -- 1,813,115 --
Proceeds from (disbursements of)
notes receivable, net.............. -- 8,202,384 (390,000)
------------ ------------ ------------
Net cash provided by (used in)
investing activities............. 138,999,141 (2,021,306) (18,961,475)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings............... -- 1,000,000 --
Payment of short-term borrowings.... -- (1,000,000) --
Repurchases and payments of long-
term debt.......................... (28,000,000) -- --
Payment of line of credit
origination fee.................... -- (100,000) (475,000)
Borrowings under line of credit
agreements......................... -- 6,360,000 45,000,000
Repayments under line of credit
agreements......................... -- (860,000) (25,700,000)
Repurchase of Company common stock.. (5,102,742) (10,659,200) (6,271,064)
Stock options exercised............. 402,456 143,975 222,312
------------ ------------ ------------
Net cash (used in) provided by
financing activities............. (32,700,286) (5,115,225) 12,776,248
------------ ------------ ------------
Net increase (decrease) in cash
and cash equivalents............. 82,150,191 70,547 (259,092)
CASH AND CASH EQUIVALENTS, beginning
of year............................. 1,206,557 1,136,010 1,395,102
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of
year................................ $ 83,356,748 $ 1,206,557 $ 1,136,010
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-6
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
MARKETABLE
COMMON STOCK EQUITY
-------------------- ADDITIONAL SECURITIES,
NUMBER PAID-IN NET OF RETAINED
OF SHARES VALUE CAPITAL TAX EFFECT EARNINGS TOTAL
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1993................... 12,354,646 $123,546 $32,285,576 $ -- $(1,704,591) $ 30,704,531
Net Income............ -- -- -- -- 14,423,549 14,423,549
Purchase and
retirement of common
stock................ (1,245,115) (12,451) (6,258,613) -- -- (6,271,064)
Stock options
exercised............ 104,079 1,041 221,271 -- -- 222,312
---------- -------- ----------- ---------- ----------- ------------
BALANCE, December 31,
1994................... 11,213,610 112,136 26,248,234 -- 12,718,958 39,079,328
Net income............ -- -- -- -- 11,125,917 11,125,917
Purchase and
retirement of common
stock................ (1,691,028) (16,910) (9,456,628) -- -- (9,473,538)
Stock options
exercised............ 57,260 572 143,403 -- -- 143,975
---------- -------- ----------- ---------- ----------- ------------
BALANCE, December 31,
1995................... 9,579,842 95,798 16,935,009 -- 23,844,875 40,875,682
Net Income............ -- -- -- -- 70,666,553 70,666,553
Unrealized gain on
marketable equity
securities, net of
tax effect........... -- -- -- 1,936,743 -- 1,936,743
Purchase and
retirement of common
stock................ (643,700) (6,437) (5,096,305) -- -- (5,102,742)
Stock options
exercised............ 102,666 1,027 401,429 -- -- 402,456
---------- -------- ----------- ---------- ----------- ------------
BALANCE, December 31,
1996................... 9,038,808 $ 90,388 $12,240,133 $1,936,743 $94,511,428 $108,778,692
========== ======== =========== ========== =========== ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-7
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. OPERATIONS
Price Communications Corporation ("Price" or the "Company") is a nationwide
communications company. Until consummation of their sale in March and February
1996, the Company owned an ABC affiliate, WHTM-TV (which was acquired by the
Company during 1994) (See Note 3), serving Harrisburg/Lancaster/Lebanon/York,
Pennsylvania; and three NBC affiliated television stations, KSNF-TV, serving
Joplin, Missouri/Pittsburg, Kansas; KJAC-TV, serving Beaumont/Port Arthur,
Texas; and KFDX-TV, serving Wichita Falls, Texas/Lawton, Oklahoma (see Note
4), respectively. Prior to 1995 the Company owned a number of television,
radio, newspaper and other media and related properties which were disposed of
pursuant to the Company's long-standing policy of buying and selling media
properties at times deemed advantageous by the Company's Board of Directors.
The Company intends to continue to investigate and pursue potential media and
other acquisitions such as television and radio properties and, possibly,
outdoor advertising and newspaper properties.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Price and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated in the consolidated financial statements.
Certain prior year amounts have been reclassified to conform with current
year presentation.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments, including Treasury
bills, purchased with maturities of three months or less at the time of
purchase to be cash equivalents.
Investment Securities
The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No.
115") effective January 1, 1994. At December 31, 1996, the Company's
Investment Securities were in marketable equity securities, and classified as
"Trading Securities" as well as "Available-for-Sale Securities" under the
provisions of SFAS No. 115. At December 31, 1995, the Company's Investment
Securities were in marketable equity securities and classified as Trading
Securities. Unrealized holding gains and losses for Available-for-Sale
Securities are excluded from earnings and reported, net of taxes, as a
separate component of shareholders' equity. Net unrealized holding gains and
losses for Trading Securities are included in net income.
Trading Securities are carried at fair value which approximates cost.
Available-for-Sale Securities are shown at fair value, which is based on
quoted market prices for these investments.
As of December 31, 1996 and 1995, the Company had unrealized gains of
$2,979,605 and $0, respectively, on available-for-sale securities, and
unrealized gains of $0 and $0, respectively, on trading securities. Realized
gains and losses are determined principally on a specific indentification
basis.
F-8
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization
are computed using the straight-line method over estimated useful lives, as
follows:
Buildings--15 to 25 years
Broadcasting equipment--10 to 12 years
Leasehold improvements--the life of the underlying lease
Furniture and fixtures--3 to 10 years
Transportation equipment--3 years
Broadcast Licenses and Other Intangibles
Excess of purchase price over the fair value of net assets acquired includes
FCC licenses, station call letters, and goodwill. These assets are integral
determinants of a communications property's economic value and have long and
productive lives. The Company amortized such assets over a 40-year life
commencing from the original date of acquisition.
Deferred expenses associated with debt instruments were amortized under the
straight-line method over the respective life of such debt instruments. Debt
discounts were amortized using the effective interest method.
Film Broadcast Rights
The cost of film broadcast rights is stated at the lower of cost or
estimated net realizable value. The total cost of the rights is recorded as an
asset and a liability when the program becomes available for broadcast. The
cost of film broadcast rights is charged to operations on the basis of the
estimated number of showings or, if unlimited showings are permitted, over the
terms of the broadcast license agreements. The current portion of film
broadcast rights represent those rights that will be amortized in the
succeeding year. Amortization of film broadcast rights included in operating
expenses amounted to approximately $333,800, $1,831,300, and $1,077,000 for
the years ended December 31, 1996, 1995, and 1994, respectively.
Revenue Recognition
Advertising revenue is recognized as income when the advertisements are
broadcast.
Revenue from barter transactions (advertising provided in exchange for goods
and services) is recognized as income when advertisements are broadcast, and
merchandise or services received are charged to expense when received or used.
Credit Risk
The Company provides an allowance for doubtful accounts based on reviews of
its customers' accounts. Included in operating expenses is bad debt expense of
approximately $179,000, $84,000, and $319,000 for the years ended December 31,
1996, 1995, and 1994, respectively.
Per Share Data
Net income per share is based on net income for the period divided by the
weighted average number of shares of common stock and common stock equivalents
outstanding, which were approximately 9.5, 10.4, and 12.4 million shares for
1996, 1995, and 1994, respectively. All presentations of shares outstanding
and amounts for 1995 and 1994 have been restated to reflect the five-for-four
common stock split in April, 1995 (Note 13).
F-9
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
Fair Market Value of Stock Options
During 1996, Statement of Financial Accounting Standards No. 123 "Accounting
for Stock-Based Compensation" ("SFAS 123") became effective. SFAS 123 requires
all companies to change what they disclose about their employee stock-based
compensation plans. This statement requires that companies either (1) record,
as compensation expense, the fair market value, as defined, of stock options
issued to employees, or (2) if the company elects to not record the fair
market value of stock options granted as compensation expense, to disclose the
pro forma impact on net income and earnings per share as if such compensation
expense was recorded. The Company has elected to adopt the disclosure
requirements.
The impact of adopting these disclosure requirements was immaterial to the
Company in 1995 and 1996.
Income Taxes
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"). Under the asset and liability method of SFAS 109,
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. 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.
3. ACQUISITION OF WHTM-TV
On September 16, 1994, the Company acquired all of the outstanding shares of
the corporation which owns all of the assets of WHTM-TV, the ABC affiliate
serving the Harrisburg-York-Lancaster-Lebanon, Pennsylvania television market
for approximately $47 million plus a working capital adjustment of
approximately $4 million. The acquisition was accounted for under the purchase
method, and accordingly, the operating results of WHTM-TV have been included
in the consolidated operating results since the date of acquisition. Funds for
the acquisition were provided by cash on hand and a credit facility from the
Bank of Montreal ("BMO") of $45 million (Note 9), which was reduced to $22.5
million upon the sale of the Company's radio properties in West Palm Beach
during October of 1994 (Note 4). The acquisition resulted in intangible
assets, primarily broadcast licenses of approximately $44.2 million and
goodwill of approximately $18.6 million, both of which were being amortized
over a forty year period.
4. DISPOSITIONS
In February 1994, the Company sold its outdoor advertising business for a
total of $875,000 in cash and notes receivable (Note 5). This disposition
resulted in a pretax loss of $350,000.
In April 1994, the Company sold substantially all of the assets of its radio
properties, WWKB-AM and WKSE-FM in Buffalo, New York, for $5 million in cash.
The Company realized a pretax gain of approximately $3.2 million on this
transaction.
In May 1994, the Company sold all of the stock of Eimar Realty Corporation,
its then wholly owned subsidiary, which held a building in Nashville,
Tennessee, to TLM Corporation, a former subsidiary of the Company. The
purchase price was $815,000 including a note from the purchaser of $540,000
(Note 5). The Company's pretax gain on the transaction was deminimis.
In October 1994, the Company sold substantially all of the assets, together
with certain liabilities of radio stations WBZT-AM and WIRK-FM, West Palm
Beach, Florida, for approximately $23 million in cash. The
F-10
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
Company realized a pretax gain of approximately $13.5 million on this
transaction. The net proceeds were used to retire $22.5 million under the BMO
credit facility (Note 9).
In October 1994, the Company sold its building in Red Bank, New Jersey for
$1.7 million in cash. The Company realized a deminimis gain on the sale.
In November 1994, the Company sold substantially all of the assets of radio
stations WOWO-AM and WOWO-FM in Fort Wayne and Huntington, Indiana,
respectively, for $2.3 million in cash. The Company recognized a pretax gain
on the sale of approximately $.8 million.
On February 2, 1996, the Company sold substantially all of the assets,
except cash and accounts receivable, together with certain liabilities, of its
three NBC affiliates, for approximately $40.7 million in cash. Of the sale
proceeds, approximately $28.7 million was used to repay the principal and
interest due under the BMO term loan agreement. The Company recognized a
pretax gain of approximately $29.4 million.
On March 1, 1996, the Company sold substantially all of the assets except
cash and accounts receivable, together with certain liabilities of WHTM-TV,
its ABC affiliate serving the Harrisburg-Lancaster-Lebanon-York, Pennsylvania,
television market, for $115 million in cash to Allbritton Communications
Company. The Company recognized a pretax gain of approximately $65.6 million.
The gains and losses on the dispositions outlined above have been included
in other (income) expense, net on the Company's statement of operations.
5. NOTES RECEIVABLE
Investments in notes receivable include the following:
During 1996, the Company loaned $1,000,000 to the Hamilton Group LLC
("Hamilton") in the form of a Promissory Note bearing interest at the rate of
6% and payable on December 31, 1999. The maturity date is extendible at the
Maker's option until December 31, 2001. A Director of the Company is a
participant in Hamilton.
In 1995 the Company received a $655,000 payment on a note receivable
originating from the sale of its outdoor advertising business in 1994. During
1994, the Company set up a reserve of $337,500 against this note receivable.
Since this note receivable was collected in full, the previously established
reserve was reversed and treated as income and included in other (income)
expense, net on the Company's consolidated statement of operations.
During 1994, in connection with the sale of Eimar Realty Corporation, the
Company received a note from the buyer, TLM Corporation (a former subsidiary
of the Company) (Note 4), in the amount of $540,000. The note bears interest
at the rate of 5% per annum, payable quarterly, with principal payable on May
20, 1998.
In connection with the sale in 1987 of seven radio stations to Fairmont
Communications Corporation ("Fairmont") for an aggregate sale price of $120
million, the Company loaned $50 million to Fairmont (the "Fairmont Notes") and
acquired a 27% equity interest in Fairmont. The Fairmont Notes were issued in
three series of 12 1/2% increasing rate subordinated notes due in 1992,
extendible at Fairmont's option to 1994. Interest on the notes was payable
quarterly in cash or additional notes at Fairmont's election.
F-11
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
During 1992, Fairmont filed for voluntary relief under Chapter 11 of the
U.S. Bankruptcy Code. At that time the Company ceased to record additional
notes related to interest paid in kind since it was not entitled to interest
after that date under the Bankruptcy Code.
During 1993, the United States Bankruptcy Court for the Southern District of
New York confirmed the Chapter 11 Plan of Reorganization (the "Fairmont Plan")
for Fairmont and its subsidiaries. Essentially, the Fairmont Plan provided for
the orderly liquidation of the assets of Fairmont and its subsidiaries, and
the distribution of the proceeds derived therefrom according to the relative
priorities of the parties asserting interests therein. In 1996 and 1995, the
Company received net cash payments totaling approximately $62.5 thousand and
$7.9 million from the proceeds of the liquidation of Fairmont, respectively.
This amount has been treated as income and included in other (income) expense,
net on the Company's consolidated statement of operations.
6. INVESTMENT IN PARTIALLY OWNED COMPANIES
On December 21, 1995, the Company acquired warrants for $8,350,000 to
purchase 1,819,610 shares of PriCellular Corporation's ("PriCellular") Class B
Common Stock. The exercise price at December 31, 1996 was approximately $4.77
per share of Class B Common Stock, and escalates over the next three years to
$6.29. During 1996, the Company purchased 1,726,250 shares of PriCellular
Class A Common Stock for approximately $13.1 million.
The President of PriCellular is the President of the Company.
7. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1996 1995
<S> <C> <C>
Land.................................................. $ -- $ 685,000
Buildings............................................. -- 2,403,409
Broadcasting equipment................................ -- 10,783,560
Leasehold improvements................................ 257,236 119,836
Furniture and fixtures................................ -- 551,332
Transportation equipment.............................. -- 596,829
-------- -----------
257,236 15,139,966
Less--Accumulated depreciation and amortization....... (98,236) (3,831,158)
-------- -----------
Net property and equipment............................ $159,000 $11,308,808
======== ===========
</TABLE>
8. OTHER LIABILITIES
Other liabilities consist of:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1996 1995
<S> <C> <C>
Liability for broadcast rights........................ $ -- $2,722,343
Income and franchise taxes payable.................... 3,310,774 1,461,995
Other................................................. -- 1,246,760
---------- ----------
3,310,774 5,431,098
Less--Amounts due currently........................... 3,310,774 4,601,409
---------- ----------
$ -- $ 829,689
========== ==========
</TABLE>
F-12
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
9. LONG-TERM DEBT
Long-term debt consists of the following notes payable by wholly-owned
subsidiaries of the Company at December 31, 1995:
<TABLE>
<CAPTION>
1995
<S> <C>
Atlantic Broadcasting Corporation, Federal Broadcasting
Corporation, Southeast Texas Broadcasting Corporation and
Tri-State Broadcasting Corporation:
Note payable to BMO under term loan agreement............... $28,000,000
-----------
Total debt................................................ 28,000,000
Less--Amount due currently.................................... 28,000,000
-----------
Total long-term debt...................................... $ --
===========
</TABLE>
On December 12, 1995, the Company entered into an amended line of credit
agreement ("Credit Agreement") with The Bank of Montreal ("BMO"). The Credit
Agreement created a line of credit for $28 million. Borrowings under the
Credit Agreement were subject to base interest at the BMO base rate, as
defined, plus a maximum of .75% and were secured by the assets of the
subsidiaries. Additionally, there was a commitment fee of .5% on the unused
portion of the Credit Agreement. On December 31, 1995, the effective interest
rate was 8.5%.
On February 2, 1996, the Company sold its three NBC affiliates and used a
portion of the proceeds to pay $28 million plus interest to BMO to terminate
the Credit Agreement.
10. INCOME TAXES
Provision (benefit) for income taxes is approximately:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1996 1995 1994
<S> <C> <C> <C>
Current:
Federal................................. $13,673,000 $ -- $ 300,000
State and local......................... 10,219,000 447,000 1,489,000
----------- --------- ----------
23,892,000 447,000 1,789,000
----------- --------- ----------
Deferred:
Federal................................. 692,000 (560,000) (97,000)
State and local......................... -- (134,000) (39,000)
----------- --------- ----------
692,000 (694,000) (136,000)
----------- --------- ----------
Tax provision (benefit)................... $24,584,000 $(247,000) $1,653,000
=========== ========= ==========
</TABLE>
F-13
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
For the years ended December 31, 1996 and 1995, the provision for income
taxes differs from the amount computed by applying the federal income tax rate
(35%) because of the effect of the following items:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Tax at federal income tax rate..... $ 33,338,000 $ 3,808,000 $ 5,627,000
State taxes, net of federal income
tax benefit....................... 7,487,000 291,000 942,000
Benefits of utilization of
operating loss carryforwards...... (33,729,000) (4,975,000) (5,120,000)
Amortization of goodwill and other
intangibles....................... 117,000 217,000 309,000
Basis difference and Goodwill on
sold Properties................... 17,088,000 -- --
Other.............................. 283,000 412,000 (105,000)
------------ ----------- -----------
$ 24,584,000 $ (247,000) $ 1,653,000
============ =========== ===========
</TABLE>
The Company had, as of December 31, 1996 and 1995, deferred tax assets of
$516,000 and $34,295,000 which were subject to a valuation allowance of
approximately $166,000 and $31,925,000, respectively. The allowance has been
recognized to offset the related tax asset due to the uncertainty of the
realization of benefit of such amount. These deferred tax assets and
liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1996 1995
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance
for doubtful accounts............................. $ 166,000 $ 100,000
Notes from and investment in partially owned compa-
nies.............................................. -- --
Minimum tax credit carryforward.................... -- 642,000
Capital loss carryforwards......................... -- 10,681,000
Net operating loss carryforwards................... -- 22,406,000
Investment tax credit carryforwards................ -- 100,000
Notes receivable, principally due to reserves...... -- 136,000
Reserve on long-term investments................... 350,000 --
Other.............................................. -- 230,000
---------- -----------
516,000 34,295,000
---------- -----------
Deferred tax liabilities:
Unrealized gain on available-for-sale securities
times the estimated tax rate of 35%............... 1,043,000 --
Property and equipment, principally due to
differences in depreciation and the effect of
Fresh Start Reporting............................. -- 2,370,000
Intangible asset FCC license....................... -- 17,971,000
---------- -----------
$1,043,000 $20,341,000
========== ===========
</TABLE>
F-14
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
11. OTHER INCOME, NET
Other income, net, consists of:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Gains on sales of properties,
net.............................. $(94,998,417) $ -- $(17,219,231)
Interest income................... (4,583,297) -- (201,896)
Loss on disposition of equipment.. -- -- 47,529
(Recovery) reserve for losses on
notes receivable, net (Note 5)... (62,500) (7,884,884) 737,500
Loss on write-down of long-term
investment....................... 1,000,000 -- --
Loss on purchase of common stock
(Note 13)........................ -- 1,185,662 --
Other, net........................ 271,855 (580,993) 391,530
------------ ----------- ------------
$(98,372,359) $(7,280,215) $(16,244,568)
============ =========== ============
</TABLE>
12. SEGMENT DATA
The Company's business operations were previously classified into two
segments: Television and Radio Broadcasting and Other. The Company sold its
radio stations and outdoor advertising business during 1994 and accordingly
operated in only one segment in 1996 and 1995. The segment data for 1994 is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
----------------------------------------------
BROADCASTING
----------------------
TELEVISION RADIO OTHER CONSOLIDATED
<S> <C> <C> <C> <C>
Net revenue................. $16,756,288 $7,233,424 $ 49,420 $24,039,132
Operating expenses.......... 9,651,752 5,250,629 59,018 14,961,399
Depreciation and amortiza-
tion....................... 2,464,785 577,430 269,834 3,312,049
----------- ---------- --------- -----------
Operating income (loss)*.... $ 4,639,751 $1,405,365 $(279,432) $ 5,765,684
=========== ========== ========= ===========
</TABLE>
- ---------------------
* Operating income (loss) is before corporate expenses, other income-net,
interest expense, amortization of debt discount and deferred debt expense,
share of loss of partially owned companies, reorganization items, income
taxes and extraordinary items.
13. SHAREHOLDERS' EQUITY
The Company currently has outstanding warrants on its common stock
exercisable for approximately 124,000 shares at an exercise price of $4.23 per
share during the five-year period ending September 30, 1998.
In October 1994, the Company's Board of Directors enacted a Stockholders'
Rights Plan (the "Plan") designed to protect the interests of the Company's
shareholders in the event of a potential takeover for a price which does not
reflect the Company's full value or which is conducted in a manner or on terms
not approved by the Board as being in the best interests of the Company and
its shareholders. The Board has declared a dividend distribution of One Common
Stock Purchase Right on each outstanding share of Common Stock of the Company.
The Rights provide, in substance, that should any person or group acquire 20%
or more of the Company's Common Stock, each Right, other than Rights held by
the acquiring person or group, would entitle its holder to purchase a
specified number of Price Communications Corporation common shares for 50% of
their then current market value. In addition, the Rights may be exercised at
the holders option, at a purchase price of $22.50 per
F-15
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
share at any time prior to the termination of the Plan. Unless a 20%
acquisition has occurred, the Rights may be redeemed by the Company at any
time prior to the termination date of the Plan.
On February 10, 1994, the Company's Board of Directors authorized the
repurchase by the Company of up to 2,500,000 shares of its Common Stock. The
Company is authorized to make such purchases from time to time in the market
or in privately negotiated transactions when it is legally permissible to do
so or believed to be in the best interests of its shareholders. During the
year ended December 31, 1994, the Company repurchased and retired
approximately 1,245,000 shares pursuant to that authorization.
On February 1, 1995, Price purchased 1,077,875 shares of its common stock
from S.A.C. Capital Management, L.P. for approximately $6.6 million. This
transaction was approved by the Company's Board of Directors. The Company paid
a premium over the daily quoted market price of approximately $1.2 million
that is recorded as other (income) expense on the Company's consolidated
statement of operations.
In March 1995, at the Company's Annual Meeting, the shareholders authorized
the creation of 20 million shares of undesignated Preferred Stock for
acquisitions and other purposes. No preferred stock had been issued as of
December 31, 1996.
On April 8, 1995, the Company's Board of Directors approved a five-for-four
stock split of the Company's Common Stock to shareholders of record as of the
close of business on March 27, 1995. The Company issued approximately 2
million shares of Common Stock. The stated par value of each share was not
changed from $.01. All presentations of shares outstanding and amounts per
share in years prior to 1995 have been restated to reflect the 1995 stock
split.
In March 1995, the Company's Board of Directors authorized the purchase of
up to 1.3 million shares of its Common Stock in the open market or in
privately negotiated transactions when it is legally permissible to do so or
believed to be in the best interest of Price's shareholders, in addition to
previous authorizations. Approximately 644,000 and 1.7 million shares were
purchased and retired in 1996 and 1995, respectively, under this new
authorization and previous authorizations.
14. STOCK OPTION PLAN
The Company has a long-term incentive plan, (the "1992 Long Term Incentive
Plan") which provides for granting incentive stock options, as defined under
current tax law, and other stock-based incentives to key employees and
officers. The maximum number of shares of the Company that are subject to
awards granted under the 1992 Long Term Incentive Plan is 1,250,000. The
exercise of such options, other than those granted on December 10, 1992, will
be exercisable at a price not less than the fair market value on the date of
the grant, for a period up to ten years.
The following table sets forth information with respect to the Company's
stock options for the years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDER OPTION
-----------------------------
OPTION
1996 1995 PRICE RANGE
<S> <C> <C> <C>
Exercised..................................... 102,666 57,260 $2.15
Canceled...................................... 39,094 -- 2.15-3.00
Granted....................................... 22,000 145,750 3.00-7.88
Outstanding................................... 704,750 824,510 2.15-7.88
Reserved for issuance......................... 240,759 262,759
</TABLE>
The above has been restated to reflect the April, 1995 five-for-four common
stock split.
F-16
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
15. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and litigation in the ordinary
course of business. In the opinion of legal counsel and management, the
ultimate disposition of these matters will not have a material adverse effect
on the Company's financial condition.
The Company has an employment agreement with Robert Price covering base
salary and incentive compensation. The agreement is for a term of three years
commencing October 1994, at a base salary of $300,000 and is extendible for
periods of three years at the Company's option. Cash performance bonuses and
stock option awards are determined solely at the discretion of the Board of
Directors or the Stock Option Committee, respectively.
The Company and its subsidiaries lease a variety of assets used in their
operations, including office space. Renewal options are available in the
majority of leases. The following is a schedule of the Company's minimum
rental commitment for operating leases of real and personal property for each
of the five years subsequent to 1996 and in the aggregate:
<TABLE>
<CAPTION>
OPERATING LEASES
<S> <C>
Year:
1997...................................................... $268,009
1998...................................................... 268,009
1999...................................................... 268,009
2000...................................................... 281,905
2001...................................................... 281,905
Thereafter................................................ 536,810
</TABLE>
Rental expense, net of sublease income, for operating leases was
approximately $158,000, $187,250 and $312,000 for the years ended December 31,
1996, 1995, and 1994, respectively.
16. SUBSEQUENT EVENTS
In January and February 1997, the Company purchased 50,000 shares of
PriCellular's Class A Common Stock for approximately $478,000.
In January and February 1997, the Company repurchased 1.9 million shares of
its Common Stock in the open market and in privately negotiated transactions
for approximately $18.1 million.
17. SUPPLEMENTAL CASH FLOW INFORMATION
The following is supplemental disclosure cash flow information for the years
ended December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Cash paid for:
Income taxes paid, net of refunds..... $23,275,000 $ 339,862 $ 240,102
Interest paid......................... 712,855 1,534,245 813,493
Non-cash operating activities:
Trade/barter revenue.................. -- 1,439,760 1,117,218
Trade/barter expense.................. -- 1,439,760 962,356
</TABLE>
F-17
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------- ------------
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................... $41,202,174 $ 83,356,748
Investment securities:
Trading securities............................... 4,789,761 4,045,628
Available-for-sale securities.................... 20,656,608 8,694,966
Securities fair value adjustment................. (985,349) --
Accounts receivable, net of allowance for doubtful
accounts of $0 in 1997 and $473,579 in 1996....... 79,367 488,882
Prepaid expenses and other current assets.......... 17,486 18,672
----------- ------------
Total current assets........................... 65,760,047 96,604,896
----------- ------------
PROPERTY AND EQUIPMENT, AT COST LESS ACCUMULATED
DEPRECIATION........................................ 146,472 159,000
LONG-TERM INVESTMENTS................................ 23,947,207 18,204,429
DEFERRED TAX ASSET................................... 580,331 350,000
NOTES RECEIVABLE..................................... 540,000 540,000
OTHER ASSETS......................................... 29,500 29,500
----------- ------------
Total assets................................... $91,003,557 $115,887,825
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses.............. $ 2,028,537 $ 2,755,497
Deferred tax liability............................. -- 1,042,862
Other current liabilities.......................... 3,265,793 3,310,774
----------- ------------
Total current liabilities...................... 5,294,330 7,109,133
SHAREHOLDERS' EQUITY:
Preferred Stock, par value $.01 per share;
authorized 20,000,000, no shares outstanding......
Common Stock, par value $.01 per share; authorized
40,000,000 shares, outstanding 6,861,814 shares in
1997 and 9,038,808 shares in 1996................. 68,618 90,388
Additional paid-in capital......................... -- 12,240,133
Unrealized gain (loss) on marketable equity
securities, net of tax effect..................... (427,757) 1,936,743
Retained earnings.................................. 86,068,366 94,511,428
----------- ------------
Total shareholders' equity..................... 85,709,227 108,778,692
----------- ------------
Total liabilities and shareholders' equity..... $91,003,557 $115,887,825
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements
F-18
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31,
-------------------------
1997 1996
----------- ------------
<S> <C> <C>
Revenue.............................................. $ -- $ 3,491,441
Agency and representatives' commissions.............. -- 529,577
----------- ------------
Net revenue.......................................... -- 2,961,864
----------- ------------
Operating expenses................................... -- 2,131,801
Corporate expenses................................... 908,888 727,109
Other income, net.................................... (1,111,251) (426,918)
Gain on sale of media properties..................... -- (95,451,878)
Interest expense..................................... 17,648 212,376
Depreciation and amortization........................ 12,528 430,409
----------- ------------
(172,187) (92,377,101)
----------- ------------
Income before income taxes........................... 172,187 95,338,965
Income tax expense................................... -- 25,021,067
----------- ------------
Net income........................................... $ 172,187 $ 70,317,898
=========== ============
Income per share..................................... $ .02 $ 7.08
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements
F-19
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Net cash provided by operating activities...... $ (4,055,642) $ 25,602,315
Cash flows provided by (used in) investing ac-
tivities:
Proceeds from sale of media properties....... -- 156,007,011
Gain on sale of media properties............. -- (71,662,104)
Purchase of available-for-sale securities and
long-term investments....................... (22,580,667) --
Sale of available-for-sale securities and
long-term investments....................... 5,358,887 --
Long-term investment in equity securities ... -- (2,000,000)
Capital expenditures......................... -- (100,619)
-------------- --------------
Net cash provided by (used in) investing
activities.................................... (17,221,780) 82,244,288
-------------- --------------
Cash flows used in financing activities:
Repayment of long-term debt.................. -- (28,000,000)
Purchase of Company common stock............. (20,877,152) (903,009)
Proceeds from stock options exercised........ -- 271,405
-------------- --------------
Net cash used in financing activities.......... (20,877,152) (28,631,604)
-------------- --------------
Net increase (decrease) in cash and cash
equivalents................................... (42,154,574) 79,214,999
Cash and cash equivalents at beginning of
quarter....................................... 83,356,748 1,206,557
-------------- --------------
Cash and cash equivalents at end of quarter.... $ 41,202,174 $ 80,421,556
============== ==============
Supplemental information:
Income taxes paid, net of refunds............ $ 53,289 $ 1,901,500
============== ==============
Interest paid................................ $ 17,648 $ 712,855
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements
F-20
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Price
Communications Corporation (the "Company" or "Price") and its subsidiaries.
All significant intercompany items and transactions have been eliminated.
The consolidated financial statements have been prepared by the Company
without audit, in accordance with rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the statements reflect all
adjustments necessary for a fair presentation of the results for the interim
periods. All such adjustments are of a normal, recurring nature. The results
of operations for any interim period are not necessarily indicative of the
results for a full year.
2. PER SHARE DATA
Primary income per common share is based on income for the period divided by
the weighted average number of shares of common stock and common stock
equivalents outstanding, which was 7,851,606 and 9,931,015 for the quarter
ended March 31, 1997 and 1996, respectively.
3. REPURCHASE OF COMMON STOCK
During the quarter ended March 31, 1997, the Company repurchased
approximately 2,177,000 shares of its common stock at an average price of
$9.59 per share.
4. SUBSEQUENT EVENTS
On April 21, 1997, Robert Price, President of the Company, exercised 625,000
employee stock options with an exercise price of $3 per share.
In May 1997, the Company's Board of Directors and Compensation Committee
authorized the issuance to Mr. Price of approximately 728,000 shares of the
Company's newly authorized Series A Preferred Stock ("Preferred Stock"), in
respect of which, in the event of (i) a merger of the Company, the sale or
exchange of all or substantially all of the Company's assets or the occurrence
of any other transaction or event as a result of which the holders of Common
Stock receive at least $22.00 per share or (ii) the acquisition of more than
50% of the voting power of the securities of the Company then outstanding by
any person, entity or group, provided the market value of the Common Stock of
the Company at such time is at least $22.00 per share (the amount per share
received by holders of Common Stock or the market price per share of Common
Stock described above being referred to as the "Transaction Price"), Mr. Price
would receive a payment per each share of the Preferred Stock equal to the sum
of 25% of the excess of the Transaction Price per share (up to $32.00) over
$9.125, 50% of the excess of the Transaction Price per share (up to $42.00)
over $32.00, 100% of the excess of the Transaction Price per share (up to
$52.00) over $42.00, and 125% of the excess of the Transaction Price per share
over $52.00. Each share of Preferred Stock is entitled to one vote per share,
and to receive dividends and liquidation distributions (other than in a
transaction resulting in a payment as described above) at the rate of 1% of
the dividends and liquidation distributions payable with respect to a share of
Common Stock.
The shares of Preferred Stock will be repurchased by the Company in the
event of Mr. Price's death or termination of employment prior to a transaction
resulting in a payment as aforesaid, as follows:
(i) If his employment with the company terminates because of death or
disability or termination by the Company not for cause, or his retirement
subsequent to the Company's Common Stock trading for an
F-21
<PAGE>
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. SUBSEQUENT EVENTS (CONTINUED)
average of at least $22.00 per share over a period of 10 consecutive
trading days, the Company will repurchase the Preferred Stock at its then
fair market value, as determined by appraisal.
(ii) If his employment terminates for any reason except as aforesaid, the
Company will repurchase the Preferred Stock at the lower of the price paid
by him for such stock or its then fair market value, as determined by
appraisal.
The foregoing provisions with respect to the Preferred Stock are subject to
appropriate adjustment in the event of a stock split, stock dividend or
similar event affecting the Company's Common Stock.
In May 1997, the Company's Board of Directors and Compensation Committee
authorized the issuance to Mr. Price of approximately 364,000 shares of the
Company's newly authorized Series B Preferred Stock, in respect of which, in
the event of (i) a merger of the Company, the sale or exchange of all or
substantially all of the Company's assets of the occurrence of any other
transaction or event as a result of which the holders of Common Stock receive
at least $15.00 per share or (ii) the acquisition of more than 50% of the
voting power of the securities of the Company then outstanding by any person,
entity or group, provided that the market value of the Common Stock of the
Company at such time is at least $15.00 per share (the amount per share
received by holders of Common Stock or the market price per share of Common
Stock described above being referred to as "Series B Transaction Price"), Mr.
Price would receive a payment per each share of Series B Preferred Stock equal
to the Series B Transaction Price per share over $10.00. Each share of the
Series B Preferred Stock is entitled to one vote per share, and to receive
dividends and liquidation distributions (other than in a transaction resulting
in the payment as described above) at a rate of 1% of the dividends and
liquidation distributions payable with respect to a share of the common stock.
The shares of the Series B Preferred Stock will be repurchased by the
Company upon Mr. Price's request, provided that the trading price of the
Company's Common Stock during any period of 10 consecutive trading days prior
to such request was at least $15.00 per share, for a purchase price equal to
its then fair market value, as determined by appraisal. In addition, the
shares of Series B Preferred Stock will be repurchased by the Company in the
event Mr. Price's death or termination of employment prior to the transaction
resulting in the payment as set forth in the preceding paragraph, as follows:
(i) If his employment with the Company terminated because of death or
disability or termination by the Company not for cause, or his retirement
subsequent to the Company's Common Stock trading for an average of at least
$15.00 per share over a period of 10 consecutive trading days, the Company
will repurchase the series B Preferred Stock at its then fair market value,
as determined by appraisal.
(ii) If his employment terminates for any reason as aforesaid, the
Company will repurchase the Series B Preferred Stock at the lower of the
price paid by him for such stock or its then fair market value, as
determined by appraisal.
The foregoing provisions with respect to the Series B Preferred Stock are
subject to appropriate adjustment in the event of a stock split, stock
dividend or similar event effecting the Company's Common Stock.
In June and July, 1997, the Company issued 1,129 Units (the "Units") each
consisting of 1,000 shares of PIK Preferred Stock and Warrants to purchase
515.6 shares to NatWest, the holder of 2,291,953 Shares of Common Stock, in
exchange for such shares of Common Stock.
F-22
<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-23
<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-24
<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 outstand-
ing.................... 18,000,000 22,326,613 26,132,455
================== ================== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
F-25
<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 op-
tions.................. 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 op-
tions.................. 6,666 -- -- -- 95 -- -- -- 95
Employee and non-
employee director stock
purchase plans......... 17,243 -- -- -- 290 -- -- -- 290
Treasury shares pur-
chased................. -- -- -- -- -- -- 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-26
<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-27
<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-28
<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-29
<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-30
<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-31
<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-32
<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-33
<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-34
<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> <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-35
<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-36
<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-37
<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-38
<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-39
<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-40
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents.................. $ 1,698 $ 2,091
Trade Accounts Receivable, Net of Allowance
for Doubtful Accounts..................... 18,784 17,819
Receivable from Other Cellular Carriers.... 1,706 3,194
Deferred Income Taxes...................... 830 1,044
Prepaid Expenses and Deposits.............. 2,313 1,940
Inventory.................................. 5,106 4,043
-------------- --------------
Total Current Assets..................... $ 30,437 $ 30,131
Net Property, Plant and Equipment............ 132,438 148,121
Licenses, Net of Amortization................ 375,808 400,620
Other Intangible Assets and Other Assets, at
Cost Less Accumulated Amortization.......... 11,259 10,694
-------------- --------------
$ 549,942 $ 589,566
============== ==============
LIABILITIES AND EQUITY
Current Liabilities:
Notes Payable.............................. $ 1,366 $ 2,698
Current Installments of Long-Term Debt..... 5,296 --
Accounts Payable........................... 10,394 10,510
Accrued Expenses........................... 8,399 9,871
Other Liabilities.......................... 4,686 4,770
-------------- --------------
Total Current Liabilities................ $ 30,141 $ 27,849
Long-Term Debt, Excluding Current Install-
ments....................................... 337,000 376,000
Deferred Income Taxes........................ 11,500 12,938
Minority Interests........................... 6,371 6,672
-------------- --------------
Total Liabilities........................ $ 385,012 $ 423,459
-------------- --------------
Stockholders' Equity......................... 164,930 166,107
-------------- --------------
$ 549,942 $ 589,566
============== ==============
</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-41
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------
1996 1997
(DOLLAR AMOUNTS IN THOUSANDS
EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C>
Revenue:
Service..................................... $ 34,915 $ 42,220
Equipment Sales and Installation............ 2,035 2,463
-------------- --------------
Total Revenue............................. $ 36,950 $ 44,683
-------------- --------------
Operating Expenses:
Engineering, Technical and Other Direct..... 7,683 7,430
Cost of Equipment........................... 3,931 5,807
Selling, General and Administrative......... 10,924 13,360
Depreciation and Amortization............... 5,898 7,553
-------------- --------------
Total Operating Expenses.................. $ 28,436 $ 34,150
-------------- --------------
Operating Income.......................... $ 8,514 $ 10,533
-------------- --------------
Other Income (Expense):
Interest Expense, Net....................... (7,945) (7,872)
Other Income, Net........................... -- 71
-------------- --------------
Total Other Expense....................... $ (7,945) $ (7,801)
-------------- --------------
Income Before Minority Interest Share of
Income and Income Taxes...................... $ 569 $ 2,732
Minority Interest Share of Income............. (452) (331)
-------------- --------------
Income Before Income Taxes.................... $ 117 $ 2,401
Income Taxes.................................. (41) (1,224)
-------------- --------------
Net Income................................ $ 76 $ 1,177
============== ==============
Net Income Per Share of Common Stock.......... $ 0.00 $ 0.04
============== ==============
Average Shares Outstanding.................... 23,561,923 27,813,259
============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-42
<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
Net income.............. -- -- -- -- -- 1,177 -- -- 1,177
---------- ---- ---------- ---- -------- ------ ------- ------- --------
Balances at March 31,
1997................... 11,119,681 $111 17,293,578 $173 $166,975 $7,712 600,000 $(8,864) $166,107
========== ==== ========== ==== ======== ====== ======= ======= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-43
<PAGE>
PALMER WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
<S> <C> <C>
1996 1997
<CAPTION>
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income.................................. $ 76 $ 1,177
-------------- ---------------
Adjustments to reconcile net income to net
cash provided by operating
activities:
Depreciation and amortization............. 5,898 7,553
Minority interest share of income......... 452 331
Deferred income taxes..................... 41 1,224
Loss on disposal of property.............. -- 5
Interest deferred and added to long-term
debt...................................... 187 --
Payment of deferred interest.............. -- (1,514)
Decrease in trade accounts receivable..... 50 1,730
Decrease in inventory..................... 378 1,223
Increase in accounts payable and accrued
expenses.................................. 40 1,252
Change in other accounts.................. (343) (651)
-------------- ---------------
Total adjustments....................... $ 6,703 $ 11,153
-------------- ---------------
Net cash provided by operating
activities.............................. $ 6,779 $ 12,330
-------------- ---------------
Cash flows from investing activities:
Capital expenditures........................ (6,618) (16,987)
Proceeds from sales of property and
equipment................................... -- 12
Purchase of cellular systems................ -- (31,096)
Collection of purchase price adjustment..... 2,452 --
Purchases of minority interests............. (1,224) (368)
Increase in other intangible assets and
other assets................................ (2,247) (48)
-------------- ---------------
Net cash used in investing activities..... $ (7,637) $ (48,487)
-------------- ---------------
Cash flows from financing activities:
Increase in short-term notes payable........ -- 1,332
Repayment of long-term debt................. (25) (3,782)
Proceeds from long-term debt................ 2,000 39,000
-------------- ---------------
Net cash provided by financing
activities................................ $ 1,975 $ 36,550
-------------- ---------------
Net increase in cash and cash
equivalents............................... $ 1,117 $ 393
Cash and cash equivalents at the beginning of
period........................................ 3,436 1,698
-------------- ---------------
Cash and cash equivalents at the end of
period........................................ $ 4,553 $ 2,091
============== ===============
Supplemental disclosure of cash flow
information:
Income taxes paid (received), net........... $ 67 $ (648)
============== ===============
Interest paid............................... $ 7,033 $ 8,615
============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-44
<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) SUBSEQUENT EVENT
On May 23, 1997, the Company entered into an agreement to sell its
outstanding shares of common stock to Price Communications Corporation for a
purchase price of $17.50 per share, for an aggregate purchase price of
approximately $489,000. In addition, Price Communications Corporation has also
agreed to repay up to $389,000 of outstanding indebtedness of the Company.
F-45
<PAGE>
ANNEX I
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into this
23rd day of May, 1997, by and among PALMER WIRELESS, INC., a Delaware
corporation (the "Company"), PRICE COMMUNICATIONS CORPORATION, a New York
corporation ("Acquiror"), and PRICE COMMUNICATIONS CELLULAR MERGER CORP., a
Delaware corporation ("Merger Sub").
WHEREAS, the Boards of Directors of the Company, Acquiror and Merger Sub
have each determined that it is fair to, and in the best interests of their
respective stockholders that Merger Sub, a wholly-owned subsidiary of
Acquiror, merge with and into the Company, pursuant to and subject to the
terms and conditions of this Agreement and the Delaware General Corporation
Law ("Delaware Law"); and
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Acquiror to enter into this Agreement, Palmer Communications
Incorporated, a Delaware corporation ("PCI"), has entered into a voting
agreement with Acquiror (the "Voting Agreement") pursuant to which, among
other things, PCI has agreed to vote its shares of common stock of the Company
in favor of this Agreement, the Merger (as defined below) and the other
transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agrees as follows:
ARTICLE I
The Merger
Section 1.1. The Merger.
Upon the terms and subject to the conditions set forth in this Agreement
(including approval of the Federal Communications Commission (the "FCC")), and
in accordance with Delaware Law, at the Effective Time (as defined in Section
1.2) Merger Sub shall be merged with and into the Company (the "Merger"). As a
result of the Merger, the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation of the
Merger (sometimes referred to herein as the "Surviving Corporation") and a
wholly-owned subsidiary of Acquiror. The name of the Company shall continue as
the name of the Surviving Corporation.
Section 1.2. Effective Time.
At the Closing, the parties hereto shall cause the Merger to be consummated
by filing a certificate of merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware, in such form as required by, and
executed in accordance with the relevant provisions of, Delaware Law and in
such form as approved by the Company and Acquiror prior to such filing (the
date and time of the filing of the Certificate of Merger or the time specified
therein being the "Effective Time").
Section 1.3. Effect of the Merger.
At the Effective Time, the effect of the Merger shall be as provided in the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, except as otherwise
provided herein, all the rights, privileges, powers and franchises of Merger
Sub and the Company, shall vest in the Surviving Corporation, and all debts,
liabilities and duties of Merger Sub and the Company shall become the debts,
liabilities and duties of the Surviving Corporation.
1
<PAGE>
Section 1.4. Certificate of Incorporation; Bylaws.
At the Effective Time, subject to the terms and conditions of Section 7.8
hereof, (a) the certificate of incorporation of Merger Sub, as in effect
immediately prior to the Effective Time and as amended by the Certificate of
Merger, shall be the certificate of incorporation of the Surviving
Corporation, and (b) the bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the bylaws of the Surviving Corporation.
Section 1.5. Directors and Officers.
The directors of Merger Sub (or such other or additional individuals as
Acquiror may designate prior to Closing) shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the certificate
of incorporation and bylaws of the Surviving Corporation; and the officers of
the Company shall continue as the officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified.
Section 1.6. Closing.
Subject to the terms and conditions of this Agreement, the closing of the
Merger (the "Closing") will take place as promptly as practicable after
satisfaction of the latest to occur or, if permissible, waiver of the
conditions set forth in Article VIII hereof (the "Closing Date"), at the
offices of Hogan & Hartson L.L.P., Columbia Square, 555 13th Street, N.W.,
Washington, D.C. 20004, unless another date or place is agreed to in writing
by the parties hereto.
Section 1.7. Subsequent Actions.
If, at any time after the Effective Time, the Surviving Corporation shall
consider or be advised that any deeds, bills of sale, assignments, assurances
or any other actions or things are necessary or desirable to continue in,
vest, perfect or confirm of record or otherwise in the Surviving Corporation
its right, title or interest in, to or under any of the rights, properties,
privileges, franchises or assets of either of its constituent corporations
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation shall be directed and
authorized to execute and deliver, in the name and on behalf of either of such
constituent corporations, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each of such
corporations or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title
and interest in, to and under such rights, properties, privileges, franchises
or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
ARTICLE II
Conversion of Securities; Exchange of Certificates
Section 2.1. Conversion of Securities.
At the Effective Time, by virtue of the Merger and without any action on the
part of Acquiror, Merger Sub, the Company or the holders of any of the
following securities:
(a) Company Common Stock. Subject to the other provisions of this Section
2.1, each share of (i) Class A common stock, par value $.01 per share, of
the Company ("Class A Common Stock"), issued and outstanding immediately
prior to the Effective Time (excluding any shares described in Sections
2.1(b) and (c) and any Dissenting Shares (as hereinafter defined)), and
(ii) Class B common stock, par value $.01 per share, of the Company ("Class
B Common Stock"; together with the Class A Common Stock, the "Common
Stock"), shall be converted into the right to receive Seventeen Dollars and
Fifty Cents ($17.50) in cash, without interest (the "Per Share Amount").
All such shares of Common Stock shall cease to be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
certificate previously evidencing any such shares shall thereafter
represent only the right to receive the Merger
2
<PAGE>
Consideration as described below. The holders of certificates previously
evidencing such shares of Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares
of Common Stock, except as otherwise provided herein or by law. Each such
certificate previously evidencing such shares of Common Stock shall be
exchanged for the Per Share Amount multiplied by the number of shares
previously evidenced by the canceled certificate upon the surrender of such
certificate in accordance with the provisions of Section 2.2, without
interest;
(b) Acquiror-Owned Shares. All shares of capital stock of the Company
owned, directly or indirectly, by Acquiror, Merger Sub or any Acquiror
Subsidiary (as defined in Section 5.1) shall be canceled and extinguished
without any conversion thereof and no cash shall be delivered or
deliverable in exchange therefor;
(c) Treasury Stock. All shares of capital stock of the Company held in
the treasury of the Company immediately prior to the Effective Time shall
be canceled and extinguished without any conversion thereof and no cash
shall be delivered or deliverable in exchange therefor; and
(d) Merger Sub Stock. Each share of common stock, par value $.01 per
share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one (1) duly and
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
Section 2.2. Payment.
(a) Paying Agent. As of the Effective Time, Acquiror shall, on behalf of
Merger Sub, deposit with a bank theretofore designated by the Company and
Acquiror (the "Paying Agent"), for the benefit of the holders of shares of
Common Stock (excluding any shares described in Sections 2.1(b) and (c) and
any Dissenting Shares), for payment in accordance with this Article II,
through the Paying Agent, cash in an amount equal to the Per Share Amount
multiplied by the number of shares of Common Stock outstanding immediately
prior to the Effective Time (excluding any shares described in Sections 2.1(b)
and (c) and any Dissenting Shares) (such cash being hereinafter referred to as
the "Payment Fund"). Acquiror shall cause the Paying Agent, pursuant to
irrevocable instructions, to deliver the cash contemplated to be paid pursuant
to Section 2.1(a) out of the Payment Fund. The Payment Fund shall not be used
for any other purpose.
(b) Payment Procedures. Promptly after the Effective Time, Acquiror shall
cause the Paying Agent to mail to each record holder, as of the Effective
Time, of an outstanding certificate (each a "Certificate" and collectively,
the "Certificates") that immediately prior to the Effective Time evidenced
outstanding shares of Common Stock (excluding any shares described in Sections
2.1(b) and (c) and any Dissenting Shares), a form letter of transmittal and
instructions for use in effecting the surrender of the Certificates for
payment therefor. Upon surrender to the Paying Agent of a Certificate,
together with such letter of transmittal duly executed, and any other required
documents, the holder of such Certificate shall be entitled to receive in
exchange therefor the consideration set forth in Section 2.1(a) (the "Merger
Consideration"), and such Certificate shall forthwith be canceled. No interest
will be paid or accrued on the cash payable upon the surrender of the
Certificates. Until surrendered in accordance with the provisions of this
Section 2.2, each Certificate shall represent for all purposes only the right
to receive the consideration set forth in Section 2.1(a), without any interest
thereon.
(c) No Further Rights in Common Stock. All cash paid upon conversion of the
shares of Common Stock in accordance with the terms of this Article II, and
all cash paid pursuant to Section 2.5, shall be deemed to have been paid in
full satisfaction of all rights pertaining to such shares of Common Stock.
(d) Termination of Payment Fund. Any portion of the Payment Fund that
remains undistributed to the holders of Common Stock for one hundred eighty
(180) days after the Effective Time shall be delivered to Acquiror, upon
demand, and any holders of Common Stock that have not theretofore complied
with this Article II shall thereafter look only to the Surviving Corporation
and Acquiror for the Merger Consideration to which they are entitled.
3
<PAGE>
(e) No Liability. Neither Acquiror nor the Surviving Corporation shall be
liable to any holder of shares of Common Stock for any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(f) Lost, Stolen or Destroyed Certificates. In the event any Certificate
evidencing shares of Common Stock shall have been lost, stolen or destroyed,
upon the making of an affidavit setting forth that fact by the person claiming
such lost, stolen or destroyed Certificate(s) and granting a reasonable
indemnity against any claim that may be made against Acquiror or the Paying
Agent with respect to such Certificate(s), Acquiror shall cause the Paying
Agent to pay to such person the Merger Consideration with respect to such
lost, stolen or destroyed Certificate(s).
Section 2.3. Company Options; Stock Purchase Plan.
(a) Company Options. Immediately prior to the Effective Time, (i) each
outstanding stock option to purchase shares of Class A Common Stock (a "Plan
Option") granted under the Company's 1995 Stock Option Plan and 1995
Directors' Stock Option Plan, each as amended to the date of this Agreement
(collectively, the "Company Stock Option Plans"), and (ii) each phantom option
to purchase shares of Class A Common Stock described on Schedule 3.3 hereto (a
"Phantom Option"; together with the Plan Options, the "Options"), whether or
not any such Options are exercisable, shall be terminated by the Company, and
Acquiror shall, on behalf of Merger Sub, pay to the holder thereof at the
Effective Time, in consideration for such termination, an amount in cash equal
to the excess, if any, of the Per Share Amount over the per share exercise
price of such Option, multiplied by the number of shares of Class A Common
Stock into which the Option remains unexercised. Any such payment shall be
subject to all applicable federal, state and local tax withholding
requirements. The Company shall terminate the Company Stock Option Plans as of
the Effective Time, and take all such action as is necessary to terminate the
Options as of the Effective Time, so that on and after the Effective Time no
holder of an Option shall have any option to purchase shares of Class A Common
Stock or any other equity interest in the Company under the Company Stock
Option Plans or the Phantom Option agreements.
(b) Employee Stock Purchase Plan. Effective as of the Effective Time, the
Company's 1995 Employee Stock Purchase Plan (the "Employee Stock Purchase
Plan") shall be terminated and the then applicable Payroll Deduction Period
(as defined in the Employee Stock Purchase Plan) shall be deemed to have ended
on the last trading day of the Class A Common Stock immediately prior to the
Effective Time. At the Effective Time, Acquiror shall, on behalf of Merger
Sub, pay to each Company employee who is a participant in the Employee Stock
Purchase Plan as of the Effective Time, an amount in cash equal to the Per
Share Amount multiplied by the number of shares of Class A Common Stock which
the accumulated funds in such employee's account would have been entitled to
purchase under the terms of the Employee Stock Purchase Plan as of the end of
such Payroll Deduction Period. Such payments shall be deemed to satisfy all
obligations of the Company and the Surviving Corporation to the participants
in the Employee Stock Purchase Plan. Such payments shall be subject to all
applicable federal, state and local tax withholding requirements. All funds in
the accounts of the participants as of the Effective Time after such payments,
shall belong to and be disbursed in accordance with the instructions of
Acquiror. The Company shall terminate the Employee Stock Purchase Plan as of
the Effective Time so that on and after the Effective Time no former
participant in the Employee Stock Purchase Plan shall have any right to
purchase shares of Class A Common Stock or any other equity interest in the
Company under the Employee Stock Purchase Plan.
(c) Non-Employee Director Stock Purchase Plan. Effective as of the Effective
Time, the Company's 1995 Non-Employee Director Stock Purchase Plan (the
"Director Stock Purchase Plan"; together with the Employee Stock Purchase
Plan, the "Company Stock Purchase Plans"), shall be terminated and the then
applicable Accumulation Period (as defined in the Director Stock Purchase
Plan) shall be deemed to have ended on the last trading day of the Class A
Common Stock immediately prior to the Effective Time. At the Effective Time,
Acquiror shall, on behalf of Merger Sub, pay to each member of the Company's
Board of Directors who is a participant in the Director Stock Purchase Plan as
of the Effective Time, an amount in cash equal to the Per Share Amount
multiplied by the number of shares of Class A Common Stock which the
accumulated funds in
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such director's account would have been entitled to purchase under the terms
of the Director Stock Purchase Plan as of the end of such Accumulation Period.
Such payments shall be deemed to satisfy all obligations of the Company and
the Surviving Corporation to the participants in the Director Stock Purchase
Plan. Such payments shall be subject to all applicable federal, state and
local tax withholding requirements. All funds in the accounts of the
participants as of the Effective Time after such payments, shall belong to and
be disbursed in accordance with the instructions of Acquiror. The Company
shall terminate the Director Stock Purchase Plan as of the Effective Time so
that on and after the Effective Time no former participant in the Director
Stock Purchase Plan shall have any right to purchase shares of Class A Common
Stock or any other equity interest in the Company under the Director Stock
Purchase Plan.
Section 2.4. Stock Transfer Books.
At the Effective Time, the stock transfer books of the Company with respect
to all shares of capital stock of the Company shall be closed and no further
registration of transfers of such shares of capital stock shall thereafter be
made on the records of the Company. On or after the Effective Time, any
Certificates for shares of Common Stock (excluding any shares described in
Sections 2.1(b) and (c) and Dissenting Shares) presented to the Paying Agent,
the Surviving Corporation or Acquiror for any reason shall be converted into
the Merger Consideration.
Section 2.5. Dissenting Shares.
Notwithstanding any other provisions of this Agreement to the contrary,
shares of Class A Common Stock that are issued and outstanding immediately
prior to the Effective Time and that are held by stockholders who shall not
have voted in favor of the Merger or consented thereto in writing and who
shall have demanded properly in writing appraisal for such shares in
accordance with Section 262 of Delaware Law (collectively, the "Dissenting
Shares") shall not be converted into or represent the right to receive the
Merger Consideration. Such stockholders shall be entitled to receive payment
of the appraised value of such shares of Class A Common Stock held by them in
accordance with the provisions of such Section 262, except that all Dissenting
Shares held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
shares of Class A Common Stock under such Section 262 shall thereupon be
deemed to have been converted into and to have become exchangeable, as of the
Effective Time, for the right to receive, without any interest thereon, the
Merger Consideration, upon surrender, in the manner provided in Section 2.2,
of the certificate or certificates that formerly evidenced such shares of
Class A Common Stock.
ARTICLE III
Representations and Warranties of the Company
The Company hereby represents and warrants to Acquiror and Merger Sub as
follows:
Section 3.1. Organization and Qualification; Subsidiaries.
(a) The Company and each Subsidiary (as defined below) of the Company (each
a "Company Subsidiary" and collectively, the "Company Subsidiaries") is a
corporation or partnership duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization. The Company
and each Company Subsidiary is duly qualified to conduct its business, and is
in good standing, in each jurisdiction where the character of its properties
owned, operated or leased or the nature of its activities makes such
qualification necessary, except for such failure which would not have a
Company Material Adverse Effect (as defined below). The Company and each
Company Subsidiary has the requisite power and authority and any necessary
governmental authority, franchise, license or permit to own, operate, lease
and otherwise to hold and operate its assets and properties and to carry on
the businesses as now being conducted, except for such failures which would
not in the aggregate have a Company Material Adverse Effect. The Company has
no Subsidiaries (as defined below) or any equity or similar interest in any
entity other than those listed in Schedule 3.1. As used herein, the term
"Company Material Adverse Effect" means any material adverse effect on the
business, assets, financial condition or results of operations of the Company
and the Company Subsidiaries taken as a whole.
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(b) For purposes of this Agreement, a "Subsidiary" of any person means any
corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other Subsidiary) (i)
owns, directly or indirectly, fifty percent (50%) or more of the stock,
partnership interests or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation, partnership, joint venture or other legal
entity; or (ii) possesses, directly or indirectly, control over the direction
of management or policies of such corporation, partnership, joint venture or
other legal entity (whether through ownership of voting securities, by
agreement or otherwise).
Section 3.2. Certificate of Incorporation and Bylaws.
The Company has heretofore made available to Acquiror a complete and correct
copy of the certificate or articles of incorporation and the bylaws of the
Company and each Company Subsidiary that is a corporation, and a correct copy
of the partnership agreement for each Company Subsidiary that is a
partnership, each as amended to date. Each such certificate or articles of
incorporation, bylaws and partnership agreement is in full force and effect.
Neither the Company nor any Company Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws,
partnership agreement or other organizational document.
Section 3.3. Capitalization.
The authorized capital stock of the Company consists, as of the date of this
Agreement, of: (a) seventy-three million (73,000,000) shares of Class A Common
Stock, of which ten million five hundred nineteen thousand six hundred and
eighty-one (10,519,681) shares are issued and outstanding; (b) eighteen
million (18,000,000) shares of Class B Common Stock, of which seventeen
million two hundred ninety-three thousand five hundred and seventy-eight
(17,293,578) shares are issued and outstanding; and (c) ten million
(10,000,000) shares of preferred stock, par value $.01 per share, of which no
shares are issued and outstanding. One million nine hundred thousand
(1,900,000) shares of Class A Common Stock have been reserved for issuance
upon the exercise of Plan Options granted under the Company Stock Option
Plans, of which seven hundred forty-five thousand eight hundred and thirty-
four (745,834) shares are issuable upon the exercise of Plan Options
outstanding under the Company Stock Option Plans as of the date hereof. The
Phantom Options assume the issuance of twenty thousand (20,000) shares of
Class A Common Stock upon exercise thereof. One hundred sixty thousand
(160,000) shares of Class A Common Stock are reserved for issuance under the
Company's 1995 Employee Stock Purchase Plan and twenty-five thousand (25,000)
shares of Class A Common Stock are reserved for issuance under the Company's
1995 Non-Employee Director Stock Purchase Plan. Seventeen million two hundred
ninety-three thousand five hundred and seventy-eight (17,293,578) shares of
Class A Common Stock are reserved for purposes of effecting conversions of
Class B Common Stock into Class A Common Stock. Since December 31, 1996, no
shares of Class A Common Stock or Class B Common Stock have been issued,
except for shares of Class A Common Stock issued upon the exercise of options
granted under the Company's Stock Option Plans and shares of Class A Common
Stock issued pursuant to the Company's Stock Purchase Plan. Except as set
forth in Schedule 3.3, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of the Company or any Company Subsidiary or
obligating the Company or any Company Subsidiary to issue or sell any shares
of capital stock of, or other equity interests in the Company or any Company
Subsidiary. Except as set forth in Schedule 3.3, there are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of its capital stock or make any material investment (in
the form of a loan, capital contribution or otherwise) in any other person.
All of the issued and outstanding shares of Class A Common Stock and Class B
Common Stock have been duly authorized and validly issued and are fully paid
and nonassessable and not subject to preemptive rights. Except as set forth in
Schedule 3.3, with respect to each Company Subsidiary that is a corporation,
all of the outstanding shares of capital stock of such Company Subsidiary have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as set forth in Schedule 3.3, with respect to each Company Subsidiary
that is a partnership, all of the partnership interests owned by the Company,
and with respect to each Company Subsidiary that is a corporation, all of the
outstanding shares of capital stock owned by the Company, are owned by the
Company free and clear of any liens, security interests, pledges, agreements,
options, rights, claims, charges or encumbrances (the "Encumbrances"). As of
the date hereof, the only
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outstanding indebtedness for borrowed money of the Company and the Company
Subsidiaries is as set forth in Schedule 3.3 and all such indebtedness is
prepayable in full without premium or penalty in accordance with its terms.
Section 3.4. Authority.
The Company has the necessary corporate power and authority to enter into
this Agreement and subject to obtaining any necessary stockholder approval of
the Merger, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby, other than the approval of this Agreement by the
stockholders of the Company in accordance with Delaware Law. This Agreement
has been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Acquiror and Merger Sub, constitutes
a legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights generally and
by the application of general principles of equity.
Section 3.5. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company do not, and
the performance by the Company of its obligations under this Agreement will
not, subject to compliance with the requirements set forth in Section 3.5(b)
below, (i) conflict with or violate the certificate or articles of
incorporation, bylaws, partnership agreement or other organizational document
of the Company or any Company Subsidiary, (ii) conflict with or violate any
law, statute, ordinance, rule, regulation, order, judgment or decree
applicable to the Company or any Company Subsidiary or by which any of their
respective properties is bound or affected, (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of an
Encumbrance on any of the properties or assets of the Company or any Company
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any Company Subsidiary is a party or by which the
Company, any Company Subsidiary or any of their respective properties or
assets is bound or affected, or (iv) result in any material breach of or
constitute a material default (or an event which with notice or lapse of time
or both would become a material default) or give rise to any material rights
to other parties under any Material Contract described in Section 3.12(a)(i),
except, in the case of clauses (ii) and (iii) above for any such conflicts,
violations, breaches, defaults or other alterations or occurrences that in the
aggregate (A) would not prevent or delay consummation of the Merger in any
material respect, or otherwise prevent the Company from performing its
obligations under this Agreement in any material respect, and (B) would not
have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign (each a
"Governmental Entity"), except (i) for (A) applicable requirements, if any, of
the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), state
takeover laws, the exchange on which the Company's securities are traded, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Communications Act of 1934, as amended, together with the rules,
regulations and published decisions of the FCC (collectively, the
"Communications Act"), (B) applicable requirements, if any, of the consents,
approvals, authorizations or permits described in Schedule 3.5, and (C) filing
and recordation of appropriate merger documents as required by Delaware Law
and (ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not in the aggregate
prevent or delay consummation of the Merger in any material respect, or
otherwise prevent the Company from performing its obligations under this
Agreement in any material respect, and would not in the aggregate have a
Company Material Adverse Effect.
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Section 3.6. SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports, statements and other documents
required to be filed with the Securities and Exchange Commission (the "SEC")
since March 21, 1995, and has heretofore made available to Acquiror, in the
form filed with the SEC since such date, together with any amendments thereto,
its (i) Annual Reports on Form 10-K, (ii) all Quarterly Reports on Form 10-Q,
(iii) all proxy statements relating to meetings of stockholders (whether
annual or special), (iv) all reports on Form 8-K, and (v) all other reports or
registration statements filed by the Company (collectively, the "Company SEC
Reports"). As of their respective filing dates the Company SEC Reports (i)
complied as to form in all material respects with the requirements of the
Exchange Act and the Securities Act of 1933, as amended (the "Securities Act")
and (ii) did not at the time they were filed contain any 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 the light of the circumstances
under which they were made, not misleading.
(b) The financial statements, including all related notes and schedules,
contained in the Company SEC Reports (or incorporated by reference therein)
fairly present the consolidated financial position of the Company and the
Company Subsidiaries as at the respective dates thereof and the consolidated
results of operations and cash flows of the Company and the Company
Subsidiaries for the periods indicated in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be noted therein) and subject in the case of interim
financial statements to normal year-end adjustments.
Section 3.7. Absence of Certain Changes or Events.
Except as disclosed in the Company SEC Reports filed prior to the date of
this Agreement or as set forth in Schedule 3.7, since December 31, 1996, the
Company and the Company Subsidiaries have not incurred any material liability,
except in the ordinary course of the businesses consistent with their past
practices, and there has not been any change in the business, financial
condition or results of operations of the Company or any of the Company
Subsidiaries or the occurrence of any other event, which has had, or is
reasonably likely to have, a Company Material Adverse Effect, and the Company
and the Company Subsidiaries have conducted their respective businesses in the
ordinary course consistent with their past practices.
Section 3.8. Absence of Litigation.
Except as set forth in Schedule 3.8, as of the date hereof there are (a) no
claims, actions, suits, investigations, or proceedings pending or, to the
Company's knowledge, threatened against the Company or any of the Company
Subsidiaries before any court, administrative, governmental, arbitral,
mediation or regulatory authority or body, domestic or foreign, that (i) if
adversely determined would individually involve the payment of more than One
Hundred Thousand Dollars ($100,000) by the Company or any Company Subsidiary,
(ii) if adversely determined would individually or in the aggregate be
reasonably likely to have a Company Material Adverse Effect, (iii) challenge
or seek to prevent, enjoin, alter or materially delay the transactions
contemplated hereby, or (iv) seek material injunctive relief against the
Company or any Company Subsidiary, and (b) no material judgments, decrees,
injunctions or orders of any Governmental Entity or arbitrator outstanding
against the Company or any Company Subsidiary.
Section 3.9. Licenses and Permits; Compliance with Laws.
The Company and the Company Subsidiaries hold all permits, licenses and
approvals (none of which has been modified or rescinded and all of which are
in full force and effect) from all Governmental Entities (collectively, the
"Permits") necessary for the Company and the Company Subsidiaries to own,
lease and operate their respective properties and to carry on their respective
businesses as now being conducted, except for the Permits for which the
failure to obtain would not have a Company Material Adverse Effect. The
businesses of the Company and the Company Subsidiaries are not being conducted
in violation of any applicable law, statute, ordinance, regulation, judgment,
Permits, order, decree, concession, grant or other authorization of any
Governmental Entity, except for violations that would not be reasonably likely
to have a Company Material Adverse Effect.
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Section 3.10. Taxes.
Except as set forth in Schedule 3.10, the Company and the Company
Subsidiaries have prepared and filed on a timely basis with all appropriate
Governmental Entities all material returns in respect of taxes that they are
required to file on or prior to the Effective Time or by the date therefor
including extensions, and all such returns are correct and complete in all
material respects. Except as set forth in Schedule 3.10, the Company and the
Company Subsidiaries have paid in full all taxes due on or before the
Effective Time and, in the case of taxes accruing on or before the Effective
Time that are not due on or before the Effective Time, the Company has made
adequate provision in its books and records and financial statements for such
payment. Except as set forth in Schedule 3.10, the Company and the Company
Subsidiaries have withheld from each payment made to any of its present or
former employees, officers and directors all amounts required by law to be
withheld and has, where required, remitted such amounts within the applicable
periods to the appropriate Governmental Entities. In addition, except as set
forth in Schedule 3.10, (a) there are no assessments of the Company or any
Company Subsidiary with respect to taxes that have been issued and are
outstanding; (b) no Governmental Entity has examined or audited the Company or
any Company Subsidiary in respect of taxes; (c) neither the Company nor any
Company Subsidiary has executed or filed any agreement extending the period of
assessment or collection of any taxes; and (d) neither the Company nor any
Company Subsidiary has received written notification from any Governmental
Entity of its intention to commence any audit or investigation. Except as set
forth in Schedule 3.10, neither the Company nor any Company Subsidiary is a
party to, is bound by or has any obligation under any tax sharing or tax
indemnification agreement, provision or arrangement, whether formal or
informal, and no power of attorney, which is currently in effect, has been
granted with respect to any matter relating to taxes of the Company or any
Company Subsidiary. Except as set forth in Schedule 3.10, neither the Company
nor any Company Subsidiary is presently required or will be required to
include any adjustment in taxable income under Section 481 of the Internal
Revenue Code of 1986, as amended (the "Code"), (or any similar provision of
the tax laws of any jurisdiction) as a result of any change in method of
accounting or otherwise. Except as set forth in Schedule 3.10, neither the
Company nor any Company Subsidiary has entered into any "intercompany
transaction" as to which any item of deferred gain or loss has not been
restored, and no "excess loss account" exists with respect to the stock of any
Company Subsidiary, as those terms are defined in the Treasury Regulations
issued under Section 1504 of the Code. For the purpose of this Agreement, the
term "tax" (including, with correlative meaning, the terms "taxes" and
"taxable") shall include except where the context otherwise requires, all
federal, state, local and foreign income, profits, franchise, gross receipts,
payroll, sales, employment, use, property, withholding, excise, occupancy and
other taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts.
Section 3.11. Intellectual Property.
Except as set forth in Schedule 3.11, the Company or one of the Company
Subsidiaries owns or possesses all rights to use of the service marks,
copyrights, franchises, trademarks, trade names, jingles, slogans, logotypes
and other similar intangible assets (the "Intellectual Property") maintained,
owned, used, held for use or otherwise held by the Company and the Company
Subsidiaries, and all of the rights, benefits and privileges associated
therewith material to the conduct of the business of the Company and the
Company Subsidiaries as currently conducted. To the knowledge of the Company,
neither the Company nor any Company Subsidiary is infringing upon any
Intellectual Property right or other legally protectable right of another. To
the knowledge of the Company, no person is materially infringing upon any
Intellectual Property right of the Company or any Company Subsidiary.
Section 3.12. Material Contracts.
(a) Schedule 3.12 sets forth a complete and correct list, as of the date of
this Agreement, of all agreements of the following type to which the Company
or a Company Subsidiary is a party or may be bound (collectively, the
"Material Contracts"): (i) agreements filed as an exhibit to the Company SEC
Reports and each agreement that would have been required to be filed as an
exhibit to the Company SEC Reports had such agreement been entered into as of
the date of filing any such SEC Report; (ii) employment, severance,
termination, consulting and retirement agreements; (iii) loan agreements,
indentures, letters of credit, mortgages, notes and other debt
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instruments evidencing indebtedness in excess of Five Hundred Thousand Dollars
($500,000); (iv) agreements that require aggregate future payments to or by
the Company or any Company Subsidiary of more than Five Hundred Thousand
Dollars ($500,000) (other than purchase orders and advertising sales contracts
entered into in the ordinary course of business); (v) agreements containing
any "change of control" provisions which, if triggered, would involve payments
by the Company or any Company Subsidiary in excess of Two Hundred Fifty
Thousand Dollars ($250,000) or other material rights or obligations; (vi)
material agreements with any key employee, director, officer, or person known
to the Company to be a direct or indirect stockholder of the Company; (vii)
agreements prohibiting the Company or any Company Subsidiary from engaging or
competing in any line of business or limiting such competition; (viii) except
for the partnership agreements of the Company Subsidiaries, any joint venture,
partnership and similar agreements involving a sharing of profits; (ix)
acquisition or divestiture agreements relating to the (A) sale of assets or
stock of the Company or any Company Subsidiary (other than sales of inventory
in the ordinary course of business) or (B) the purchase of assets or stock of
any other person (other than the purchase of inventory in the ordinary course
of business and acquisitions of additional interests in Company Subsidiaries
involving payments by the Company of less than Five Hundred Thousand Dollars
($500,000) in the aggregate); (x) brokerage, finder's or financial advisory
agreements; (xi) guarantees of indebtedness for borrowed money of any person
(other than a Company Subsidiary); (xii) interconnection agreements and switch
sharing agreements; and (xiii) agreements under which the Company or any
Company Subsidiary manages a cellular system of any third party.
(b) Except as set forth in Schedule 3.12, all the Material Contracts are
valid and in full force and effect on the date hereof except to the extent
they have previously expired in accordance with their terms, and neither the
Company nor any Company Subsidiary has (or has any knowledge that any other
party thereto has) violated any provision of, or committed or failed to
perform any act which with or without notice, lapse of time or both would
constitute a default under the provisions of, any Material Contract, except
for defaults which would not in the aggregate reasonably be expected to have a
Company Material Adverse Effect. True and complete copies of all Material
Contracts have been delivered to Acquiror or made available for inspection.
Section 3.13. Employee Benefit Plans.
(a) Schedule 3.13 sets forth a list of all of the pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus or other material incentive plans, all other
material written employee programs, arrangements or agreements and all other
material employee benefit plans or fringe benefit plans, including, without
limitation, all "employee benefit plans" as that term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), currently adopted, maintained by, sponsored in whole or in part by,
or contributed to by the Company or for which the Company could incur a
liability or any entity required to be aggregated with the Company (each, a
"Commonly Controlled Entity") pursuant to Section 414 of the Code for the
benefit of present and former employees or directors of the Company and of
each Company Subsidiary or their beneficiaries, or providing benefits to such
persons in respect of services provided to any such entity (collectively, the
"Benefit Plans"). Any of the Benefit Plans which is an "employee pension
benefit plan", as that term is defined in Section 3(2) of ERISA, is referred
to herein as an "ERISA Plan".
(b) Each of the Benefit Plans intended to be "qualified" within the meaning
of Section 401(a) or 501 of the Code has been determined by the Internal
Revenue Service to be so qualified and to the Company's knowledge, no
circumstances exist that could reasonably be expected by the Company to result
in the revocation of any such determination. Each of the Benefit Plans is in
compliance with their terms and the applicable terms of ERISA and the Code and
any other applicable laws, rules and regulations the breach or violation of
which could result in a material liability to the Company or any Commonly
Controlled Entity.
(c) No ERISA Plan which is a defined benefit pension plan has any "unfunded
current liability", as that term is defined in Section 302(d)(8)(A) of ERISA,
and the present fair market value of the assets of any such plan equals or
exceeds the plan's "benefit liabilities", as that term is defined in Section
4001(a)(16) of ERISA, when determined under actuarial factors that would apply
if the plan terminated in accordance with all applicable legal requirements.
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(d) Except as disclosed in Schedule 3.13, no Benefit Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA (a
"Multiemployer Plan"). Neither the Company nor any Commonly Controlled Entity
has completely or partially withdrawn from any Multiemployer Plan. No
termination liability to the Pension Benefit Guaranty Corporation or
withdrawal liability to any Multiemployer Plan that is material in the
aggregate has been or is reasonably expected to be incurred with respect to
any Multiemployer Plan by the Company or any Commonly Controlled Entity.
(e) The Company has made available to Acquiror complete copies, as of the
date hereof, of all of the Benefit Plans that have been reduced to writing,
together with all documents establishing or constituting any related trust,
annuity contract, insurance contract or other funding instrument. The Company
has made available to Acquiror complete copies of current plan summaries,
employee booklets, personnel manuals and other material documents or written
materials concerning the Benefit Plans that are in the possession of the
Company as of the date hereof.
(f) To the Company's knowledge, except as set forth in Schedule 3.13 and
except for claims for benefits in the ordinary course of business, no claim,
lawsuit, arbitration or other action has been threatened or instituted against
any Benefit Plan.
(g) Except as set forth in Schedule 3.13, Schedule 7.9 or as otherwise
contemplated by the terms of this Agreement, the consummation of the
transactions contemplated by this Agreement will not give rise to any
liability, including, without limitation, liability for severance pay or
termination pay, or accelerate the time of payment or vesting or increase the
amount of compensation or benefits due to any employee, director or
stockholder of the Company (whether current, former, or retired) or their
beneficiaries solely by reason of such transactions. No amounts payable under
any Benefit Plan will fail to be deductible for federal income tax purposes by
virtue of Section 280G or 162(m) of the Code.
(h) Except as set forth in Schedule 3.13 or Schedule 7.9, neither the
Company nor any Company Subsidiary maintains, contributes to, or in any way
provides for any benefits of any kind (other than under Section 4980B of the
Code, the Federal Social Security Act, or a plan qualified under Section
401(a) of the Code) to any current or future retiree or terminee.
(i) Neither the Company, any Company Subsidiary nor any Commonly Controlled
Entity has (or could incur) any liability under Title IV of ERISA.
Section 3.14. Properties; Assets.
Except as set forth in Schedule 3.14, the Company or one of the Company
Subsidiaries (a) has good and marketable title to all the properties and
assets reflected in the latest consolidated balance sheet of the Company dated
as of March 31, 1997 (the "Balance Sheet") as being owned by the Company or
one of the Company Subsidiaries (except properties sold or otherwise disposed
of since the date thereof in the ordinary course of business), or acquired
after the date thereof which are material to the Company's business on a
consolidated basis, free and clear of all Encumbrances except (i) statutory
liens securing payments not yet due, and (ii) such imperfections or
irregularities of title, claims, liens, charges, security interests or
encumbrances as do not materially affect the use of the properties or assets
subject thereto or affected thereby or otherwise materially impair business
operations at such properties, and (b) is the lessee of all leasehold estates
which are material to its business on a consolidated basis and is in
possession of the properties purported to be leased thereunder, and to the
knowledge of the Company, each such lease is valid without default thereunder
by the lessee or lessor. The assets and properties of the Company and the
Company Subsidiaries, taken as a whole, are in good operating condition and
repair (ordinary wear and tear excepted), and constitute all of the assets and
properties which are required for the businesses and operations of the Company
and the Company Subsidiaries as presently conducted.
Section 3.15. Labor Relations.
Neither the Company nor any Company Subsidiary is a party to any collective
bargaining agreement or other contract or agreement with any labor
organization or other representative of any of the employees of the
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Company or any Company Subsidiary. Except as set forth in Schedule 3.15, the
Company and each Company Subsidiary is in compliance in all material respects
with all laws relating to the employment or the workplace, including, without
limitation, provisions relating to wages, hours, collective bargaining, safety
and health, work authorization, equal employment opportunity, immigration and
the withholding of income taxes, unemployment compensation, worker's
compensation, employee privacy and right to know and social security
contributions.
Section 3.16. Environmental Matters.
(a) Except as specifically set forth in those environmental reports
previously made available to Acquiror in the Company's due diligence data room
(the "Environmental Reports"), and except for matters which would not in the
aggregate have a Company Material Adverse Effect, (i) the Company and each
Company Subsidiary is in compliance with all applicable Environmental Laws (as
defined below) in effect on the date hereof; (ii) all Permits and other
governmental authorizations currently held by the Company and each Company
Subsidiary pursuant to the Environmental Laws are in full force and effect,
the Company and each Company Subsidiary is in compliance with all of the terms
of such Permits and authorizations, and no other Permits or authorizations are
required by the Company or any Company Subsidiary for the conduct of their
respective businesses on the date hereof; and (iii) the management, handling,
storage, transportation, treatment, and disposal by the Company and each
Company Subsidiary of any Hazardous Materials (as defined below) has been in
compliance with all applicable Environmental Laws. Neither the Company nor any
Company Subsidiary has received any written communication that alleges that
the Company or any Company Subsidiary is not in compliance in all material
respects with all applicable Environmental Laws in effect on the date hereof.
As of the date hereof, the Environmental Reports do not set forth any facts or
circumstances which have had or are reasonably likely to have a Company
Material Adverse Effect.
(b) Except as specifically set forth in the Environmental Reports, there is
no material Environmental Claim (as defined below) pending or, to the
knowledge of the Company, threatened against or involving the Company or any
of the Company Subsidiaries or against any person or entity whose liability
for any material Environmental Claim the Company or any of the Company
Subsidiaries has or may have retained or assumed either contractually or by
operation of law.
(c) Except as specifically set forth in the Environmental Reports and except
for matters which would not in the aggregate have a Company Material Adverse
Effect, to the knowledge of the Company, there are no past or present actions
or activities by the Company or any Company Subsidiary including the storage,
treatment, release, emission, discharge, disposal or arrangement for disposal
of any Hazardous Materials, that could reasonably form the basis of any
Environmental Claim against the Company or any of the Company Subsidiaries or
against any person or entity whose liability for any Environmental Claim the
Company or any Company Subsidiary may have retained or assumed either
contractually or by operation of law.
(d) As used herein, these terms shall have the following meanings:
(i) "Environmental Claim" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives, claims,
liens, investigations, proceedings or notices of noncompliance or violation
(written or oral) by any person or governmental authority alleging
potential liability arising out of, based on or resulting from the
presence, or release or threatened release into the environment, of any
Hazardous Materials at any location owned or leased by the Company or any
Company Subsidiary or other circumstances forming the basis of any
violation or alleged violation of any Environmental Law.
(ii) "Environmental Laws" means all applicable foreign, federal, state
and local laws (including the common law), rules, requirements and
regulations relating to pollution, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or protection of human health as it relates to the
environment including, without limitation, laws and regulations relating to
releases of Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials or relating to management of asbestos in
buildings.
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(iii) "Hazardous Materials" means wastes, substances, or materials
(whether solids, liquids or gases) that are deemed hazardous, toxic,
pollutants, or contaminants, including without limitation, substances
defined as "hazardous substances", "toxic substances", "radioactive
materials", or other similar designations in, or otherwise subject to
regulation under, any Environmental Laws.
Section 3.17. Insurance.
Schedule 3.17 contains a list of all insurance policies of title, property,
fire, casualty, liability, life, workmen's compensation, libel and slander,
and other forms of insurance in force at the date thereof with respect to the
Company and the Company Subsidiaries. All such insurance policies: (a) insure
against such risks, and are in such amounts, as appropriate and reasonable
considering the Company and the Company Subsidiaries' properties, businesses
and operations; (b) are in full force and effect; and (c) are valid,
outstanding, and enforceable. Neither the Company nor any of the Company
Subsidiaries has received or given notice of cancellation with respect to any
of the material insurance policies.
Section 3.18. FCC Matters and Governmental Matters.
(a) The Company and the Company Subsidiaries hold all licenses, permits and
other authorizations issued by the FCC to the Company and the Company
Subsidiaries for the operation of their respective businesses (the "FCC
Licenses") as set forth in Schedule 3.18. The FCC Licenses constitute all of
the licenses, permits and authorizations from the FCC that are required for
the operations and businesses of the Company and the Company Subsidiaries as
they are now operated, except where the FCC has not issued a written microwave
authorization. Without limiting the foregoing, the Company and the Company
Subsidiaries have received all necessary authorizations from the Federal
Aviation Administration ("FAA") for all existing towers that are part of the
cellular systems operated by the Company and the Company Subsidiaries and for
any facilities the construction of which have been approved by the FCC or of
which applications or notifications have been filed for such approval.
(b) Schedule 3.18 sets forth each application and notification that the
Company and the Company Subsidiaries have pending before the FCC and sets
forth the expiration date for each of the cellular FCC Licenses. The Company
and the Company Subsidiaries have provided a copy to Acquiror of each of the
FCC Licenses and the applications and notifications listed in Schedule 3.18,
except where the FCC has not issued a written microwave authorization.
(c) The FCC Licenses are valid and in full force and effect, unimpaired by
any condition or restriction or any act or omission by the Company or any of
the Company Subsidiaries which would reasonably be likely to have a Company
Material Adverse Effect. Except as set forth in Schedule 3.18, there are no
modifications, amendments, applications, revocations, or other proceedings, or
complaints pending or, to the knowledge of the Company, threatened, with
respect to the FCC Licenses (other than proceedings that apply to the cellular
industry generally). All fees due and payable to the FCC have been paid and no
event has occurred which, with or without the giving of notice or lapse of
time or both, would constitute grounds for revocation or modification of the
FCC Licenses.
(d) All material reports required by the Communications Act or required to
be filed with the FCC by the Company and the Company Subsidiaries have been
timely filed and are accurate and complete in all material respects. All
material reports required to be filed by the Company and the Company
Subsidiaries with all other governmental or administrative authorities,
federal, state and local, have been timely filed and are accurate and complete
in all material respects.
(e) Except where a lack of compliance would not have a Company Material
Adverse Effect, the Company and the Company Subsidiaries are in compliance
with, and their cellular systems have been operated in compliance with, the
Communications Act and the rules, regulations, policies and orders of the
relevant state public utilities commissions and the FAA, including, without
limitation, the FCC's time and coverage requirements of 47 C.F.R. (S)(S)
22.142, 22.911, 22.912 and 22.946 (the "Statutes"). The Company and the
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Company Subsidiaries have in operation validly licensed and adequate cellular
base stations required to provide 32 dBu contour coverage, as calculated under
the formula prescribed by the FCC in 47 C.F.R. (S) 22.911, to all areas of
their cellular markets except for coverage gaps that are less than 50
contiguous square miles in size. Except as set forth in Schedule 3.10 and
3.18, the Company and the Company Subsidiaries have not received any written
notice to the effect, or otherwise been advised in writing, that they are not
in compliance with any Statutes and do not have any reason to anticipate that
any presently existing circumstances are reasonably likely to result in
violations of any Statutes.
(f) Without limiting the generality of the foregoing, except as set forth in
Schedule 3.8, no adverse finding has been made, no consent decree entered, no
adverse action has been approved or taken by the FCC or any court or other
administrative body, and no admission of liability has been made with respect
to the Company or any of the Company Subsidiaries or any of the Company's
stockholders or any management employee of the Company or the Company
Subsidiaries concerning any civil or criminal suit, action or proceeding
brought under the provision of any federal, state, territorial or local law
relating to any of the following: any felony; unlawful restraint of trade or
monopoly; unlawful combination; contract or agreement in restraint of trade;
the use of unfair methods of competition; fraud; unfair labor practice; or
discrimination.
(g) Neither the Company nor any of the Company Subsidiaries has engaged in
any course of conduct that could reasonably be expected to impair the ability
of Merger Sub or its subsidiaries to be the holder of the FCC Licenses or is
aware of any reason why the FCC Licenses might not be renewed in the ordinary
course, why any of the FCC Licenses might be revoked, or why any pending
applications or notifications might not be approved.
Section 3.19. Board Approval; Vote Required.
The Board of Directors of the Company has determined that the transactions
contemplated by this Agreement are in the best interests of the Company and
its stockholders and has resolved to recommend to such stockholders that they
vote in favor thereof. The affirmative vote of a majority of the votes
entitled to be cast by the holders of outstanding shares of the Class A Common
Stock and Class B Common Stock (voting as a single class) is the only vote of
any class or series of capital stock of the Company necessary to approve the
transactions contemplated under this Agreement and the Merger.
Section 3.20. Opinion of Financial Advisor.
The Company's Board of Directors has received the opinion of Goldman, Sachs
& Co. that the consideration to be received in the Merger by the stockholders
of the Company is fair to such stockholders from a financial point of view, a
written copy of which opinion will be provided to Acquiror when received by
the Company, and such opinion has not been withdrawn or modified in any
material respect.
Section 3.21. Brokers.
Except for Goldman, Sachs & Co., no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
ARTICLE IV
Representations and Warranties of Merger Sub
Acquiror and Merger Sub jointly and severally represent and warrant to the
Company as follows:
Section 4.1. Organization and Qualification.
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Merger Sub
was formed solely for the purpose of engaging in the transactions contemplated
by this Agreement. As of the date of this Agreement, except for obligations or
liabilities incurred
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in connection with its incorporation or organization and the transactions
contemplated by this Agreement, Merger Sub has not incurred, directly or
indirectly, any obligations or liabilities or engaged in any business
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any person.
Section 4.2. Certificate of Incorporation and Bylaws.
Merger Sub has heretofore made available to the Company a complete and
correct copy of the certificate of incorporation and the bylaws of Merger Sub,
each as amended to date. Such certificate of incorporation and bylaws are in
full force and effect. Merger Sub is not in violation of any of the provisions
of its certificate of incorporation or bylaws.
Section 4.3. Authority.
Merger Sub has the necessary corporate power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Merger Sub and the consummation by Merger Sub of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Merger Sub
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Merger Sub and, assuming the due authorization, execution and delivery by the
Company and Acquiror, constitutes a legal, valid and binding obligation of
Merger Sub, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and by the application of general
principles of equity.
Section 4.4. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Merger Sub do not, and
the performance by Merger Sub of its obligations under this Agreement will
not, subject to compliance with the requirements set forth in Section 4.4(b)
below, (i) conflict with or violate the certificate of incorporation or bylaws
of Merger Sub, (ii) conflict with or violate any law, statute, ordinance,
rule, regulation, order, judgment or decree applicable to Merger Sub or by
which any of its properties is bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of any Encumbrance on any of the properties or assets of Merger Sub
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Merger
Sub is a party or by which Merger Sub or any of its properties or assets is
bound or affected, except, in the case of clauses (ii) and (iii) above for any
such conflicts, violations, breaches, defaults or other alterations or
occurrences that would not prevent or delay consummation of the Merger in any
material respect, or otherwise prevent Merger Sub from performing its
obligations under this Agreement in any material respect.
(b) The execution and delivery of this Agreement by Merger Sub does not, and
the performance of this Agreement by Merger Sub will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for (A) applicable requirements, if any, of
the Exchange Act, state takeover laws, exchanges on which Acquiror's
securities are traded, the HSR Act and the Communications Act, (B) applicable
requirements, if any, of the consents, approvals, authorizations or permits
described in Schedule 4.4, and (C) filing and recordation of appropriate
merger documents as required by Delaware Law and (ii) where failure to obtain
such consents, approvals, authorizations or permits, or to make such filings
or notifications, would not prevent or delay consummation of the Merger in any
material respect.
Section 4.5. Vote Required.
The affirmative vote of Acquiror, the sole stockholder of Merger Sub, is the
only vote of the holders of any class or series of Merger Sub capital stock
necessary to approve any of the transactions contemplated hereby.
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ARTICLE V
Representations and Warranties of Acquiror
Acquiror represents and warrants to the Company as follows:
Section 5.1. Organization and Qualification; Subsidiaries.
Acquiror is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation. Acquiror is duly
qualified to conduct its business, and is in good standing, in each
jurisdiction where the character of its properties owned, operated or leased
or the nature of its activities makes such qualification necessary, except for
such failure which would not have an Acquiror Material Adverse Effect (as
defined below). Acquiror has the requisite power and authority and any
necessary governmental authority, franchise, license or permit to own,
operate, lease and otherwise to hold and operate its assets and properties and
to carry on the business as now being conducted, except for such failure which
would not have an Acquiror Material Adverse Effect. As used herein, the term
"Acquiror Material Adverse Effect" means any material adverse effect on the
business, assets, financial condition or results of operations of Acquiror and
its subsidiaries (collectively, the "Acquiror Subsidiaries") taken as a whole.
Section 5.2. Organizational Documents.
Acquiror has heretofore made available to the Company a complete and correct
copy of the certificate of incorporation and bylaws of Acquiror, each as
amended to date. Such certificate of incorporation and bylaws are in full
force and effect. Acquiror is not in violation of any of the provisions of its
certificate of incorporation or bylaws.
Section 5.3. Authority.
Acquiror has the necessary power and authority to enter into this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Acquiror
and the consummation by Acquiror of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action and no
other proceedings on the part of Acquiror are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Acquiror and, assuming the
due authorization, execution and delivery by the Company, constitutes a legal,
valid and binding obligation of Acquiror, enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights generally and by the application of
general principles of equity.
Section 5.4. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Acquiror do not, and the
performance by Acquiror of its obligations under this Agreement will not,
subject to compliance with the requirements set forth in Section 5.4(b) below,
(i) conflict with or violate the certificate of incorporation or bylaws of
Acquiror, (ii) conflict with or violate any law, statute, ordinance, rule,
regulation, order, judgment or decree applicable to Acquiror or by which any
of its properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of an
Encumbrance on any of the properties or assets of Acquiror pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Acquiror is a party or by
which Acquiror or any of its properties or assets is bound or affected,
except, in the case of clauses (ii) and (iii) above for any such conflicts,
violations, breaches, defaults or other alterations or occurrences that would
not prevent or delay consummation of the Merger in any material respect, or
otherwise prevent Acquiror from performing its obligations under this
Agreement in any material respect, and would not have an Acquiror Material
Adverse Effect.
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(b) The execution and delivery of this Agreement by Acquiror does not, and
the performance of this Agreement by Acquiror will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for (A) applicable requirements, if any, of
the Exchange Act, state takeover laws, exchanges on which Acquiror's
securities are traded, the HSR Act and the Communications Act, (B) applicable
requirements, if any, of the consents, approvals, authorizations or permits
described in Schedule 5.4, and (C) filing and recordation of appropriate
merger documents as required by Delaware Law and (ii) where failure to obtain
such consents, approvals, authorizations or permits, or to make such filings
or notifications, would not prevent or delay consummation of the Merger in any
material respect, or otherwise prevent Acquiror from performing its
obligations under this Agreement in any material respect, and would not have
an Acquiror Material Adverse Effect.
Section 5.5. Vote Required.
No vote of the stockholders of Acquiror is necessary to approve any of the
transactions contemplated hereby.
Section 5.6. Financing.
Acquiror will have available on the Effective Time sufficient funds to
consummate the Merger and to make all the payments necessary to consummate the
transactions contemplated hereby, including, without limitation, payments
under Article II hereof for the Common Stock, Options and Dissenting Shares,
and payments necessary to satisfy all amounts outstanding as of the Closing
Date under the Company's credit facilities described on Schedule 3.3 hereto.
Section 5.7. Qualification of Acquiror.
Acquiror is and pending the Effective Time will be legally, technically,
financially and otherwise qualified under the Communications Act and all
rules, regulations and policies of the FCC to acquire, own and operate the
assets and business of the Company and the Company Subsidiaries. There are no
facts or proceedings which would reasonably be expected to disqualify Acquiror
under the Communications Act or otherwise from acquiring or operating any of
the assets and business of the Company and the Company Subsidiaries or would
cause the FCC not to approve the FCC Application (as defined in Section
7.5(a)). Acquiror has no knowledge of any fact or circumstance relating to
Acquiror or any of its affiliates that would reasonably be expected to (a)
cause the filing of any objection to the FCC Application, or (b) lead to a
delay in the processing by the FCC of the FCC Application. No waiver of any
FCC rule or policy is necessary to be obtained for the approval of the FCC
Application, nor will processing pursuant to any exception or rule of general
applicability be requested or required in connection with the consummation of
the transactions herein.
Section 5.8. Absence of Litigation.
Except as set forth in Schedule 5.8, there are (a) no claims, actions,
suits, investigations, or proceedings pending or, to Acquiror's knowledge,
threatened against Acquiror or any of its properties or assets before any
court, administrative, governmental, arbitral, mediation or regulatory
authority or body, domestic or foreign, that challenge or seek to prevent,
enjoin, alter or materially delay the transactions contemplated hereby, and
(b) no judgments, decrees, injunctions or orders of any Governmental Entity or
arbitrator outstanding against Acquiror or any of its properties or assets
that would prevent or materially delay the transactions contemplated hereby.
Section 5.9. Brokers.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Acquiror.
Section 5.10. SEC Filings; Financial Statements.
(a) Acquiror has filed all forms, reports, statements and other documents
required to be filed with the SEC since December 31, 1996, and has heretofore
made available to the Company, in the form filed with the SEC
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since such date, together with any amendments thereto, its (i) Annual Reports
on Form 10-K, (ii) all Quarterly Reports on Form 10-Q, (iii) all proxy
statements relating to meetings of stockholders (whether annual or special),
(iv) all reports on Form 8-K, and (v) all other reports or registration
statements filed by Acquiror (collectively, the "Acquiror SEC Reports"). As of
their respective filing dates the Acquiror SEC Reports (i) complied as to form
in all material respects with the requirements of the Exchange Act and the
Securities Act and (ii) did not at the time they were filed contain any 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 the light of
the circumstances under which they were made, not misleading.
(b) The financial statements, including all related notes and schedules,
contained in the Acquiror SEC Reports (or incorporated by reference therein)
fairly present the consolidated financial position of Acquiror and Acquiror
Subsidiaries as at the respective dates thereof and the consolidated results
of operations and cash flows of Acquiror and Acquiror Subsidiaries for the
periods indicated in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as may
be noted therein) and subject in the case of interim financial statements to
normal year-end adjustments.
Section 5.11. Absence of Certain Changes or Events.
Except as disclosed in the Acquiror SEC Reports filed prior to the date of
this Agreement or as set forth in Schedule 5.11, since March 31, 1997,
Acquiror and Acquiror Subsidiaries have not incurred any material liability,
except in the ordinary course of their businesses consistent with their past
practices, and there has not been any change in the business, financial
condition or results of operations of Acquiror or any of Acquiror
Subsidiaries, which has had, or is reasonably likely to have, an Acquiror
Material Adverse Effect, and Acquiror and Acquiror Subsidiaries have conducted
their respective businesses in the ordinary course consistent with their past
practices. The representations and warranties contained in this Section 5.11
shall be deemed to speak only as of the date hereof.
ARTICLE VI
Covenants
Section 6.1. Affirmative Covenants of the Company.
The Company hereby covenants and agrees that, prior to the Effective Time,
unless otherwise expressly contemplated by this Agreement or consented to in
writing by Acquiror, the Company shall, and shall cause each Company
Subsidiary to, (a) operate its business in the usual and ordinary course
consistent with past practices; (b) use its reasonable efforts to preserve
substantially intact its business organization, maintain its rights and
franchises, retain the services of its respective principal officers and key
employees and maintain its relationship with its respective principal
customers and suppliers; (c) use its reasonable efforts to maintain and keep
its properties and assets in as good repair and condition as at present,
ordinary wear and tear excepted; and (d) use its reasonable efforts to keep in
full force and effect insurance comparable in amount and scope of coverage to
that currently maintained; provided, however, that in the event the Company or
any of the Company Subsidiaries deems it necessary to take certain actions
that would otherwise be prohibited by clauses (a)-(d) of this Section 6.1, the
Company shall consult with Acquiror and Acquiror shall consider in good faith
the Company's request to take such action and not unreasonably withhold or
delay its consent for such action.
Section 6.2. Negative Covenants of the Company.
Except as expressly contemplated by this Agreement and except as set forth
in Schedule 6.2, or otherwise consented to in writing by Acquiror, from the
date hereof until the Effective Time, the Company shall not, and shall cause
each Company Subsidiary not to, do any of the following:
(a) (i) increase the compensation payable to or to become payable to any
of its directors, executive officers or employees, except for increases in
salary, wages or bonuses payable or to become payable in the ordinary
course of business and consistent with past practice; (ii) grant any
severance or termination pay
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(other than pursuant to existing severance arrangements or policies as in
effect on the date of this Agreement) to, or enter into or modify any
employment or severance agreement with, any of its directors, officers or
employees; or (iii) adopt or amend any employee benefit plan or
arrangement, except as may be required by applicable law;
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of its capital stock;
(c) (i) redeem, repurchase or otherwise reacquire any share of its
capital stock or any securities or obligations convertible into or
exchangeable for any share of its capital stock, or any options, warrants
or conversion or other rights to acquire any shares of its capital stock or
any such securities or obligations (except in connection with the exercise
of outstanding Options referred to in Schedule 3.3 in accordance with their
terms); (ii) effect any reorganization or recapitalization; or (iii) split,
combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of, or
in substitution for, shares of its capital stock;
(d) (i) issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale (including the grant of any
Encumbrances) of, any shares of any class of its capital stock (including
shares held in treasury), any securities convertible into or exercisable or
exchangeable for any such shares (including any phantom options or stock
appreciation rights), or any rights, warrants or options to acquire, any
such shares (except for the issuance of shares upon the exercise of
outstanding Options and the issuance of shares under the Company Stock
Purchase Plans); or (ii) amend or otherwise modify the terms of any such
rights, warrants or options in a manner inconsistent with the provisions of
this Agreement or the effect of which shall be to make such terms more
favorable to the holders thereof;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division (other than a wholly-owned
Subsidiary) thereof, or otherwise acquire or agree to acquire any assets of
any other person (other than the purchase of assets in the ordinary course
of business and consistent with past practice), or make or commit to make
any capital expenditures other than capital expenditures in the ordinary
course of business consistent with past practice;
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, any of its material assets except for the grant of
purchase money security interests not to exceed Five Hundred Thousand
Dollars ($500,000) in the aggregate and dispositions in the ordinary course
of business and consistent with past practice;
(g) propose or adopt any amendments to its certificate of incorporation
or, as to its bylaws or partnership agreement, as the case may be, any
amendments that would have an adverse impact on the consummation of the
transactions contemplated by this Agreement or would be adverse to
Acquiror's interests;
(h) (i) change any of its methods of accounting in effect at January 1,
1997, or (ii) make or rescind any express or deemed election relating to
taxes, settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
taxes (except where the amount of such settlements or controversies,
individually or in the aggregate, does not exceed Five Hundred Thousand
Dollars ($500,000), or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year ending
December 31, 1996, except, in the case of clause (i) or clause (ii), as may
be required by law or generally accepted accounting principles;
(i) incur any obligation for borrowed money, whether or not evidenced by
a note, bond, debenture or similar instrument, other than (i) purchase
money indebtedness not to exceed Five Hundred Thousand Dollars ($500,000)
in the aggregate, (ii) indebtedness incurred in the ordinary course of
business under the existing loan agreements described on Schedule 3.3
hereto, and (iii) capitalized leases not to exceed One Million Dollars
($1,000,000) in the aggregate;
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(j) without the written consent of Acquiror (which consent shall not be
unreasonably withheld, delayed or conditioned), enter into or modify in any
material respect any agreement which, if in effect as of the date hereof,
would have been required to be disclosed on Schedule 3.12 as a Material
Contract; or
(k) agree in writing or otherwise to do any of the foregoing.
Section 6.3. Negative Covenants of Acquiror.
From the date hereof until the Effective Time, Acquiror shall not (a)
declare or pay any dividend on or make any other distribution of cash or
property in respect of, outstanding shares of its capital stock; or (b)
redeem, repurchase or otherwise reacquire any shares of its capital stock or
any securities or obligations convertible into or exchangeable for any shares
of its capital stock.
Section 6.4. Control of Operations.
Nothing contained in this Agreement shall give Acquiror or Merger Sub,
directly or indirectly, except as expressly provided in this Agreement, the
right to control or direct the Company's operations prior to the Effective
Time. Prior to the Effective Time, each of the Company and Acquiror shall
exercise, consistent with the terms and conditions of this Agreement, complete
control and supervision over its respective operations.
ARTICLE VII
Additional Agreements
Section 7.1. Access and Information.
From the date hereof to the Effective Time, the Company shall, and shall
cause the Company Subsidiaries to, afford to Acquiror and its officers,
employees, accountants, consultants, legal counsel, representatives of current
and prospective sources of financing for the Merger and other representatives
of Acquiror (collectively, the "Acquiror Representatives"), reasonable access
during normal business hours to the properties, executive personnel and all
information concerning the business, properties, contracts, records and
personnel of the Company and the Company Subsidiaries as Acquiror may
reasonably request. The Company further agrees to reasonably cooperate with
Acquiror in connection with Acquiror's obtaining financing for this
transaction (including making appropriate officers of the Company available on
a reasonable basis for road show presentations).
Section 7.2. Confidentiality.
Acquiror acknowledges and agrees that all information received from or on
behalf of the Company or any of the Company Subsidiaries in connection with
the Merger shall be deemed received pursuant to the confidentiality agreement,
dated as of May 21, 1997, between the Company and Acquiror (the
"Confidentiality Agreement") and Acquiror shall, and shall cause the Acquiror
Representatives to comply with the provisions of the Confidentiality Agreement
with respect to such information and the provisions of the Confidentiality
Agreement are hereby incorporated herein by reference with the same effect as
if fully set forth herein.
Section 7.3. Stockholder Approval.
The Company shall, promptly after the date of this Agreement, take all
action necessary in accordance with Delaware Law and its certificate of
incorporation and bylaws to convene a meeting of the Company's stockholders
(the "Stockholders' Meeting"), to approve and adopt this Agreement and the
Merger. The Company shall use its best efforts to solicit from stockholders of
the Company proxies in favor of the approval and adoption of this Agreement
and the Merger and to take all other actions reasonably necessary or in
Acquiror's reasonable judgment advisable to secure such vote as promptly as
practicable, unless otherwise required by applicable fiduciary duties of the
directors of the Company, as determined by such directors in good faith after
consultation with independent legal counsel.
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Section 7.4. Proxy Statement.
(a) As promptly as practicable after the execution and delivery of this
Agreement, the Company shall prepare and file with the SEC a proxy statement
in connection with the matters to be considered at the Stockholders' Meeting
(the "Proxy Statement"). The Company shall use its best efforts to cause the
Proxy Statement to be "cleared" by the SEC for mailing to the stockholders of
the Company as promptly as practicable and shall mail the Proxy Statement to
its stockholders as promptly as practicable thereafter. Acquiror shall furnish
all information concerning it and the holders of its capital stock as the
Company may reasonably request in connection with such actions. The Proxy
Statement shall include the recommendation of the Company's Board of Directors
in favor of approval and adoption of this Agreement and the Merger, unless
otherwise required by applicable fiduciary duties of the directors of the
Company, as determined by such directors in good faith after consultation with
independent legal counsel. Acquiror shall have the right to review the Proxy
Statement before it is filed with the SEC.
(b) The information supplied by Acquiror for inclusion in the Proxy
Statement shall not, at the date the Proxy Statement (or any supplement
thereto) is first mailed by stockholders or at the time of the Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are
made, not misleading. If at any time prior to the Stockholders' Meeting any
event or circumstance relating to Acquiror or any of its affiliates, or its or
their respective officers or directors, should be discovered by Acquiror that
should be set forth in a supplement to the Proxy Statement, Acquiror shall
promptly inform the Company.
(c) All information contained in the Proxy Statement (other than information
provided by Acquiror for inclusion therein) shall not, at the date the Proxy
Statement (or any supplement thereto) is first mailed to stockholders or at
the time of the Stockholders' Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. If at any time prior
to the Stockholders' Meeting any event or circumstance relating to the Company
or any of the Company Subsidiaries, or to its or their respective officers or
directors, should be discovered by the Company that should be set forth in a
supplement to the Proxy Statement, the Company shall promptly inform Acquiror.
All documents that the Company is responsible for filing with the SEC in
connection with the transactions contemplated herein will comply as to form
and substance in all material respects with the applicable requirements of the
Exchange Act and the rules and regulations thereunder.
Section 7.5. FCC Application.
(a) As promptly as practicable after the execution and delivery of this
Agreement, Acquiror, Merger Sub and the Company shall prepare all appropriate
applications for FCC consent, and such other documents as may be required,
with respect to the transfer of control of the Company to Acquiror
(collectively, the "FCC Application"). Not later than the fifth (5th) business
day following execution and delivery of this Agreement, Acquiror and Merger
Sub shall deliver to the Company their respective completed portions of the
FCC Application. Not later than the tenth (10th) business day following the
execution and delivery of this Agreement, the Company shall file, or cause to
be filed, the FCC Application. Acquiror, Merger Sub and the Company shall
prosecute the FCC Application in good faith and with due diligence in order to
obtain such FCC consent as expeditiously as practicable. If the Closing shall
not have occurred for any reason within the initial effective period of the
granting of approval by the FCC of the FCC Application, and neither Acquiror
nor the Company shall have terminated this Agreement pursuant to Section 9.1,
Acquiror and the Company shall jointly request one or more extensions of the
effective period of such grant. No party hereto shall knowingly take, or fail
to take, any action the intent or reasonably anticipated consequence of which
action or failure to act would be to cause the FCC not to grant approval of
the FCC Application.
(b) Acquiror and the Company shall each pay one-half ( 1/2) of any FCC fees
that may be payable in connection with the filing or granting of approval of
the FCC Application. Acquiror and the Company shall each
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oppose any request for reconsideration or judicial review of the granting of
approval of the FCC Application. The Company shall pay any cost incurred in
connection with complying with the FCC notice and advertisement requirements
in connection with the transfer of control of the Company.
Section 7.6. Further Action; Best Efforts.
(a) Each of the parties shall use best efforts to take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable laws or otherwise to
consummate and make effective the transactions contemplated by this Agreement
as promptly as practicable, including, without limitation, using its best
efforts to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of Governmental Entities and parties to contracts
with the Company and Acquiror as are necessary for the transactions
contemplated herein. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall use
commercially reasonable efforts to take all such action.
(b) From the date of this Agreement until the Effective Time, each of the
parties shall promptly notify the other in writing of any pending or, to the
knowledge of such party, threatened action, proceeding or investigation by any
Governmental Entity or any other person (i) challenging or seeking damages in
connection with the Merger or the conversion of the Common Stock into the
Merger Consideration pursuant to the Merger or (ii) seeking to restrain or
prohibit the consummation of the Merger or otherwise limit the right of
Acquiror to own or operate all or any portion of the business or assets of the
Company.
(c) The Company shall give prompt written notice to Acquiror, and Acquiror
and Merger Sub shall give prompt written notice to the Company, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date of this Agreement to the Effective Time. Each party shall use
its best efforts to not take any action, or enter into any transaction, which
would cause any of its representations or warranties contained in this
Agreement to be untrue or result in a breach of any covenant made by it in
this Agreement.
Section 7.7. Public Announcements.
Acquiror and the Company shall consult with each other before issuing any
press release or otherwise making any public statements with respect to the
Merger and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or any
listing agreement of Acquiror or the Company with any exchange on which the
securities of the Company or Acquiror are traded.
Section 7.8. Indemnification; Directors' and Officers' Insurance.
(a) The certificate of incorporation and bylaws of the Surviving Corporation
shall contain the provisions with respect to indemnification set forth in the
certificate of incorporation and bylaws of the Company on the date of this
Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six (6) years after the Effective Time in any manner
that would adversely affect the rights thereunder of persons who at any time
prior to the Effective Time were identified as prospective indemnities under
the certificate of incorporation or bylaws of the Company in respect of
actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement), unless
such modification is required by applicable law.
(b) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers, directors
and employees of the Company and the Company Subsidiaries (collectively, the
"Indemnified Parties") against all losses, expenses, claims, damages,
liabilities or amounts that are paid in settlement of, with the approval of
Acquiror and the Surviving Corporation (which approval shall not be
unreasonably withheld), or otherwise in connection with, any claim, action,
suit, proceeding or investigation (a "Claim"), based in whole or in part on
the fact that such person is or was such a director, officer or employee and
arising out of actions or omissions occurring at or prior to the Effective
Time (including, without limitation,
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the transactions contemplated by this Agreement), in each case to the fullest
extent permitted under Delaware Law (and shall pay expenses in advance of the
final disposition of any such action or proceeding to each Indemnified Party
to the fullest extent permitted under Delaware Law, upon receipt from the
Indemnified Party to whom expenses are advanced of the undertaking to repay
such advances contemplated by Section 145(e) of Delaware Law).
(c) Without limiting the foregoing, in the event any Claim is brought
against any Indemnified Party (whether arising before or after the Effective
Time) after the Effective Time (i) the Indemnified Parties may retain its
regularly engaged independent legal counsel as of the date of this Agreement,
or other independent legal counsel satisfactory to them provided that such
other counsel shall be reasonably acceptable to Acquiror and the Surviving
Corporation, (ii) the Surviving Corporation shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received, and (iii) the Surviving Corporation will use its
reasonable efforts to assist in the vigorous defense of any such matter,
provided that the Surviving Corporation shall not be liable for any settlement
of any Claim effected without its written consent, which consent shall not be
unreasonably withheld. Any Indemnified Party wishing to claim indemnification
under this Section 7.8, promptly upon learning of any such Claim, shall notify
the Surviving Corporation (although the failure so to notify the Surviving
Corporation shall not relieve the Surviving Corporation from any liability
which the Surviving Corporation may have under this Section 7.8, except to the
extent such failure prejudices the Surviving Corporation), and shall deliver
to the Surviving Corporation the undertaking contemplated by Section 145(e) of
Delaware Law. The Indemnified Parties as a group may retain one law firm (in
addition to local counsel) to represent them with respect to each such matter
unless there is, under applicable standards of professional conduct (as
reasonably determined by counsel to such Indemnified Parties) a conflict on
any significant issue between the position of any two or more of such
Indemnified Parties, in which event, an additional counsel as may be required
may be retained by such Indemnified Parties.
(d) Acquiror shall cause to be maintained in effect for not less than six
(6) years after the Effective Time the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by
the Company with respect to matters occurring prior to the Effective Time;
provided, however, that (i) Acquiror may substitute therefor policies of
substantially the same coverage containing terms and conditions that are
substantially the same for the Indemnified Parties to the extent reasonably
available and (ii) Acquiror shall not be required to pay an annual premium for
such insurance in excess of three hundred percent (300%) of the last annual
premium paid prior to the date of this Agreement, but in such case shall
purchase as much coverage as possible for such amount.
(e) This Section 7.8 is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties referred to herein, their heirs and
personal representatives and shall be binding on Acquiror and Merger Sub and
the Surviving Corporation and their respective successors and assigns.
Acquiror hereby guarantees the Surviving Corporation's obligations pursuant to
this Section 7.8.
Section 7.9. Employee Benefits Matters.
(a) For a period of two (2) years after the Effective Time, Acquiror shall
cause the Surviving Corporation to provide employee benefits under plans,
programs and arrangements, which, in the aggregate, will provide benefits to
the employees of the Company and the Company Subsidiaries which are no less
favorable, in the aggregate, than those provided pursuant to the plans,
programs and arrangements of the Company in effect and disclosed to Acquiror
on the date hereof; provided, however, that nothing herein shall interfere
with the Surviving Corporation's right or obligation to make such changes to
such plans, programs or arrangements as are necessary to conform with
applicable law; provided, further, however, that with respect to any such
plan, program or arrangement that provides for the issuance of the Company's
Common Stock, or options or securities exercisable or convertible into the
Company's Common Stock, the Surviving Corporation shall be required to adopt
equity compensation programs providing for the issuance of common stock of
Acquiror to such employees.
(b) In furtherance of the provisions of Section 7.9(a), Acquiror shall cause
the Surviving Corporation to provide to those executives listed on Schedule
7.9 hereto with the employee benefits provided to each such
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executive on the date hereof and for the time period set forth in the
Company's employment and/or severance agreements with such executives as set
forth on Schedule 7.9 hereto; provided, however, that notwithstanding the
foregoing, to the extent that any contributions under a qualified retirement
plan would be prohibited by applicable law, Acquiror shall cause the Surviving
Corporation to make cash payments from time to time to such executives equal
to the value of such contributions which can not be so made under applicable
law, as and when such contributions would have been made as noted on Schedule
7.9. The employee benefits provided to such executives on the date hereof
under the Company's employment and/or severance agreements with such
executives are detailed on Schedule 7.9 hereto.
(c) Acquiror acknowledges and agrees that prior to the Effective Time, the
Company will take all such actions as may be necessary to cause (i) all
participants to become fully vested in their benefits under the Company's
401(k) Plan, and (ii) employer contributions to be made with respect to
periods prior to the Effective Time to the Company's 401(k) Plan to the extent
that such contributions would be made if the participants were employed by the
Company on the last day of the calendar year in which the Closing occurs.
Acquiror will allow employees of PCI to continue to participate in the
Company's 401(k) Plan at least until the end of the calendar year in which the
Closing occurs.
(d) On or prior to the Effective Time, the Company shall pay a pro-rated
portion of the annual bonuses and gainshare that would have otherwise been
payable to the eligible employees of the Company after the end of the year,
such bonuses and gainshare to be consistent with the Company's 1997 Management
and Professional Bonus Plan and the Company's Gainshare Program, with past
practice, and the estimates contained in Schedule 7.9(d).
(e) Acquiror agrees that it will not allow the Surviving Corporation to
amend or terminate the Palmer Wireless, Inc. Change of Control Severance
Program for a period of one (1) year after the Effective Time.
(f) Prior to Closing, the Company shall make, or shall make accruals on its
financial statements for, all payments required to be made by the Company
under the terms of any Benefit Plan or by any law applicable to any Benefit
Plan with respect to all periods through the Closing Date.
(g) On or prior to the Effective Time, the Company shall take, or cause to
be taken, such actions as are reasonably necessary to:
(i) cause the Company to adopt the PCI plans providing medical, dental,
vision, prescription drug, flexible spending account, pre-tax premium
contribution, travel accident, accidental death and dismemberment, long
term disability, and life insurance benefits for the benefit of Company
employees;
(ii) add the Company as a contractholder under insurance contracts
providing insurance coverage, and administrative contracts relating to, for
one or more of the benefits listed in the immediately preceding paragraph
(i) above as well as workers compensation liability coverage and provide
that such contracts continue as to the Company after the Effective Time;
(iii) substitute the Company for PCI as the party to the Palmer
Communications Health Care Expense Fund which is a Code Section 501(c)(9)
trust used to fund certain of the benefits listed in paragraph (i) above
and any other trust or account which is used with respect to flexible
spending accounts or pre-tax premium contributions for Company employees;
and
(iv) except as provided in Section 7.9(c) hereof, cease participation and
coverage in the Company plans, trusts and insurance contracts referred to
in paragraphs (i) through (iii) above with respect to all individuals who
are not Company employees as of the Effective Time.
Section 7.10. HSR Act Matters.
Acquiror, Merger Sub and the Company (as may be required pursuant to the HSR
Act) promptly will complete all documents required to be filed with the
Federal Trade Commission and the United States Department of Justice in order
to comply with the HSR Act and, not later than fifteen (15) days after the
date
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hereof, together with the persons who are required to join in such filings,
shall file the same with the appropriate Governmental Entities. Acquiror,
Merger Sub and the Company shall promptly furnish all materials thereafter
required by any of the Governmental Entities having jurisdiction over such
filings, and shall take all reasonable actions and shall file and use best
efforts to have declared effective or approved all documents and notifications
with any such Governmental Entity, as may be required under the HSR Act or
other Federal antitrust laws for the consummation of the Merger and the other
transactions contemplated hereby.
Section 7.11. Negotiation With Others.
(a) Unless and until this Agreement shall have been terminated in accordance
with its terms, the Company shall not, through any officer, director,
employee, representative, agent or direct or indirect stockholder of the
Company or any Company Subsidiaries, directly or indirectly, encourage or
solicit any proposal that constitutes an Acquisition Proposal (as defined
below), engage in any discussions or negotiations or provide any information
to any person relating thereto or in furtherance thereof or accept any
Acquisition Proposal; provided, however, that nothing contained in this
Section 7.11 shall prohibit the Company, or its Board of Directors, from
making any disclosure to its stockholders that, in the judgment of its Board
of Directors in accordance with, and based upon, the advice of outside
counsel, is required under applicable law. For purposes of this Agreement,
"Acquisition Proposal" means any offer to acquire (or meaningful indication of
interest in the acquisition of) all or any substantial part of the business
and properties or capital stock of the Company or the Company Subsidiaries,
whether by merger, consolidation, sale of assets or stock, tender offer or
similar transaction or series of transactions involving the Company, the
Company Subsidiaries or their direct or indirect stockholders.
(b) Notwithstanding Section 7.11(a), the Board of Directors of the Company,
in the exercise of and as required by its fiduciary duties as determined in
good faith by the Board of Directors of the Company in accordance with and
based upon the advice of outside counsel, may (i) furnish information
(including, without limitation, confidential information) concerning the
Company to a third party who makes an unsolicited request for such information
for the purpose of making an Acquisition Proposal, provided that such third
party executes and delivers a confidentiality agreement substantially the same
as the Confidentiality Agreement, and (ii) engage in discussions or
negotiations with a third party who submits in writing an interest in making
an Acquisition Proposal that the Board of Directors believes, based on advice
of its financial advisors, is reasonably capable of being consummated and is
reasonably likely to be superior to the transactions contemplated by this
Agreement from a financial point of view to all stockholders of the Company,
provided, however, that in the case of clause (i) or (ii) hereof, the Company
shall promptly notify Acquiror in writing of such request for information or
Acquisition Proposal, providing reasonable details with respect thereto, and
shall keep Acquiror informed as to the status of any discussions or
negotiations referred to in clause (ii) above.
ARTICLE VIII
Closing Conditions
Section 8.1. Conditions to Obligations of Acquiror, Merger Sub and the
Company to Effect the Merger.
The respective obligations of Acquiror, Merger Sub and the Company to effect
the Merger and the other transactions contemplated herein shall be subject to
the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law:
(a) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the
Company in accordance with applicable law.
(b) No Order. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, judgment,
injunction or other order (whether temporary, preliminary or permanent), in
any case which is in effect and which prevents or prohibits consummation of
the Merger or any other transactions contemplated in this Agreement;
provided, however, that the parties shall use their reasonable efforts to
cause any such decree, judgment, injunction or other order to be vacated or
lifted.
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(c) HSR Act. Any waiting period with any extensions thereof under the HSR
Act shall have expired or been terminated.
(d) FCC Approval. All consents, waivers, approvals and authorizations
(the "FCC Transfer Approvals") required to be obtained, and all filings or
notices required to be made, by Acquiror, Merger Sub and the Company prior
to consummation of the transactions contemplated in this Agreement shall
have been obtained from, and made with, the FCC. Each of the FCC Transfer
Approvals shall have become a Final Order. For purposes of this Agreement,
"Final Order" shall mean an action by the FCC: (i) that is not reversed,
stayed, enjoined, set aside, annulled or suspended within the deadline, if
any, provided by applicable statute or regulation; (ii) with respect to
which no request for stay, motion or petition for reconsideration or
rehearing, application or request for review, or notice of appeal or other
judicial petition for review that is filed within such period is pending,
and (iii) as to which the deadlines, if any, for filing any such request,
motion, petition, application, appeal or notice, and for the entry of
orders staying, reconsidering or reviewing on the FCC's own motion have
expired. Notwithstanding anything to the contrary contained herein or
otherwise, Acquiror may, at is option by written notice to the Company: (i)
waive on behalf of the parties the requirement that each of the FCC
Transfer Approvals shall have become a Final Order; and (ii) acquire the
microwave licenses pursuant to special temporary authority granted to
Acquiror by the FCC.
Section 8.2. Additional Conditions to Obligations of Acquiror.
The obligations of Acquiror to effect the Merger and the other transactions
contemplated in this Agreement are also subject to the following conditions,
any or all of which may be waived, in whole or in part, to the extent
permitted by applicable law:
(a) Representations and Warranties. The representations and warranties of
the Company made in this Agreement shall be true and correct in all
material respects, on and as of the Effective Time with the same effect as
though such representations and warranties had been made on and as of the
Effective Time (provided that any representation or warranty contained
herein that is qualified by a materiality standard shall not be further
qualified hereby), except for representations and warranties that speak as
of a specific date or time other than the Effective Time (which need only
be true and correct in all material respects as of such date or time).
Acquiror shall have received a certificate of the Chief Executive Officer
or Chief Financial Officer of the Company to that effect.
(b) Agreements and Covenants. The agreements and covenants of the Company
required to be performed on or before the Effective Time shall have been
performed in all material respects. Acquiror shall have received a
certificate of the Chief Executive Officer or Chief Financial Officer of
the Company to that effect.
(c) Legal Opinions. Acquiror shall have received (i) an opinion from
Hogan & Hartson L.L.P., counsel to the Company, in form and substance
reasonably satisfactory to Acquiror, and (ii) an opinion from the Company's
FCC counsel in substantially the form attached hereto as Exhibit A.
(d) Dissenting Shares. The Dissenting Shares shall constitute not greater
than ten percent (10%) of the shares of Class A Common Stock outstanding on
the Closing Date.
(e) No Company Material Adverse Effect. Since the date of this Agreement,
no Company Material Adverse Effect shall have occurred and be continuing.
Section 8.3. Additional Conditions to Obligations of the Company.
The obligations of the Company to effect the Merger and the other
transactions contemplated in this Agreement are also subject to the following
conditions any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law:
(a) Representations and Warranties. The representations and warranties of
Acquiror and Merger Sub made in this Agreement shall be true and correct in
all material respects, on and as of the Effective
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Time with the same effect as though such representations and warranties had
been made on and as of the Effective Time (provided that any representation
or warranty contained herein that is qualified by a materiality standard
shall not be further qualified hereby), except for representations and
warranties that speak as of a specific date or time other than the
Effective Time (which need only be true and correct in all material
respects as of such date or time). The Company shall have received a
certificate of the Chief Executive Officer or Chief Financial Officer of
Acquiror to that effect.
(b) Agreements and Covenants. The agreements and covenants of Acquiror
and Merger Sub required to be performed on or before the Effective Time
shall have been performed in all material respects. The Company shall have
received a certificate of the Chief Executive Officer or Chief Financial
Officer of Acquiror to that effect.
(c) Legal Opinion. The Company shall have received an opinion from
Proskauer Rose Goetz & Mendelsohn LLP, counsel to Acquiror and Merger Sub,
in form and substance reasonably satisfactory to the Company.
ARTICLE IX
Termination, Amendment and Waiver
Section 9.1. Termination.
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval of this Agreement and the Merger by the
stockholders of the Company:
(a) by mutual written consent of each of Acquiror and the Company;
(b) by Acquiror if the Company shall have breached, or failed to comply
with, in any material respect any of its obligations under this Agreement
or any representation or warranty made by the Company shall have been
incorrect in any material respect when made or shall have since ceased to
be true and correct in any material respect, such that as a result of such
breach, failure or misrepresentation the conditions set forth in Section
8.2(a), 8.2(b) or 8.2(e) would not be satisfied, and such breach, failure
or misrepresentation is not cured within thirty (30) days after notice
thereof;
(c) by the Company if Acquiror or Merger Sub shall have breached, or
failed to comply with, in any material respect any of its obligations under
this Agreement or any representation or warranty made by Acquiror or Merger
Sub shall have been incorrect in any material respect when made or shall
have since ceased to be true and correct in any material respect, such that
as a result of such breach, failure or misrepresentation the conditions set
forth in Section 8.3(a) or 8.3(b) would not be satisfied, and such breach,
failure or misrepresentation is not cured within thirty (30) days after
notice thereof;
(d) by either Acquiror or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any Governmental Entity preventing or prohibiting
consummation of the Merger shall have become final and nonappealable;
(e) by either Acquiror or the Company if the Agreement shall fail to
receive the requisite vote for approval and adoption by the stockholders of
the Company at the Stockholders' Meeting and the Merger shall not have been
consummated within forty-five (45) days thereafter; and
(f) by either the Company or Acquiror if the merger shall not have been
consummated before December 31, 1997 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section
9.1(f) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before the Termination Date.
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Section 9.2. Effect of Termination.
Except as provided in Section 9.3 or Section 10.1, in the event of the
termination of this Agreement pursuant to Section 8.1, this Agreement shall
forthwith become void, there shall be no liability on the part of Acquiror,
Merger Sub or the Company or any of their respective officers or directors to
the other parties hereto and all rights and obligations of any party hereto
shall cease, except that nothing herein shall relieve any party for any breach
of this Agreement.
Section 9.3. Expenses; Fee.
(a) Except as otherwise expressly provided herein, all expenses incurred by
the parties hereto shall be borne solely by the party that has incurred such
expenses. All FCC annual regulatory fees which are due and payable prior to
Closing shall be paid by the Company prior to Closing.
(b) Without in any way limiting the Company's obligations under this
Agreement (including without limitation under Sections 1.1, 1.2, 1.6, 2.3,
6.1, 6.2, 7.1, 7.3, 7.4, 7.5, 7.6, 7.10 and 7.11 hereof) or Acquiror's rights
under Section 10.7 hereof, the Company shall pay, or shall cause to be paid
to, Acquiror a Fee (the "Fee") of Fifteen Million Dollars ($15,000,000), if
this Agreement is (i) terminated either (A) by Acquiror under Section 9.1(b)
as a result of the Company's breach of its obligations under Sections 1.1,
1.2, 1.6, 2.3, 6.1, 6.2, 7.1, 7.3, 7.4, 7.5, 7.6, 7.10 or 7.11, (B) by the
Company or Acquiror under Section 9.1(e) and (ii) either (A) an Alternative
Transaction (as defined below) has been publicly announced and has not been
withdrawn at the time of such termination (in which event the Fee shall be
paid simultaneously with such termination) or (B) an Alternative Transaction
is consummated on or prior to the date that is one (1) year after the date of
this Agreement (in which event the Fee shall be paid simultaneously with such
consummation); provided, however, that payment of such Fee shall be deemed to
satisfy in full all of the liabilities and obligations of the Company under
this Agreement. As used herein, an "Alternative Transaction" shall mean any
transaction or proposed transaction or related series of transactions
(including without limitation any merger, consolidation, sale of assets or
stock, tender offer or other transaction) providing for the receipt by the
Company and/or the holders of more than fifty percent (50%) of its Common
Stock of consideration equivalent to a value in excess of Seventeen Dollars
and Fifty Cents ($17.50) per share of Common Stock.
Section 9.4. Amendment.
This Agreement may be amended by the parties hereto by action taken by or on
behalf of their respective Boards of Directors at any time prior to the
Effective Time; provided, however, that, after approval of this Agreement and
the Merger by the stockholders of the Company, no amendment may be made which
would reduce the amount or change the type of consideration into which each
share of Common Stock shall be converted pursuant to this Agreement upon
consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
Section 9.5. Waiver.
At any time prior to the Effective Time, the parties may (a) extend the time
for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement and (c) waive compliance by the other party with any of the
agreements or conditions contained in this Agreement. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE X
General Provisions
Section 10.1. Nonsurvival of Representations, Warranties and Agreements.
The representations, warranties and agreements in this Agreement (and in any
certificate delivered in connection with the Closing) shall be deemed to be
conditions to the Merger and shall not survive the Effective Time or
termination of this Agreement, except for the agreements set forth in Articles
I (the Merger) and II
28
<PAGE>
(Conversion of Securities; Exchange of Certificates) and Sections 7.8
(Indemnification and Insurance) and 7.9 (Employee Benefits Matters), each of
which shall survive the Effective Time indefinitely, and Sections 7.2
(Confidentiality), 9.2 (Effect of Termination) and 9.3 (Expenses; Fee), each
of which shall survive termination of this Agreement indefinitely.
Section 10.2. Notices.
All notices and other communications given or made pursuant hereto shall be
in writing and shall be deemed to have been duly given or made as of the date
delivered, mailed or transmitted, and shall be effective upon receipt, if
delivered personally, mailed by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like changes of
address) or sent by electronic transmission to the telecopier number specified
below:
(a) If to Acquiror:
Price Communications Corporation
45 Rockefeller Plaza
Suite 3200
New York, New York 10020
Telecopier No.: (212) 397-3755
Attention: Robert Price
With a copy (which shall not constitute notice) to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036-8299
Telecopier No.: (212) 969-2900
Attention: Peter G. Samuels, Esq.
(b) If to the Company:
Palmer Wireless, Inc.
12800 University Drive
Fort Myers, Florida 33014
Telecopier No.: (914) 433-8213
Attention: Pat Meehan, Esq.
With a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, DC 20004
Telecopier No.: (202) 637-5910
Attention: David B.H. Martin, Jr., Esq.
Section 10.3. Certain Definitions.
For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "beneficial owner" means with respect to any shares of Common Stock a
person who shall be deemed to be the beneficial owner of such shares (i)
which such person or any of its affiliates or associates beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates or
associates (as such term is defined in Rule 12b-2 of the Exchange Act) has,
directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant
to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights,
29
<PAGE>
warrants or options, or otherwise, or (B) the right to vote pursuant to any
agreement, arrangement or understanding, (iii) which are beneficially
owned, directly or indirectly, by any other persons with whom such person
or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding voting or disposing of
any such shares or (iv) pursuant to Section 13(d) of the Exchange Act and
any rules or regulations promulgated thereunder;
(c) "business day" shall mean any day other than a day on which banks in
the State of Florida are authorized or obligated to be closed;
(d) "control" (including the terms "controlled by" and "under common
control with") means, other than for purposes of the Communications Act,
the possession, directly or indirectly or as trustee or executor, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of stock or as trustee or executor,
by contract or credit arrangement or otherwise; and
(e) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d) of the Exchange Act).
Section 10.4. Headings.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Section 10.5. Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the
end that transactions contemplated hereby are fulfilled to the extent
possible.
Section 10.6. Entire Agreement.
This Agreement (together with the Exhibits, the Schedules and the other
documents delivered pursuant hereto) and the Confidentiality Agreement
constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or
any of them, with respect to the subject matter hereof and, except as
otherwise expressly provided herein, are not intended to confer upon any other
person any rights or remedies hereunder.
Section 10.7. Specific Performance.
The transactions contemplated by this Agreement are unique. Accordingly,
each of the parties acknowledges and agrees that, in addition to all other
remedies to which it may be entitled, each of the parties hereto is entitled
to a decree of specific performance, provided such party is not in material
default hereunder.
Section 10.8. Assignment.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other party.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
Section 10.9. Third Party Beneficiaries.
This Agreement shall be binding upon and inure solely to the benefit of each
party hereto, and nothing in this Agreement, express or implied, is intended
to or shall confer upon any other person any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement except for (a) the
Indemnified Parties
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<PAGE>
under Section 7.8, (b) the rights of the holders of Common Stock to receive
the Merger Consideration payable in the Merger pursuant to Article II, and (c)
the rights of the individuals listed on Schedule 7.9 under Section 7.9.
Section 10.10. Governing Law.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law.
Section 10.11. Counterparts.
This Agreement may be executed and delivered in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which
when executed and delivered shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
In Witness Whereof, the parties hereto have caused this Agreement and Plan
of Merger to be executed and delivered as of the date first written above.
Price Communications Corporation
/s/ Robert Price
By: _________________________________
Name: Robert Price
Title:President
Price Communications Cellular Merger
Corp.
/s/ Robert Price
By: _________________________________
Name: Robert Price
Title:President
Palmer Wireless, Inc.
/s/ William J. Ryan
By: _________________________________
William J. Ryan
President and Chief Executive
Officer
31
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 721 of the New York Business Corporation Law provides that the
indemnification and advancement of expenses of directors and officers may be
provided by the certificate of incorporation or by-laws of a corporation, or
when authorized by the certificate of incorporation or by-laws, a resolution
of shareholders, a resolution of directors or an agreement providing for
indemnification (except in cases where a judgment or other final adjudication
establishes that such acts were committed in bad faith or were the result of
active or deliberate dishonesty and were material to the cause of action so
adjudicated or that he personally gained in fact a financial profit or other
advantage to which he was not legally entitled).
Section 722 of the New York Business Corporation Law provides that a
corporation may indemnify any person, made, or threatened to be made, a party
of an action or proceeding other than one by or in the right of the
corporation to procure a judgment in its favor, whether civil or criminal,
including an action by or in the right of any other corporation, partnership,
joint venture, trust, employee benefit plan or other entity which any director
or officer of the corporation served in any capacity at the request of the
corporation, by reason of the fact that he was a director or officer of the
corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other entity in any other capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses if such
director or officer acted, in good faith, for a purpose which he reasonably
believed to be in, or in the case of service for any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interests of the corporation and, in criminal acts or
proceedings, in addition, had no reasonable cause to believe that his conduct
was unlawful.
Section 722 of the New York Business Corporation Law also states that a
corporation may indemnify any person made, or threatened to be made, a party
to an action by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director or officer of the
corporation or any other corporation, partnership, joint venture, trust,
employee benefit plan or other entity at the request of the corporation,
against amounts paid in settlement and reasonable expenses actually and
necessarily incurred by him in connection with the defense or settlement of
such action, or in connection with an appeal therein if such director or
officer acted, in good faith, for a purpose which he reasonably believed to be
in, or in the case of service for any other corporation, partnership, joint
venture, employee benefit plan or other entity, not opposed to, the best
interests of the corporation, except that no indemnification shall be made in
respect to a threatened or pending action which is settled or otherwise
disposed of, or any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation, unless the court determines the
person is fairly and reasonably entitled to indemnity for such portion of the
settlement amount and expenses as the court deems proper.
Section 726 of the New York Business Corporation Law provides that a
corporation shall have the power to purchase and maintain insurance for
indemnification of directors and officers. However, no insurance may provide
for any payment, other than cost of defense, to or on behalf of any director
or officer for a judgment or a final adjudication adverse to the insured
director or officer if (i) a judgment or other final adjudication establishes
that his acts of active and deliberate dishonesty were material to the cause
of action adjudicated or that he personally gained a financial profit or other
advantage to which he was not legally entitled or (ii) if prohibited under the
insurance law of New York.
Section 724 of the New York Business Corporation Law provides that
indemnification shall be awarded by a court to the extent authorized under
Sections 722 and 723(a) of the New York Business Corporation Law
notwithstanding the failure of a corporation to provide indemnification, and
despite any contrary resolution of the board or of the shareholders.
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<PAGE>
The Certificates of Incorporation and By-laws of the Company and Holdings
exonerate directors of the Company and Holdings from personal liability to the
Company or Holdings, as the case may be, and their respective stockholders,
for monetary damages for breach of the fiduciary duty of care as a director,
but it does not eliminate or limit liability for any breach of the directors'
duty of loyalty for acts or omissions not in good faith or which involve
intentional misconduct or knowing violations of law, for any improper
declaration of dividends or for any transaction from which the directors
derived an improper personal benefit. The Certificates of Incorporation do not
eliminate a stockholder's right to seek nonmonetary, equitable remedies, such
as an injunction or rescission, to redress an action taken by the directors.
However, as a practical matter, equitable remedies may not be available in all
situations, and there may be instances in which no effective remedy is
available.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger among the Company, Holdings and PCC
Sub, Inc. (the "Plan of Merger") (incorporated by reference to
Exhibit 3.3).
3.1 Certificate of Incorporation of Holdings.
3.2 By-laws of Holdings.
3.3 The Plan of Merger.
4.1 Certificate of Incorporation of Holdings (incorporated by
reference to Exhibit 3.1).
4.2 By-Laws of Holdings (incorporated by reference to Exhibit 3.2).
5.1 Opinion of Proskauer Rose LLP.
10.1 1992 Long Term Incentive Plan, incorporated by reference to
Exhibit 10(a) to the Company's Form 10-K for the year ended
December 31, 1992.
10.2 Warrant Agreement dated April 12, 1990 between the Company and
Warner Communications Investors, Inc., incorporated by reference
to Exhibit (4) to the Company's Form 8-K filed to report an
event of April 12, 1990.
10.3 Form of Amendment to Time Warner Warrant, incorporated by
reference to Exhibit 10(i) to the Company's Form 10-K for the
year ended December 31, 1992.
10.4 Stock Purchase Agreement, dated as of April 27, 1987, among the
Company, Republic Broadcasting Corporation and Fairfield
Broadcasting, Inc., as amended July 16, 1987, incorporated by
reference to Annex I to the Company's Definitive Proxy Statement
dated July 27, 1987.
10.5 Notes and Stock Purchase Agreement between and among Fairfield
Broadcasting, Inc., the Company and Republic Broadcasting
Corporation dated as of September 30, 1987, as amended,
incorporated by reference to Exhibit 10(a) to Registration
Statement on Form S-1 (File No. 33-30318).
10.6 Stockholders' Agreement among Fairfield Broadcasting, Inc., the
Company, Citicorp Venture Capital Ltd., Osborn Communications
Corporation and Prudential-Bache Interfunding Inc., dated as of
September 30, 1987, incorporated by reference to Exhibit 10(b)
to Registration Statement on Form S-1 (File No. 33-30318).
10.7 Form of Indemnification Agreement between the Company and its
officers and directors, incorporated by reference to Exhibit
10(y) to the Company's Form 10-K for the year ended December 31,
1993.
10.8 Employment Agreement, dated as of October 6, 1994, between the
Company and Robert Price, incorporated by reference to Exhibit
10(aa) to the Company's Form 10-K for the year ended December
31, 1994.
10.9 Employment Agreement, dated as of January 5, 1995, between the
Company and Kim Pressman, incorporated by reference to Exhibit
10(bb) to the Company's Form 10-K for the year ended December
31, 1994.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.10 Stock Option Agreement, dated as of February 10, 1994, between
the Company and Robert Price, incorporated by reference to
Exhibit 10(cc) to the Company's Form 10-K for the year ended
December 31, 1994.
10.11 Rights Agreement dated as of October 6, 1994 between the Company
and Harris Trust Company of New York, incorporated by reference
to Exhibit 4 to Registrant's Form 8-K filed to report an event
on October 6, 1994.
10.12 Amendment dated January 12, 1995 to Rights Agreement dated as of
October 6, 1994 between the Company and Harris Trust Company of
New York, incorporated by reference to Exhibit 4 to the
Company's Form 8-K filed to report an event on January 12, 1995.
10.13 Securities Purchase Agreement, dated as of February 15, 1994,
between the stockholders and warrant holders of Smith
Acquisition Corp. and the Registrant, incorporated by reference
to Exhibit 10 to the Company's Form 8-K filed to report an event
of September 16, 1994.
10.14 Asset purchase agreement dated as of August 8, 1995 by and
between USA Broadcast Group L.L.C. and Price Communications
Corporation, Texoma Broadcasting Corp., Southeast Texas
Broadcasting Corp. and Tri-State Broadcasting Corp.,
incorporated by reference to Exhibit 10(gg) to the Company's
Form 10-Q for the Quarter ended September 30, 1995.
10.15 Asset purchase agreement dated as of October 18, 1995 by and
between WHTM-TV, Inc. and Allbritton Communications Company,
incorporated by reference to Exhibit 10(hh) to the Company's
Form 10-Q for the Quarter ended September 30, 1995.
10.16 Agreement and Plan of Merger, dated May 23, 1997, by and among
Palmer Wireless, Inc., the Company and Price Communications
Cellular Merger Corp. (incorporated by reference from Annex I to
the proxy statement and prospectus included herein).
10.18 Commitment Letter, dated July 2, 1997, among DLJ Capital
Funding, Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ Securities"), Price Communications Wireless Inc. ("PCW")
and the Company.
10.19 Purchase Agreement, dated July 3, 1997, among the Company, PCW,
the Purchasers named therein and DLJ Securities, as
Representative of the Purchasers.
10.20 Purchase Agreement, dated July 31, 1997, among the Company,
Price Communications Cellular Inc., Price Communications
Cellular Holdings, Inc., NatWest Capital Markets Limited
("NatWest") and Wasserstein Perella Securities, Inc.
("Wasserstein Perella").
10.21 Registration Rights Agreement, dated July 10, 1997, by and among
PCW and DLJ Securities, Wasserstein Perella, NatWest, Lehman
Brothers, Inc. and PaineWebber Incorporation as Purchasers.
10.22 Indenture, dated as of July 10, 1997, between PCW and Bank of
Montreal Trust Company, as trustee.
21.1 Subsidiaries of the Registrant--none.
23.1 Consent of Proskauer Rose LLP (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP*
23.3 Consent of KPMG Peat Marwick LLP*
24.1 Powers of Attorney are set forth on the signature page hereof.
</TABLE>
- --------
* To be provided by amendment.
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<PAGE>
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c) the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The registrant undertakes that every prospectus (i) that is filed pursuant
to (1) immediately preceeding, or (ii) that purports to meet the requirements
of section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as part of an
amendment to the registration statement and will not be used until such
amendment is effected, and that, for purposes 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.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy 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.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act 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.
II-4
<PAGE>
(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.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW
YORK, ON AUGUST 11, 1997.
PRICE COMMUNICATIONS CORPORATION
/s/ Robert Price
By
ROBERT PRICE
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a
director or officer, or both of PRICE COMMUNICATIONS CORPORATION, a New York
corporation, hereby constitutes and appoints Robert Price and Ashley B. Dixon
and each of them acting alone, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) or supplements to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite, necessary or advisable to be done, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
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 President and August 11, 1997
- ------------------------------------- Director (Principal
(ROBERT PRICE) Executive Officer,
Financial Officer
and Accounting
Officer)
/s/ George H. Cadgene Director August 11, 1997
- -------------------------------------
(GEORGE H. CADGENE)
/s/ Robert F. Ellsworth Director August 11, 1997
- -------------------------------------
(ROBERT F. ELLSWORTH)
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW
YORK, ON AUGUST 11, 1997.
PRICE HOLDINGS CORPORATION
By /s/ Robert Price
___________________________________
ROBERT PRICE
PRESIDENT
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a
director or officer, or both of PRICE HOLDINGS CORPORATION, a New York
corporation, hereby constitutes and appoints Robert Price and Ashley B. Dixon
and each of them acting alone, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) or supplements to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite, necessary or advisable to be done, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
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 President and August 11, 1997
- ------------------------------------- Director (Principal
(ROBERT PRICE) Executive Officer,
Financial Officer
and Accounting
Officer)
/s/ George H. Cadgene Director August 11, 1997
- -------------------------------------
(GEORGE H. CADGENE)
/s/ Robert F. Ellsworth Director August 11, 1997
- -------------------------------------
(ROBERT F. ELLSWORTH)
II-7
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
PRICE HOLDINGS CORPORATION
----------------
(UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW)
----------------
FIRST
The name of the corporation is Price Holdings Corporation (the
"Corporation").
SECOND
The purpose for which the Corporation is formed is to engage in any lawful
act or activity for which corporations may be organized under the Business
Corporation Law of the State of New York (the "Business Corporation Law");
provided, however, that the Corporation is not formed to engage in any act or
activity requiring the consent or approval of any state official, department,
board, agency or other body without such consent or approval first being
obtained.
THIRD
The office of the Corporation in the State of New York shall be located in
the City of New York and County of New York.
FOURTH
A.
The total number of shares of capital stock which the Corporation shall have
authority to issue is Eighty Million (80,000,000) shares, of which Sixty
Million (60,000,000) shares shall be common stock, $.01 par value per share
(the "Common Stock"), and Twenty Million (20,000,000) shares shall be
preferred stock, par value $.01 per share (the "Preferred Stock"). Shares of
capital stock of the Corporation may be issued for such consideration, not
less than the par value thereof, as shall be fixed from time to time by the
Board of Directors, and shares issued for such consideration shall be fully
paid and nonassessable.
B.
The following is a statement of the powers, preferences and rights and the
qualifications, restrictions and limitations of the Common Stock of the
Corporation:
(1) Dividends. Subject to the preferences and other rights of the
Preferred Stock as fixed in this Certificate of Incorporation or in any
certificate of amendment providing for the issuance of such Preferred Stock
pursuant to Paragraph C of this Article FOURTH, the holders of record of
Common Stock shall be entitled to receive such dividends ratably as may
from time to time be declared by the Board of Directors out of funds
legally available therefor.
(2) Liquidation. In the event of any liquidation, dissolution or winding
up of the affairs of the Corporation, voluntary or involuntary, after
payment to the holders of Preferred Stock of the amounts to
1
<PAGE>
which they are entitled under this Certificate of Incorporation or in any
certificate of amendment providing for the issuance of such Preferred Stock
pursuant to paragraph C of this Article FOURTH, the net assets of the
Corporation available to shareholders shall be distributed ratably to the
holders of Common Stock.
(3) Voting Rights. The holders of shares of Common Stock shall be
entitled to one vote in respect of each share held.
(4) Other Rights. The Common Stock shall not bear conversion or
preemptive rights and shall not be redeemable.
C.
The Corporation may issue Preferred Stock from time to time in one or more
series as may be established by the adoption of a resolution or resolutions
relating thereto by the Board of Directors and authorized by the Corporation's
shareholders and set forth in a certificate of amendment prepared and
delivered in accordance with Section 805 of the Business Corporation Law, with
each series having such voting powers, full or limited, or no voting powers,
and such designations, preferences and relative, participating, optional or
other special rights, and such qualifications, limitations or restrictions
thereof or thereon, as shall be stated and expressed therein.
D.
SENIOR PAYMENT-IN-KIND INCREASING RATE PREFERRED STOCK
Pursuant to the authority granted to and vested in the Board of Directors in
accordance with the provisions of the Certificate of Incorporation, the Board
of Directors has authorized a separate series of the Corporation's Preferred
Stock, par value $.01 per share, and has stated the designation and number of
shares, and has fixed the relative rights, preferences, privileges, powers and
restrictions thereof as follows:
(a) Designation and Amount. The designation of this series is "Senior
Payment-In-Kind Increasing Rate Preferred Stock." The number of shares
constituting such series shall be 4,130,000 and are referred to herein as
the "Senior Preferred Stock." 1,009,000 shares of Senior Preferred Stock
shall be initially issued with an additional 3,121,000 shares reserved for
issuance in accordance with paragraph (c) (i) hereof or otherwise. The
liquidation preference of the Senior Preferred Stock shall be $25.00 per
share.
(b) The Senior Preferred Stock shall, with respect to dividends and
distributions upon liquidation, winding-up and dissolution of the
Corporation, rank (i) senior to all classes of Common Stock and Preferred
Stock of the Corporation and to each other class of Capital Stock of the
Corporation or series of Preferred Stock of the Corporation hereafter
created (collectively referred to as "Junior Stock"). The Corporation may
not issue any class or series of Capital Stock that ranks (x) on a parity
with the Senior Preferred Stock as to dividends and distributions upon
liquidation, winding-up and dissolution (collectively referred to as
"Parity Stock") that was not approved by the Holders in accordance with
paragraph (f) (ii) (A) of this Article Fourth, Section D (to the extent
such approval is required) or (y) senior to the Senior Preferred Stock as
to dividends and distributions upon liquidation, winding-up and dissolution
of the Corporation (collectively referred to as "Senior Stock") that was
not approved by the Holders in accordance with paragraph (f) (ii) (B) of
this Article Fourth, Section D.
(c) Dividends.
(i) Beginning on the Issue Date, the Holders of the outstanding
shares of Senior Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors, out of Funds legally
available therefor, dividends (the "Regular Dividends") on each share
of Senior Preferred Stock, at an initial rate per annum equal to 15% of
the liquidation preference per share of the Senior Preferred Stock,
payable quarterly; provided that after January 15, 1998, the annual
dividend rate will increase over and above the stated interest rate at
a rate of 0.50% per annum on each Regular Dividend Payment
2
<PAGE>
Date, subject to a maximum rate of 20% per annum; and provided,
further, that the Regular Dividend rate per annum is subject to
additional increase as provided for in clause (v) below. All Regular
Dividends shall be cumulative, whether or not earned or declared, on a
daily basis from the date of issuance of the Senior Preferred Stock and
shall be payable quarterly in arrears on each Regular Dividend Payment
Date, commencing on the first Regular Dividend Payment Date after the
Issue Date. Regular Dividends (including Additional Dividends, if any)
may be paid, at the Corporation's option, either in cash or by the
issuance of additional shares of Senior Preferred Stock (including
fractional shares) having an aggregate liquidation preference equal to
the amount of such Regular Dividends (but not less than $1.00). In the
event that Regular Dividends are declared and paid through the issuance
of additional shares of Senior Preferred Stock as provided in the
previous sentence, such Regular Dividends shall be deemed paid in full
and shall not accumulate. Each Regular Dividend shall be payable to the
Holders of record as they appear on the stock books of the Corporation
on the Regular Dividend Record Date immediately preceding the related
Regular Dividend Payment Date.
(ii) All Regular Dividends paid with respect to shares of the Senior
Preferred Stock pursuant to paragraph (c) (i) of this Article Fourth,
Section D shall be paid pro rata to the Holders entitled thereto.
(iii) So long as any share of the Senior Preferred Stock is
outstanding, the Corporation shall not declare, pay or set apart for
payment any dividend on any Junior Stock or Parity Stock or make any
payment on account of, or set apart for payment money for a sinking or
other similar fund for, the purchase, redemption or other retirement
of, any Junior Stock or Parity Stock or any warrants, rights, calls or
options exercisable for or convertible into any Junior Stock or Parity
Stock whether in cash, obligations or shares of the Corporation or
other property, and shall not permit any corporation or other entity
directly or indirectly controlled by the Corporation to purchase or
redeem any Junior Stock or Parity Stock or any such warrants, rights,
calls or options: (a) unless full cumulative dividends determined in
accordance herewith on the Senior Preferred Stock have been paid (or
are deemed paid) in full and (b) except as provided in Section k (ii)
of this Article Fourth, Section D.
(iv) Regular Dividends payable on the Senior Preferred Stock for any
period less than a year shall be computed on the basis of a 360-day
year of twelve 30-day months and the actual number of days elapsed in
the period for which payable. The amount of Additional Dividends will
be determined consistent with the preceding sentence and by multiplying
the applicable Additional Dividends by a fraction, the numerator of
which is the number of days (not to exceed 90) such rate was applicable
during any Dividend Period and the denominator of which is 360.
(v) Additional Dividends shall become due and payable with respect to
the Senior Preferred Stock as set forth in the Registration Rights
Agreement.
(d) Liquidation Preference.
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the
Holders of shares of Senior Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders an amount in cash equal to the
liquidation preference for each share outstanding, plus, without
duplication, (x) an amount in cash equal to accumulated and unpaid
Regular Dividends and Additional Dividends thereon to the date fixed
for liquidation, dissolution or winding up (including an amount equal
to a prorated Regular Dividend for the period from the last Dividend
Payment Date to the date fixed for liquidation, dissolution or winding
up) before any distribution is made on Junior Stock. Except as provided
in the preceding sentence, Holders of Senior Preferred Stock shall not
be entitled to any distribution in the event of any liquidation,
dissolution or winding up of the affairs of the Corporation. If the
assets of the Corporation are not sufficient to pay in full the
liquidation payments payable to the Holders of outstanding shares of
the Senior Preferred Stock and all Parity Stock, then the holders of
all such shares shall share equally and ratably in such distribution of
assets in proportion to the full liquidation preference to which each
is entitled until such preferences are paid in full, and then in
proportion to their respective amounts of accumulated but unpaid
dividends.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities
or other consideration) of all or substantially all of the property or
3
<PAGE>
assets of the Corporation nor the consolidation or merger of the
Corporation with or into one or more entities shall be deemed to be a
liquidation, dissolution or winding up of the affairs of the
Corporation.
(e) Redemption.
(i) Optional Redemption. The Senior Preferred Stock will be
redeemable, at the Corporation's option, (A) at any time in whole or in
part from time to time, on or prior to the 90th day after the Issue
Date, or (B) at any time NatWest is the Holder of all of the Senior
Preferred Stock, in each case, at a redemption price equal to 100% of
the liquidation preference thereof, plus, without duplication, an
amount in cash equal to all accumulated and unpaid dividends (including
but not limited to an amount in cash equal to a prorated dividend for
the period from the immediately preceding dividend payment date to the
redemption date). Subject to clause (B) above, after the 90th day after
the Issue Date and prior to June 25, 2002, the Senior Preferred Stock
is not redeemable. On or after June 25, 2002, the Senior Preferred
Stock will be redeemable, at the Corporation's option, in whole at any
time or in part from time to time, at 107.5% of the liquidation
preference plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends (including but not limited to an
amount in cash equal to a prorated dividend for the period from the
immediately preceding dividend payment date to the Redemption Date).
(ii) Mandatory Redemption. The Senior Preferred Stock will be subject
to mandatory redemption, subject to contractual and other restrictions
with respect thereto and to the legal availability of funds therefor,
in the manner provided in paragraph (e) (iii) of this Article Fourth,
Section D, in whole on July 15, 2004 at a redemption price equal to the
liquidation preference thereof, plus, without duplication, all
accumulated and unpaid dividends to the date of redemption.
(iii) Procedures for Redemption. (A) At least ten (10) days and not
more than thirty (30) days prior to the date fixed for any redemption
of the Senior Preferred Stock, written notice (the "Redemption Notice")
shall be given by first class mail, postage prepaid, to each Holder of
record on the record date fixed for such redemption of the Senior
Preferred Stock at such Holder's address as it appears on the stock
books of the Corporation, provided that no failure to give such notice
nor any deficiency therein shall affect the validity of the procedure
for the redemption of any shares of Senior Preferred Stock to be
redeemed except as to the Holder or Holders to whom the Corporation has
failed to give said notice or except as to the Holder or Holders whose
notice was defective. The Redemption Notice shall state:
(1) whether the redemption is pursuant to paragraph (e)(i) or
(e)(ii) of this Article Fourth, Section D;
(2) the redemption price;
(3) whether all or less than all the outstanding shares of the
Senior Preferred Stock are to be redeemed and the total number of
shares of the Senior Preferred Stock being redeemed;
(4) the date fixed for redemption;
(5) that the Holder is to surrender to the Corporation, in the
manner, at the place or places and at the price designated, his
certificate or certificates representing the shares of Senior
Preferred Stock to be redeemed; and
(6) that dividends on the shares of the Senior Preferred Stock to
be redeemed shall cease to accumulate on such Redemption Date unless
the Corporation defaults in the payment of the redemption price.
(B) Each Holder of Senior Preferred Stock shall surrender the
certificate or certificates representing such shares of Senior
Preferred Stock to the Corporation, duly endorsed (or otherwise in
proper form for transfer, as determined by the Corporation), in the
manner and at the place designated in the Redemption Notice, and on the
Redemption Date the full redemption price for such shares shall
4
<PAGE>
be payable in cash to the Person whose name appears on such certificate
or certificates as the owner thereof, and each surrendered certificate
shall be canceled and retired. In the event that less than all of the
shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Corporation defaults
in the payment in full of the applicable redemption price, dividends on
the Senior Preferred Stock called for redemption shall cease to
accumulate on the Redemption Date, and all rights of the Holders of
redeemed shares shall terminate with respect thereto on the Redemption
Date, other than the right to receive the redemption price; provided,
however, that if a notice of redemption shall have been given as
provided in paragraph (iii) (A) above and the funds necessary for
redemption (including an amount in cash in respect of all dividends
that will accumulate to the Redemption Date) shall have been
irrevocably deposited in trust for the equal and ratable benefit for
the Holders of the shares to be redeemed, then, at the close of
business on the day on which such funds are segregated and set aside,
the Holders of the shares to be redeemed shall cease to be stockholders
of the Corporation and shall be entitled only to receive the redemption
price.
(f) Voting Rights.
(i) The Holders of Senior Preferred Stock except as otherwise
required under New York law or as set forth in paragraphs (ii), (iii)
and (iv) below, shall not be entitled or permitted to vote on any
matter required or permitted to be voted upon by the stockholders of
the corporation.
(ii) (A) So long as any shares of the Senior Preferred Stock are
outstanding, the Corporation shall not authorize or issue any class of
Parity Stock without the affirmative vote or consent of Holders of at
least a majority of the then outstanding shares of Senior Preferred
Stock, Exchange Preferred Stock and Private Exchange Preferred Stock,
voting or consenting, as the case may be, as one class, given in person
or by proxy, either in writing or by resolution adopted at an annual or
special meeting provided, however, that no such vote or consent shall
be necessary in connection with (i) issuance of additional shares of
Senior Preferred Stock pursuant to the provisions of paragraph (c) of
this Certificate of Amendment, or (ii) the authorization and issuance
of that number of shares of Exchange Preferred Stock and/or the Private
Exchange Preferred Stock not in excess of 4,130,000 shares less the sum
of (x) that number of shares of Senior Preferred Stock not exchanged in
the Exchange Offer and/or Private Exchange Offer and (y) that number of
shares of Senior Preferred Stock payable as dividends on such other
shares of Senior Preferred Stock referred to in clause (x), assuming
accumulation, to the extent applicable, of the maximum number of
Additional Dividends payable.
(B) So long as any shares of the Senior Preferred Stock are
outstanding, the Corporation shall not authorize or issue any class of
Senior Stock without the affirmative vote or consent of Holders of at
least a majority of the outstanding shares of Senior Preferred Stock,
Exchange Preferred Stock and Private Exchange Preferred Stock, voting
or consenting, as the case may be, as one class, given in person or by
proxy, either in writing or by resolution adopted at an annual or
special meeting.
(C) So long as any shares of the Senior Preferred Stock are
outstanding, the Corporation shall not amend this Certificate of
Amendment so as to affect adversely the specified rights, preferences,
privileges or voting rights of holders of shares of Senior Preferred
Stock without the affirmative vote or consent of Holders of at least a
majority of the issued and outstanding shares of (x) Senior Preferred
Stock, Exchange Preferred Stock and Private Exchange Preferred Stock,
voting or consenting, as the case may be, as one class, given in person
or by proxy, either in writing or by resolution adopted at an annual or
special meeting, if a corresponding amendment is to be made to the
certificate of designation governing the Exchange Preferred Stock and
Private Exchange Preferred Stock which amendment, together with such
amendment to this Certificate of Amendment, affects the Senior
Preferred Stock, Exchange Preferred Stock and Private Exchange
Preferred Stock identically in all material respects (a "Corresponding
Amendment") or (y) Senior Preferred Stock, voting or consenting, as the
case may
5
<PAGE>
be, as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting, if such amendment
is not a Corresponding Amendment.
(iii) Without the affirmative vote or consent of Holders of a
majority of the issued and outstanding shares of Senior Preferred
Stock, Exchange Preferred Stock and Private Exchange Preferred Stock,
voting or consenting, as the case may be, as a separate class, given in
person or by proxy, either in writing or by resolution adopted at an
annual or special meeting, the Corporation shall not consolidate with
or merge with or into, or convey, transfer or lease all or
substantially all of its assets to, any Person, unless: (A) the
resulting, surviving or transferee Person (the "Successor Corporation")
shall be a corporation, partnership, trust or limited liability company
organized and existing under the laws of the United States of America,
any State thereof or the District of Columbia and the Successor
Corporation (if not the Corporation) shall expressly assume, all the
obligations of the Corporation under the Senior Preferred Stock; (B)
immediately after giving effect to such transaction (and treating any
Indebtedness that becomes an obligation of the Successor Corporation or
any Subsidiary of the Successor Corporation as a result of such
transaction as having been incurred by the Successor Corporation or
such Subsidiary at the time of such transaction), no Default or Event
of Default shall have occurred and be continuing; (C) immediately after
giving effect to such transaction, the Successor Corporation would be
able to incur at least an additional $1.00 of Indebtedness pursuant to
paragraph (k)(i) of this Article Fourth, Section D; and (D) immediately
after giving effect to such transaction, the Consolidated Net Worth of
the Successor Corporation is not less than that of the Corporation
immediately prior to the transaction.
Notwithstanding the foregoing clauses (B) and (C), any Restricted
Subsidiary of the Corporation may consolidate with, merge into or
transfer all or part of its properties and assets to the Corporation.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of related
transactions) of all or substantially all of the properties or assets
of one or more Subsidiaries of the Corporation, the Capital Stock of
which constitutes all or substantially all of the properties and assets
of the Corporation shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Corporation.
(iv) (A) During any period in which the dividend rate on the Senior
Preferred Stock is greater than or equal to a rate per annum of 20% of
the liquidation preference per share, the number of directors
constituting the board of directors of the Corporation will be adjusted
to permit the holders of a majority of the then outstanding shares of
Senior Preferred Stock, Exchange Preferred Stock and Private Exchange
Preferred Stock, voting together as a class, to elect two directors to
the board of directors of the Corporation. Such voting rights will
continue until such time as all shares of Senior Preferred Stock,
Exchange Preferred Stock and Private Exchange Preferred Stock have been
redeemed pursuant to paragraph (e), at which time (1) the special right
of the Holders of Senior Preferred Stock, Exchange Preferred Stock and
Private Exchange Preferred Stock so to vote as a class for the election
of directors and (2) the term of office of the directors elected by the
Holders of the Senior Preferred Stock, Exchange Preferred Stock and
Private Exchange Preferred Stock shall each terminate and the directors
elected by the holders of Common Stock or Capital Stock (other than the
Senior Preferred Stock, Exchange Preferred Stock and Private Exchange
Preferred Stock) shall constitute the entire Board of Directors. At any
time after voting power to elect directors shall have become vested and
be continuing in the Holders of Senior Preferred Stock, Exchange
Preferred Stock and Private Exchange Preferred Stock pursuant to
paragraph (f) (iv) hereof, or if vacancies shall exist in the offices
of directors elected by the Holders of Senior Preferred Stock, Exchange
Preferred Stock and Private Exchange Preferred Stock, a proper officer
of the Corporation may, and upon the written request of the Holders of
record of at least twenty-five percent (25%) of the shares of Senior
Preferred Stock, Exchange Preferred Stock and Private Exchange
Preferred Stock then outstanding addressed to the secretary of the
Corporation, shall call a special meeting of the Holders of the Senior
Preferred Stock, Exchange Preferred Stock and Private Exchange
Preferred Stock, for the purpose of electing directors
6
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which such Holders are entitled to elect. If such meeting shall not be
called by a proper officer of the Corporation within twenty (20) days
after personal service of said written request upon the secretary of
the Corporation, or within twenty (20) days after mailing the same
within the United States by certified mail, addressed to the secretary
of the Corporation at its principal executive offices, then the Holders
of record of at least twenty-five percent (25%) of the outstanding
shares of Senior Preferred Stock, Exchange Preferred Stock and Private
Exchange Preferred Stock may designate in writing one of their number
to call such meeting at the expense of the Corporation, and such
meeting may be called by the Person so designated upon the notice
required for the annual meetings of stockholders of the Corporation and
shall be held at the place for holding the annual meetings of
stockholders. Any Holder of Senior Preferred Stock, Exchange Preferred
Stock or Private Exchange Preferred Stock so designated shall have, and
the Corporation shall provide, access to the lists of stockholders to
be called pursuant to the provisions hereof.
(B) At any meeting held for the purpose of electing directors at
which the Holders of Senior Preferred Stock, Exchange Preferred Stock
and Private Exchange Preferred Stock shall have the right, voting
together as a separate class, to elect directors as aforesaid, the
presence in person or by proxy of the Holders of at least a majority of
the outstanding shares of Senior Preferred Stock, Exchange Preferred
Stock and Private Exchange Preferred Stock entitled to vote thereat
shall be required to constitute a quorum of such Senior Preferred
Stock, Exchange Preferred Stock and Private Exchange Preferred Stock.
(C) Any vacancy occurring in the office of a director elected by the
Holders of Senior Preferred Stock, Exchange Preferred Stock and Private
Exchange Preferred Stock may be filled by the remaining director
elected by the Holders of Senior Preferred Stock, Exchange Preferred
Stock and Private Exchange Preferred Stock unless and until such
vacancy shall be filled by the Holders of Senior Preferred Stock,
Exchange Preferred Stock and Private Exchange Preferred Stock.
(v) In any case in which the Holders of Senior Preferred Stock shall
be entitled to vote pursuant to this paragraph (f) or pursuant to New
York law, each Holder of Senior Preferred Stock entitled to vote with
respect to such matter shall be entitled to one vote for each share of
Senior Preferred Stock held.
(g) Change of Control.
(i) Within 20 days of the occurrence of a Change of Control, the
Corporation shall make an offer to purchase (the "Change of Control
Offer") the outstanding Senior Preferred Stock at a purchase price
equal to 101% of the liquidation preference thereof plus, without
duplication, an amount in cash equal to all accumulated and unpaid
Regular Dividends (including Additional Dividends, if any) thereon
(including an amount in cash equal to a prorated Regular Dividend for
the period from the immediately preceding Regular Dividend Payment Date
to the Change of Control Payment Date) (such applicable purchase price
being hereinafter referred to as the "Change of Control Purchase
Price") in accordance with the procedures set forth in this paragraph
(g).
(ii) Within 20 days of the occurrence of a Change of Control, the
Corporation also shall (i) cause a notice of the Change of Control to
be sent at least once to the Dow Jones News Service or similar business
news service in the United States and (ii) send by first-class mail,
postage prepaid, to each holder of Senior Preferred Stock, at the
address appearing on the stock books of the Corporation, a notice
stating:
(1) that the Change of Control Offer is being made pursuant to
this paragraph (g) and that all Senior Preferred Stock tendered will
be accepted for payment, and otherwise subject to the terms and
conditions set forth herein;
(2) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 20 Business Days from
the date such notice is mailed (the "Change of Control Payment
Date"));
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(3) that any Senior Preferred Stock not tendered will continue to
accumulate dividends;
(4) that, unless the Corporation defaults in the payment of the
Change of Control Purchase Price, any Senior Preferred Stock
accepted for payment pursuant to the Change of Control offer shall
cease to accumulate dividends after the Change of Control Payment
Date;
(5) that holders accepting the offer to have their Senior
Preferred Stock purchased pursuant to a Change of Control Offer will
be required to surrender their certificates representing Senior
Preferred Stock to the Corporation at the address specified in the
notice prior to the close of business on the Business Day preceding
the Change of Control Payment Date;
(6) that holders will be entitled to withdraw their acceptance if
the Corporation receives, not later than the close of business on
the third Business Day preceding the Change of Control Payment Date,
a telegram, telex, facsimile transmission or letter setting forth
the name of the holder, the number of shares of Senior Preferred
Stock delivered for purchase, and a statement that such holder is
withdrawing his election to have such Senior Preferred Stock
purchased;
(7) that holders whose Senior Preferred Stock is being purchased
only in part will be issued new certificates representing the number
of shares of Senior Preferred Stock equal to the unpurchased portion
of the certificates surrendered; and
(8) any other procedures that a holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance.
(iii) In the event that a Change of Control occurs and the holders of
Senior Preferred Stock exercise their right to require the Corporation
to purchase Senior Preferred Stock, if such purchase constitutes a
"tender offer" for purposes of Rule 14e-1 under the Exchange Act at
that time, the Corporation will comply with the requirements of Rule
14e-1 as then in effect with respect to such repurchase.
(iv) On the Change of Control Payment Date, the Corporation shall (A)
accept for payment the shares of Senior Preferred Stock validly
tendered pursuant to the Change of Control Offer, (B) promptly mail to
the Holders of shares so accepted the Change of Control Purchase Price
therefor and (C) cancel and retire each surrendered Certificate and
execute a new Senior Preferred Stock certificate equal to any
unpurchased shares represented by a certificate surrendered. Unless the
Corporation defaults in the payment for the shares of Senior Preferred
Stock tendered pursuant to the Change of Control Offer, dividends shall
cease to accrue with respect to the shares of Senior Preferred Stock
tendered and all rights of Holders of such tendered shares shall
terminate, except for the right to receive payment therefor, on the
Change of Control Payment Date.
(v) Prior to the mailing of the notice referred to in paragraph (g)
(ii) of this Article Fourth, Section D, but in any event within 20 days
following the date on which a Change of Control occurs, the Corporation
covenants that, if the purchase of the Senior Preferred Stock would
violate or constitute a default or be prohibited under any instrument
governing Indebtedness outstanding at the time, then the Corporation
will, to the extent needed to permit such purchase of Senior Preferred
Stock, either (i) repay in full all Indebtedness under any such
instrument, or (ii) obtain the requisite consents under any such
instrument to permit the redemption of the Senior Preferred Stock as
provided above. The Corporation will first comply with the covenant in
the preceding sentence before it will be required to redeem Senior
Preferred Stock pursuant to the provisions described above.
(h) Conversion or Exchange. The Holders of shares of Senior Preferred
Stock shall not have any rights hereunder to convert such shares into or
exchange such shares for shares of any other class or classes or of any
other series of any class or classes of Capital Stock of the Corporation
other than the Exchange Preferred Stock and the Private Exchange Preferred
Stock as provided in the Registration Rights Agreement.
(i) Reissuance of Senior Preferred Stock. Shares of Senior Preferred
Stock that have been issued and reacquired in any manner, including shares
purchased or redeemed or exchanged, shall (upon compliance
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with any applicable provisions of the laws of New York) have the status of
authorized and unissued shares of Preferred Stock undesignated as to series
and may be redesignated and reissued as part of any series of Preferred
Stock, provided that any issuance of such shares of Preferred Stock must be
in compliance with the terms hereof.
(j) Business Day. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business
Day, such payment, redemption or exchange shall be made on the immediately
succeeding Business Day.
(k) Certain Additional Provisions.
(i) Limitation on Indebtedness. The Corporation will not, and will
not permit any Restricted Subsidiary of the Corporation to, directly or
indirectly, incur any Indebtedness provided that the Corporation may
incur Indebtedness if on the date thereof there exists no Default or
Event of Default immediately prior and subsequent thereto and the
Corporation's Annualized Operating Cash Flow Ratio, after giving effect
to the Incurrence of such Indebtedness, would be no greater than 11.0
to 1.0.
Notwithstanding the foregoing paragraph, the Corporation may Incur
the following Indebtedness:
(A) Indebtedness represented by Capitalized Lease Obligations,
mortgage financings or Purchase Money Indebtedness, in each case
Incurred for the purpose of financing all or any part of the
purchase price or cost of construction or improvement of property
used in a Permitted Business or Incurred to refinance any such
purchase price or cost of construction or improvement, in each case
Incurred no later than 365 days after the date of such acquisition
or the date of completion of such construction or improvement;
provided, however, that the principal amount of any Indebtedness
Incurred pursuant to this clause (A) shall not exceed $15 million at
any time outstanding;
(B) Indebtedness of the Corporation owing to and held by any
Wholly-Owned Subsidiary or Indebtedness of a Restricted Subsidiary
owing to and held by the Corporation or any Wholly-Owned Subsidiary;
provided, however, that any subsequent issuance or transfer of any
Capital Stock or any other event which results in any such Wholly-
Owned Subsidiary ceasing to be a Wholly-Owned Subsidiary or any
subsequent transfer of any such Indebtedness (except to the
Corporation or any Wholly-Owned Subsidiary) shall be deemed, in each
case, to constitute the incurrence of such Indebtedness by the
issuer thereof;
(C) Indebtedness represented by Existing Indebtedness and any
Refinancing Indebtedness;
(D) (a) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on the date on which such Restricted Subsidiary was
acquired by the Corporation (other than Indebtedness Incurred in
anticipation of, or to provide all or any portion of the funds or
credit support utilized to consummate the transaction or series of
related transactions pursuant to which such Restricted Subsidiary
became a Subsidiary or was otherwise acquired by the Corporation);
provided, however, that at the time such Restricted Subsidiary is
acquired by the Corporation, the Corporation would have been able to
incur $1.00 of additional Indebtedness pursuant to this paragraph
(k)(i) after giving effect to the Incurrence of such Indebtedness
pursuant to this clause (D) and (b) Refinancing Indebtedness
Incurred by a Restricted Subsidiary in respect of Indebtedness
Incurred by such Restricted Subsidiary pursuant to this clause (D);
(E) Indebtedness (a) in respect of performance bonds, bankers'
acceptances and surety or appeal bonds provided by the Corporation
or any of its Restricted Subsidiaries to their customers in the
ordinary course of their business, (b) in respect of performance
bonds or similar obligations of the Corporation or any of its
Restricted Subsidiaries for or in connection with pledges, deposits
or payments made or given in the ordinary course of business in
connection with or to secure statutory, regulatory or similar
obligations, including obligations under health, safety or
environmental obligations and (c) arising from Guarantees to
suppliers, lessors, licensees,
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contractors, franchises or customers of obligations (other than
Indebtedness) incurred in the ordinary course of business;
(F) Indebtedness under Currency Agreements and Interest Rate
Agreements; provided, however, that in the case of Currency
Agreements and Interest Rate Agreements, such Currency Agreements
and Interest Rate Agreements are entered into for bona fide hedging
purposes of the Corporation or its Restricted Subsidiaries (as
determined in good faith by the Board of Directors of the
Corporation) and correspond in terms of notional amount, duration,
currencies and interest rates as applicable, to Indebtedness of the
Corporation or its Restricted Subsidiaries Incurred without
violation of the terms of the Senior Preferred Stock or to business
transactions of the Corporation or its Restricted Subsidiaries on
customary terms entered into in the ordinary course of business;
(G) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar
obligations, or from Guarantees or letters of credits, surety bonds
or performance bonds securing any obligations of the Corporation or
any of its Restricted Subsidiaries pursuant to such agreements, in
each case incurred in connection with the disposition of any
business assets or Restricted Subsidiary of the Corporation (other
than Guarantees of Indebtedness or other obligations incurred by any
Person acquiring all or any portion of such business assets or
Restricted Subsidiary of the Corporation for the purpose of
financing such acquisition) in a principal amount not to exceed the
gross proceeds actually received by the Corporation or any of its
Restricted Subsidiaries in connection with such disposition;
(H) Indebtedness consisting of Guarantees by a Restricted
Subsidiary of senior Indebtedness incurred by the Corporation (so
long as such Restricted Subsidiary could have incurred such
Indebtedness directly); and
(I) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument drawn
against insufficient funds in the ordinary course of business in an
amount not to exceed $500,000 at any time, provided that such
Indebtedness is extinguished within two business days of its
incurrence.
In addition, the Corporation will not permit any Unrestricted
Subsidiary to incur any Indebtedness other than Non-Recourse Debt.
(ii) Limitation on Restricted Payments. The Corporation shall not,
and shall nor permit any of its Restricted Subsidiaries, directly or
indirectly, to (A) declare or pay any dividend or make any distribution
on or in respect of its Junior Stock (including any payment in
connection with any merger or consolidation involving the Corporation
or any of its Restricted Subsidiaries) except (1) dividends or
distributions payable in its Junior Stock (other than Disqualified
Stock) or in options, warrants or other rights to purchase such Junior
Stock, and (2) dividends or distributions payable to the Corporation or
a Wholly-Owned Subsidiary of the Corporation and (3) dividends on
Senior Preferred Stock (in cash or additional shares of Senior
Preferred Stock), (B) purchase, redeem, retire or otherwise acquire for
value any Junior Stock of the Corporation or any Restricted Subsidiary
of the Corporation held by Persons other than the Corporation or
another Restricted Subsidiary of the Corporation (in either case, other
than in exchange for its Junior Stock (other than Disqualified Stock)),
or (C) make any Investment (other than a Permitted Investment) in any
Person (any such dividend, distribution, purchase, redemption,
repurchase, defeasance, other acquisition, retirement or Investment as
described in preceding clauses (A) through (C) being referred to as a
"Restricted Payment"); if at the time the Corporation or such
Restricted Subsidiary makes such Restricted Payment:
(A) a Default or Event of Default has occurred and is continuing
(or would result therefrom);
(B) the Corporation is not able to incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) under paragraph (k) (i) of
this Article Fourth, Section D; or
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(C) the aggregate amount of such Restricted Payment and all other
Restricted Payments declared or made subsequent to the Issue Date
would exceed the sum of (1) 50% of the Consolidated Net Income
accrued during the period (treated as one accounting period) from
the first day of the fiscal quarter beginning on or after the Issue
Date to the end of the most recent fiscal quarter ending prior to
the date of such Restricted Payment as to which financial results
are available (but in no event ending more than 135 days prior to
the date of such Restricted Payment) (or, in case such Consolidated
Net Income shall be a deficit, minus 100% of such deficit); (2) the
aggregate net proceeds received by the Corporation from the issue or
sale of its Capital Stock (other than Disqualified Stock) or other
capital contributions subsequent to the Issue Date (other than net
proceeds received from an issuance or sale of such Capital Stock to
a Subsidiary of the Corporation or an employee stock ownership plan
or similar trust); provided, however, that the value of any non-cash
net proceeds shall be as determined by the Board of Directors in
good faith, except that in the event the value of any non-cash net
proceeds shall be $1 million or more, the value shall be as
determined in writing by an independent investment banking firm of
nationally recognized standing.
The provisions of the foregoing paragraph shall not prohibit:
(i) any purchase or redemption of Junior Stock of the Corporation
made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Junior Stock of the Corporation (other than
Disqualified Stock and other than Junior Stock issued or sold to a
Subsidiary or an employee stock ownership plan or similar trust);
provided, however, that (A) such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments and
(B) the Net Cash Proceeds from such sale shall be excluded from
clause (C) (2) of the foregoing paragraph; or
(ii) dividends paid within 60 days after the date of declaration
if at such date of declaration such dividend would have complied
with this provision; provided, however, that such dividend shall be
included in the calculation of the amount of Restricted Payments;
provided, however, that no Event of Default shall have occurred or be
continuing at the time of such payment or as a result thereof.
For purposes of determining compliance with the foregoing covenant,
Restricted Payments may be made with cash or non-cash assets, provided
that any Restricted Payment made other than in cash shall be valued at
the fair market value (determined, subject to the additional
requirements of the immediately succeeding proviso, in good faith by
the Board of Directors) of the assets so utilized in making such
Restricted Payment, provided further that (i) in the case of any
Restricted Payment made with Capital Stock or Indebtedness, such
Restricted Payment shall be deemed to be made in an amount equal to the
greater of the fair market value thereof and the liquidation preference
(if any) or principal amount of the Capital Stock or Indebtedness, as
the case may be, so utilized, and (ii) in the case of any Restricted
Payment in an aggregate amount in excess of $1 million, a written
opinion as to the fairness of the valuation thereof (as determined by
the Corporation) for purposes of determining compliance with the
"Limitation on Restricted Payments" covenant above shall be issued by
an independent investment banking firm of national standing.
(iii) Limitation on Affiliate Transactions. The Corporation will
not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, enter into or conduct any transaction or
series of related transactions (including the purchase, sale, lease
or exchange of any property or the rendering of any service) with or
for the benefit of any Affiliate of the Corporation, other than a
Wholly-Owned Subsidiary (an "Affiliate Transaction") unless: (i) the
terms of such Affiliate Transaction are no less favorable to the
Corporation or such Restricted Subsidiary, as the case may be, than
those that could be obtained at the time of such transaction in
arm's length dealings with a Person who is not such an Affiliate;
(ii) the terms of such transaction have been approved by a majority
of the members of the Board of Directors of the Corporation and by a
majority of the disinterested members of such Board, if any (and
such majority or majorities, as the case may
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be, determines that such Affiliate Transaction satisfies the
criteria in (i) above); and (iii) the Corporation has received a
written opinion from an independent investment banking firm of
nationally recognized standing that such Affiliate Transaction is
fair to the Corporation or such Restricted Subsidiary, as the case
may be, from a financial point of view.
The foregoing paragraph shall not apply to (i) any Restricted
Payment permitted to be made pursuant to paragraph (k)(ii) of this
Article Fourth, Section D, (ii) any issuance or securities, or other
payments, awards or grants in cash, securities or otherwise pursuant
to, or the funding of, employment arrangements, or any stock options
and stock ownership plans for the benefit of employees, officers and
directors, consultants and advisors approved by the Board of
Directors of the Corporation, (iii) loans or advances to employees
in the ordinary course of business of the Corporation or any of its
Restricted Subsidiaries in aggregate amount outstanding not to
exceed $500,000 at any time, (iv) any transaction between Wholly-
Owned Subsidiaries, (v) indemnification agreements with, and the
payment of fees and indemnities to, directors, officers and
employees of the Corporation and its Restricted Subsidiaries, in
each case in the ordinary course of business, (vi) transactions
pursuant to agreements in existence on the Issue Date which are, in
the aggregate, immaterial to the Corporation and its Restricted
Subsidiaries taken as a whole, (vii) any employment, non-competition
or confidentiality agreements entered into by the Corporation or any
of its Restricted Subsidiaries with its employees in the ordinary
course of business and (viii) the issuance of Junior Stock of the
Corporation (other than Disqualified Stock).
(iv) Limitation on Preferred Stock of Restricted Subsidiaries. The
Corporation will not permit any of its Restricted Subsidiaries to
issue any Preferred Stock (except Preferred Stock to the Corporation
or a Restricted Subsidiary) or permit any person (other than the
Corporation or a Restricted Subsidiary) to hold any such Preferred
Stock unless the Corporation or Restricted Subsidiary would be
entitled to incur or assume Indebtedness under the covenant
described under paragraph (k)(i) of this Article Fourth, Section D
in the aggregate principal amount equal to the aggregate liquidation
value of the Preferred Stock to be issued.
(v) SEC Reports. The Corporation will provide to the holders of
the Senior Preferred Stock, within 15 days after it files them with
the Commission, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations
prescribe) which the Corporation files with the Commission pursuant
to Section 13 or 15(d) of the Exchange Act. In the event that the
Corporation is not required to file such reports with the Commission
pursuant to the Exchange Act, the Corporation will nevertheless
deliver such Exchange Act information to the holders of the Senior
Preferred Stock within 15 days after it would have been required to
file it with the Commission.
(l) Definitions. As used in this Certificate of Amendment, the following
terms shall have the following meanings (with terms defined in the singular
having comparable meanings when used in the plural and vice versa), unless
the context otherwise requires:
"Additional Dividends" has the meaning set forth in the Registration
Rights Agreement.
"Affiliate" of any specified person means 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 "controlling" and "controlled" have meanings correlative to the
foregoing.
"Affiliate Transaction" shall have the meaning ascribed to it in
paragraph k(iii) of this Article Fourth, Section D.
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"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.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at
the interest rate borne by the Senior Preferred Stock, compounded annually)
of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale/Leaseback Transaction
(including any period for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i)
the sum of the products of the number of year from the date of
determination to the dates of each successive scheduled principal payment
of such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by (ii) the sum of
all such payments.
"Board of Directors" shall have the meaning ascribed to it in the first
paragraph of this Certificate of Amendment.
"Business Day" means any day except a Saturday, a Sunday, or any day on
which banking institutions in New York, New York are required or authorized
by law or other governmental action to be closed.
"Capital Stock" of any Person means any and all shares, partnership or
other equity interests, rights to purchase, warrants, options,
participations or other equivalents of or interests in (however designated)
equity of such Person, including any Preferred Stock, but excluding any
debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to
be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP, and the Stated Maturity
thereof shall be the date of the last payment of rent or any other amount
due under such lease prior to the first date such lease may be terminated
without penalty.
"Certificate of Amendment" means this Certificate of Amendment creating
the Senior Preferred Stock.
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"Change of Control" means (i) any sale, lease, exchange or other transfer
(in one transaction or a series of related transactions) of all or
substantially all of the assets of the Corporation and its Subsidiaries; or
(ii) during any period of twelve consecutive months after the Issue Date,
individuals who at the beginning of any such twelve-month period
constituted the Board of Directors of the Corporation (together with any
new directors whose election by such Board or whose nomination for election
by any shareholders of the Corporation 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 Corporation then in office; or (iii) the
acquisition by any Person or group of related Persons (other than an
Excluded Person or Excluded Group) for purposes of Section 13(d) of the
Exchange Act, of the power, directly or indirectly, to vote or direct the
voting of securities having more than 50% of the ordinary voting power for
the election of directors of the Corporation or of any direct or indirect
holding company thereof.
"Common Stock" of any Person means all Capital Stock of such Person that
is generally entitled to (i) vote in the election of directors of such
Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or
others that will control the management and policies of such Person.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Corporation and its Restricted Subsidiaries determined in
accordance with GAAP, plus, to the extent not included in such interest
expense (i) interest expense attributable to Capitalized Lease Obligations
leases, (ii) amortization of debt discount, (iii) capitalized interest,
(iv) non-cash interest expense, (v) commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) interest actually paid by the Corporation or any such
Restricted Subsidiary under any Guarantee of Indebtedness or other
obligation of any other Person, (vii) net payments (whether positive or
negative) pursuant to Interest Rate Agreements, (viii) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or
fees to any Person (other than the Corporation) in connection with
Indebtedness Incurred by such plan or trust and (ix) cash and Disqualified
Stock dividends in respect of all Preferred Stock of Subsidiaries and
Disqualified Stock of the Corporation held by Persons other than the
Corporation or a Wholly-Owned Subsidiary and less (a) to the extent
included in such interest expense, the amortization of capitalized debt
issuance costs and (b) interest income. Notwithstanding the foregoing, the
Consolidated Interest Expense with respect to any Restricted Subsidiary of
the Corporation, that was not a Wholly-Owned Subsidiary, shall be included
only to the extent (and in the same proportion) that the net income of such
Restricted Subsidiary was included in calculating Consolidated Net Income.
"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Corporations and its consolidated Subsidiaries
determined after payment of dividends on the Preferred Stock in accordance
with GAAP; provided, however, that there shall not be included in such
Consolidated Net income: (i) any net income (loss) of any person acquired
by the Corporation or any of its Restricted Subsidiaries in a pooling of
interests transaction for any period prior to the date of such acquisition,
(ii) any net income of any Restricted Subsidiary of the Corporation if such
Restricted Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Corporation (other
than restrictions in effect on the Issue Date with respect to a Restricted
Subsidiary of the Corporation, (iii) any gain or loss realized upon the
sale or other disposition of any assets of the Corporation or its
consolidated Restricted Subsidiaries (including pursuant to any
Sale/Leaseback Transaction) which are not sold or otherwise disposed of in
the ordinary course of business and any gain or loss realized upon the sale
or other disposition of any Capital Stock of any Person, (iv) any
extraordinary gain or loss, (v) the cumulative effect of a change in
accounting principles, (vi) the net income of any Person, other than a
Restricted Subsidiary, except to the extent of the lesser of (A) dividends
or distributions paid to the Corporation or any of its Restricted
Subsidiaries by such Person and (B) the net income of such Person (but in
no event less than zero), and the net loss of such Person (other than an
Unrestricted Subsidiary) shall be included only to the extent of the
aggregate
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Investment of the Corporation or any of its Restricted Subsidiaries in such
Person and (vii) any non-cash expenses attributable to grants or exercises
of employee stock options. Notwithstanding the foregoing, Consolidated Net
Income for any period shall be reduced by the aggregate amount of dividends
paid during such period pursuant to clause (v) of paragraph (b) of
paragraph (k)(ii) of this Article Fourth, Section D and for the purpose of
paragraph (k)(ii) of this Article Fourth, Section D only, there shall be
excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Corporation or a Restricted Subsidiary to the extent such dividends,
repayments or transfers increase the amount of Restricted Payments
permitted under such covenant.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Corporation and its consolidated Restricted
Subsidiaries, determined on a consolidated basis in accordance with GAAP,
as of the end of the most recent fiscal quarter of the Corporation ending
prior to the taking of any action for the purpose of which the
determination is being made and for which financial statements are
available (but in no event ending more than 135 days prior to the taking of
such action), as (i) the par or stated value of all outstanding Capital
Stock of the Corporation plus (ii) paid in capital or capital surplus
relating to such Capital Stock plus (iii) any retained earnings or earned
surplus less (A) any accumulated deficit and (B) any amounts attributable
to Disqualified Stock.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap, agreement or other similar agreement to which
Person is a party or a beneficiary.
"Default" means any event or condition that is, or after notice or
passage of time of both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock which, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event (other than an event
which would constitute a Change of Control), (i) matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or
is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the option of the holder thereof, in whole
or in part in paragraph (e) (ii) of this Article Fourth, Section D, or (ii)
is convertible into or exchangeable (unless at the sole option of the
issuer thereof) for debt securities at any time prior to the final stated
maturity of the Senior Preferred Stock.
"Dividend Period" means the Initial Dividend Period and, thereafter, each
quarterly dividend period.
"Event of Default" means the occurrence or existence of any of the
following events or circumstances:
(a) the Corporation fails to redeem the Senior Preferred Stock on or
before July 15, 2004 or fails to discharge any redemption obligation
with respect to the Senior Preferred Stock;
(b) the Company fails to make a Change of Control Offer if such offer
is required by the provisions set forth under paragraph (g) (i) of this
Article Fourth, Section D hereof or fails to purchase shares of Senior
Preferred Stock from holders who elect to have such shares purchases
pursuant to the Change of Control Offer;
(c) a breach or violation of any of the provisions of paragraph (k)
of this Article Fourth, Section D occurs and the breach or violation
continues for 60 days or more after the Corporation receives notice
thereof specifying the default from the holders of 25% of the shares of
Senior Preferred Stock, Exchange Preferred Stock and Private Exchange
Preferred Stock then outstanding; or
(d) the Corporation fails to pay at the final stated maturity (giving
effect to any extensions thereof) the principal amount of any
Indebtedness of the Corporation or any Restricted Subsidiary of the
Corporation, or the final stated maturity under any such Indebtedness
is accelerated, in each case, after a 20 day period during which such
default shall not have been cured or such acceleration rescinded.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
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"Exchange Notice" shall have the meaning ascribed to it in paragraph (g)
hereof.
"Exchange Offer" means a registered offer to exchange any and all shares
of the Senior Preferred Stock for a like number of shares (with a
liquidation preference equal to that of the surrendered shares) of another
series of the Corporation's senior exchangeable preferred stock that has
terms identical in all material respects to the Senior Preferred Stock
except that the Exchange Preferred Stock shall have been registered
pursuant to an effective registration statement under the Securities Act
and the certificates therefor shall contain no restrictive legends thereon.
"Exchange Preferred Stock" means the series of the Corporation's senior
exchangeable preferred stock publicly offered in exchange for the Senior
Preferred Stock as contemplated by the Registration Rights Agreement and
having terms identical in all material respects to the Senior Preferred
Stock.
"Excluded Group" means a "group" (as such term is used in Section 13(d)
of the Exchange Act) that includes one or more Excluded Persons; provided,
that the voting power of the Capital Stock of the Corporation "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 Corporation on the Issue Date and any Affiliate of any of the
foregoing that is wholly-owned by any of the foregoing.
"Existing Indebtedness" means Indebtedness of the Corporation and its
Subsidiaries in existence and outstanding on the Issue Date.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the date of the Indenture, including
those 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 or in such other statements by such other entity as approved by a
significant segment of the accounting profession. All ratios and
computations based on GAAP contained in the Indenture shall be computed in
conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person
and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness of such other Person (whether arising by
virtue of partnership arrangements, or by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such
Indebtedness of the payment thereof or to protect such obligee against loss
in respect thereof or to protect such obligee against loss in respect
thereof (in whole or in part); provided, however, that the term "Guarantee"
used as a verb has a corresponding meaning.
"Holder" means a holder of shares of Senior Preferred Stock, Exchange
Preferred Stock or Private Exchange Preferred Stock, as the context
requires, as reflected in the stock books of the Corporation.
"Incur" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any indebtedness or Capital Stock of a Person
existing at the time such person becomes a Restricted Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be
incurred by such Restricted Subsidiary at the time it becomes a Restricted
Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if
any) in respect of indebtedness of such Person for borrowed money, (ii) the
principal of and premium (if any) in respect of obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person in respect of letters of credit or other
similar instruments (including reimbursement obligations with respect
thereto), (iv) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services (except
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trade payables incurred in the ordinary course of business, 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 by the
Corporation in good faith and for which appropriate reserves have been
established), (v) all Capitalized Lease Obligations and all Attributable
Indebtedness of such Person, (vi) all Indebtedness of other Persons secured
by a Lien on any asset of such Person, whether or not such Indebtedness is
assumed by such Person, (vii) all Indebtedness of other Persons to the
extent Guaranteed by such Person, (viii) the amount of all obligations of
such Person with respect to the redemption, repayment or other repurchase
of any Disqualified Stock other than the Senior Preferred Stock or, with
respect to any Restricted Subsidiary of the Corporation, any Preferred
Stock of such Restricted Subsidiary to the extent such obligation arises on
or before the stated maturity of such Preferred Stock (but excluding, in
each case, accrued dividends) and (ix) to the extent not otherwise included
in this definition, obligations under Currency Agreements and Interest Rate
Agreements. The amount of Indebtedness of any Person at any date shall be
the outstanding principal amount of all unconditional obligations as
described above, as such amount would be reflected on a balance sheet
prepared in accordance with GAAP, and the maximum liability of such Person,
upon the occurrence of the contingency giving rise to the obligation, of
any contingent obligations described above at such date.
"Initial Dividend Period" means the dividend period commencing on the
Issue Date and ending on the first Regular Dividend Payment Date to occur
thereafter.
"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate
option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or
a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that
are recorded as accounts payable on the balance sheet of such Person) or
other extension of credit (including by way of Guarantee or similar
arrangement, but excluding any debt or extension of credit represented by a
bank deposit other than a time deposit) or capital contribution to (by
means of any transfer of cash or other property to others or any payment
for property or services for the account or use others), or any purchase or
acquisition of Capital Stock, Indebtedness or other similar instruments
issued by such Person. For purposes of paragraph (k) (2) of this Article
Fourth, Section D, (i) "Investment" shall include the portion
(proportionate to the Corporation's equity interest in a Restricted
Subsidiary to be designated as an Unrestricted Subsidiary) of the fair
market value of the net assets of such Restricted Subsidiary of the
Corporation at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a redesignation of
such Subsidiary as a Restricted Subsidiary, the Corporation shall be deemed
to continue to have a permanent "Investment" in an Unrestricted Subsidiary
in an amount (if positive) equal to (x) the Corporation's "Investment" in
such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Corporation's equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time that
such Subsidiary is so redesignated a Restricted Subsidiary; and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued
at its fair market value at the time of such transfer, in each case as
determined in good faith by the Board of Directors and evidenced by a
resolution of such Board of Directors certified in an officers'
certificate.
"Issue Date" means the date on which the Preferred Stock are originally
issued.
"Junior Stock" shall have the meaning ascribed to it in paragraph (b) of
this Article Fourth, Section D.
"Lien" means any security interest, charge or encumbrance of any kind
(including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security
interest).
"Mandatory Redemption Price" shall have the meaning ascribed to it in
paragraph (a) of this Article Fourth, Section D.
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"NatWest" means NatWest Capital Markets Limited and its Affiliates.
"Net Cash Proceeds" with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees, discounts
or commissions and brokerage, consultant and other fees actually incurred
in connection with such issuance or sale and net of taxes paid or payable
as a result of such issuance or sale.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Corporation nor any Restricted Subsidiary (a) provides any Guarantee or
credit support of any kind (including any undertaking, guarantee,
indemnity, agreement or instrument that would constitute Indebtedness) or
(b) is directly or indirectly liable (as a guarantor, general partner or
otherwise) and (ii) no default with respect to which (including any rights
that the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of time or both)
any holder of any other Indebtedness of the Corporation or any Restricted
Subsidiary to declare a default under such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity.
"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 cash, 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.
"Parity Stock" shall have the meaning ascribed to it in paragraph (b)
hereof.
"Permitted Business" means any communications or media business including
any which is the same as or related, ancillary or complementary to any of
the businesses of the Corporation and its Restricted Subsidiaries on the
Issue Date.
"Permitted Investment" means an Investment by the Corporation or any of
its Restricted Subsidiaries in: (i) a Wholly-Owned Subsidiary of the
Corporation; provided, however, that the primary business of such Wholly-
Owned Subsidiary is a Permitted Business; (ii) another Person if as a
result of such Investment such other Person becomes a Wholly-Owned
Subsidiary of the Corporation or is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, the
Corporation or a Wholly-Owned Subsidiary of the Corporation; provided,
however, that in each case such Person's primary business is a Permitted
Business; (iii) Temporary Cash Investment; (iv) receivables owing to the
Corporation or any of its Restricted Subsidiaries, created or acquired in
the ordinary course of business and payable or dischargeable in accordance
with customary trade terms; (v) payroll, travel and similar advances to
cover matters that are expected at the time of such advances ultimately to
be treated as expenses for accounting purposes and that are made in the
ordinary course of business; (vi) loans and advances to employees made in
the ordinary course of business consistent with past practices of the
Corporation or such Restricted Subsidiary; (vii) stock, obligations or
securities received in settlement of debts created in the ordinary course
of business and owing to the Corporation or any of its Restricted
Subsidiaries or in satisfaction of judgments or claims; (viii) prepayments
and other credits to supplies made in the ordinary course of business in
connection with or to secure statutory, regulatory or similar obligations,
including obligations under health, safety or environmental obligations and
(ix) a Person engaged in a Permitted Business or a loan or advance
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to a Restricted Subsidiary the proceeds of which are used solely to make an
investment in a Person engaged in a Permitted Business or a Guarantee by
the Corporation of Indebtedness of any Person in which such Investment has
been made provided, however, that no Permitted Investments may be made
pursuant to this clause (ix) if (A) at the time the Corporation or such
Restricted Subsidiary makes such Investment the Corporation is not able to
incur an additional $1.00 of Indebtedness pursuant to paragraph (a) under
paragraph (k)(i) of this Article Fourth, Section D or (B) such Investment
would not be permitted by paragraph (k)(iii) of this Article Fourth,
Section D.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision hereof or any other
entity.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however, designated) which is
preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Private Exchange Preferred Stock" means a series of the Corporation's
senior exchangeable preferred stock contemplated by the Registration Rights
Agreement issued under the same certificate of designation as the Exchange
Preferred Stock and having terms identical in all material respects to the
Senior Preferred Stock.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the
cost of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection
therewith.
"Redemption Date", with respect to any shares of Senior Preferred Stock,
means the date on which such shares of Senior Preferred Stock are redeemed
by the Corporation.
"Redemption Notice" shall have the meaning ascribed to it in paragraph
(e) of this Article Fourth, Section D.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances,
replaces, renews, repays or extends (including pursuant to any defeasance
or discharge mechanism) (collectively, "refinances," and "refinanced" shall
have a correlative meaning) any Existing Indebtedness or Incurred in
compliance with the terms of paragraph (k) (i) (including Indebtedness of
the Corporation that refinances Indebtedness of any Restricted Subsidiary
and Indebtedness of any Restricted Subsidiary that refinances Indebtedness
of another Restricted Subsidiary) including Indebtedness that refinances
Refinancing Indebtedness; provided, however, that (i) the Refinancing
Indebtedness has a Stated Maturity no earlier than the Stated Maturity of
the Indebtedness being refinanced, (ii) the Refinancing Indebtedness has an
Average Life at the time such Refinancing Indebtedness is Incurred that is
equal to or greater than the Average Life of the Indebtedness being
refinanced, (iii) the Refinancing Indebtedness is in an aggregate principal
amount (or if issued with original issue discount, an aggregate issue
price) that is equal to or less than the sum of the aggregate principal
amount (or if issued with original issue discount, the aggregate accreted
value) then outstanding of the Indebtedness being refinanced (plus the
amount of any premium required to be paid in connection therewith and
reasonable fees and expenses therewith) provided, further, that Refinancing
Indebtedness shall not include Indebtedness of a Subsidiary which
refinances Indebtedness of the Corporation.
"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 Senior
Preferred Stock.
"Registration Rights Agreement" means the Preferred Stock Registration
Rights Agreement dated as of the Issue Date among the Corporation and
NatWest Capital Markets Limited.
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"Regular Dividend Payment Date" means January 15, April 15, July 15 and
October 15 of each year.
"Regular Dividend Record Date" means January 1, April 1, July 1 and
October 1 of each year.
"Restricted Subsidiary" means any Subsidiary of the Corporation other
than an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Corporation or a Restricted
Subsidiary transfers such property to a Person and the Corporation or a
Subsidiary leases it from such Person.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Started Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of
principal or face amount of such security is due and payable, including
pursuant to any mandatory redemption provisions.
"Subsidiary" of any Person incorporated in the United States means any
corporation, association, partnership or other business entity organized in
the United States of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency)
to vote in the election of directors, managers or trustees thereof is at
the time owned or controlled, directly or indirectly, by (i) such Person,
(ii) such Person and one or more Subsidiaries of such Person or (iii) one
or more Subsidiaries of such Person. Unless otherwise specified herein,
each reference to a Subsidiary shall refer to a Subsidiary of the
Corporation.
"Subsidiary Guarantees" means the Guarantee of the Notes by a Guarantor.
"Temporary Cash Investments" means any of the following: (i) any
Investment in direct obligations of the United States of America or any
agency thereof or obligations Guaranteed by the United States of America or
any agency thereof, (ii) Investments in time deposit accounts, certificates
of deposit and money market deposits maturing within 180 days of the date
of acquisition thereof issued by the bank or trust company which is
organized under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States of America having
capital surplus and undivided profits aggregating in excess of $250 million
(or the foreign currency equivalent thereof) and whose long-term debt, or
whose parent holding company's long-term debt, is rated "A" (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the
Securities Act), (iii) repurchase obligations with a term of not more than
30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in
clause (ii) above, (iv) Investments in commercial paper, maturing not more
than 180 days after the date of acquisition, issued by a corporation (other
than an Affiliate of the Corporation) organized and in existence under the
laws of the United States of America or any foreign country recognized by
the United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. or "A-1" (or higher) according to Standard and
Poor's Ratings Group, (v) Investments in securities with maturities of six
months or less from the date of acquisition issued or fully guaranteed by
any state, commonwealth or territory of the United States of America, or by
any political subdivision or taxing authority thereof, and rated at least
"A" by Standard & Poor's Ratings Group or "A" by Moody's Investors Service,
Inc., and (vi) Investments in mutual funds whose investment guidelines
restrict such funds' investments to those satisfying the provisions of
clauses (i) through (v) above.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Corporation
that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii)
any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may
designate any Subsidiary of the Corporation (including any newly acquired
or newly formed Subsidiary of the Corporation) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any
Capital Stock or Indebtedness of, or owns or holds any Lien on any property
of, the Corporation or any
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Restricted Subsidiary of the Corporation that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, each Subsidiary to be so
designated 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 of the assets
of the Corporation or any of its Restricted Subsidiaries and either (A) the
Subsidiary to be so designated has total consolidated assets of $10,000 or
less or (B) if such Subsidiary has consolidated assets greater than
$10,000, then such designation would be permitted under "Limitation on
Restricted Payments." The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation (x) the Corporation
could Incur $1.00 of additional Indebtedness under clause (a) of
"Limitation on Indebtedness" and (y) no Default shall have occurred and be
continuing.
"Wholly-Owned Subsidiary" means a Restricted Subsidiary of the
Corporation, at least 99% of the Capital Stock of which (other than
directors' qualifying shares) is owned by the Corporation or another
Wholly-Owned Subsidiary.
The manner in which the foregoing amendment of the Certificate of
Incorporation was authorized is as follows: The Board of Directors of the
Corporation authorized the amendment under the authority vested in said Board
under the provisions of the Certificate of Incorporation and of Section 502 of
the Business Corporation Law.
FIFTH
The duration of the Corporation is to be perpetual.
SIXTH
The Secretary of the State of New York is hereby designated as the agent of
the Corporation upon whom process against the Corporation may be served. The
post office address to which the Secretary of State shall mail a copy of any
process against the Corporation served upon him is:
c/o Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attention: Peter G. Samuels
SEVENTH
A.
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders 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 shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 719 of the Business Corporation
Law, or (iv) for any transaction from which the director personally gained in
fact a financial profit or other advantage to which he was not legally
entitled.
B.
(1) Right of Indemnification. Each officer or director of the Corporation
and the legal representatives thereof who was or is made a party or is
threatened to be made a party to, or is involved in, any action, suit or
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proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she or a person
of whom he or she 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 as a director, officer,
employee or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized or permitted by the Business
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (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 such
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 or her heirs,
executors and administrators; provided, however, that, except as provided in
this paragraph (B), the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to indemnification conferred
in this paragraph (B) 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 Business Corporation Law requires that the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer of the Corporation (and not in any other capacity in which service was
or is rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding may 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 this Section or otherwise,
then such advancement of expenses shall be subject to the receipt of such
undertaking.
(2) Right of Claimant to Bring Suit. If a claim under subparagraph (B)(1) is
not paid in full by the Corporation within thirty (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 shall be
entitled to be paid also the expense of prosecuting such 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, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Business Corporation Law for the
Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of
the Corporation (including its Board of Directors, independent legal counsel
or shareholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the
circumstances because he or she has met the applicable standard of conduct set
forth in the Business Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel or
shareholders) that the claimant has not met such standard of conduct, shall be
a defense to the action or create a presumption that the claimant has not met
the applicable standard of conduct.
(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 paragraph (B) shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, by-law, agreement, vote of
shareholders or disinterested directors or otherwise. The Board of Directors
may, in its discretion, extend the indemnification provided by this paragraph
(B) to other employees or agents of the Corporation.
(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
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enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such
expense, liability or loss under the Business Corporation Law.
EIGHTH
A special meeting of the shareholders may be called only by (i) the Board of
Directors or (ii) upon the written request of the holders of a majority of the
outstanding shares of Common Stock.
NINTH
The number of directors constituting the entire Board of Directors of the
Corporation shall be not less than five (5) and not more than ten (10), with
the actual number of Directors being set from time to time by resolution of
the Board. Election of directors need not be by ballot unless the By-laws so
provide. Each director shall hold office until the next annual meeting of
shareholders and the election and qualification of his or her successor.
Directors may be removed by vote of the shareholders for cause; provided,
however, that during the period from the Effective Date through the third
anniversary of the Effective Time (hereinafter referred to as the "Restricted
Period"), any such removal shall require the affirmative vote of the holders
of at least 80% of the outstanding shares of Common Stock.
Unless a greater vote requirement in any matter is provided in the By-laws,
the affirmative vote of a majority of the directors present and acting at a
duly constituted meeting at which a majority of each member of the entire
Board of Directors is present and acting is sufficient for all action of the
Board of Directors, except that the affirmative vote of each member of the
entire Board of Directors shall be required for the taking of any action
inconsistent with the Corporation's Plan of Reorganization under Chapter 11 of
the United States Bankruptcy Code, Case No. 91 B 13937 (BRL), United States
Bankruptcy Court for the Southern District of New York. Except upon the
affirmative vote of at least seven directors (or, at any time that there are
fewer than ten members serving on the Board of Directors, the minimum number
of directors constituting at least two-thirds of all directors then in office)
no investment or series of investments by the Corporation in the following
securities shall be made during the Restricted Period:
(a) common stock;
(b) debt securities rated lower than "A" or "Prime-2" from Moody's
Investors Services, Inc. or lower than "A" or "A-2" from Standard & Poor's
Corporation;
(c) securities for which the purchase price is provided, in whole or in
part, by margin loan from a broker-dealer;
(d) any other securities where the cash or other consideration for the
investment or series of investments has a fair value at the time of such
investment or series of investments in excess of $250,000.
As used in this Article NINTH, the term "investment" means the purchase by
the Corporation of equity or debt securities issued by any corporation,
limited partnership or other similar entity, excluding the Corporation or
subsidiaries thereof, for portfolio investment purposes; provided that
"investment" shall not include or be construed to include (i) the purchase by
the Corporation of any certificate of deposit, money market deposit account,
or like instrument issued by a commercial banking institution with combined
capital and surplus of at least $50 million; (ii) the purchase by the
Corporation of any security or evidence of indebtedness issued by the United
States or any State thereof, or by any instrumentality or agency of the United
States or any State thereof, or of any other security or evidence of
indebtedness subject to the full faith and credit of any of such entities;
(iii) the receipt by the Corporation of any equity or debt securities in
connection with the acquisition by a person or entity or any stock or assets
of the Corporation or any subsidiary of the Corporation or the financing of
such acquisition; (iv) the extension of trade credit by the Corporation in
accordance with its normal practices; or (v) the purchase by the Corporation
of any equity or voting securities in an entity in which the Corporation has
or is
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seeking (A) ownership of 20% or more of any class of equity securities or
voting power and/or (B) the right to designate a member of the board of
directors or other governing body.
TENTH
The Board of Directors may from time to time make, amend, supplement or
repeal the By-laws; provided, however, that the shareholders may change or
repeal any By-law adopted by the Board of Directors; and provided further,
that no amendment or supplement adopted by the Board of Directors shall vary
or conflict with any amendment or supplement to the By-laws adopted by the
shareholders.
ELEVENTH
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
shareholders herein are granted subject to this reservation.
Any Amendment to Articles EIGHTH or NINTH of this Restated Certificate of
Incorporation or this Article ELEVENTH during the Restricted Period shall
require the affirmative vote of the holders of at least 80% or more of the
outstanding shares of Common Stock.
TWELFTH
Notwithstanding any other provision contained herein, the Corporation, as
successor to the Debtor(s) under the Plan of Reorganization Under Chapter 11
for Price Communications Corporation (the "Plan") shall not issue nonvoting
equity securities (which term shall not include any warrant to purchase shares
of Common Stock) in connection with the Plan and shall comply, to the extent
required by Section 1123(a)(6) of the Bankruptcy Code of 1978, as amended.
5. This Restated Certificate of Incorporation and amendments effected hereby
were authorized by the undersigned, who have been designated by order of the
United States Bankruptcy Court for the Southern District of New York to act on
behalf of the Corporation, without action of its shareholders or Board, in
order to put into effect and carry out the Corporation's reorganization plan
and decree and orders of the said Bankruptcy Court relative thereto in the
case entitled In re Price Communications Corporation, Debtor (Case No. 91 B
13937 (BRL), under Chapter 11 of Title 11 of the United States Code, as
provided in Section 808(a) of the Business Corporation Law. The undersigned
certify that such plan of reorganization, confirmed by order of such
Bankruptcy Court on October 27, 1992, contains provision for this Restated
Certificate of Incorporation, and that such plan has been confirmed as
provided in Chapter 11, Title 11 of the United States Code. The undersigned
also certify that this restated Certificate of Incorporation shall be
delivered to the New York Department of State.
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EXHIBIT 3.2
BY-LAWS
OF
PRICE HOLDINGS CORPORATION
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of Price Holdings
----------------
Corporation (the "Corporation") shall be in the County of New York, State of New
York.
Section 2. Other Offices. The Corporation may also have an office or
-------------
offices and keep the books and records of the Corpora tion, except as otherwise
may be required by law, in such other place or places, either within or without
the State of New York, as the Board of Directors of the Corporation may from
time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of holders of shares of
-----------------
capital stock of the Corporation shall be held at such place or places, within
or without the State of New York, as may from time to time be fixed by the Board
of Directors and stated in the notice of the meeting.
Section 2. Annual Meetings. An annual meeting of share holders for the
---------------
election of directors and for the transaction of such other business as may
properly come before the meeting (an "Annual Meeting") shall be held on such
date as may be fixed by the Board of Directors and stated in the notice of the
meeting.
Section 3. Special Meetings. Special meetings of share holders may be
----------------
called only as provided in the Restated Certificate of Incorporation of the
Corporation.
Section 4. Notice of Meetings. Except as otherwise may be required by
------------------
law, notice of a meeting of shareholders, whether an Annual Meeting or a special
meeting, shall be in writing, shall state the purpose or purposes of the
meeting, the place, date and hour of the meeting and, unless it is an Annual
Meeting, shall indicate that the notice is being issued by or at the direction
of the person or persons calling the meeting, and a copy thereof
<PAGE>
shall be delivered or sent by mail, not less than 10 nor more than 50 days
before the date of said meeting, to each shareholder entitled to vote at such
meeting. If mailed, the notice shall be directed to such shareholder at his or
her address as it appears on the stock records of the Corporation, unless such
shareholder shall have filed with the Secretary a written request that notices
be mailed to some other address, in which case it shall be directed to him or
her at such other address. Notice of an adjourned meeting need not be given if
the time and place to which the meeting is to be adjourned was announced at the
meeting at which the adjournment was taken, unless the Board shall fix a new
record date for such adjourned meeting after the adjournment.
Section 5. Quorum. At each meeting of shareholders of the Corporation,
------
the presence in person or by proxy holders of shares having a majority of the
voting power of the capital stock of the Corporation issued and outstanding and
entitled to vote thereat shall constitute a quorum for the transaction of
business, except as otherwise provided by law.
Section 6. Adjournments. Any meeting of shareholders may be adjourned to
------------
a designated time and place by a vote of a majority in interest of the
shareholders present in person or by proxy and entitled to vote thereon, even if
less than a quorum is present.
Section 7. Order of Business.
-----------------
(a) At any Annual Meeting of shareholders, only such business shall be
conducted as shall have been brought before the Annual Meeting (i) by or at the
direction of the Board of Directors or (ii) by any shareholder who complies with
the procedures set forth in this Section 7. At any special meeting, only such
business shall be conducted as shall have been set forth in the notice of such
meeting.
(b) For business properly to be brought before a meeting by a shareholder,
the shareholder must have given timely notice thereof in proper written form to
the Secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 50 days nor more than 90 days prior to the meeting at
which such business will be considered; provided, however, that if less than 50
days' notice or prior public disclosure of the date of the meeting is given or
made to shareholders, notice by the shareholder to be timely must be received
not later than the close of business on the earlier of (i) the tenth day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made or (ii) the last business day prior to the
meeting date. To be in proper written form, a shareholder's notice to the
Secretary shall set forth in writing as to each matter the shareholder proposes
to bring before the meeting: (i) a brief
2
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description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting; (ii) the name and address,
as they appear on the Corporation's books, of the shareholder or shareholders
proposing such business; (iii) the class and number of shares of the Corporation
which are beneficially owned by such shareholder or shareholders, and (iv) any
material interest of such shareholders in such business. Notwithstanding
anything else in the By-laws to the contrary, no business shall be conducted at
a meeting of shareholders except in accordance with the procedures set forth in
this Section 7. The chairman of a meeting shall, if the facts warrant,
determine that business was not properly brought before the meeting in
accordance with the provisions of this Section 7 and, if he should so determine,
he shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted.
Section 8. Voting. At each meeting of shareholders, each holder of a
------
share of Common Stock (as defined in the Corpora tion's Restated Certificate of
Incorporation) of the Corporation shall be entitled to one vote for each share
of Common Stock standing in his name on the stock records of the Corporation (i)
at the time fixed pursuant to Section 6 of Article VI of these By-laws as the
record date for the determination of shareholders entitled to vote at such
meeting, or (ii) if no such record date shall have been fixed, then at the close
of business on the day next preceding the day on which notice thereof shall be
given. At each meeting of shareholders, except as otherwise provided in Section
3 of Article III of these By-laws and except in cases where a greater vote is
required by law or by the Restated Certificate of Incorporation of the
Corporation, all matters shall be decided by a majority of the votes cast at
such meeting by the holders of shares of Common Stock present or represented by
proxy and entitled to vote thereon, a quorum being present.
Section 9. Inspectors. For each election of directors by the shareholders
----------
and in any other case in which it shall be advisable, in the opinion of the
Board, that the voting upon any matter shall be conducted by inspectors of
election, the Board shall appoint two inspectors of election. If any inspector
appointed by the Board shall be unwilling or unable to serve, or if the Board
shall fail to appoint inspectors, the chairman of the meeting shall appoint the
necessary inspector or inspectors. Before entering upon the discharge of their
duties, the inspectors so appointed shall be sworn faithfully to execute the
duties of inspectors with strict impartiality and according to the best of their
ability, and such oath shall be subscribed by them. The inspectors shall (i)
determine the number of shares of capital stock of the Corporation outstanding
and the voting power of each of the shares represented at the meeting, the
existence of a quorum and the validity and effect of proxies, (ii) receive the
votes, ballots or consents, (iii) hear and determine all challenges and
questions arising in connection with the right to
3
<PAGE>
vote, (iv) count and tabulate all votes, ballots or consents and determine the
result, and (v) do such acts as are proper to conduct the election or vote with
fairness to all shareholders. On request of the chairman of the meeting or any
shareholder entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, question or matter determined by them and shall
execute a certificate of any fact found by them. No director or candidate for
the office of director shall act as an inspector of election of directors.
Inspectors need not be shareholders.
ARTICLE III
DIRECTORS
Section 1. Powers. The business of the Corporation shall be managed under
------
the direction of the Board of Directors. The Board may exercise all such
authority and powers of the Corpora tion and do all such lawful acts and things
as are not by law or otherwise directed or required to be exercised or done by
the shareholders.
Section 2. Number, Election and Terms. The authorized number of directors
--------------------------
shall be set as provided in the Restated Certificate of Incorporation of the
Corporation.
Section 3. Nominations of Directors; Elections. Nomina tions for the
-----------------------------------
election of directors may be made by the Board of Directors or a committee
appointed by the Board, or by any share holder entitled to vote generally in
the election of directors who complies with the procedures set forth in this
Section 3. Directors shall be at least 21 years of age. Directors need not be
shareholders. At each meeting of shareholders for the elec tion of directors
at which a quorum is present, the persons re ceiving a plurality of the votes
cast shall be elected directors. All nominations by shareholders shall be made
pursuant to timely notice in proper written form to the Secretary of the Corpora
tion. To be timely, a shareholder's notice shall be delivered to or mailed and
received at the principal executive offices of the Corporation not less than 50
days nor more than 90 days prior to the meeting; provided, however, that if less
than 50 days' notice or prior public disclosure of the date of the meeting is
given or made to shareholders, notice by the shareholder to be timely must be so
received not later than the close of business on the earlier of (i) the tenth
day following the day on which such notice of the date of the meeting was mailed
or such public disclosure was made or (ii) the last business day prior to the
meeting date. To be in proper written form, a shareholder's notice to the
Secretary shall set forth in writing (i) as to each person whom the shareholder
proposes to nominate for election or reelection as a director, all information
relating to such person that is required to be disclosed in connection with the
4
<PAGE>
solicitation of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended, or any successor regulation or law, including, without limitation,
such person's written consent to being named in the proxy statement as a nominee
and to serving as director if elected; and (ii) as to the shareholder or
shareholders giving the notice, (x) the name and address, as they appear on the
Corporation's books, of such shareholder or shareholders and (y) the class and
number of shares of the Corporation which are beneficially owned by such
shareholder or shareholders. If a shareholder seeks to nominate one or more
directors, the Secretary shall appoint two inspectors, who shall not be
affiliated with the Corporation, to determine whether a shareholder has complied
with this Section 3. If the inspectors shall determine that a shareholder has
not complied with this Section 3, the inspectors shall direct the chairman of
the meeting to declare to the meeting that the nomination was not made in
accordance with the procedures prescribed by the By-laws of the Corporation, and
the defective nomination shall be disregarded.
Section 4. Place of Meetings. Meetings of the Board shall be held at the
-----------------
Corporation's office in the State of New York or at such other place, within or
without such State, as the Board may from time to time determine or as shall be
specified or fixed in the notice or waiver of notice of any such meeting.
Section 5. Regular Meetings. Regular meetings of the Board shall be held
----------------
in accordance with a yearly meeting schedule as determined by the Board; or such
meetings may be held on such other days and at such other times as the Board may
from time to time determine. Notice of regular meetings of the Board need not
be given except as otherwise required by these By-laws.
Section 6. Special Meetings. Special meetings of the Board may be called
----------------
by the Chairman of the Board or the President and shall be called by the
Secretary at the request of any two of the other directors.
Section 7. Notice of Meetings. Notice of each special meeting of the
------------------
Board (and of each regular meeting for which notice shall be required), stating
the time, place and purposes thereof, shall be mailed to each director,
addressed to him at his residence or usual place of business, or shall be sent
to him by telex, cable or telegram so addressed, or shall be given personally or
by telephone, on five business days' notice.
Section 8. Quorum and Manner of Acting. The presence of a majority of the
---------------------------
entire Board of Directors shall be necessary and sufficient to constitute a
quorum for the transaction of business at any meeting of the Board. If a quorum
shall not be present at any meeting of the Board, a majority of the directors
present thereat may adjourn the meeting from time to time, without notice
5
<PAGE>
other than announcement at the meeting, until a quorum shall be present. Except
where a different vote is expressly required or permitted by the New York
Business Corporation Law or the Restated Certificate of Incorporation of the
Corporation, the act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the Board. Any action required or
permitted to be taken by the Board may be taken without a meeting if all the
directors consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consent thereto by the directors shall
be filed with the minutes of the proceedings of the Board. Any one or more
directors may participate in any meeting of the Board 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 be deemed to constitute presence in person at a meeting of the Board.
Section 9. Resignation. Any director may resign at any time by giving
-----------
written notice to the Corporation. Written notice to the Board, the Chairman of
the Board, the President or the Secretary shall be deemed to constitute notice
to the Corporation. Such resignation shall take effect upon receipt of such
notice or at any later time specified therein and, unless otherwise specified
therein, acceptance of such resignation shall not be necessary to make it
effective.
Section 10. Removal of Directors. Directors may be removed only as
--------------------
provided in the Restated Certificate of Incorporation of the Corporation.
Section 11. Vacancies. Any vacancy among the members of the Board of
---------
Directors, whether caused by death, resignation, removal or any other cause, may
be filled by majority vote of the Directors then in office or by shareholder
vote.
Section 12. Compensation of Directors. The Corporation shall pay each
-------------------------
director who is not also an officer or employee of the Corporation a fee of
$25,000 per annum, and shall reimburse each director for his or her reasonable
expenses.
Section 13. Board Observer. W.R. Huff Asset Management, L.P. ("Huff")
--------------
shall have the right to designate an individual to sit as an observer of the
Board of Directors and all Committees of the Board for so long as the aggregate
number of shares of Common Stock with respect to which Huff (i) is a beneficial
owner as defined in Rule 13d-3 promulgated under the Securities Exchange Act of
1934, or (ii) has been engaged by one or more such beneficial owners to provide
investment advice, equals or exceeds 5% of the Corporation's outstanding Common
Stock.
6
<PAGE>
Section 14. Indemnification. Without limiting the other rights of any
---------------
director, officer or other person seeking indemnification or advancement or
reimbursement of expenses, the Corporation has the authority, with the approval
of the Board of Directors of the Corporation, to provide for such
indemnification or advancement or reimbursement of expenses pursuant to
agreement.
ARTICLE IV
COMMITTEES OF THE BOARD
Section 1. Appointment of Executive Committee. The Board may not
----------------------------------
designate an Executive Committee of the Board, or any other Committee having
powers or authority of a type or scope generally exercised by an executive
committee or a full board of directors.
Section 2. Appointment of Audit and Finance Committee. The Board may, by
------------------------------------------
resolution adopted by the affirmative vote of a majority of the entire Board,
designate an Audit and Finance Committee of the Board which shall consist of
such members as the Board shall determine. The Audit and Finance Committee
shall (i) make recommendations to the Board as to the independent accountants to
be appointed by the Board; (ii) review with the independent accountants the
scope of their examination; (iii) receive the reports of the independent
accountants and meet with representatives of such accountants for the purpose of
reviewing and considering questions relating to their examination and such
reports; (iv) review, either directly or through the independent accountants,
the internal accounting and auditing procedures of the Corporation; (v) study
various issues relating to the capital structure of the Corporation; and (vi)
perform such other functions as may be assigned to it from time to time by the
affirmative vote of a majority of the entire Board. The Audit and Finance
Committee may determine its manner of acting and fix the time and place of its
meetings, unless the Board, by the affirmative vote of a majority of the entire
Board, shall otherwise provide. A majority of the members of the Audit and
Finance Committee shall constitute a quorum for the transaction of business by
the committee, and the act of a majority of the members of the committee present
at a meeting at which a quorum shall be present shall be the act of the
committee.
Section 3. Stock Option and Compensation Committee; Other Committees.
---------------------------------------------------------
(a) The Board may, by resolution adopted by the affirmative vote of a
majority of the entire Board, designate a Stock Option and Compensation
Committee of the Board which shall consist of such members as the Board shall
determine. The Stock Option and Compensation Committee shall (i) review and
approve
7
<PAGE>
arrangements relating to the compensation of executive officers of the
Corporation; (ii) administer the Corporation's 1992 Long-Term Incentive Plan;
and (iii) perform such other functions as may be assigned to it from time to
time by the affirmative vote of a majority of the entire Board. The Stock
Option and Compensation Committee may determine its manner of acting and fix the
time and place of its meetings, unless the Board, by the affirmative vote of a
majority of the entire Board, shall otherwise provide. A majority of the
members of the Stock Option and Compensation Committee shall constitute a quorum
for the transaction of business by the Committee, and the act of a majority of
the members of the Committee present at a meeting at which a quorum shall be
present shall be the act of the Commmitee.
(b) The Board may, by resolution adopted by the affirmative vote of a
majority of the entire Board, designate members of the Board to constitute such
other committees of the Board as it may determine. Such committees shall in
each case consist of such number of directors as the Board may provide, and
shall have and may exercise, to the extent permitted by law, such powers as the
Board may delegate to them in the respective resolutions appointing such
committees. Each such committee may determine its manner of acting and fix the
time and place of its meeting, unless the Board, by the affirmative vote of a
majority of the entire Board, shall otherwise provide. A majority of the
members of any such committee shall constitute a quorum for the transaction of
business by the committee, and the act of a majority of the members of such
committee present at a meeting at which a quorum shall be present shall be the
act of the committee.
Section 4. Action by Consent; Participation by Telephone or Similar
--------------------------------------------------------
Equipment. Unless the Board shall otherwise provide, by the affirmative vote of
- ---------
a majority of the entire Board, any action required or permitted to be taken by
any committee may be taken without a meeting if all members of the committee
consent in writing to the adoption of a resolution authorizing the action. The
resolution and the written consents thereto by the members of the committee
shall be filed with the minutes of the proceedings of the committee. Unless the
Board shall otherwise so provide, by the affirmative vote of a majority of the
entire Board, any one or more members of any such committee may participate in
any meeting of the committee by means of con ference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear one another. Participation by such means shall constitute
presence in person at a meeting of the committee.
Section 5. Changes in Committees; Resignations, Removals. Subject to
---------------------------------------------
Section 1 of this Article IV, the Board shall have power, by the affirmative
vote of a majority of the entire Board, at any time to change the members of, to
fill vacancies in, and
8
<PAGE>
to discharge any committee of the Board in accordance with the provisions of
this Article IV. Any member of any committee may resign at any time by giving
notice to the Corporation. Notice to the Board, the Chairman of the Board, the
President, the chairman of such committee or the Secretary shall be deemed to
constitute notice to the Corporation. Such resignation shall take effect upon
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, acceptance of such resignation shall not be
necessary to make it effective. Any member of any committee may be removed at
any time, either with or without cause, by the affirmative vote of a majority of
the entire Board at any meeting of the Board called for that purpose.
ARTICLE V
OFFICERS
Section 1. Number and Qualification. The Corporation shall have such
------------------------
officers as may be necessary or desirable for the business of the Corporation.
There shall be elected by the Board of Directors persons having the titles and
exercising the duties of the Chairman of the Board, President, Vice President,
Treasurer and Secretary, and such other persons having such other titles and
such other duties as the Board may prescribe. The same person may hold more
than one office. The Chairman of the Board shall be elected from among the
directors. Unless other wise determined by the Board, the officers of the
Corporation shall be elected by the Board at its annual meeting and shall be
elected to hold office until the next succeeding annual meeting of the Board.
In the event of the failure to elect officers at such annual meeting, officers
may be elected at any regular or special meeting of the Board. Each officer
shall hold office until his successor has been elected and qualified, or until
his earlier death, resignation or removal.
Section 2. Resignations. Any officer may resign at any time by giving
------------
written notice to the Corporation. Notice to the Board, the Chairman of the
Board, the President or the Secretary shall be deemed to constitute notice to
the Corporation. Such resignation shall take effect upon receipt of such notice
or at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Section 3. Vacancies. Any vacancy among the officers, whether caused by
---------
death, resignation, removal or any other cause, shall be filled in the manner
prescribed for election or appointment to such office.
9
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Section 4. Chairman of the Board. The Chairman of the Board shall, if
---------------------
present, preside at all meetings of the Board and of the shareholders. He shall
perform the duties incident to the office of the Chairman of the Board and all
such other duties of a senior executive nature as are specified in these By-laws
or as shall be assigned to him from time to time by the Board.
Section 5. President. In the absence of the Chairman of the Board or if
---------
there shall be no such officer, the President shall preside at all meetings of
the shareholders and of the Board of Directors at which he is present. He shall
act as Chief Executive Officer of the Corporation and shall have supervision and
control over, and complete responsibility for, the general management and
operation of the Corporation, and such other powers and duties that may, from
time to time, be prescribed by the Board, provided that such duties are of the
type usually assigned to the President and Chief Executive Officer in charge of
similar companies.
Section 6. Vice President. The Vice President (or if there shall be more
--------------
than one Vice President, the Vice Presidents) shall perform such duties and
exercise such powers consistent with these By-laws as may be assigned to such
officer(s) from time to time by a resolution of a majority of the Board of
Directors. In the absence of a President, the duties of a President shall be
performed and his powers may be exercised by such Vice President as may be
designated by the President or, failing such designa tion, such duties shall be
performed and such power may be exercised by each Vice President in the order of
their earliest election to that office; subject in any case to review and
superseding action by the President.
Section 7. Treasurer. The Treasurer shall have charge and custody of, and
---------
be responsible for, all funds and securities of the Corporation, shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
Corporation, shall deposit all moneys and other valuables to the credit of the
Corporation in such depositaries as may be designated pursuant to these By-laws,
shall receive, and give receipts for, moneys due and payable to the Corporation
from any source whatsoever, shall disburse the funds of the Corporation and
shall render to all regular meetings of the Board, or whenever the Board may
require, an account of all his transactions as Treasurer. He shall, in general,
perform all the duties incident to the office of Treasurer and all such other
duties as may be assigned to him from time to time by the President.
Section 8. Secretary. The Secretary shall, if present, act as secretary
---------
of, and keep the minutes of all meetings of the Board, such committees of the
Board, and the shareholders in one or more books provided for that purpose,
shall see that all notices are duly given in accordance with these By-laws and
as required by law, shall be custodian of the seal of the
10
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Corporation and shall affix and attest the seal to all documents to be executed
on behalf of the Corporation under its seal. He shall, in general, perform all
the duties incident to the office of Secretary and all such other duties as may
be assigned to him from time to time by the President.
Section 9. Additional Officers. The Board of Directors may by resolution
-------------------
appoint such other officers and agents as it may deem appropriate, and such
other officers and agents shall hold their offices for such terms and shall
exercise such powers and perform such duties consistent with these By-laws as
may be determined from time to time by the Board of Directors.
Section 10. Salaries. No officer shall be prevented from receiving any
--------
salary by reason of the fact that he is also a director of the Corporation.
ARTICLE VI
CAPITAL STOCK
Section 1. Stock Certificates. Each shareholder shall be entitled to
------------------
have, in such form as shall be approved by the Board, a certificate or
certificates signed by the Chairman of the Board or the President, and by either
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary (except that, when any such certificate is countersigned by a transfer
agent or registered by a registrar other than the Corporation or an employee of
the Corporation, the signatures of any such officers may be facsimiles, engraved
or printed), which may be sealed with the seal of the Corporation (which seal
may be a facsimile, engraved or printed), certifying the number of shares of
capital stock of the Corporation owned by such shareholder. In the event any
officer who has signed or whose facsimile signature has been placed upon any
such certificate shall have ceased to be such officer before such certificate is
issued, such certificate may be issued by the Corporation with the same effect
as if he were such officer at the date of its issue.
Section 2. List of Shareholders Entitled to Vote. The officer of the
-------------------------------------
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make or cause to be prepared or made, at least 10 days before every meeting
of shareholders, a complete list of the shareholders entitled to vote at the
meeting arranged in alphabetical order, and showing the address of each
shareholder and the number of shares of capital stock registered in the name of
each shareholder. Such list shall be open to the examination of any
shareholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the
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place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting for the duration thereof, and may be
inspected by any shareholder of the Corporation who is present.
Section 3. Stock Ledger. The stock ledger of the Corpora tion shall be
------------
the only evidence as to who are the shareholders entitled to examine the stock
ledger, the list required by Section 2 of this Article VI or the books of the
Corporation, or to vote in person or by proxy at any meeting of shareholders.
Section 4. Transfers of Capital Stock. Transfers of shares of capital
--------------------------
stock of the Corporation shall be made only on the stock ledger of the
Corporation by the holder of record thereof, by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation, or by the transfer agent of the Corporation, and only on
surrender of the certificate or certificates representing such shares, properly
endorsed or accompanied by a duly executed stock transfer power. The Board may
make such additional rules and regulations as it may deem advisable concerning
the issue and transfer of certificates representing shares of the capital stock
of the Corporation.
Section 5. Restriction on Ownership, Voting and Transfer. In accordance
---------------------------------------------
with the Federal Communications Act of 1934, as amended (the "Communications
Act"), and regulations of the Federal Communications Commission (the "FCC"), the
Board of Directors shall prohibit: (i) the ownership or voting of the
Corporation's outstanding capital stock whenever necessary to ensure that, in
the aggregate, no more than 25% of the Corporation's outstanding capital stock
(or 20% of the Corporation's outstanding capital stock if the Corporation holds
any FCC licenses directly rather than through subsidiaries) is held or voted by
or for the account of aliens or their representatives or by foreign
government(s) or representative(s) thereof or by any corporation(s) organized
under the laws of a foreign country, or by or for corporations of which any
officer is an alien, more than one-fourth of its directors are aliens, or by or
for corporations or partnerships deemed alien pursuant to Section 310(b) of the
Communications Act (collectively "Aliens"); and (ii) any transfer or voting of
the Corporation's outstanding capital stock which would cause the Corporation to
violate the above or any other provision of the Communications Act or FCC
regulation.
Section 6. Lost Certificates. The Board of Directors may direct a new
-----------------
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as
12
<PAGE>
a condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate, or his legal representative, to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 7. Fixing of Record Date. In order that the Corporation may
---------------------
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive payment of any
dividends or other distributions or allotments of any rights, or entitled to
exer cise any rights in respect to any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board may fix, in advance, a
record date, which shall not be more than 50 days nor less than 10 days before
the date of such meeting, nor more than 50 days prior to any other action. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjourn ment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 8. Beneficial Owners. The Corporation shall be entitled to
-----------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends and to vote as such owner, and to hold liable for
calls and assessments a person registered on its books as the owner of shares,
and shall not be bound to recognize any equitable or other claim to or interest
in such shares on the part of any other person, whether or not the Corporation
shall have express or other notice thereof, except as otherwise provided by law.
ARTICLE VII
FISCAL YEAR
The Corporation's fiscal year shall coincide with the calendar year.
ARTICLE VIII
SEAL
The Corporation's seal shall be circular in form and shall include the
words, "PRICE HOLDINGS CORPORATION, New York, 1997, Seal".
13
<PAGE>
ARTICLE IX
WAIVER OF NOTICE
Whenever any notice is required by law, the certificate of
incorporation or these By-laws to be given to any director, member of a
committee or shareholder, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether signed before or after the time stated
in such written waiver, shall be deemed equivalent to such notice. Attendance
of a person at a meeting shall constitute a waiver of notice of such meeting,
except when such person attends a meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business on the
grounds that the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any meeting of the share
holders, directors, or members of a committee of directors need be specified in
any written waiver of notice.
ARTICLE X
AMENDMENTS
These By-laws may be adopted, amended, supplemented or repealed by
vote of the holders of a majority of the outstanding shares of Common Stock,
except that during the Restricted Period (as defined in the Amended and Restated
Certificate of Incorporation) the affirmative vote of 80% or more of the
outstanding shares of Common Stock is required to amend, supplement or repeal
Section 13 of Article III, Section 1 of Article IV or the supermajority
shareholder vote requirements of this Article X. Except as hereinafter
provided, the By-laws may be adopted, amended or repealed by majority vote of
the Board of Directors, but any such By-law may be amended or repealed by the
shareholders entitled to vote thereon as herein provided, and no amendment or
supplement adopted by the Board shall vary or conflict with any amendment or
supplement to these By-laws adopted by the shareholders. During the Restricted
Period (i) the Board may not amend, supplement or repeal Section 13 of Article
IV or this Article X,(ii) the affirmative vote of at least seven (7) directors
is required to amend, supplement or repeal Section 1 of Article IV, and (iii)
whenever these By-laws require the affirmative vote of a majority of the entire
Board for the taking of any action, the repeal of such requirement requires the
affirmative vote of a majority of the entire Board.
14
<PAGE>
EXHIBIT 3.3
AGREEMENT AND PLAN OF MERGER
OF
PRICE COMMUNICATIONS CORPORATION
(A NEW YORK CORPORATION)
PRICE HOLDINGS CORPORATION
(A NEW YORK CORPORATION)
AND
PCC SUB, INC.
(A NEW YORK CORPORATION)
(Pursuant to Section 902 of the Business
Corporation Law of the State of New York)
AGREEMENT AND PLAN OF MERGER, dated as of_____ 1997, by and among
PRICE COMMUNICATIONS CORPORATION, a New York corporation (the "COMPANY"), PCC
SUB, INC., a New York corporation ("Sub"), and PRICE HOLDINGS CORPORATION, a New
York corporation ("Holdings").
WHEREAS, the shareholders of the Company and the sole shareholder of
Sub desire to merge Sub with and into the Company (the "Merger");
WHEREAS, in a transaction that is to be undertaken together with, and
is integrally related to, the Merger, Holdings will make an exchange offer to
the stockholders of Palmer Wireless, Inc. which will enable such stockholder to
receive common stock of Holdings in exchange for Palmer common stock (the
"Exchange Offer");
WHEREAS, the Boards of Directors of the Company and Sub have each
determined that it is in the best interests of such corporations to merge Sub
with and into the Company and to have this Merger and Exchange Offer qualify as
a tax-free transfer of property under Section 351 of the Internal Revenue Code
of 1986, as amended;
WHEREAS, the total number of outstanding shares of Sub is 100 shares
of common stock, par value $.01 per share;
<PAGE>
WHEREAS, the total number of outstanding shares of the Company is
728,133 shares of Series A Preferred Stock, par value $.01 per share, ("Series A
Preferred Stock") 364,066 shares of Series B Preferred Stock, par value $.01 per
share, ("Series B Preferred Stock") 1,009,000 shares of Senior Payment-In-Kind
Increasing Rate Preferred Stock, par value $.01 per share ("PIK Preferred
Stock") (the Series A Preferred Stock, the Series B Preferred Stock, the PIK
Preferred Stock and any other shares of the Company's preferred stock issued
between the date hereof and the Effective Time (as hereinafter defined) being
the "Preferred Stock") and 4,996,881 shares of common stock, par value $.01 per
share (such shares and any other shares of the Company's common stock issued
between the date hereof and the Effective Time being the "Common Stock");
WHEREAS, all the issued and outstanding shares of the common stock of
Sub are held by Holdings;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises set forth herein, the parties do hereby agree as follows:
1. MERGER. On the terms and subject to the conditions hereof; on the
Effective Date Sub shall be merged with and into the Company, with the effect
that the Company (the "Surviving Corporation") shall be the surviving
corporation from and after the Effective Time of the Merger. The separate
existence of Sub (the "Terminating Corporation") shall cease at the Effective
Time.
2. NAME OF SURVIVING CORPORATION. AS OF the Effective Time, the name
of the Surviving CORPORATION shall be changed to:
PRICE, INC.
3. NAME OF HOLDINGS. AS OF THE EFFECTIVE TIME, the name of Holdings
shall be changed to:
PRICE COMMUNICATIONS CORPORATION
4. CERTIFICATE OF INCORPORATION; BY-LAWS. AT THE EFFECTIVE TIME, THE
Certificate of Incorporation and By-Laws of Sub shall be the Certificate of
Incorporation and By-Laws of the Surviving Corporation until thereafter amended.
5. DIRECTORS AND OFFICERS. The Directors and officers of the Company
shall become the directors and officers of the Surviving Corporation at the
Effective Time, in each case until their respective successors are duly elected
or appointed and qualified.
6. EFFECTIVE TIME. The Parties hereto shall cause the Merger to be
consummated by delivering a Certificate of Merger (the "Certificate of Merger")
to the Secretary of State of the State of New York, in such form as required by,
and executed in accordance with the relevant provisions of; the Business
Corporation Law of the State of New York (the "New
2
<PAGE>
York Law"), for filing by the Secretary of State as promptly as practicable.
Subject to and in accordance with the laws of the State of New York, the Merger
will become effective at the date and time the Certificate of Merger is filed
with the office of the Secretary of State of the State of New York, or such
later time or date as may be specified in the Certificate of Merger (the
"Effective Time").
7. EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of New York Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the rights (whether arising under contracts or otherwise),
privileges, powers, franchises and property of the Company and Sub shall vest in
the Surviving Corporation, and all restrictions, disabilities, duties, debts and
liabilities of the Company and Sub shall become the restrictions, disabilities,
duties, debts, and liabilities of the Surviving Corporation, except as set forth
herein.
8. CONVERSION OF SHARES.
(a) Each share of Common Stock of the Company outstanding
immediately prior to the Merger, each share of Series A Preferred Stock of the
Company outstanding immediately prior to the Merger, each share of Series B
Preferred Stock of the Company outstanding prior to the Merger and each share of
PIK Preferred Stock of the Company outstanding immediately prior to the Merger
shall, at the Effective Time of the Merger, be converted into one (1) share of
the common stock Holdings, par value $.01 per share ("Holdings Common Stock"),
one (1) share of the Series A Preferred Stock of Holdings, par value $.01 per
share ("Holdings Series A Preferred Stock"), one (1) share of the Series B
Preferred Stock of Holdings, par value $.01 per share ("Holdings Series B
Preferred Stock"), and one share of the PIK Preferred Stock of Holdings, par
value $.01 per share ("Holdings PIK Preferred Stock"), respectively. At the
Effective Time, the certificates theretofore representing shares of the
Surviving Corporation will automatically, without any exchange, represent the
shares of Holdings Common Stock, Holdings Series A Preferred Stock, Holdings
Series B Preferred Stock and Holdings PIK Preferred Stock for which the shares
of the Surviving Corporation have been converted. As a result of the Merger, Sub
will be merged with and into the Company, and the Company's shareholders will
become shareholders of Holdings.
(b) Upon consummation of the Merger at the Effective Time, Holdings
shall hold 100 shares of the common stock of the Surviving Corporation, no par
value, constituting all the issued and outstanding shares of the Surviving
Corporation's capital stock.
9. STOCK OPTIONS AND WARRANTS. At the Effective Time, Holdings shall
assume the rights and obligations of the Company under stock options granted and
warrants issued by the Company with respect to Company's Common Stock and the
Company's PIK Preferred Stock ("Assumed Options"). Pursuant to such assumption,
the holder of each Assumed Option shall be entitled, subject to the terms of his
or her stock option and compliance with applicable law, to purchase the same
number of shares of Holdings Common Stock (the "Option Shares") for the same
exercise price per share. Each Assumed Option shall constitute a continuation of
the corresponding Assumed Option substituting Holdings for the Company,
3
<PAGE>
Holdings Common Stock for the Company's Common Stock and Holdings PIK Preferred
Stock for the Company's PIK Preferred Stock, and substituting, if applicable,
employment by Holdings or any of its subsidiaries for employment by the Company
or any of its subsidiaries, effective at the Effective Time. Except as provided
in this Section, all of the terms and provisions of each Assumed Option shall be
the same as the terms and provisions of the corresponding Assumed Option,
including, but not limited to, the times when the Assumed Option may be
exercised in relation to the date of the granting of the corresponding Existing
Company Option. As soon as practicable after the Effective Time, Holdings will
send written notice of the assumption of the Assumed Options to each holder
thereof. Holdings will take all corporate and other action necessary to reserve
a sufficient number of shares of Holdings Common Stock.
10. AMENDMENT, WAIVER OR TERMINATION. The Company, Holdings and Sub
may amend any of the terms of; or waive any of the conditions to, this Agreement
before the Effective Time and before or after shareholder approval, provided
that such amendment will not, in the opinion of the Board of Directors of the
Company, have any materially adverse effect on the shareholders of the Company.
In addition, this Agreement may be terminated at any time prior to the Effective
Time by mutual consent duly authorized by the Boards of Directors of the
Company.
[END OF TEXT]
4
<PAGE>
[EXECUTION PAGE]
IN WITNESS WHEREOF, this Agreement and Plan of Merger is hereby
executed and attested on behalf of each of the constituent corporations parties
hereto on this day of July, 1997.
PRICE COMMUNICATIONS CORPORATION
BY:
--------------------------
Name:
Title:
Attest:
- ---------------
Secretary
PC SUB, INC.
BY:
--------------------------
Name:
Title:
Attest:
- ---------------
Secretary
PRICE HOLDINGS CORPORATION
BY:
--------------------------
Name:
Title:
Attest:
- ---------------
Secretary
5
<PAGE>
EXHIBIT 5.1
August 11, 1997
Price Communications Corporation
Price Holdings Corporation
45 Rockefeller Plaza
New York, New York 10020
RE: PRICE COMMUNICATIONS CORPORATION AND PRICE HOLDINGS CORPORATION
REGISTRATION STATEMENT
ON FORM S-4
-----------
Ladies and Gentlemen:
You have requested our opinion in connection with the above-referenced
Registration Statement on Form S-4, pursuant to which Price Holdings
Corporation, a New York corporation ("Holdings"), intends to issue, in
accordance with that certain Agreement and Plan of Merger among Holdings, Price
Communications Corporation, a New York corporation (the "Company") and PCC Sub,
Inc., a New York corporation, (the "Agreement and Plan of Merger") certain
shares (the "Shares") of its Common Stock, par value $.01 per share (the "Common
Stock").
We have reviewed copies of the Certificate of Incorporation and By-laws of the
Company and Holdings, the Agreement and Plan of Merger and the Registration
Statement and exhibits thereto, and have examined such other corporate documents
and records, and have made such investigations of law, as we have deemed
necessary, in order to render the opinion hereinafter set forth.
Based upon, and subject to, the forgoing, we advise you that, in our opinion,
the Shares have been duly authorized and, upon issuance, will be validly issued,
fully paid and non-assessable.
We hereby consent to the references to our firm under the caption "Legal
Matters" in the Registration Statement and to the use of this opinion as an
exhibit to the Registration Statement. In giving this consent, we do not hereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
PROSKAUER ROSE LLP
<PAGE>
EXHIBIT 10.18
July 2, 1997
Price Communications Wireless, Inc.
45 Rockefeller Plaza
New York, New York 10020
Price Communications Corporation
45 Rockefeller Plaza
New York, New York 10020
Attention: Robert Price
President
Re: Bank Facilities for the Acquisition of Palmer Wireless, Inc.
Ladies and Gentlemen:
You have advised us that Price Communications Corporation ("PCC") has
formed Price Communications Cellular Holdings, Inc. ("New Holdings") as a
wholly-owned indirect subsidiary which has in turn formed Price Communications
Wireless, Inc. ("PCW") for the purpose of acquiring (the "Acquisition") all of
approximately 27.8 million shares of the outstanding capital stock and options
(the "Shares") of Palmer Wireless Inc. ("Palmer") at a price not to exceed
$17.50 per Share for an aggregate purchase price of $488.9 million. We
understand that the Acquisition will be accomplished through a purchase of the
Shares by PCW followed by a merger (the "Merger") of PCW with and into Palmer
pursuant to which Palmer, which concurrently with or subsequent to the Merger
will change its name to Price Communications Wireless, Inc. ("Price Wireless"),
will be the surviving corporation (any references in this letter to "Company"
being understood to refer to (i) PCW prior to the Merger, (ii) Palmer after the
Merger but prior to its change of name as the surviving corporation in the
Merger and (iii) Price Wireless after such change of name). In connection with
the Acquisition, we understand that certain of the existing outstanding
indebtedness of Palmer and its subsidiaries in the aggregate principal amount of
approximately $381.4 million (the "Existing Debt") shall be repaid. In
addition, as part of this transaction, it is our understanding that prior to or
concurrent with the Acquisition, Palmer will complete the sale of its Fort
Myers, Florida MSA
<PAGE>
business unit for net cash proceeds of approximately $166.3 million or make
arrangements satisfactory to us for short-term financing up to such amount
bridging such sale (in either case, the "Pending Asset Sale Proceeds") and that
upon receipt of such net cash proceeds, Palmer will immediately and permanently
repay the Existing Debt in an amount equal to such Pending Asset Sale Proceeds.
The Company will also pay fees and expenses in connection with the Acquisition
and related transactions of approximately $25.5 million. Upon the consummation
of the Acquisition, PCC will own Price Communications Cellular, Inc., which will
own all of the outstanding shares of New Holdings and New Holdings will own all
of the outstanding shares of the Company's common and preferred stock.
DLJ Capital Funding, Inc. ("DLJ") is pleased to confirm that it commits
to providing all of the up to $525 million of senior bank credit facilities
described below. The senior bank credit facilities will consist of a tranche A
term loan of up to $100 million and a tranche B term loan of up to $225 million
(collectively, the "Term Loan Facility") and a reducing revolving credit
facility of up to $200 million with a sublimit for letters of credit to be
agreed upon (the "Revolving Credit Facility"; together with the Term Loan
Facility, the "Bank Facilities"). Donaldson, Lufkin & Jenrette Securities
Corporation, an affiliate of DLJ, will act as arranger (the "Arranger") for the
Bank Facilities. The Arranger intends to arrange for other banks, financial
institutions and other "accredited investors" (as defined in SEC regulations;
each such bank, financial institution and accredited investor, including DLJ,
being a "Lender" and, collectively, the "Lenders") to provide a portion of the
Bank Facilities. "Lenders" shall not include persons which are, or through
joint ventures or affiliates, principally engaged in the business of operating
wireless telecommunications businesses. DLJ will act as syndication agent for
the Lenders (the "Syndication Agent") and a financial institution satisfactory
to the Company, the Arranger and the Syndication Agent will act as
administrative agent for the Lenders (the "Administrative Agent"; together with
the Syndication Agent, the "Agents"). Certain of the terms of each of the Bank
Facilities are set forth in the Summary of Terms attached hereto as Annex A (the
"Term Sheet").
You have advised us that (i) the proceeds of $325 million in borrowings
under the Term Loan Facility and up to $100 million in borrowings under the
Revolving Credit Facility, (ii) the proceeds of the issuance for cash of not
greater than $80 million (gross proceeds) of Senior Discount Notes of New
Holdings (the "Holdings Discount Notes") to investors satisfactory to us, the
proceeds of which shall be used by New Holdings to (a) purchase not less than
$50 million of Pay-In-Kind Preferred Stock or common equity of the Company and
(b) contribute $30 million to PCC, (iii) equity contributions of not less than
$80 million to Company, (iv) the proceeds of the issuance for cash of not less
than $175 million of new senior subordinated debt securities of the Company (the
"New Sub Debt"), and (v) the net cash proceeds of $166.3 million of Pending
Asset Sale Proceeds, will be used (x) to pay the aggregate purchase price for
the Shares of not greater than $488.9 million, (y) to repay Existing Debt in an
aggregate maximum principal amount of $381.4 million and (z) to pay fees and
expenses in connection with the Acquisition and related transactions of
approximately $25.5 million. Upon consummation of the Acquisition, the Company
and its subsidiaries will have no Indebtedness other than the Bank Facilities
and the New Sub Debt. You have further advised us that the Revolving Credit
Facility will also be used to provide for the working capital requirements and
other corporate purposes of the Company and its subsidiaries. The common equity
contribution to Company shall be not less than $80 million and may be a
combination of cash, Shares of Palmer contributed to Company
<PAGE>
(valued at $17.50 per Share) and shares of PCC contributed to Company to be
exchanged for Shares of Palmer (valued at $17.50 for each Share of Palmer so
exchanged).
We have reviewed certain historical and pro forma financial statements
of Palmer and its subsidiaries and have met with representatives of PCC and with
members of the management of Palmer regarding the transactions contemplated
hereby, and we are pleased to advise you that the results of our due diligence
investigation of Palmer and its subsidiaries to date are satisfactory. Our due
diligence investigation is to be deemed complete and satisfactory unless (i) any
information submitted to us is inaccurate, incomplete or misleading in any
respect reasonably determined by us to be materially adverse or (ii) any change
occurs, or any additional information is disclosed to or discovered by us, which
could be materially adverse in respect of the business, operations, assets,
liabilities, condition (financial or otherwise) or prospects of Palmer and its
subsidiaries. In the event that any such information should be so inaccurate,
incomplete or misleading or any such change occurs, or any such additional
information so disclosed or discovered, we may, in our sole discretion, suggest
alternative financing amounts or structures that ensure adequate protection for
the Lenders or decline to participate in the proposed financing. In addition,
DLJ's commitment is subject to the accuracy and completeness in all material
respects of the Information and the Projections described in the immediately
succeeding paragraph and the satisfaction of the conditions set forth in the
Term Sheet and others customary and appropriate for transactions of this kind.
PCC hereby represents that, to its knowledge (a) all information, other
than Projections (as defined below), which has been or is hereafter made
available to the Arranger or DLJ by PCC and information known to PCC made
available by Palmer in connection with the transactions contemplated hereby (the
"Information") has been reviewed by PCC in connection with the performance of
its own due diligence and, as supplemented as contemplated by the next sentence,
(i) is (or will be, in the case of Information made available after the date
hereof), with respect to Information provided by PCC, and (ii) with respect to
Information provided by Palmer, PCC has no reason to believe that such
Information is not (or will not be, in the case of such Information made
available after the date hereof), complete and correct in all material respects
and does not (or will not, as the case may be) contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained therein not materially misleading in light of the circumstances under
which such statements were or are made, and (b) all financial projections
concerning Palmer and its subsidiaries that have been or are hereafter made
available to the Arranger or the Lenders by PCC or Palmer or any of their
representatives in connection with the transactions contemplated hereby (the
"Projections") have been (or will be, in the case of Projections made available
after the date hereof) prepared in good faith based upon reasonable assumptions.
PCC agrees to supplement the Information and the Projections (to the extent PCC
has been furnished with such Information and Projections) from time to time
until the closing date so that the representation and warranty in the preceding
sentence is correct on the closing date. In arranging and syndicating the Bank
Facilities, the Arranger will be using and relying on the Information and the
Projections without independent verification thereof; provided that the Arranger
--------
will request PCC and Palmer to provide comfort on the accuracy of Information
relating to them contained in the "bank book" or "Confidential Information
Memorandum" to be prepared and used in connection with the syndication of the
Bank Facilities. The representations and covenants contained in this paragraph
shall remain effective until a definitive
<PAGE>
financing agreement is executed between the Company and the Lenders and
thereafter the disclosure representations contained herein shall be superseded
by those contained in such definitive financing agreement.
Except as modified by the provisions outlined below, PCC shall pay the
reasonable costs and expenses (including the reasonable fees and expenses of
counsel to DLJ and the Arranger, reasonable professional fees of consultants and
other experts and reasonable out-of-pocket expenses of DLJ and the Arranger,
including without limitation syndication expenses) arising in connection with
the preparation, execution and delivery of this letter and the definitive
financing agreements and the syndication of the Bank Facilities. PCC further
agrees to indemnify and hold harmless each of the Arranger, the Agents and the
Lenders (including DLJ) and each director, officer, employee, agent and
affiliate thereof (each an "indemnified person") from and against any losses,
claims, damages, liabilities or other expenses to which the Arranger, the Agents
or a Lender or such indemnified persons may become subject, insofar as such
losses, claims, damages, liabilities (or actions or other proceedings commenced
or threatened in respect thereof) or other expenses arise out of or in any way
relate to or result from the actions of PCC or the Company or any of their
respective affiliates in connection with the Acquisition, any of the statements
contained in this letter or relating to the extension of the financing
contemplated by this letter, or any use or intended use of the proceeds of any
of the loans and other extensions of credit contemplated by this letter, and to
reimburse each of the Arranger, the Agents and the Lenders and each indemnified
person for any reasonable legal or other expenses incurred in connection with
investigating, defending or participating in any such investigation, litigation
or other proceeding (whether or not any such investigation, litigation or other
proceeding involves claims made between PCC or any third party and such
Arranger, Agent or Lender or any such indemnified person, and whether or not
such Arranger, Agent or Lender or any such indemnified person is a party to any
investigation, litigation or proceeding out of which any such expenses arise);
provided, however, that the indemnity contained herein shall not apply to the
- --------- -------
extent that such losses, claims, damages, liabilities or other expenses result
from the gross negligence or willful misconduct of such Arranger, Agent, Lender
or indemnified person. The obligations to indemnify each Arranger, Agent,
Lender and such indemnified persons and to pay such legal and other expenses
shall remain effective until the initial funding under a definitive financing
agreement and thereafter the indemnification and expense reimbursement
obligations contained herein shall be superseded by those contained in such
definitive financing agreement which shall transfer such obligations to the
Company and PCC shall thereupon be released from such obligations. Neither the
Arranger nor any Agent nor any other Lender shall be responsible or liable to
any other party or any other person for consequential damages which may be
alleged as a result of this letter. The foregoing provisions of this paragraph
shall be in addition to any rights that any Arranger, Agent, Lender or any
indemnified person may have at common law or otherwise.
In case any action or proceeding shall be brought or asserted against
an indemnified person in respect of which indemnity may be sought against PCC
under the provisions of the preceding paragraph, such indemnified person shall
promptly notify PCC in writing and PCC shall, if requested by such indemnified
person or if PCC desires to do so, assume the defense thereof, including the
employment of counsel reasonably satisfactory to such indemnified person. The
failure to so notify PCC shall not affect any obligations PCC may have to such
indemnified person under the
<PAGE>
provisions of such preceding paragraph or otherwise except to the extent that
PCC is adversely affected by such failure. Such indemnified person shall have
the right to employ separate counsel in such action or proceeding 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) PCC has agreed to
pay such fees and expenses, (ii) PCC has failed to assume the defense of such
action or proceeding and employ counsel reasonably satisfactory to such
indemnified person or (iii) such indemnified person shall have been advised in
writing by counsel that under prevailing ethical standards there may be a
conflict between the positions of PCC and such indemnified person in conducting
the defense of such action or proceeding or that there may be legal defenses
available to such indemnified person different from or in addition to those
available to PCC, in which case, if such indemnified person notifies PCC in
writing that it elects to employ separate counsel at the expense of PCC, PCC
shall not have the right to assume the defense of such action or proceeding on
behalf of such indemnified person; provided, however, that PCC shall not, in
--------- -------
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be responsible hereunder for
the reasonable fees and expenses of more than one such firm of separate counsel,
in addition to any local counsel. PCC shall not be liable for any settlement of
any such action or proceeding effected without the written consent of PCC (which
shall not be unreasonably withheld).
In connection with the services to be provided hereunder by DLJ or the
Arranger, DLJ or the Arranger may employ the services of their affiliates. DLJ
or the Arranger may share with such affiliates, and such affiliates may share
with DLJ or the Arranger, any information concerning Palmer and PCC; provided
--------
that DLJ or the Arranger and such affiliates agree to hold any non-public
information confidential in accordance with their respective customary policies
relating to non-public information. Any such affiliate so employed (and its
directors, officers, employees, agents and affiliates) shall be entitled to all
of the benefits afforded to DLJ or the Arranger hereunder.
This letter is confidential and shall not be disclosed by you to any
person other than your directors, accountants, attorneys and other advisors, and
to Palmer and its directors, attorneys and advisors and then only on a
confidential basis and in connection with the Acquisition and the related
transactions contemplated herein. Any disclosure to an advisor may be made for
the sole purpose of evaluating and advising on the offer of financing made in
this letter and may not be used by such advisor in formulating any offer of
financing by such advisor or an affiliate. Additionally, you may make such
disclosures of this letter as are required by law or judicial process or as may
be required or appropriate in response to any summons or subpoena or in
connection with any litigation; provided that you will use your best efforts to
--------
notify us of any such disclosure prior to making such disclosure.
Our offer will terminate on July 2, 1997, unless on or before that date
you sign and return an enclosed counterpart of this letter together with an
executed copy of the accompanying letter concerning certain fee arrangements.
The Bank Facilities referred to herein shall in no event be available unless the
Acquisition and the related transactions described herein have been consummated
on or prior to October 15, 1997. This letter supersedes any prior letters from
us with respect to the subject matter hereof, including without limitation our
letter dated May 22, 1997.
<PAGE>
This letter agreement shall be governed by and construed in accordance
with the internal laws of the State of New York. This letter agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument.
[Remainder of page intentionally left blank]
<PAGE>
We appreciate having been given the opportunity by you to be involved
in this transaction.
Very truly yours,
DLJ CAPITAL FUNDING, INC.
By: /s/ Thomas Benninger
----------------------------
Title: ____________________________
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
By: /s/ Thomas Benninger
----------------------------
Title: ____________________________
AGREED AND ACCEPTED
this 2 day of July, 1997
----
PRICE COMMUNICATIONS WIRELESS, INC.
By: /s/ Robert Price
------------------------
Title: ________________________
PRICE COMMUNICATIONS CORPORATION
By: /s/ Robert Price
------------------------
Title: ________________________
<PAGE>
ANNEX A
-------
PALMER WIRELESS, INC.
(TO BE RENAMED PRICE COMMUNICATIONS WIRELESS, INC.)
SUMMARY OF TERMS
BANK FACILITIES
The following summarizes selected terms of certain senior bank credit
facilities to be utilized in connection with the proposed acquisition (the
"Acquisition") of Palmer Wireless, Inc. ("Palmer") by Price Communications
Corporation ("PCC") through Price Communications Cellular Holdings, Inc. ("New
Holdings"), which will be formed by PCC as a wholly-owned indirect subsidiary.
This Summary of Terms is intended merely as an outline of certain of the
material terms of such bank credit facilities. It does not include descriptions
of all of the terms, conditions and other provisions that are to be contained in
the definitive documentation relating to such bank credit facilities and it is
not intended to limit the scope of discussion and negotiation of any matters not
inconsistent with the specific matters set forth herein. All terms defined in
the financing letter to which this Summary of Terms is attached and not
otherwise defined herein shall have the same meanings when used herein.
I. THE BANK FACILITIES
Borrower: Price Communications Wireless, Inc. ("PCW"); upon
- -------- consummation of the Merger, the obligations of PCW
will be assumed by Palmer, which will change its name
to Price Communications Wireless, Inc. ("Price
Wireless") concurrently with or subsequent to the
Merger, and all subsequent extensions of credit will be
incurred by Palmer prior to its change of name and
Price Wireless after such change of name (and any
references to "Company" shall be to (i) PCW prior to
the Merger, (ii) Palmer after the Merger but prior to
its change of name as the surviving corporation in the
Merger, and (iii) thereafter as Price Wireless after
such change of name).
Lenders: DLJ Capital Funding, Inc. and its affiliates ("DLJ")
- ------- and a syndicate of banks, financial institutions and
other accredited investors (the "Lenders"). "Lenders"
shall not include persons which are, or through joint
ventures or affiliates, principally
<PAGE>
engaged in the business of operating wireless
telecommunications businesses.
Arranger: Donaldson, Lukfin & Jenrette Securities Corporation
- -------- (the "Arranger)
Syndication Agent DLJ (in such capacity, the "Syndication Agent").
- -----------------
for the Lenders:
- ---------------
Administrative Agent A financial institution to be mutually determined by
- -------------------- the Arranger and the Company (the "Administrative
for the Lenders: Agent").
- ---------------
Type and Amount: The Bank Facilities shall consist of the Term Loan
- --------------- Facility and the Revolving Credit Facility.
Term Loan Facility. The Term Loan Facility will consist
------------------
of Tranche A Term Loans and Tranche B Term Loans. The
Lenders' commitments to lend the Tranche A Term Loans
and Tranche B Term Loans will terminate immediately
upon the initial funding of the Term Loan Facility upon
the consummation of the Acquisition.
Tranche A Term Loans. The Tranche A Term Loans will
--------------------
have a final maturity date of eight years after the
Closing Date and be in an original principal amount of
up to anniversary of the Closing Date, resulting in
aggregate annual amounts as follows:
Year Aggregate Annual Amortization
------ ------------------------------
(%)
1 0
2 0
3 10.0
4 12.5
5 15.0
6 17.5
7 20.0
8 25.0
-----
100.0
Tranche B Term Loans. The Tranche B Term Loans will
have a final maturity date of nine years after the
Closing Date and be in an original principal amount of
up to $225
<PAGE>
million. Quarterly amortization will be required,
resulting in aggregate annual amounts as follows:
Year Aggregate Annual Amortization
----- ------------------------------
(%)
1 1.0
2 1.0
3 1.0
4 1.0
5 1.0
6 1.0
7 1.0
8 1.0
9 92.0%
------
100.0%
Revolving Credit Facility. The Revolving Credit
-------------------------
Facility will consist of a reducing revolving credit
facility with a termination date of eight years after
the Closing Date and be in an original amount of up to
$200 million under which revolving loans may be made
and under which letters of credit may be issued up to a
sublimit to be agreed upon. A portion of the Revolving
Credit Facility in an amount to be agreed upon shall be
made available as a swingline facility. Quarterly
commitment reductions will be required resulting in
aggregate annual commitment reductions, expressed as a
percentage of the original commitment amount of the
Revolving Credit Facility, as follows:
Year Aggregate Annual Reduction
----- --------------------------
(%)
1 0
2 0
3 10.0
4 12.5
5 15.0
6 17.5
7 20.0
8 25.0
-----
100.0
The aggregate amount of outstanding loans under the
Revolving Credit Facility on any commitment reduction
date in excess of the commitments, as required to be
reduced on such commitment
<PAGE>
reduction date, shall be repaid in full on such
commitment reduction date.
Use of Proceeds: The funds required to consummate the Acquisition will
- --------------- be provided as follows: (i) $325 million in proceeds of
the Term Loan Facility and up to $100 million in
initial borrowings under the Revolving Credit Facility;
(ii) the issuance for cash by New Holdings of not
greater than $80 million (gross proceeds) of Senior
Discount Notes (the "Holdings Discount Notes") to
investors satisfactory to the Arranger and the Agents,
the proceeds of which shall be used by New Holdings to
(x) purchase for cash not less than $50 million of Pay-
In-Kind Preferred Stock or common equity of the Company
(the "Company PIK Preferred Stock") and (y) contribute
$30 million to PCC; (iii) the equity contribution of
not less than $80 million to Company; (iv) the proceeds
of the issuance for cash of not less than $175 million
of new senior subordinated debt securities (the "New
Sub Debt") by the Company; and (v) approximately $166.3
million in net cash proceeds from the sale by Palmer of
its Fort Myers, Florida MSA business unit or short-term
financing bridging such sale (the "Fort Myers' Bridge
Financing", and such net sale proceeds or proceeds of
such bridge financing, the "Pending Asset Sale
Proceeds"). Such funds shall be made available upon the
Closing Date and shall be used as follows:
1. to make an aggregate purchase payment for all
existing shares of the Company's common stock of
not in excess of $488.9 million;
2. to refinance the existing debt of Palmer and its
subsidiaries (the "Existing Debt") in an aggregate
principal amount of approximately $381.4 million,
including the application of the Pending Asset Sale
Proceeds immediately upon receipt by Palmer to
permanently repay such Existing Debt;
3. to pay fees and expenses in connection with the
Acquisition and related transactions in an
aggregate amount of approximately $25.5 million;
and
4. to fund the Company's cash account in an amount not
to exceed $600,000.
The Revolving Credit Facility will also be available to
provide for the working capital requirements and
general corporate purposes of the Company and
subsidiaries and to issue standby letters of credit
<PAGE>
in an aggregate amount to be agreed upon to support
workers' compensation contingencies and for other
corporate purposes to be agreed upon.
Guarantors: New Holdings and all existing or future subsidiaries of
- ---------- the Company. PCC shall not be a guarantor.
Security: All extensions of credit to the Company and all
- -------- guaranties of subsidiaries of the Company will be
secured by all existing and after-acquired personal
property of the Company and the subsidiary guarantors,
including a pledge of all of the stock of all existing
or future subsidiaries of the Company.
The Bank Facilities shall also be secured by first
priority liens on all existing and after-acquired real
property fee and leasehold interests of the Company and
the subsidiary guarantors, subject to exceptions to be
agreed upon.
To effect such liens securing the Bank Facilities, the
Company and the subsidiary guarantors shall execute and
deliver to the Administrative Agent all security
agreements, pledge agreements, financing statements,
deeds of trust, mortgages and other documents and
instruments as are necessary to grant a first priority
perfected security interest in and lien upon all such
property of the Company and the subsidiary guarantors,
subject to customary permitted liens to be agreed upon.
New Holdings' guaranty will be secured by a pledge of
the stock of the Company.
Negative pledge on all assets of the Company and its
subsidiaries.
Interest Rates: All amounts outstanding under the Bank Facilities shall
- -------------- bear interest, at the Company's option, at a spread
over the Base Rate or the reserve adjusted Euro-Dollar
Rate as set forth on Schedule I annexed hereto.
Loans outstanding under the swingline facility shall
bear interest at the rate otherwise applicable to Base
Rate Loans under the Revolving Credit Facility minus
the commitment fee percentage and such outstanding
loans shall not constitute usage of the Revolving
Credit Facility for purposes of calculating the
commitment fee.
<PAGE>
As used herein, the terms "Base Rate" and
"reserve adjusted Euro-Dollar Rate" shall have
meanings customary and appropriate for financings
of this type, and the basis for calculating
accrued interest and the interest periods for
loans bearing interest at the reserve adjusted
Euro-Dollar Rate ("Euro-Dollar Loans") shall be
customary and appropriate for financings of this
type. After the occurrence and during the
continuation of an event of default, interest
shall accrue at a rate equal to the rate on loans
bearing interest at the rate determined by
reference to the Base Rate ("Base Rate Loans")
plus an additional two percentage points (2.00%)
per annum and shall be payable on demand.
Interest Payments: Quarterly for Base Rate Loans; on the last day
- -----------------
of selected interest periods (which shall be 1,
2, 3 and 6 months) for Euro-Dollar Loans (and at
the end of every three months, in the case of
interest periods of longer than three months);
and upon prepayment, in each case payable in
arrears and computed on the basis of a 360-day
year.
Interest Rate Protection: Within 90 days after the Closing Date, the
- ------------------------
Company will obtain interest rate protection,
pursuant to interest rate swaps, caps or other
similar arrangements satisfactory to DLJ and the
Administrative Agent, against increases in
interest rates (above a per annum rate to be
specified by DLJ and the Administrative Agent)
with respect to a notional amount equal to not
less than 50% of the total borrowings outstanding
on the Closing Date, such arrangements to remain
in effect for a period of not less than two years
after the Closing Date.
Letter of Credit Fee: The standby letter of credit fee shall be a
- --------------------
percentage equal to the applicable margin for
Euro-Dollar Loans under the Revolving Credit
Facility, which shall be shared by all Lenders,
and 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.
Commitment Fees: Commitment fees equal to 0.40% per annum times
- ----------------
the principal amount of the Bank Facilities shall
accrue from the date of the signing of the
Definitive Financing Documents (as defined in
Part II 1. below) through the Closing Date and
commitment fees equal to 0.50% per annum times
the daily average unused portion of the Revolving
Credit Facility shall accrue from the Closing
Date and, in both cases, shall be computed on the
basis of a 360-day year and
<PAGE>
payable on the Closing Date and quarterly in
arrears and upon the maturity or termination of
the Revolving Credit Facility.
Voluntary Prepayments and The Bank Facilities may be prepaid in whole or
Commitment Reductions: in part without premium or penalty (Euro-Dollar
- -------------------------
Loans prepayable only on the last days of related
interest periods or the Company's prepayment of
related breakage fees) and the Lenders'
commitments relative thereto reduced or
terminated upon such notice and in such amounts
as may be agreed upon. Voluntary prepayments of
the Term Loan Facility shall be applied ratably
between the Tranche A Term Loans and the Tranche
B Term Loans and shall be applied at the
Company's option in one year forward order of
scheduled maturities with any remaining proceeds
applied pro rata to the scheduled installments
thereof. Voluntary commitment reductions of the
Revolving Credit Facility shall be applied at the
Company's option in one year forward order of
scheduled maturities with any remaining proceeds
applied pro rata to scheduled commitment
reductions of the Revolving Credit Facility.
Mandatory Prepayments and The Company shall prepay the loans and/or the
Commitment Reductions: commitments under the Revolving Credit Facility
- -------------------------
shall be reduced (subject to certain exceptions
and basket amounts to be agreed upon) in amounts
equal to:
Asset Sale Proceeds: the net after-tax cash
-------------------
proceeds of the sale or other disposition of any
property or assets of the Company or any of its
subsidiaries in excess of $5 million per year
(other than net cash proceeds from (i)
dispositions of inventory in the ordinary course
of business or (ii) other asset sales in the
ordinary course of business; provided that such
--------
proceeds from such asset sales are reinvested in
similar assets of the Company within 180 days
after the date of such asset sale) payable no
later than the third business day following the
date of receipt;
Proceeds of Equity Offerings: 50% of the net
----------------------------
cash proceeds received from the issuance of
equity securities of New Holdings or any of its
subsidiaries, payable no later than the third
business day following the date of receipt;
Proceeds of Debt Issuances: the net cash
--------------------------
proceeds received from certain issuances of debt
securities by New Holdings or any of its
subsidiaries, payable no later than the third
business day following the date of receipt; and
<PAGE>
Excess Cash Flow: 50% of excess cash flow (to
----------------
be defined) 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 and the reduction of the
commitments thereunder. All such mandatory
prepayments of the Term Loan Facility shall be
applied ratably to the Tranche A Term Loans and
the Tranche B Term Loans and shall be applied pro
rata to the scheduled installments thereof.
Mandatory prepayments and/or commitment
reductions of the Revolving Credit Facility shall
be applied pro rata to scheduled commitment
reductions of the Revolving Credit Facility.
Notwithstanding the foregoing, if at the time of
issuance the Leverage Ratio (as defined in
Schedule I hereto) is less than 6x, the proceeds
of the issuance of equity or debt securities of
New Holdings having the same or better terms
(from the perspective of the Lenders) as those of
the Holdings Discount Notes may be used to redeem
or repurchase the Holdings Discount Notes and any
balance of such proceeds not so used shall be
applied to the Bank Facilities as provided in the
preceding paragraph.
Notwithstanding the foregoing, in the case of any
mandatory prepayment to be applied to the Tranche
B Term Loans, the Company may elect to offer the
holders thereof the opportunity to waive the
right to receive the amount of such mandatory
prepayment. In the event any such holders elect
to waive such right, 50% of the amount that would
otherwise have been applied as a mandatory
prepayment of the Tranche B Term Loans of such
holders shall be applied to the prepayment of the
Tranche A Term Loans and the remaining 50% of
such amount may be retained by the Company.
Representations and Customary and appropriate, including without
Warranties: limitation due organization and authorization,
- -------------------
enforceability, financial condition, no material
adverse changes, title to properties, liens,
litigation, payment of taxes, no material adverse
agreements, compliance with laws, employee
benefit liabilities, environmental liabilities,
perfection and priority of liens securing the
Bank Facilities, full disclosure, and the
accuracy of all representations and warranties in
the Definitive Acquisition Documents (as defined
below under the heading "Acquisition Structure
and Documentation").
<PAGE>
Covenants: Customary and appropriate affirmative and
- ---------
negative covenants, including but not limited to
limitations on other indebtedness, liens,
investments (with an exception for expenditures
relating to purchases of minority equity
interests in existing, non-wholly-owned
subsidiaries of the Company up to an amount to be
determined), guarantees, restricted junior
payments (dividends, redemptions and payments on
subordinated debt and with exceptions for the
Company to make dividend or other payments to New
Holdings for purposes of paying (i) operating
expenses and other related costs of New Holdings
under any management or similar agreements
between the Company and New Holdings up to an
amount to be determined and (ii) cash interest
payments on the Holdings Discount Notes when
contractually required; provided that after
--------
giving effect to such dividend or other payments
Company shall be in compliance with all of its
pro forma covenants under the Bank Facilities),
mergers and acquisitions, sales of assets,
capital expenditures, leases, transactions with
affiliates, conduct of business and other
provisions customary and appropriate for
financings of this type, including exceptions (in
addition to the exceptions discussed above) and
baskets to be mutually agreed upon. Financial
performance covenants will include 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. The definitive financing agreement
shall permit the issuance of indebtedness to
sellers (or their affiliates), and the incurrence
of purchase money indebtedness, up to an
aggregate maximum amount of $50 million to be
issued or incurred in connection with the
acquisition after the Closing Date of cellular
telephone systems and such indebtedness may be
secured on a first-priority basis by the assets
so acquired and recourse may be had to a
subsidiary holding such assets but no other
recourse may be had to Company or any other
subsidiary of Company or any of their assets. The
terms of such indebtedness issued to such sellers
or such purchase money indebtedness shall be
reasonably satisfactory to Requisite Lenders.
Events of Default: Customary and appropriate (subject to customary
- -----------------
and appropriate grace periods), including without
limitation failure to make payments when due,
defaults under other agreements or instruments of
indebtedness, noncompliance with covenants,
breaches of representations and warranties,
bankruptcy, judgments in excess of specified
amounts, revocation of licenses, invalidity of
guaranties, impairment of security interests in
collateral, and
<PAGE>
"changes of control" (to be defined in a mutually
agreed upon manner).
II. CONDITIONS TO LOANS
Certain Conditions Conditions precedent to the initial funding of
Precedent to Initial the Bank Facilities will include, without
Funding: limitation, the following:
- ---------------------
1. Satisfactory Documentation. The definitive
--------------------------
documentation evidencing the Bank Facilities
(the "Definitive Financing Documents") shall
be prepared by counsel to DLJ and shall be in
form and substance satisfactory to the
Arranger, the Agents and the Lenders.
2. Corporate Structure, Management, etc. The
------------------------------------
corporate, capital and ownership structure of
New Holdings and its subsidiaries shall be
satisfactory to the Arranger, the Agents and
the Lenders. The Arranger and the Agents
shall be satisfied with senior management and
their employment contracts and proposed
ownership interests in the Company after
consummation of the Acquisition.
3. Acquisition Structure and Documentation. The
---------------------------------------
structure utilized to consummate the
Acquisition and the definitive documentation
relating thereto (the "Definitive Acquisition
Documents") shall be in form and substance
satisfactory to the Arranger, the Agents and
the Lenders, and the Definitive Acquisition
Documents shall be in full force and effect.
4. Company and New Holdings Capitalization. New
---------------------------------------
Holdings shall contribute not less than $80
million in common equity to Company. The
equity contribution to Company may be a
combination of cash, Shares of Palmer
contributed to Company (valued at $17.50 per
Share) and shares of PCC contributed to
Company to be exchanged for Shares of Palmer
(valued at $17.50 for each Share of Palmer so
exchanged). New Holdings shall issue for cash
not greater than $80 million of Holdings
Discount Notes, the proceeds of which will be
used by New Holdings to (i) purchase for cash
not less than $50 million of Company PIK
Preferred Stock or common equity and (y)
contribute $30 million to PCC. Such debt and
equity capitalization of New Holdings and
Company shall be on terms and conditions
satisfactory
<PAGE>
to the Arranger, the Agents and the Lenders.
The Holdings Discount Notes and Company PIK
Preferred Stock shall have no cash interest
or dividends, as the case may be, until the
fifth anniversary of the date of issuance and
thereafter cash interest or dividends shall
be payable provided that no default or event
of default shall have occurred and be
continuing. The Holdings Discount Notes and
Company PIK Preferred Stock shall not be
redeemable (subject, in the case of the
Holdings Discount Securities, to a "put"
right upon a "change of control") until the
tenth anniversary of the date of issuance and
all other terms of the Holdings Discount
Notes and Company PIK Preferred Stock,
including without limitation interest or
dividend rates, covenants, defaults, any
subordination provisions and remedies, shall
be reasonably satisfactory to the Arranger,
the Agents and the Lenders. Upon consummation
of the Acquisition, PCC shall indirectly own
all of the outstanding shares of New Holdings
and New Holdings will own all of the
outstanding shares of the Company's common
and preferred stock.
5. Issuance of New Sub Debt. On or prior to the
------------------------
Closing Date, the Company shall have issued
$175 million of New Sub Debt. The New Sub
Debt shall be unsecured and shall have no
scheduled principal payments payable prior to
the date which is one year after the final
maturity of the Bank Facilities. In addition,
the interest rate, covenants, defaults,
subordination provisions, remedies and all
other terms of the New Sub Debt shall be
satisfactory to the Arranger, the Agents and
the Lenders. All such negative covenants and
defaults shall be less restrictive than those
contained in the Definitive Financing
Documents.
6. Consummation of the Acquisition. Merger Sub
-------------------------------
shall have acquired all of the existing
shares of common stock (including options) of
the Company for an aggregate purchase payment
which does not exceed $488.9 million and all
other aspects of the Acquisition (including
the Merger) shall have been consummated
pursuant to the Definitive Acquisition
Documents, no provision of which shall have
been amended, supplemented, waived or
otherwise modified in any material respect
without the prior written consent of the
Arranger, the Agents and the Lenders.
<PAGE>
7. Completion of Pending Asset Sale; Fort Myers'
---------------------------------------------
Bridge Financing. On or prior to the Closing
----------------
Date, Palmer shall have completed the sale,
on terms and conditions satisfactory to
Arranger, of its Fort Myers, Florida MSA
business unit for net cash proceeds of
approximately $166.3 million. Alternatively,
FMT Ltd. or any subsidiary of FMT Ltd. may
borrow up to $166.3 million for up to 45 days
(the "Fort Myers' Bridge Financing") and the
proceeds of such borrowing used to provide
consideration to be used in the Merger. The
Fort Myers' Bridge Financing shall be on
terms satisfactory to the Arranger, the
Agents and the Lenders and shall be non-
recourse to Company and Palmer except to the
extent agreed to by the Arranger, the Agents
and the Lenders. Upon receipt of Pending
Asset Sale Proceeds, Palmer shall have
immediately and permanently repaid the
Existing Debt in an amount equal to such
Pending Asset Sale Proceeds.
8. Discharge of Existing Debt. The Existing Debt
--------------------------
in the aggregate principal amount of
approximately $381.4 million, as reduced by
the application of the Pending Asset Sale
Proceeds, shall have been paid in full, all
commitments relating thereto shall have been
terminated, and all liens or security
interests related thereto shall have been
terminated or released, in each case on terms
satisfactory to the Arranger, the Agents and
the Lenders, and no other existing
indebtedness of the Company and its
subsidiaries shall remain outstanding.
9. Certain Approvals and Agreements. All
--------------------------------
governmental and third party approvals
(including without limitation any consents
required from the Federal Communications
Commission and any state regulatory
authorities) necessary or advisable in
connection with the Acquisition, the
financings contemplated thereby and the
continuing operations of the business of the
Company and its subsidiaries shall have been
obtained and be in full force and effect, and
all applicable waiting periods shall have
expired without any action being taken or
threatened by any competent authority which
would restrain, prevent or otherwise impose
adverse conditions on the Acquisition or the
financing thereof and no action, request for
stay, petition for review or rehearing,
reconsideration or appeal shall be
<PAGE>
pending, in each case except for such
governmental and third party approvals the
failure of which to obtain would not,
individually or in the aggregate, have a
material adverse effect on the condition
(financial or otherwise), business, assets,
liabilities, properties, results of
operations or prospects of the Company and
its subsidiaries (a "Material Adverse
Effect") or have a material adverse effect on
the parties' ability to consummate the
Acquisition substantially on the terms and
conditions described herein. The Arranger and
the Agents shall be satisfied that existing
licenses relating to the Company and its
subsidiaries will remain in place and will
not be adversely affected by the Acquisition.
10. Security. The Administrative Agent, for the
--------
benefit of the Lenders, shall have been
granted on the Closing Date a perfected
security interest in all assets to the extent
described above under the heading "Security".
11. Title Insurance. The Arranger shall have
---------------
received satisfactory assurances that one or
more ALTA title insurance policies, in
amounts and in form and substance
satisfactory to the Arranger and the Agents,
will be available to insure the interests of
the Lenders in such of the real property
securing the Bank Facilities as may be
designated by the Arranger in its discretion.
12. Environmental Matters. The Arranger, the
---------------------
Agents and the Lenders shall have received
reports and other information, in form, scope
and substance satisfactory to the Arranger,
the Agents and the Lenders, concerning any
environmental liabilities of the Company and
its subsidiaries.
13. Financial Statements. The Lenders shall have
--------------------
received (i) audited financial statements of
the Company and its subsidiaries for the
fiscal years ended December 31, 1994,
December 31, 1995 and December 31, 1996, (ii)
unaudited financial statements of the Company
and its subsidiaries for the fiscal periods
most recently ended prior to the Closing Date
(including without limitation monthly
financial statements for any such period of
less than three months), (iii) a pro forma
--- -----
balance sheet of the Company and its
subsidiaries as of the Closing Date after
giving effect to the Acquisition and the
transactions contemplated hereby, and
<PAGE>
(iv) projected financial statements
(including balance sheets and statements of
operations, stockholders' equity and cash
flows) of the Company and its subsidiaries
for the eight-year period after the Closing
Date, all of the foregoing to be in form and
substance satisfactory to the Arranger, the
Agents and the Lenders.
14. No Material Adverse Change. Since December
--------------------------
31, 1996, there shall have occurred no
material adverse change in the business,
operations, properties, assets, liabilities,
condition (financial or otherwise) or
prospects of the Company and its
subsidiaries, taken as a whole or in the
facts and Information as represented to date.
15. No Disruption of Financial and Capital
--------------------------------------
Markets. There shall have been no material
-------
adverse change after the date hereof in the
syndication markets for credit facilities
similar in nature to the Bank Facilities, and
there shall not have occurred and be
continuing a material disruption of or
material adverse change in the financial,
banking or capital markets that would have an
adverse effect on such syndication market, in
each case as determined by the Arranger based
in its good faith assessment of such markets.
16. Due Diligence. No information submitted to
-------------
DLJ in its due diligence investigation shall
be inaccurate, incomplete or misleading in
any respect which could be materially adverse
and no change shall occur, and no additional
information shall be disclosed to or
discovered by DLJ which DLJ reasonably deems
materially adverse in respect of the
business, operations, assets, liabilities,
condition (financial or otherwise) or
prospects of Palmer and its subsidiaries.
17. Solvency. The Administrative Agent shall have
--------
received an opinion from an independent
valuation consultant or appraiser
satisfactory to the Arranger and the Agents
and a certificate of the chief financial
officer of the Company, in each case in form
and substance satisfactory to the Arranger,
the Agents and the Lenders, supporting the
conclusions that, after giving effect to the
Acquisition and the related transactions
contemplated hereby, the Company will not be
insolvent or be rendered insolvent by the
indebtedness incurred in connection
therewith, or be left
<PAGE>
with unreasonably small capital with which to
engage in its businesses, or have incurred
debts beyond its ability to pay such debts as
they mature.
18. Amendment or Redemption of Existing PCC
---------------------------------------
Preferred Stock. The existing Senior Payment-
---------------
In-Kind Increasing Rate Preferred Stock of
PCC shall be amended on terms satisfactory to
the Arranger, the Agents and the Lenders or
shall be redeemed in full from the issuance
of payment-in-kind securities to be issued by
Holdings having terms satisfactory to the
Arranger, the Agents and the Lenders.
19. Customary Closing Documents. All documents
---------------------------
required to be delivered under the Definitive
Financing Documents, including customary
legal opinions, corporate records, documents
from public officials and officers'
certificates, shall have been delivered.
Conditions to All The conditions to all borrowings will include
Borrowings: requirements relating to prior written notice of
- -----------------
borrowing, the accuracy of representations and
warranties, and the absence of any default or
potential event of default, and will otherwise be
customary and appropriate for financings of this
type.
III. MISCELLANEOUS
Syndication: A syndicate of financial institutions will be
- -----------
arranged by the Arranger. PCW, New the Bank
Facilities (such cooperation to include, without
limitation, participating in meetings with the
Lenders and assisting in the preparation of a
Confidential Information Memorandum and other
materials to be used in connection with such
syndication) and shall provide and cause their
respective advisors to provide all information
reasonably deemed necessary by the Arranger to
successfully complete such syndication. PCW, New
Holdings and the Company also agree to coordinate
any other financings by PCW, New Holdings or the
Company with the Arranger's primary syndication
efforts relating to the Bank Facilities.
The Lenders may assign all or, in an amount of
not less than $5.0 million (or such lesser amount
as may constitute the assigning Lender's entire
commitment), any part of their shares of the Bank
<PAGE>
Facilities to their affiliates, to other Lenders,
or to one or more banks or other entities that
are eligible assignees (to be defined in the
Definitive Financing Documents) which are
acceptable to the Company and the Syndication
Agent and the Administrative Agent, such consent
not to be unreasonably withheld, and upon such
assignment any such affiliate, bank or entity
shall become a Lender for all purposes of the
Definitive Financing Documents; provided that
assignments made to affiliates and other Lenders
shall not be subject to the $5.0 million minimum
assignment requirement. The Lenders will have the
right to sell participations, subject to
customary limitations on voting rights, in their
shares of the Bank Facilities.
Lenders' rights of assignment and participation
are subject to the limitations that (i)
prospective assignees and participants shall
represent that they are not principally engaged
in the business of operating wireless
telecommunications businesses and (ii) such
prospective assignees and participants receive
all non-public information subject to customary
confidentiality undertakings set forth in the
Definitive Financing Documents.
Requisite Lenders: Requisite Lenders shall mean Lenders holding in
- ------------------
the aggregate more than 51% of the commitments
under the Bank Facilities.
Taxes, Reserve All payments are to be made free and clear of
Requirements & any present or future taxes (other than
Indemnities: franchise taxes and taxes on overall net income),
- ---------------
imposts, assessments, withholdings, or other
deductions whatsoever. Foreign Lenders shall
furnish to the Administrative Agent (for delivery
to the Company) appropriate certificates or other
evidence of exemption from U.S. federal income
tax withholding.
The Company shall indemnify the Lenders against
all increased costs of capital resulting from
reserve requirements or otherwise imposed, in
each case subject to customary increased costs,
capital adequacy and similar provisions.
Governing Law and The Company will submit to the non-exclusive
Jurisdiction: jurisdiction and venue of the federal and state
- -----------------
courts of the State of New York and will waive
any right to trial by jury. New York law shall
govern the Definitive Loan Documents.
Counsel to the Arranger O'Melveny & Myers LLP.
and DLJ:
- -----------------------
<PAGE>
SCHEDULE I
The applicable margin for Euro-Dollar Rate and Base Rate Loans shall be
determined based on the ratio (the "Leverage Ratio") of consolidated total debt
to consolidated EBITDA of Company and its Subsidiaries as set forth in the table
below provided that for the first six months after the Closing Date such margin
--------
shall be 2.50% for Euro-Dollar Rate Loans and 1.50% for Base Rate Loans with
respect to the Tranche A Term Loans and the Revolving Credit Facility and 2.75%
for Euro-Dollar Rate Loans and 1.75% for Base Rate Loans with respect to the
Tranche B Term Loans:
A. Tranche A Term Loans and Revolving Credit Facility
<TABLE>
<CAPTION>
===============================================================================
Leverage Ratio Euro-Dollar Margin Base Rate Margin
===============================================================================
<S> <C> <C>
more than 8x 2.50% 1.50%
- -------------------------------------------------------------------------------
more than 7x less than or equal to 8x 2.25% 1.25%
- -------------------------------------------------------------------------------
more than 6x less than or equal to 7x 2.00% 1.00%
- -------------------------------------------------------------------------------
more than 5x less than or equal to 6x 1.75% 0.75%
- -------------------------------------------------------------------------------
more than 4x less than or equal to 5x 1.50% 0.50%
- -------------------------------------------------------------------------------
less than or equal to 4x 1.25% 0.25%
===============================================================================
</TABLE>
B. Tranche B Term Loans
<TABLE>
<CAPTION>
===============================================================================
Leverage Ratio Euro-Dollar Margin Base Rate Margin
===============================================================================
<S> <C> <C>
more than 8x 2.75% 1.75%
- -------------------------------------------------------------------------------
more than 7x less than or equal to 8x 2.50% 1.50%
- -------------------------------------------------------------------------------
less than or equal to 7x 2.25% 1.25%
===============================================================================
</TABLE>
<PAGE>
Exhibit 10.19
$175,000,000
11-3/4% Senior Subordinated Notes due 2007
of PRICE COMMUNICATIONS WIRELESS, INC.
PURCHASE AGREEMENT
------------------
July 3, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
WASSERSTEIN PERELLA SECURITIES, INC.
NATWEST CAPITAL MARKETS LIMITED
LEHMAN BROTHERS, INC.
PAINEWEBBER INCORPORATED
c/o Donaldson, Lufkin & Jenrette
Securities Corporation,
As Representative of the Purchasers,
277 Park Avenue
New York, New York 10172
Ladies & Gentlemen:
Price Communications Wireless, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to Donaldson, Lufkin & Jenrette
-------
Securities Corporation, Wasserstein Perella Securities, Inc., NatWest Capital
Markets Limited, Lehman Brothers, Inc. and PaineWebber Incorporated, (each, a
"Purchaser") an aggregate of $175,000,000 principal amount of 11-:% Senior
---------
Subordinated Notes due 2007 (the "Notes") subject to the terms and conditions
-----
set forth herein. The Notes are to be issued pursuant to the provisions of an
indenture (the "Indenture") to be dated as of July 10, 1997 by and between the
---------
Company and The Bank of Montreal Trust Company, as trustee (the "Trustee").
--------
1. Offering Memorandum The Notes will be offered and sold to you
-------------------
pursuant to an exemption from the registration requirements of the Securities
Act of 1933, as amended, and the rules and regulations of the Securities and
Exchange Commission thereunder (the "Act"). The Company has prepared a
---
preliminary offering memorandum, dated June 20, 1997 (including the documents
incorporated therein by reference, the "Preliminary Offering Memorandum"), and a
-------------------------------
final offering memorandum, dated July 2, 1997
<PAGE>
(including the documents incorporated therein by reference, the "Offering
--------
Memorandum"), relating to the Company and the Notes.
- ----------
Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Offering Memorandum. All references herein to
"subsidiaries" or "Subsidiaries" of the Company, except where specifically
- ------------- -------------
indicated otherwise, refer solely to subsidiaries of the Company as of the date
of this agreement. Any representation or warranty made herein to the best of
Parent's or the Company's knowledge with respect to Palmer Wireless, Inc., a
Delaware corporation ("Palmer") is based solely on actual knowledge of Price
-------
Communications Corporation ("Parent") and the Company.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Act, the Notes (and all
securities issued in exchange therefor or in substitution thereof) shall bear
the following legend:
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"), OR (B) 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 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) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) 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),
(E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
(F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIRE-
2
<PAGE>
MENTS 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 REGULATIONS 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.
You have advised the Company that you will make offers (the "Exempt
------
Resales") of the Notes purchased hereunder on the terms set forth in the
- -------
Offering Memorandum, as amended or supplemented by the Company, if applicable,
solely to (i) persons whom you reasonably believe to be "qualified institutional
-----------------------
buyers," as defined in Rule 144A under the Act ("QIBs") and (ii) to persons
- ------ ----
permitted to purchase Notes in offshore transactions in reliance upon Regulation
S under the Act (each, a "Regulation S Purchaser"). The QIBs and Regulation S
----------------------
Purchasers who purchase Notes from the Purchasers in the initial placement
thereof are referred to herein as the "Eligible Purchasers." You have advised
-------------------
the Company that you will offer the Notes to such Eligible Purchasers initially
at the price set forth on the cover of the Offering Memorandum, and that such
price may be changed at any time without notice.
The Company and the Purchasers intend to enter into a registration
rights agreement (the "Registration Rights Agreement"), to be dated the Closing
-----------------------------
Date, having customary and reasonable terms and conditions taking into
consideration the circumstances of the Offering. Pursuant to the Registration
Rights Agreement, the Company will agree to file with the Securities and
Exchange Commission (the "Commission"), under the circumstances set forth
----------
therein, (i) a registration statement under the Act (the "Exchange Offer
--------------
Registration Statement") relating to the 11-:% Senior Subordinated Notes due
- ----------------------
2007 (the "Exchange Notes" to be offered in exchange for the Notes (the
--------------
"Exchange Offer"), or (ii) a shelf registration statement pursuant to Rule 415
--------------
under the Act (the "Shelf Registration Statement") relating to the resale by
----------------------------
certain holders of the Notes, and to use its best efforts to cause such
Registration Statements to be declared effective. The Agreement and Plan of
Merger, as amended, (the "Merger Agreement"), dated as of May 23, 1997, by and
among Palmer, Price Communications Corporation, a New York corporation
("Parent"), and Price Communications Cellular Merger Corp., the Voting Agreement
(the "Voting Agreement"), dated as of
3
<PAGE>
May 23, 1997, between Parent and Palmer, this Agreement, the Notes, the
Indenture and the Registration Rights Agreement are hereinafter sometimes
referred to collectively as the "Operative Documents."
-------------------
2. Agreements to Sell and Purchase On the basis of the
-------------------------------
representations and warranties contained in this purchase agreement, hereinafter
referred to as the "Agreement," and subject to its terms and conditions, the
---------
Company agrees to issue and sell to you, and each of the Purchasers, severally
but not jointly, agrees to purchase from the Company, the Notes in the
respective principal amount set forth opposite its name on Schedule I hereto.
The aggregate purchase price for the Notes shall be $169,750,000 (the "Purchase
--------
Price").
- -----
3. Delivery and Payment Delivery to the Purchasers of and payment
--------------------
for the Notes shall be made at 10:00 A.M., New York City time, on July 10, 1997
(the "Closing Date"), at the offices of Davis, Polk & Wardwell, 450 Lexington
------------
Avenue, New York, New York l00l7. The Closing Date and the location of delivery
of and the form of payment for the Notes may be varied by agreement between you
and the Company.
One or more of the Notes in definitive form, registered in the name of
Cede & Co., as nominee of The Depository Trust Company ("DTC"), having an
---
aggregate principal amount equal to $175,000,000, shall be delivered by the
Company to you (or as you may direct), against payment by you of the Purchase
Price therefor by wire transfer in immediately available funds to such accounts
with such financial institutions as the Company may direct.
4. Agreements of the Company The Company agrees with each of you
-------------------------
as follows:
(a) To advise you promptly and, if requested by you, to confirm
such advice in writing, (i) of the issuance by any state securities commission
of any stop order suspending the qualification or exemption from qualification
of any of the Notes for offering or sale in any jurisdiction, or the initiation
of any proceeding for such purpose by any state securities commission or other
regulatory authority, and (ii) of the happening of any event which makes any
statement of a material fact made in the Offering Memorandum untrue or which
requires the making of any additions to or changes in the Offering Memorandum in
order to make the statements therein not misleading; provided, however, that the
Company shall have no obligation with respect to any
4
<PAGE>
such event occurring after the Closing Date unless one or more of the Purchasers
notifies the Company in writing at the Closing Date that it has not completed
the initial placement of the Notes, in which case, the Company shall have such
obligation until such Purchaser notifies the Company of the completion of such
initial placement, which such Purchaser shall do promptly upon such completion.
(b) To furnish to you, without charge, such number of copies of
the Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as you may reasonably request. The Company
consents to the use of the Preliminary Offering Memorandum and the Offering
Memorandum, and any amendments and supplements thereto prepared by the Company,
by you in connection with offers or sales of the Notes.
(c) Not to make any amendment or supplement to the Preliminary
Offering Memorandum or the Offering Memorandum of which you shall not previously
have been advised or to which you shall reasonably object; and to prepare and
make any amendment or supplement to the Preliminary Offering Memorandum or the
Offering Memorandum which may be necessary or advisable in connection with the
distribution of the Notes by you.
(d) If, after the date hereof, any event shall occur as a result
of which, in the reasonable judgment of the Company or in your reasonable
judgment, it becomes necessary to amend or supplement the Offering Memorandum in
order to make the statements therein, in light of the circumstances under which
the Offering Memorandum is delivered to an Eligible Purchaser which is a
prospective purchaser, not misleading, or, if it is necessary to amend or
supplement the Offering Memorandum to comply with any applicable law, forthwith
to prepare an appropriate amendment or supplement to the Offering Memorandum so
that the statements in the Offering Memorandum, as so amended or supplemented,
will not, in light of the circumstances when it is so delivered, be misleading,
or so that the Offering Memorandum will comply with the applicable law;
provided, however, that the Company shall have no such obligation with respect
to any event occurring after the Closing Date unless one or more of the
Purchasers notifies the Company in writing at the Closing Date that it has not
completed the initial placement of the Notes, in which case the Company shall
have such obligation until such Purchaser notifies the Company of the completion
of such initial placement, which such Purchaser shall do promptly upon such
completion.
5
<PAGE>
(e) To cooperate with you and counsel for the Purchasers in
connection with the registration or qualification of the Notes for offer and
sale by the Purchasers and by dealers under the securities or Blue Sky laws of
such jurisdictions as you may request, to continue such qualification in effect
so long as required for the completion of the initial placement of the Notes and
to file such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification; provided,
however, that the Company shall not be required in connection therewith to
register or qualify as a foreign corporation where it is not now so qualified or
to take any action that would subject it to service of process in suits or
taxation, other than as to matters and transactions relating to the Exempt
Resales, in any jurisdiction where it is not now so subject.
(f) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement becomes effective or is terminated,
to pay all costs, expenses, fees and taxes incident to and in connection with:
(i) the printing, filing and distribution of the Preliminary Offering Memorandum
and the Offering Memorandum (including financial statements and exhibits) and
all amendments and supplements thereto, (ii) the preparation (including, without
limitation, word processing and duplication costs) and delivery of all
preliminary and final Blue Sky memoranda, (iii) the issuance and delivery by the
Company of the Notes, (iv) the qualification of the Notes for offer and sale
under the securities or Blue Sky laws of the several states (including, without
limitation, the reasonable fees and disbursements of your counsel relating to
such registration or qualification), (v) furnishing such copies of the
Preliminary Offering Memorandum and the Offering Memorandum and all amendments
and supplements thereto as may be reasonably requested for use in connection
with offers and sales of the Notes, (vi) the preparation of certificates for the
Notes (including, without limitation, printing and engraving thereof), (vii) the
fees, disbursements and expenses of the Company's counsel and accountants and
the Trustee for the Notes, (viii) the rating of the Notes by investment rating
agencies; and (ix) the performance by the Company of its other obligations under
this Agreement.
(g) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by the
Company prior to the Closing Date.
(h) To use the proceeds from the sale of the Notes in the manner
described in the Offering Memorandum under
6
<PAGE>
the caption "Use of Proceeds" and consistent with that described therein under
---------------
the caption "Description of Notes - Security."
(i) Not to claim voluntarily, and to resist actively any
attempts to claim, the benefit of any usury laws against the holders of any
Notes.
(j) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined by the Act) other
than the Notes, in a manner that would require the registration under the Act of
the sale to you or Eligible Purchasers of the Notes.
(k) For so long as any of the Notes remain outstanding and
during any period in which the Company is not subject to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to make
------------
available to any holder and any prospective purchaser of such Notes from such
holder the information specified by Rule 144A(d)(4) under the Act.
(l) Except following the effectiveness of the Exchange Offer
Registration Statement, not to, and not to authorize or knowingly permit any
person acting on its behalf to, solicit any offer to buy or offer to sell the
Notes by means of any form of general solicitation or general advertising (as
such terms are used in Regulation D under the Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Act.
(m) To cause the Exchange Offer to be made on the appropriate
form to permit registration of the Exchange Notes to be offered in exchange for
the Notes and to comply with all applicable federal and state securities laws in
connection with the Exchange Offer.
(n) To comply with all of its agreements set forth in the
Registration Rights Agreement and all agreements set forth in the representation
letter of the Company to DTC relating to the approval of the Notes by DTC for
"book-entry" transfer.
(o) To use its best efforts to effect the inclusion of the
Notes in PORTAL.
5. Representations and Warranties (a) The Company and Parent,
------------------------------
represent and warrant to each of you that:
7
<PAGE>
(i) The Preliminary Offering Memorandum and the
Offering Memorandum have been prepared in connection with the Exempt
Resales. The Offering Memorandum does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, except that the representations and warranties set
forth in this paragraph (i) do not apply to statements in or omissions from
the Offering Memorandum based upon information relating to the Purchasers
furnished to the Company in writing by the Purchasers expressly for use
therein. The Company and Parent acknowledge for all purposes under this
Agreement that the statements set forth in the legend appearing at the
bottom of the inside cover page and in the table and the third paragraph,
the first sentence of the seventh paragraph (but only as it relates to the
Purchasers), ninth and tenth paragraphs appearing under the caption "Plan
of Distribution" in the Preliminary Offering Memorandum and Offering
Memorandum constitute the only written information furnished to the Company
by the Purchasers expressly for use in the Preliminary Offering Memorandum
or the Offering Memorandum, respectively, and that you shall not be deemed
to have provided any information (and therefore are not responsible for any
statement or omission) pertaining to any arrangement or agreement with
respect to any party other than the Purchasers. No stop order preventing
the use of the Preliminary Offering Memorandum or the Offering Memorandum,
or any amendment or supplement thereto, or any order asserting that any of
the transactions contemplated by this Agreement are subject to the
registration requirements of the Act or the applicable laws of any other
jurisdiction, has been issued. The Offering Memorandum, as of its date,
contains all the information specified in, and meeting the requirements of,
Rule 144A(d)(4) under the Act.
(ii) When the Notes are issued and delivered pursuant
to this Agreement, none of the Notes will be of the same class (within the
meaning of Rule 144A under the Act) as securities of Parent or the Company
that are listed on a national securities exchange registered pursuant to
the Exchange Act or that are quoted in a United States automated
interdealer quotation system.
(iii) The Company and Palmer and each of its
subsidiaries (in the case of such representation with
8
<PAGE>
respect to Palmer and its subsidiaries by Parent and the Company, to the
best of Parent's and the Company's knowledge) has been duly organized, is
validly existing as a corporation or limited or general partnership in good
standing under the laws of its respective jurisdiction of organization, has
all requisite corporate or partnership power and authority to carry on its
business as is currently being conducted and as described in the Offering
Memorandum and to own, lease and operate its properties, and is duly
qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where
the failure to be so qualified would not, singly or in the aggregate, have
a Material Adverse Effect (as defined below ).
(iv) The Company has no subsidiaries; and as of the
Closing Date the Company will own, directly or indirectly, the assets,
properties and interests disclosed in the Offering Memorandum as owned by
the Company and Palmer will own, (in the case of such representation with
respect to Palmer and its subsidiaries by Parent and the Company, to the
best of Parent's and the Company's knowledge) directly or indirectly, the
assets, properties and interests disclosed in the Offering Memorandum as
owned by it, in each case free and clear of any security interest, claim,
lien, limitation on voting rights or encumbrance other than as is set forth
in the Offering Memorandum.
(v) Each of Parent and the Company, as applicable,
has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement, the Indenture, the
Registration Rights Agreement, and each of Parent and the Company and their
subsidiaries and Palmer and its subsidiaries, as applicable, has all
requisite corporate or partnership power and authority to execute, deliver
and perform its obligations under the other Operative Documents to which it
is a party and, in each case, to consummate the transactions contemplated
hereby and thereby, including, without limitation, the corporate power and
authority to issue, sell and deliver the Notes as provided herein and
therein (in the case of such representation with respect to Palmer and its
subsidiaries by Parent and the Company, to the best of Parent's and the
Company's knowledge).
9
<PAGE>
(vi) This Agreement has been duly and validly
authorized, executed and delivered by each of Parent and the Company and is
a valid and binding agreement of the Company and Parent.
(vii) The Indenture has been duly and validly
authorized by the Company and when duly executed and delivered by the
Company, will be a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except (i) as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and remedies
generally and (ii) as to general principles of equity, regardless of
whether enforcement is sought in a proceeding at law or in equity. The
Indenture, when executed and delivered, will conform to the description
thereof in the Offering Memorandum.
(viii) The Notes have been duly and validly authorized
for issuance and sale to you by the Company pursuant to this Agreement and,
when issued and authenticated in accordance with the terms of the Indenture
and delivered against payment therefor in accordance with the terms hereof,
will be valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms and entitled to the benefits of
the Indenture, except (i) as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights and remedies generally and (ii) as to general principles of equity,
regardless of whether enforcement is sought in a proceeding at law or in
equity. The Notes, when issued, authenticated and delivered, will conform
to the description thereof in the Offering Memorandum.
(ix) The Exchange Notes have been duly and validly
authorized for issuance by the Company, and when issued and authenticated
in accordance with the terms of the Indenture, the Registration Rights
Agreement and the Exchange Offer, will be valid and binding obligations of
the Company, enforceable against the Company in accordance with their terms
and entitled to the benefits of the Indenture, except (i) as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and remedies
generally and (ii) as to general principles of equity, regardless of
whether enforcement is sought in a proceeding at law or in equity.
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(x) Each of the Merger Agreement, and the agreement
between the Company, Price Communications Cellular Holdings, Inc.
("Holdings") and Parent relating to Parent's interest in Palmer (the
"Contribution Agreement") has been duly and validly authorized by the
----------------------
Company (and as applicable, Parent and each of the Company's and Parent's
subsidiaries party thereto), duly executed and delivered by the Company
(and, as applicable, Parent and each of Parent's subsidiaries party
thereto), and is a valid and binding obligation of each of them,
enforceable in accordance with their respective terms, except (i) as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and remedies
generally and (ii) as to general principles of equity, regardless of
whether enforcement is sought in a proceeding at law or in equity. The
Merger Agreement conforms to the description thereof in the Offering
Memorandum.
(xi) The Registration Rights Agreement has been duly
and validly authorized by the Company and, when duly executed and delivered
by the Company, will be the valid and binding obligation of the Company,
enforceable in accordance with its terms, except (i) as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights and remedies generally, (ii) as to
general principles of equity, regardless of whether enforcement is sought
in a proceeding at law or in equity and (iii) that the enforceability of
the indemnification and contribution provisions contained therein may be
limited by Federal and state securities laws and the policies underlying
such laws. The Registration Rights Agreement conforms to the description
thereof in the Offering Memorandum.
(xii) None of Parent, the Company, or any of their
subsidiaries nor, Palmer or any of its subsidiaries is in violation of its
respective charter, bylaws or other organizational document or is in
default in the performance of any bond, debenture, note, indenture,
mortgage, deed of trust, license or other agreement or instrument to which
it is a party or by which it is bound or to which any of its properties is
subject, or is in violation of any law, statute, rule, regulation, judgment
or court decree applicable to them or their assets or properties, except
for any such defaults or violations, which singly or in the aggregate,
would not have a Material Adverse Effect (as defined below). There exists
no condition that, with
11
<PAGE>
notice, the passage of time or otherwise, would constitute a default under
any such document or instrument, except for any such defaults or
violations, which singly or in the aggregate, would not have a Material
Adverse Effect (in the case of such representations with respect to Palmer
and its subsidiaries by Parent and the Company in this clause 5(xii), to
the best of Parent's and the Company's knowledge).
(xiii) The execution, delivery and performance by the
Company and Parent of this Agreement and by each of Parent, the Company and
their subsidiaries and Palmer and its subsidiaries, as applicable, of the
other Operative Documents (except as set forth in the Offering Memorandum)
to which they are parties, the issuance and sale of the Notes as
contemplated by this Agreement and the Offering Memorandum and the
consummation of the transactions contemplated hereby and thereby will not
violate, conflict with or constitute a breach of any of the terms or
provisions of, or a default under (or an event that with notice or the
lapse of time, or both, would constitute a default), or require consent
under, or result in the imposition of a lien or encumbrance on any
properties of Parent, the Company or any of their subsidiaries or, Palmer
or any of its material subsidiaries, or an acceleration of indebtedness
pursuant to, (i) the charter or bylaws of Parent, the Company or any of
their subsidiaries, Palmer or any of its material subsidiaries, (ii) any
bond, debenture, note, indenture, mortgage, deed of trust, license or other
agreement or instrument to which Parent, the Company or any of their
subsidiaries or Palmer or any of its material subsidiaries) is a party or
by which any of them or their property is or may be bound, (iii) any
statute, rule or regulation applicable to Parent, the Company, any of their
subsidiaries, or Palmer or any of its material subsidiaries or any of their
assets or properties or those of Palmer or any of its material
subsidiaries), or (iv) any judgment, order or decree of any court or
governmental agency or authority having jurisdiction over Parent, the
Company, any of their subsidiaries, or Palmer or any of its material
subsidiaries or their assets or properties or those of Palmer or any of its
material subsidiaries). Except as required by the Federal Communications
Commission ("FCC") as disclosed in the Offering Memorandum, no consent,
approval, authorization or order of, or filing, registration,
qualification, license or permit of or with, any court or governmental
agency, body or administrative agency is required for the execution,
delivery and performance of this Agreement and the other Opera-
12
<PAGE>
tive Documents (except as set forth in the Offering Memorandum) by Parent
or the Company or, as applicable, any of their subsidiaries or, Palmer or
any of its subsidiaries and the consummation of the transactions
contemplated hereby and thereby, except such as have been obtained and made
(or, in the case of the Registration Rights Agreement, will be obtained and
made) under the Act, the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), and state securities or Blue Sky laws and
-------------------
regulations or such as may be required by the National Association of
Securities Dealers, Inc. (the "NASD"). No consents or waivers from any
----
other person are required for the execution, delivery and performance of
this Agreement and the other Operative Documents (except as set forth in
the Offering Memorandum) by Parent or the Company or, as applicable, any of
their subsidiaries or Palmer or any of its subsidiaries and the
consummation of the transactions contemplated hereby and thereby, other
than such consents and waivers as have been obtained (or, in the case of
the Registration Rights Agreement, will be obtained). In the case of such
representations with respect to Palmer and its subsidiaries by Parent and
the Company in this clause 5(xiii) to the best of Parent's and the
Company's knowledge.
(xiv) There is (i) no action, suit or proceeding
before or by any court, arbitrator or governmental agency, body or
official, domestic or foreign, now pending or, to the best knowledge of the
Company and Parent, threatened or contemplated to which Parent, the Company
or any of their subsidiaries or Palmer or any of its subsidiaries is a
party or to which the business or property of Parent, the Company or any of
their subsidiaries or Palmer or any of its subsidiaries is subject, (ii) no
statute, rule, regulation or order that has been enacted, adopted or issued
by any governmental agency or that has been proposed by any governmental
body, (iii) no injunction, restraining order or order of any nature by a
federal or state court or foreign court of competent jurisdiction to which
Parent, the Company or any of their subsidiaries or, Palmer or any of its
subsidiaries is subject issued that, in the case of clauses (i), (ii) and
(iii) above, (x) might, singly or in the aggregate, result in a material
adverse effect on the properties, business, results of operations,
condition (financial or otherwise), or prospects of the Company and its
subsidiaries or, Palmer or any of its subsidiaries, taken as a whole (a
"Material Adverse Effect"), (y) would interfere with or adversely affect
-----------------------
the issuance of the Notes
13
<PAGE>
or (z) in any manner draw into question the validity of this Agreement, the
Notes, the Indenture, the Registration Rights Agreement or any other
Operative Document (in the case of such representations with respect to
Palmer and its subsidiaries by Parent and the Company, to the best of
Parent's and the Company's knowledge).
(xv) To the best knowledge of the Company and Parent,
no action has been taken and no statute, rule or regulation or order has
been enacted, adopted or issued by any governmental agency that prevents
the issuance of the Notes; to the best knowledge of the Company and Parent,
no injunction, restraining order or order of any nature by a federal or
state court of competent jurisdiction has been issued that prevents the
issuance of the Notes or suspends the sale of the Notes in any jurisdiction
referred to in Section 4(e) hereof; and to the best knowledge of the
Company and Parent, no action, suit or proceeding is pending against
Parent, the Company or any of their subsidiaries or, Palmer or any of its
material subsidiaries) before any court or arbitrator or any governmental
body, agency or official which, if adversely determined, would prohibit the
issuance of the Notes or invalidate any Operative Document; and every
request of the Company or Parent by any securities authority or agency of
any jurisdiction for additional information has been complied with in all
material respects (in the case of such representation with respect to
Palmer and its subsidiaries by Parent and the Company, to the best of
Parent's and the Company's knowledge).
(xvi) To the best of their knowledge, none of Parent,
the Company or any of their subsidiaries or, Palmer or any of its
subsidiaries has violated any federal, state or local law relating to
discrimination in hiring, promotion or pay of employees (in the case of
such representation with respect to Palmer and its subsidiaries by Parent
and the Company, to the best of Parent's and the Company's knowledge).
(xvii) To the best of their knowledge, none of Parent,
the Company or any of their subsidiaries nor, to the best of Parent's or
the Company's knowledge, Palmer or any of its subsidiaries has violated any
environmental, safety or similar law or regulation applicable to it or its
business or property relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes, pollutants or
14
<PAGE>
contaminants ("Environmental Laws"), lacks any permit, license or other
------------------
approval required of them under applicable Environmental Laws or is
violating any term or condition of such permit, license or approval which
might result in a Material Adverse Effect (in the case of such
representation with respect to Palmer and its subsidiaries by Parent and
the Company, to the best of Parent's and the Company's knowledge).
(xviii) Each of the Company and its subsidiaries and
Palmer and its subsidiaries has (i) good and marketable title to all of the
properties and assets described in the Offering Memorandum as owned by it,
free and clear of all liens, charges, encumbrances and restrictions, except
such as are described in the Offering Memorandum or as would not have a
Material Adverse Effect, (ii) peaceful and undisturbed possession under all
leases to which it is party as lessee, (iii) all licenses, certificates,
permits, authorizations, approvals, franchises and other rights from, and
has made all declarations and filings with, all federal, state and local
authorities (including the FCC), all self-regulatory authorities and all
courts and other tribunals necessary to engage in the business currently
conducted by it in the manner described in the Offering Memorandum (each an
"Authorization"), except where failure to hold such Authorizations would
-------------
not have a Material Adverse Effect and (iv) no reason to believe that any
governmental body or agency is considering limiting, suspending or revoking
any such Authorization, except as described in the Offering Memorandum. All
such Authorizations are valid and in full force and effect and the Company
and its subsidiaries and, Palmer and its subsidiaries are in compliance in
all respects with the terms and conditions of all such Authorizations and
with the rules and regulations of the regulatory authorities having
jurisdiction with respect thereto, except as would not have a Material
Adverse Effect. All leases to which the Company or any of its subsidiaries
and, Palmer or any of its subsidiaries is a party are valid and binding and
no default by the Company or any of its subsidiaries or Palmer or any of
its subsidiaries has occurred and is continuing thereunder, except such as
are described in the Offering Memorandum or as would not have a Material
Adverse Effect, and no material defaults by the landlord are existing under
any such lease (in the case of such representation with respect to Palmer
and its subsidiaries by Parent and the Company, to the best of Parent's and
the Company's knowledge). Neither the Company nor
15
<PAGE>
Parent has any reason to believe that the FCC licenses with respect to each
of the cellular systems identified in the Offering Memorandum as owned and
operated by Palmer and each of its subsidiaries (the "Systems") will not be
-------
renewed for a full term when such FCC licenses are due for renewal. To the
Company's and Parent's knowledge, none of such FCC licenses are subject to
any conditions outside of the ordinary course. All necessary applications,
exhibits or other filings required by the FCC for transfer of control of
the Systems pursuant to the Merger Agreement have been filed with the FCC
(the "Transfer Applications"). To the best of the Company's and Parent's
---------------------
knowledge, there are no existing circumstances that would cause the FCC to
reject any of the Transfer Applications.
(xix) Except as otherwise disclosed in the Offering
Memorandum, each of the Company and its subsidiaries and Palmer and its
material subsidiaries owns or possesses all patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and trade
names, in each case to the extent disclosed in the Offering Memorandum as
being material to the business of the Company (collectively, the
"Intellectual Property"), presently employed by it in connection with the
---------------------
businesses now operated by them, and neither the Company nor any of its
subsidiaries, nor Palmer or any of its material subsidiaries, has received
any notice of infringement of or conflict with asserted rights of others
with respect to any of the foregoing. The use of such Intellectual Property
in connection with the business and operations of the Company and its
subsidiaries and Palmer and its material subsidiaries does not infringe on
the rights of any person. In the case of such representations with respect
to Palmer and its subsidiaries by Parent and the Company in this clause
5(xix), to the best of Parent's and the Company's knowledge.
(xx) All tax returns required to be filed by
Parent, the Company or any of their subsidiaries, or Palmer or any of its
material subsidiaries, in all jurisdictions, have been so filed. All taxes,
including withholding taxes, penalties and interest, assessments, fees and
other charges due or claimed to be due from such entities or that are due
and payable have been paid, other than those being contested in good faith
and for which adequate reserves have been provided in accordance with
generally
16
<PAGE>
accepted accounting principles or those currently payable without penalty
or interest. None of Parent, the Company or any of their subsidiaries nor
Palmer or any of its material subsidiaries knows of any material proposed
additional tax assessments against it. In the case of such representations
with respect to Palmer and its subsidiaries by Parent and the Company in
this clause 5(xx), to the best of Parent's and the Company's knowledge.
(xxi) Neither Parent nor the Company or any of its
subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company Act").
----------------------
(xxii) There are no holders of securities of the
Company who, by reason of the execution by the Company of this Agreement or
any other Operative Document to which it is a party or the consummation of
the transactions contemplated hereby and thereby, have the right that has
not been waived to request or demand that the Company register under the
Act or analogous foreign laws and regulations securities held by them.
(xxiii) The authorized, issued and outstanding
capital stock of each of the Company and Palmer and its material
subsidiaries, has been duly and validly authorized and issued, is fully
paid and nonassessable and was not issued in violation of any preemptive or
similar rights (in the case of such representation relating to Palmer and
its subsidiaries by Parent and the Company, to the best of Parent's and the
Company's knowledge). The Company and its subsidiaries had, at March 31,
1997, an authorized and outstanding capitalization as set forth in the
Offering Memorandum.
(xxiv) Each certificate signed by any officer of the
Company and delivered to the Purchasers or counsel for the Purchasers shall
be deemed to be a representation and warranty by the Company to each
Purchaser as to the matters covered thereby.
(xxv) The Company and Palmer and each of its
material subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of
17
<PAGE>
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect thereto.
(xxvi) Except as would not be unlawful, none of
Parent, the Company or any of their subsidiaries has (i) taken, directly or
indirectly, any action designed to, or that might reasonably be expected
to, cause or result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Notes or
(ii) since the date of the Preliminary Offering Memorandum (A) sold, bid
for, purchased or paid any person any compensation for soliciting purchases
of the Notes or (B) paid or agreed to pay to any person any compensation
for soliciting another to purchase any other securities of the Company.
(xxvii) No registration under the Act of the Notes is
required for the sale of the Notes to the Purchasers as contemplated hereby
or for Exempt Resales to the Eligible Purchasers, assuming (i) that the
Purchasers who buy the Notes in the Exempt Resales are QIBs and (ii) the
accuracy of the Purchasers' representations regarding the absence of
general solicitation in connection with the sale of Notes to the Purchasers
and the Exempt Resales contained herein. No form of general solicitation or
general advertising was used by the Company or any of its representatives
(assuming, for purposes of the Purchasers, the accuracy of the Purchasers'
representations in Section 5(b) hereof) in connection with the offer and
sale of any of the Notes or in connection with Exempt Resales, including,
but not limited to, articles, notices or other communications published in
any newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising. No securities of the same
class as the Notes have been issued and sold by the Company within the six-
month period immediately prior to the date hereof.
(xxviii) Each of the Preliminary Offering Memorandum
and the Offering Memorandum, as of its date, and each amendment or
supplement thereto, as of its
18
<PAGE>
date, contains all the information specified in, and meets the requirements
of, Rule 144A(d)(4) under the Act.
(xxix) Subsequent to the respective dates as of
which information is given in the Offering Memorandum and up to the Closing
Date, except as set forth in the Offering Memorandum, neither the Company
nor Palmer or its subsidiaries, has incurred any liabilities or
obligations, direct or contingent, which are material to the Company and
its subsidiaries and Palmer and its subsidiaries, taken as a whole, nor
entered into any transaction not in the ordinary course of business, there
has not been, singly or in the aggregate, any material adverse change, or
any development which may reasonably be expected to involve a material
adverse change, in the properties, business, results of operations,
condition (financial or otherwise), or prospects of the Company and its
subsidiaries, or Palmer and its subsidiaries, taken as a whole (a "Material
---------
Adverse Change"), and there have not been dividends or distributions of any
--------------
kind declared, paid or made by the Company or any of its subsidiaries, or
Palmer or its subsidiaries on any class of its capital stock (in the case
of such representation with respect to Palmer and its subsidiaries by
Parent and the Company, to the best of Parent's and the Company's
knowledge).
(xxx) Neither the Company, nor Parent, nor any
agent thereof acting on the behalf of any of them (other than the
Purchasers, to the extent applicable) has taken, and none of them will
take, any action that might cause this Agreement or the issuance or sale of
the Notes to violate Regulation G (12 C.F.R. Part 207), Regulation T (12
C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12
C.F.R. Part 224) of the Board of Governors of the Federal Reserve System.
(xxxi) Each firm of accountants that has certified
or shall certify the financial statements and supporting schedules included
or to be included as part of the Preliminary Offering Memorandum and the
Offering Memorandum are to the best of Parent's and the Company's knowledge
independent public accountants with respect to Palmer and its subsidiaries,
as required by the Act for financial statements included in a registration
statement on Form S-1. The consolidated historical statements fairly
present the consolidated financial conditions and results of operations of
Palmer and its subsidiaries at the respective dates and
19
<PAGE>
for the respective periods indicated, in accordance with generally accepted
accounting principles consistently applied throughout such periods. The pro
forma financial statements have been prepared on a basis consistent with
such historical statements, except for the pro forma adjustments specified
therein, and give effect to assumptions made on a reasonable basis and
present fairly the historical and proposed transactions contemplated by the
Preliminary Offering Memorandum, the Offering Memorandum, this Agreement
and the other Operative Documents. Other financial and statistical
information and data included in the Offering Memorandum, historical and
pro forma, are accurately presented (including to the best of Parent's and
the Company's knowledge after reasonable inquiry those relating to Palmer
and its subsidiaries presented therein) and prepared on a basis consistent
with such financial statements and the books and records of the Company and
its subsidiaries and Palmer and its subsidiaries, respectively.
(xxxii) Immediately prior to and after the Closing
Date, the present fair saleable value of the assets of the Company and its
subsidiaries and of Palmer and its subsidiaries, taken as a whole, will
exceed the amount that will be required to be paid on or in respect of the
existing debts and other liabilities (including contingent liabilities) of
each such person as they become absolute and matured. The assets of the
Company, immediately after the Issue Date, will not constitute unreasonably
small capital to permit it to carry out its business as conducted or as
proposed to be conducted. The Company does not intend to, nor does it
believe that it will, incur debts beyond its ability to pay such debts as
they mature. Upon the issuance of the Notes, the present fair saleable
value of the assets of the Company will not exceed the amount that will be
required to be paid on or in respect of the existing debts and other
liabilities (including contingent liabilities) of the Company as they
become absolute and matured. The assets of the Company, upon the issuance
of the Notes, will not constitute unreasonably small capital to carry out
its business as now conducted, including the capital needs of the Company,
taking into account the projected capital requirements and the capital
availability of the Company.
(xxxiii) There are no contracts, agreements or
understandings between the Company or any of its subsidiaries and any
person that would give rise to a valid claim against the Company, its
subsidiaries or any
20
<PAGE>
Purchaser for a brokerage commission, finder's fee or like payment in
connection with the issuance, purchase and sale of the Notes.
(xxxiv) The Company and Parent acknowledge that the
Purchasers and, for purposes of the opinions to be delivered to the
Purchasers pursuant to Section 7 hereof, counsel to the Company and counsel
to the Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
(xxxv) The Company, Parent and their respective
affiliates and all persons acting on their behalf (other than the
Purchasers, as to whom no representation is made) have complied with and
will comply with the offering restrictions of Regulation S in connection
with the offering of the Notes outside the United States of America.
(b) Each Purchaser represents and warrants to the Company and the
other Purchasers and agrees that:
(i) Such Purchaser is a QIB with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Notes.
(ii) Such Purchaser (A) is not acquiring the Notes
with a view to any distribution thereof that would violate the Act or the
securities laws of any state of the United States or any other applicable
jurisdiction and (B) will be reoffering and reselling the Notes only to (x)
QIBs in reliance on the exemption from the registration requirements of the
Act provided by Rule 144A and (y) in offshore transactions in reliance upon
Regulation S under the Act.
(iii) No form of general solicitation or general
advertising has been or will be used by such Purchaser or any of its
representatives in connection with the offer and sale of any of the Notes,
which would render unavailable to the Company reliance upon the exemption
from the registration requirements of the Act afforded by Section 4(2)
thereof, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.
21
<PAGE>
(iv) Such Purchaser agrees that, in connection with
the Exempt Resales, it will solicit offers to buy the Notes only from, and
will offer to sell the Notes only to, QIBs. Such Purchaser further agrees
(A) that it will offer to sell the Notes only to, and will solicit offers
to buy the Notes only from, (1)(A) QIBs who in purchasing such Notes will
be deemed to have represented and agreed that they are purchasing such
Notes for their own accounts or accounts with respect to which they
exercise sole investment discretion and that they or such accounts are
QIBs, that they are aware that the sale to them is being made in reliance
on Rule 144A, and that they are acquiring such Notes for investment and not
with a view to, or for offer or sale in connection with, any distribution
(within the meaning of the Act) or fractionalization thereof or with any
intention of reselling the Notes or any part thereof, subject to any
requirement of law that the disposition of their property or the property
of such investor account or accounts be at all times within their control
and subject to their ability to resell such Notes pursuant to Rule 144,
144A, Regulation S or other exemption from registration available under the
Act and (B) Regulation S Purchasers who in purchasing the Notes will be
deemed to have represented and agreed that their purchase of Notes pursuant
to Regulation S is not part of a plan or scheme to evade the registration
provisions of the Act and (2) that, in the case of such Eligible
Purchasers, such Eligible Purchasers will be deemed to have acknowledged
that the Notes have not been registered under the Act and may not be sold
except as permitted below, and (C) that, unless so registered, in the case
of such Eligible Purchasers, such Eligible Purchasers will be deemed to
have agreed that if they should sell, pledge or otherwise transfer the
Notes prior to the second anniversary of the later of the original issuance
of the Notes or the sale thereof by any affiliate (within the meaning of
Rule 144 under the Act or any successor rule thereto, an "Affiliate") of
the Company (computed in accordance with paragraph (d) of Rule 144 under
the Act) or if they were at the date of such transfer or during the three
months preceding such date of transfer an Affiliate of the Company, they
would do so in compliance with any applicable state securities or "Blue
Sky" laws and only (v) to the Company or Parent, as applicable (w) in
accordance with Rule 144A (as indicated by the box checked by the
transferor on the form of assignment on the reverse of the Note), (x)
pursuant to any exemption from registration in accordance with Regulation S
under the Act (as indicated by the box
22
<PAGE>
checked by the transferor on the form of assignment on the reverse of the
Note), (y) to an institutional investor that is an "accredited investor"
within the meaning of Rule 501(a) (1), (2), (3) or (7) under the Act which
delivers a certificate in the form of Exhibit B to the Indenture to the
indenture trustee under the Indenture to be dated as of July 10, 1997, by
and between the Company and The Bank of Montreal Trust Company, as trustee,
or (z) any other applicable exemption under the securities laws and (D)
that, in the case of such Eligible Purchasers, such Eligible Purchasers
will be deemed to have acknowledged that they have received the
information, if any, requested by them pursuant to Rule 144A, have had full
opportunity to review such information and have received all additional
information necessary to verify such information and that they (i) are able
to fend for themselves in the transactions contemplated by the Offering
Memorandum, (ii) have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
their prospective investment in the Notes and (iii) have the ability to
bear the economic risks of their prospective investment and can afford the
complete loss of such investment.
(v) Such Purchaser also understands that the Company
and, for purposes of the opinions to be delivered to you pursuant to
Section 7 hereof, counsel to the Company and counsel to the Purchasers will
rely upon the accuracy and truth of the foregoing representations and
hereby consents to such reliance.
(vi) No such Purchaser nor any of its affiliates, nor
any person acting on their behalf, has engaged in any directed selling
efforts within the meaning of Regulation S with respect to the Notes.
(vii) Such Purchasers agree that, at or prior to
confirmation of a sale of Notes by them to any distributor, dealer or
person receiving a selling concession, fee or other remuneration during the
40-day restricted period referred to in Rule 903(c)(3) under the Act, they
will have sent to such distributor, dealer or person receiving a selling
concession, fee or other remuneration a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), and
may not be
23
<PAGE>
offered and sold within the United States or to, or for the
account or benefit of, U.S. persons (i) as part of your distribution
at any time or (ii) otherwise until 40 days after the later of the
commencement of the Offering and the Closing Date, except in either
case in accordance with Regulation S (or Rule 144A in transactions
that are exempt from the registration requirements of the Securities
Act) under the Securities Act, and in connection with any subsequent
sale by you of the Notes covered hereby in reliance on Regulation S
during the period referred to above to any distributor, dealer or
person receiving a selling concession, fee or other remuneration, you
must deliver a notice to substantially the foregoing effect. Terms
used above have the meanings assigned to them in Regulation S."
6. Indemnification
---------------
(a) The Company agrees to indemnify and hold harmless (i) each
of the Purchasers 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
Purchasers (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 any of the
Purchasers 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
the Preliminary Offering Memorandum or the Offering Memorandum (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), 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 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
Purchaser furnished in writing to the Company by or on behalf of any Purchaser
expressly for use therein; provided that the foregoing indemnity with respect to
any Preliminary Offering Memorandum 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 statement
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<PAGE>
or omission or alleged untrue statement or omission made in such Preliminary
Offering Memorandum is eliminated or remedied in the Offering Memorandum and a
copy of the Offering Memorandum shall not have been furnished to such person in
a timely manner due to the wrongful action or wrongful inaction of any
Purchaser.
(b) In case any action shall be brought against any Indemnified
Person, based upon the Preliminary Offering Memorandum or the Offering
Memorandum 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 Donaldson, Lufkin & Jenrette
Securities Corporation, 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 could have been sought hereunder by such indemnified party,
unless such settlement includes an
25
<PAGE>
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(c) Each Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers 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 the Preliminary Offering
Memorandum or Offering Memorandum. 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 the Preliminary Offering Memorandum or Offering Memorandum
and in respect of which indemnity may be sought against any of the Purchasers,
such Purchaser shall have the rights and duties given to the Company (except
that if the Company shall have assumed the defense thereof, such Purchaser shall
not be required to do so, but may employ separate counsel therein and
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of such Purchaser), and the Company, its directors, any
such officer and any person controlling the Company shall have the rights and
duties given to the Purchasers, by Section 6(b) hereof.
(d) If the indemnification provided for in this Section 6 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
Purchaser 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 Purchaser in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and each Purchaser on the other shall be deemed to be in the
same proportion as the total net proceeds from the Offering (before deducting
expenses) received by the Company, and the total discounts received by each
Purchaser, bear
26
<PAGE>
to the total price to investors of the Notes, in each case as set forth in the
table on the cover page of the Offering Memorandum. The relative fault of the
Company on the one hand and each Purchaser on the other 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 Purchaser 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 6(d) were determined by
pro rata allocation (even if the Purchasers 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 6, no Purchaser shall be required
to contribute any amount in excess of the amount by which the total discounts
received by it in connection with the sale of the Notes pursuant to this
Agreement exceeds the amount of any damages which such Purchaser 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 Purchasers' obligations to contribute pursuant to this
Section 6(d) are several in proportion to the respective amount of Notes
purchased by each of the Purchasers hereunder and not joint.
7. Conditions of the Purchasers' Obligations The several
-----------------------------------------
obligations of the Purchasers under this Agreement are subject to the
satisfaction of each of the following conditions:
(a) All of the representations and warranties of Parent and
the Company contained in this Agreement shall be true and correct on the date
hereof and on the Closing Date with the same force and effect as if made on and
as of the date hereof and the Closing Date, respectively. The Company shall have
performed or complied with all of the agreements herein contained and
27
<PAGE>
required to be performed or complied with by it at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and
copies distributed to the Purchasers not later than the date immediately
following the date of this Agreement or at such later date and time as you may
approve in writing, and, at the Closing Date, no stop order suspending the
qualification or exemption from qualification of any of the Notes in any
jurisdiction referred to in Section 4(e) shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending or
threatened.
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, prevent the issuance or
sale of any of the Notes; no action, suit or proceeding shall be pending against
or, to the knowledge of the Company, threatened against, the Company or any of
its subsidiaries before any court or arbitrator or any governmental body, agency
or official in which there is a reasonable possibility of an adverse decision
that would prohibit, interfere with or adversely affect the issuance or sale of
the Notes or would have a Material Adverse Effect, in any manner draw into
question the validity of this Agreement, the Indenture, the Notes, the
Registration Rights Agreement or the other Operative Documents; and no stop
order, injunction, restraining order, or order of any nature preventing the use
of the Offering Memorandum, or any amendment or supplement thereto, or any order
asserting that any of the transactions contemplated by this Agreement are
subject to the registration requirements of the Act shall have been issued.
(d) Since the dates as of which information is given in the
Offering Memorandum, (i) there shall not have been any material change, or any
development that is reasonably likely to result in a material change, in the
capital stock or the long-term debt, or material increase in the short-term
debt, of the Company and Palmer or its subsidiaries, taken as a whole, from that
set forth in the Offering Memorandum, (ii) no dividend or distribution of any
kind shall have been declared, paid or made by the Company or Palmer on any
class of its capital stock, and (iii) neither the Company nor Palmer nor any of
its subsidiaries shall have incurred any liabilities or obligations, direct or
contingent, that are material, individually or in the aggregate, to the Company
and Palmer and its subsidiaries, taken as a whole, and that are required to be
disclosed on a balance sheet in
28
<PAGE>
accordance with generally accepted accounting principles and are not disclosed
on the latest balance sheet included in the Offering Memorandum. Since the date
hereof and since the dates as of which information is given in the Offering
Memorandum, there shall not have been any Material Adverse Change.
(e) You shall have received certificates, dated the Closing
Date, signed by (i) the President or any Vice President and (ii) a principal
financial or accounting officer of the Company confirming, as of the Closing
Date, the matters set forth in paragraphs (a), (b), (c), (d), (n), (o), (p), (q)
and (r) of this Section 7.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and your counsel), dated the Closing Date, of outside
counsel to the Company (which will be Davis Polk & Wardwell, except where
indicated in the last paragraph of this Section 7(f)) to the effect that:
(i) The Company and Parent have duly and validly
authorized, executed and delivered this Agreement.
(ii) The Company has duly and validly authorized,
executed and delivered the Indenture, and (assuming the due authorization,
execution and delivery thereof by the Trustee) the Indenture is the valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except (i) as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or similar laws affecting creditors' rights and remedies generally, (ii) as
to general principles of equity, regardless of whether enforcement is
sought in a proceeding at law or in equity, and (iii) to the extent that a
waiver of rights under any usury law may be unenforceable. The Indenture
conforms as to legal matters in all material respects to the description
thereof in the Offering Memorandum.
(iii) The Notes have been duly and validly authorized
for issuance and sale to you by the Company pursuant to this Agreement and,
when issued and authenticated in accordance with the terms of the Indenture
and delivered against payment therefor in accordance with the terms hereof,
will be the valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms and entitled to the
benefits of the
29
<PAGE>
Indenture, except (i) as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar
laws affecting creditors' rights and remedies generally, (ii) as to general
principles of equity, regardless of whether enforcement is sought in a
proceeding at law or in equity, and (iii) to the extent that a waiver of
rights under any usury laws may be unenforceable. The Notes, when issued,
authenticated and delivered, will conform as to legal matters in all
material respects to the description thereof in the Offering Memorandum.
(iv) The Exchange Notes have been duly and validly
authorized for issuance by the Company and, when issued and authenticated
in accordance with the terms of the Indenture, the Registration Rights
Agreement and the Exchange Offer, will be valid and binding obligations of
the Company, enforceable against the Company in accordance with their terms
and entitled to the benefits of the Indenture, except (i) as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting creditors'
rights and remedies generally, (ii) as to general principles of equity,
regardless of whether enforcement is sought in a proceeding at law or in
equity, and (iii) to the extent that a waiver of rights under any usury
laws may be unenforceable.
(v) The Registration Rights Agreement has been duly
and validly authorized by the Company and, when duly executed and delivered
by the Company, will be the valid and binding obligation of the Company,
enforceable in accordance with its terms, except (i) as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws affecting creditors' rights and
remedies generally, (ii) as to general principles of equity, regardless of
whether enforcement is sought in a proceeding at law or in equity and (iii)
that the enforceability of the indemnification and contribution provisions
contained therein may be limited by Federal and state securities laws and
the policies underlying such laws. The Registration Rights Agreement
conforms, as to legal matters, in all material respects to the description
thereof in the Offering Memorandum.
(vi) The Contribution Agreement has been duly and
validly authorized, executed and delivered by each of the Company and
Parent, and is a valid and binding obligation of each of the Company and
Parent, enforceable
30
<PAGE>
against each of the Company and Parent in accordance with its terms,
except (i) as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting
creditors' rights and remedies generally and (ii) as to general principles
of equity, regardless of whether enforcement is sought in a proceeding at
law or in equity.
(vii) Each of this Agreement, the Notes and the Indenture
conforms as to legal matters in all material respects to the description
thereof in the Offering Memorandum.
(viii) When the Notes are issued and delivered pursuant to
this Agreement, none of the Notes will be of the same class (within the
meaning of Rule 144A under the Act) as securities of Parent or the Company
that are listed on a national securities exchange registered pursuant to
the Exchange Act or that are quoted in a United States automated inter-
dealer quotation system.
(ix) Registration of the Notes under the Act or
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended, is not required in connection with the offer, sale and delivery of
the Notes to the Purchasers or the initial placement of the Notes by the
Purchasers in the manner contemplated by the Offering Memorandum to QIBs,
it being understood that in rendering this opinion such counsel may assume
the accuracy of the representations of the Purchasers and the Company
contained herein and that the offer, sale and delivery of the Notes have
been made as contemplated by this Agreement and the Offering Memorandum and
such counsel may state that no opinion is given with respect to any other
offer or resale of the Notes.
(x) The execution, delivery and performance by each of
Parent and the Company, as applicable, of this Agreement (with respect to
Section 4(h) hereof to the extent of the deposit of the proceeds in the
Account and the use of the proceeds to pay the fees and expenses of the
Company in connection with the Offering, as contemplated by this
Agreement), the Indenture and the Registration Rights Agreement and the
issuance and sale of the Notes as contemplated by the Offering Memorandum
and this Agreement, will not violate, conflict with or constitute a breach
of any of the terms or provisions of, or a de-
31
<PAGE>
fault under (or an event that with notice or the lapse of time, or both,
would constitute a default), or require consent under, or result in the
imposition of a lien or encumbrance on any properties of Parent, the
Company or any of their material subsidiaries, or an acceleration of
indebtedness pursuant to, (i) the charter or bylaws of Parent, the Company
or any of their material subsidiaries, except any such violation, conflict,
breach or default that has been waived or consent that has been obtained,
(ii) any bond, debenture, note, indenture, mortgage, deed of trust, license
or other agreement or instrument to which Parent, the Company or any of
their material subsidiaries is a party or by which any of them or their
property is or may be bound, which is set forth in Schedule III hereto,
(iii) to such counsel's knowledge any statute, rule or regulation
applicable to Parent, the Company, any of their material subsidiaries or
any of their assets or properties, except such as may be required under the
Act, the Trust Indenture Act and state securities or Blue Sky laws and
regulations or by the NASD, or (iv) to such counsel's knowledge any
judgment, order or decree of any court or governmental agency or authority
having jurisdiction over Parent, the Company, any of their material
subsidiaries or their assets or properties. No consent, approval,
authorization or order of, or filing, registration, qualification, license
or permit of or with, any court or governmental agency, body or
administrative agency is required for the execution, delivery and
performance of this Agreement (with respect to Section 4(h) hereof, to the
extent of the deposit of the proceeds in the Account and the use of the
proceeds to pay the fees and expenses of the Company in connection of the
Offering, as contemplated by this Agreement), the Indenture, the Notes or
the Registration Rights Agreement by the Company, except such as have been
obtained (subject to clause (ix), above, and assuming reliance by such
counsel on the accuracy of the representations referred to therein), such
as may be required under the Act, the Trust Indenture Act and state
securities or Blue Sky laws and regulations or such as may be required by
the NASD.
(xi) To the best knowledge of such counsel, no action has
been taken and no statute, rule or regulation or order has been enacted,
adopted or issued by any governmental agency that prevents the issuance of
the Notes; no injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction has been issued that
prevents the issuance of the Notes; and
32
<PAGE>
no action, suit or proceeding is pending against or affecting or, to the
best knowledge of such counsel, threatened against, Parent, the Company or
any of their subsidiaries before any court or arbitrator or any
governmental body, agency or official which, if adversely determined, would
prohibit the issuance of the Notes.
(xii) The Offering Memorandum, as of its date, and each
amendment or supplement prepared by the Company, if any, thereto, as of its
date (except for the financial statements, including the notes thereto, and
supporting schedules and other financial, statistical, and accounting data
included therein or omitted therefrom, as to which no opinion need be
expressed), comply as to form in all material respects with the
requirements of, Rule 144A(d)( 4) under the Act.
(xiii) The Indenture permits the Trustee to invest any moneys
deposited in the Account established pursuant thereto solely in United
States Treasury Bills. Pursuant to the Indenture the Trustee may invest in
Treasury Bills so long as the Treasury Bills are credited to the Trustee's
account at the Federal Reserve Bank of New York (the "Federal Reserve") and
the Trustee credits the Treasury Bills to the Collateral Account. Assuming
that (i) the Trustee has a direct account with the Federal Reserve, (ii)
the Trustee follows the procedures mandated in the Indenture for the
purchase and possession of such Treasury Bills and the making of book
entries with respect thereto and (iii) the "securities intermediary's
jurisdiction" (as defined in 31 C.F.R. (S)357.2) with respect to the
Trustee for purposes relating to the Collateral Account is the State of New
York, the provisions of the Indenture, together with such procedures, are
sufficient to create a valid and perfected security interest in favor of
the Trustee for the benefit of the Noteholders in a security entitlement
with respect to such Treasury Bills, provided that such counsel need
--------
express no opinion as to the priority of such security interest or as to
the existence of, or nature and extent of the Company's title to, any such
Treasury Bills.
In rendering the foregoing opinions, Davis, Polk & Wardwell may state
that they are not expressing any opinions as to any laws relating specifically
to the communications industry.
In addition, Davis, Polk & Wardwell shall state that it has generally
reviewed and discussed with certain officers and
33
<PAGE>
other representatives of the Company, representatives of the independent public
accountants for the Company, your representatives and your counsel in connection
with the preparation of the Preliminary Offering Memorandum and the Offering
Memorandum and the statements contained therein and, although such counsel has
not independently verified the accuracy, completeness or fairness of such
statements (except as indicated above), such counsel advises you that, on the
basis of the foregoing, no facts came to its attention that caused it to believe
that the Offering Memorandum (as amended or supplemented, if applicable) as of
its date or at the Closing Date, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements, in light of the circumstances under which they were made,
not misleading. Without limiting the foregoing, such counsel may further state
that they assume no responsibility for, and have not independently verified, the
accuracy, completeness or fairness of the financial statements, notes and
schedules and other financial data included in the Preliminary Offering
Memorandum or the Offering Memorandum.
The opinions of such counsel described in this subsection shall be
rendered to you at the request of the Company and shall so state therein.
(g) You shall have received on the Closing Date an opinion
(satisfactory to you and your counsel), dated the Closing Date, of outside
counsel to the Company (which will be Proskauer Rose LLP, except where indicated
in the last paragraph of this Section 7(g)) to the effect that:
(i) Each of the Company and Parent and each of their
respective subsidiaries has been duly organized and is validly existing as
a corporation in good standing under the laws of its respective
jurisdiction of incorporation, has all requisite corporate power and
authority to own, lease and operate its properties and to conduct its
business as it is currently being conducted and as described in the
Offering Memorandum, and is duly qualified and in good standing as a
foreign corporation authorized to do business in each jurisdiction in which
the ownership, leasing and operation of its property and the conduct of its
business requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
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<PAGE>
(ii) Each of Parent and the Company, as applicable,
has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement, the Indenture, the
Registration Rights Agreement and the other Operative Documents and to
consummate the transactions contemplated hereby or thereby, including,
without limitation, with respect to the Company, the corporate power and
authority to issue, sell and deliver the Notes as provided herein.
(iii) The Merger Agreement has been duly and validly
authorized, executed and delivered by the Company and, as applicable,
Parent and each of Parent's subsidiaries party thereto, and is the valid
and binding obligation of each of them, enforceable against each of them in
accordance with its terms, except (i) as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or similar laws affecting creditors' rights and remedies generally and (ii)
as to general principles of equity, regardless of whether enforcement is
sought in a proceeding at law or in equity. The Merger Agreement conforms,
as to legal matters, in all material respects to the description thereof in
the Offering Memorandum.
(iv) Neither Parent nor the Company or any of its
subsidiaries listed on Schedule II hereto is an "investment company" within
the meaning of the Investment Company Act.
(v) The authorized, issued and outstanding capital
stock of the Company has been duly and validly authorized and issued, is
fully paid and nonassessable and was not issued in violation of or subject
to preemptive or similar rights.
(vi) The execution, delivery and performance by each
of Parent and the Company, as applicable, of this Agreement, the Merger
Agreement, the Voting Agreement, the Indenture and the Registration Rights
Agreement and the issuance and sale of the Notes as contemplated by the
Offering Memorandum and this Agreement, will not violate, conflict with or
constitute a breach of any of the terms or provisions of, or a default
under (or an event that with notice or the lapse of time, or both, would
constitute a default), or require consent under, or result in the
imposition of a lien or encumbrance on any properties of Parent,
35
<PAGE>
the Company or any of their material subsidiaries, or an acceleration of
indebtedness pursuant to, (i) the charter or bylaws of Parent, the Company
or any of their material subsidiaries, (ii) any bond, debenture, note,
indenture, mortgage, deed of trust, license or other agreement or
instrument to which Parent, the Company or any of their material
subsidiaries is a party or by which any of them or their property is or may
be bound, which is set forth on Schedule III hereof, (iii) to such
counsel's knowledge any statute, rule or regulation applicable to Parent,
the Company, any of their material subsidiaries or any of their assets or
properties, except such as may be required under the Act, the Trust
Indenture Act and state securities or Blue Sky laws and regulations or by
the NASD, or (iv) to such counsel's knowledge any judgment, order or decree
of any court or governmental agency or authority having jurisdiction over
Parent, the Company, any of their material subsidiaries or their assets or
properties.
In addition, Proskauer Rose LLP shall state that it has generally
reviewed and discussed with certain officers and other representatives of the
Company, representatives of the independent public accountants for the Company,
your representatives and your counsel in connection with the preparation of the
Preliminary Offering memorandum and the Offering Memorandum and the statements
contained therein and, although such counsel has not independently verified the
accuracy, completeness or fairness of such statements (except as indicated
above), such counsel advises you that, on the basis of the foregoing, no facts
came to its attention that caused it to believe that the Offering Memorandum (as
amended or supplemented, if applicable) as of its date or at the Closing Date,
contained or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements, in light of
the circumstances under which they were made, not misleading. Without limiting
the foregoing, such counsel may further state that they assume no responsibility
for, and have not independently verified, the accuracy, completeness or fairness
of the financial statements, note and schedules and other financial data
included in the Preliminary Offering Memorandum or the Offering Memorandum.
The opinions of such counsel described in this subsection shall be
rendered to you at the request of the Company and shall so state therein.
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<PAGE>
(h) You shall have received on the Closing Date an opinion
(satisfactory to you and your counsel), dated the Closing Date of Roberts &
Eckard, P.C., counsel for the Company with respect to FCC and related matters to
the effect that:
(i) Those statements in the Offering Memorandum that describe
provisions of the Communications Act of 1934, as amended (the
"Communications Act"), and the rules, regulations and published orders,
policies and decisions of the FCC ("FCC Rules") are accurate descriptions
---------
in all material respects.
(ii) The execution, delivery and performance of the obligations
by the Company under the Operative Documents other than the Merger
Agreement and the Voting Agreement are not and will not be contrary to the
Communications Act, or to the terms of any System license, will not result
in any violation of the FCC Rules, will not cause any forfeiture or
impairment of any FCC license of any of the Systems, and will not require
any consent, approval or authorization of the FCC.
(iii) The execution, delivery and performance of the
obligations by the Company, Palmer and Price Communications Cellular Merger
Corp. under the Merger Agreement, are not and will not be contrary to the
Communications Act, or to the terms of any FCC license of any of the
Systems will not result in any violation of the FCC Rules, will not cause
any forfeiture or impairment of any FCC license of any of the Systems, and
will not require any consent, approval or authorization of the FCC not
already obtained (other than approval for a transfer of control over the
licensees for the Systems and the associated microwave licenses). All
Transfer Applications have been filed with the FCC. To the best of such
counsel's knowledge, there are no existing circumstances that would cause
the FCC to reject any of the Transfer Applications.
The opinions of such counsel described in this subsection shall be
rendered to you at the request of the Company and shall so state therein.
(i) You shall have received on the Closing Date an opinion
(satisfactory to you and your counsel) dated the Closing Date of Lukas, McGowan,
Nace & Gutierrez, Chartered,
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counsel to Palmer with respect to FCC and related matters to the effect that:
(i) To such counsel's knowledge, after such counsel's inquiry,
Palmer and each of its subsidiaries validly holds all FCC licenses
necessary for the operation of the Systems (and any associated microwave
links) in the manner in which they are described as being conducted in the
Offering Memorandum (for purposes of this opinion only, the "FCC
Licenses"). The FCC Licenses are in full force and effect, and are not
subject to any conditions outside the ordinary course (except as set forth
in an exhibit to such opinion).
(ii) Except as may be disclosed in an exhibit to such opinion,
all applicable administrative and judicial appeal, review and
reconsideration periods relating to the grant of the FCC Licenses have
expired without our being served with any timely filing of any such appeal,
review, request or reconsideration petition, and without the FCC having
instituted review or reconsideration of the grant of any of the FCC
Licenses on its own motion.
(iii) To such counsel's knowledge, after such counsel's
inquiry, each of Palmer and its subsidiaries has filed with the FCC all
necessary and material reports, documents, instruments, information and
applications required to be filed pursuant to the FCC's rules, regulations
and requests. To such counsel's knowledge, after such counsel's inquiry,
no notice has been issued by the FCC which could permit, or after notice or
lapse of time or both could permit, revocation or termination of any of the
FCC Licenses prior to the expiration dates thereof or which could result in
any other material impairment of any of Palmer's and each of its
subsidiaries' rights thereunder.
(iv) To such counsel's knowledge, after such counsel's inquiry
but without field investigation, each of the Systems is operating in
compliance in all material respects with the Communications Act and the FCC
Rules. To such counsel's knowledge, after such counsel's inquiry, there is
not issued, outstanding or pending any notice of violation, notice of
apparent liability, order to show cause, material complaint or
38
<PAGE>
investigation by or before the FCC which could reasonably be expected to,
singly or in the aggregate, have a Material Adverse Effect, nor does such
counsel have reason to believe, subject to Palmer's and its subsidiaries'
continued regulatory compliance, that the FCC Licenses will not be renewed
for a full term when they are due for renewal.
The opinions of such counsel described in this subsection shall be
rendered to you at the request of the Company and shall so state therein.
(j) You shall have received on the Closing Date an opinion
(satisfactory to you and your counsel), dated the Closing Date, of Hogan &
Hartson L.L.P., counsel for Palmer.
(k) You shall have received an opinion, dated the Closing Date,
of Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden Arps"), your counsel, in
------------
form and substance reasonably satisfactory to you, covering such matters as are
customarily covered in such opinions.
(l) At the time this Agreement is executed and delivered by the
Company and on the Closing Date, you shall have received letters, substantially
in the form previously approved by you, from Arthur Anderson LLP and KPMG Peat
Marwick LLP with respect to the financial statements and certain financial
information contained in the Offering Memorandum.
(m) Skadden Arps shall have been furnished with such documents
and opinions, in addition to those set forth above, as they may reasonably
require for the purpose of enabling them to review or pass upon the matters
referred to in this Section 7 and in order to evidence the accuracy,
completeness or satisfaction in all material respects of any of the
representations, warranties or conditions herein contained.
(n) Prior to the Closing Date, the Company shall have furnished
to you such further information, certificates and documents as you may
reasonably request.
(o) The Company and the Trustee shall have entered into the
Indenture and you shall have received counterparts, conformed as executed,
thereof.
(p) The rights, property and assets disclosed in the Offering
Memorandum as being owned or exercisable, directly
39
<PAGE>
or indirectly, by the Company shall be so owned and exercisable by the Company
on the Closing Date.
(q) The Company shall have entered into the Registration Rights
Agreement and you shall have received counterparts, conformed as executed,
thereof.
(r) The Company and Parent shall have entered into the
Contribution Agreement and you shall have received counterparts, conformed as
executed, thereof.
(s) The Trustee and the Purchasers shall have received evidence
satisfactory to them of the creation, priority and perfection of the security
interests created pursuant to the Indenture.
(t) The provisions of the bylaws and articles or certificates of
incorporation of the Company and all the parent companies of the Company
(including, without limitation, PCC) as they relate to any preferred stock shall
have been approved by Parent or such subsidiaries, as applicable, and shall be
in a form satisfactory to you and shall be in full force and effect.
(u) The Company shall have received a commitment from DLJ
Capital Funding, Inc. principally on the terms described in the Offering
Memorandum under the caption "Description of New Credit Facility."
All opinions, certificates, letters and other documents required by
this Section 7 to be delivered by the Company will be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and substance
to you. The Company will furnish the Purchasers with such conformed copies of
such opinions, certificates, letters and other documents as they shall
reasonably request.
8. Defaults. If, on the Closing Date, any of the Purchasers shall
--------
fail or refuse to purchase Notes that it has agreed to purchase hereunder on
such date and the aggregate principal amount of such Notes that such defaulting
Purchaser agreed but failed or refused to purchase does not exceed 10% of the
total principal amount of such Notes that all of the Purchasers are obligated to
purchase on such Closing Date, the non-defaulting Purchasers shall be obligated
to purchase the amount of such Notes that such defaulting Purchaser agreed but
failed or refused to purchase. If, on the Closing Date, any of the Purchasers
shall fail or refuse to purchase Notes in an aggregate principal
40
<PAGE>
amount that exceeds 10% of such total principal amount and arrangements
satisfactory to the other Purchasers and the Company for the purchase of such
Notes are not made within 48 hours after such default, this Agreement shall
terminate without liability on the part of the non-defaulting Purchasers or the
Company, except as otherwise provided in Section 9. In any such case that does
not result in termination of this Agreement, the Purchasers or the Company may
postpone the Closing Date for not longer than seven (7) days, in order that the
required changes, if any, in the Offering Memorandum or any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve a defaulting Purchaser from liability in respect of any default by any
such Purchaser under this Agreement.
9. Effective Date of Agreement and Termination. This Agreement
-------------------------------------------
shall become effective upon the execution hereof.
This Agreement may be terminated at any time on or prior to the
Closing Date by you by notice to the Company if any of the following has
occurred: (i) subsequent to the date information is provided in the Offering
Memorandum, any Material Adverse Change which, in your judgment, materially
impairs the investment quality of the Notes, (ii) any outbreak or escalation of
hostilities or other national or international calamity or crisis or material
adverse change in the financial markets of the United States or elsewhere, or
any other substantial national or international calamity or emergency if the
effect of such outbreak, escalation, calamity, crisis, material adverse change
or emergency would, in your judgment, make it impracticable or inadvisable to
market the Notes or to enforce contracts for the sale of the Notes, (iii) any
suspension or limitation of trading generally in securities on the New York
Stock Exchange or in the over-the-counter markets or any setting of minimum
prices for trading on such exchange or markets, (iv) any declaration of a
general banking moratorium by either federal or New York authorities, (v) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs that in your judgment has a material
adverse effect on the financial markets in the United States, and would, in your
judgment, make it impracticable or inadvisable to market the Notes or to enforce
contracts for the sale of any of the Notes, (vi) the enactment, publication,
decree, or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which, in your judgment,
would have a Material Adverse Effect, or (vii) any securities of the Company or
any of its subsidiaries shall have been downgraded
41
<PAGE>
or placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
The indemnities and contribution provisions and the other agreements,
representations and warranties of the Company, its officers and directors and of
the Purchasers set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive delivery of and payment
for the Notes, regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of any of the Purchasers or by or on
behalf of the Company, the officers or directors of the Company or any
controlling person of the Company, (ii) acceptance of the Notes and payment for
them hereunder and (iii) termination of this Agreement.
If this Agreement shall be terminated by the Purchasers pursuant to
clause (i) or (vii) of the second paragraph of this Section 9 or because of the
failure or refusal on the part of the Company to comply with the terms or to
fulfill any of the conditions of this Agreement, the Company agrees to reimburse
you for all reasonable out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by you. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 4(f) hereof.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon Parent, the Company, the
Purchasers, any Indemnified Person referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The terms "successors and assigns" shall not include a purchaser of
any of the Notes from any of the Purchasers merely because of such purchase.
10. Miscellaneous. Notices given pursuant to any provision of this
-------------
Agreement shall be addressed as follows: (a) if to the Company, Price
Communications Wireless Inc. at [45 Rockefeller Plaza, Suite 3201, New York, New
York 10020,] Attention: President, with a copy to Davis Polk & Wardwell at 450
Lexington Avenue, New York, New York 10017, Attention: Richard D. Truesdell,
Jr., Esq., and (b) if to the Purchasers, c/o Donaldson, Lufkin & Jenrette
Securities Corporation, 277 Park Avenue, New York, New York, 10172, Attention:
Thomas M. Benninger, with copies to Wasserstein Perella Securities, Inc., 31
West 52nd Street, New York, New York 10019, Attention:
42
<PAGE>
Frederic M. Seegal; Natwest Capital Markets Limited, 175 Water Street, 30th
Floor, New York, New York 10038; Lehman Brothers, Inc.; PaineWebber
Incorporated, 1285 Avenue of the Americas, New York, New York 10019; and
Skadden, Arps, Slate, Meagher & Flom LLP at 300 South Grand Avenue, Suite 3400,
Los Angeles, California 90071, Attention: Nicholas P. Saggese, Esq., or in any
case to such other address as the person to be notified may have requested in
writing.
This Agreement shall be governed and construed in accordance with the
internal laws of the State of New York as applied to contracts made and
performed in such state. This Agreement may be signed in various counterparts
which together shall constitute one and the same instrument.
43
<PAGE>
Please confirm that the foregoing correctly sets forth the Agreement
among Parent, the Company and the Purchasers.
Very truly yours,
PRICE COMMUNICATIONS CORPORATION
/s/ Robert Price
---------------------------------
Name:
Title:
PRICE COMMUNICATIONS WIRELESS, INC.
/s/ Robert Price
----------------------------------
Name:
Title:
Accepted and agreed to as of
the date first above written:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION, on behalf
of and as Representative of the Purchasers
By: /s/ Steven D. Smith
--------------------------------
Name:
Title:
44
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
----------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities
Corporation.................................... $96,250,000
Wasserstein Perella Securities, Inc............. 52,500,000
NatWest Capital Markets Limited................. 8,750,000
Lehman Brothers, Inc............................ 8,750,000
PaineWebber Incorporated........................ 8,750,000
TOTAL....... $175,000,000
</TABLE>
45
<PAGE>
SCHEDULE II
SUBSIDIARIES OF THE COMPANY
None
46
<PAGE>
SCHEDULE III
Any bond, debenture, note, indenture, mortgage, deed of trust,
license or other agreement or instrument to which Parent, the Company or
any of their material subsidiaries is a party or by which any of them or
their property is or may be bound, which is effective and which is included
or incorporated by reference as an exhibit to Parent's annual report on
Form 10K for the year ended December 31, 1997, or quarterly report on Form
10Q for the quarter ended March 31, 1997.
47
<PAGE>
EXHIBIT 10.20
PRICE COMMUNICATIONS CORPORATION
PRICE COMMUNICATIONS CELLULAR INC.
PRICE COMMUNICATIONS CELLULAR HOLDINGS, INC.
153,400 Units
Consisting of 13-1/2% Senior Discount Notes due 2007
and
Warrants to purchase 527,696 Shares of Common Stock
PURCHASE AGREEMENT
------------------
July 31, 1997
NATWEST CAPITAL MARKETS LIMITED
WASSERSTEIN PERELLA SECURITIES, INC.
c/o NatWest Capital Markets Limited
135 Bishopsgate
London, EC2M 3XT
England
Ladies & Gentlemen:
Price Communications Cellular Holdings, Inc., a Delaware corporation
(the "Company"), proposes to issue and sell (or cause to be issued and sold in
-------
the case of the warrants referred to below) to Natwest Capital Markets Limited
and Wasserstein Perella Securities, Inc. (each a "Purchaser") an aggregate of
---------
153,400 units (the "Securities") consisting of (i) $153,400,000 aggregate
----------
principal amount at maturity of 13-1/2% Senior Secured Discount Notes due 2007
(the "Notes"), to be issued pursuant to an indenture (the "Indenture") to be
----- ---------
dated as of August 7, 1997 by and between the Company, Price Communications
Cellular Inc., a Delaware corporation, (the "Guarantor") which will guarantee
---------
the obligations of the Company (the "Guarantee") with respect to the Notes, and
---------
The Bank of Montreal Trust Company, as trustee (the "Trustee") and (ii) warrants
-------
(the "Warrants") to purchase an aggregate (subject to adjustment in certain
--------
events as set forth in the Warrant Agreement (as defined below)) of 527,696
shares of the Common Stock, par value $.01 per share (the "Common Stock"), of
------------
Price Communications
<PAGE>
Corporation, a New York corporation ("PCC"). The shares of Common Stock
---
issuable upon exercise of the Warrants are collectively referred to herein as
the "Warrant Shares". The Warrants are to be issued pursuant to the provisions
--------------
of a warrant agreement to be dated as of August 7, 1997 (the "Warrant
-------
Agreement"), by and between, PCC and The Bank of Montreal Trust Company, as
warrant agent (the "Warrant Agent"), having such terms and conditions as are
-------------
reasonable and customary under the circumstances. The parties hereto hereby
agree to negotiate the Warrant Agreement in good faith.
1. Offering Memorandum. The Securities will be offered and sold to
-------------------
you pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended, and the rules and regulations of the
Securities and Exchange Commission thereunder (the "Act"). The Company, the
---
Guarantor and PCC have prepared a preliminary offering memorandum, dated July
1997 (including the documents incorporated therein by reference, the
"Preliminary Offering Memorandum"), and a final offering memorandum, dated
- --------------------------------
August 1, 1997 (including the documents incorporated therein by reference, the
"Offering Memorandum"), relating to the Company, the Guarantor, PCC and the
- --------------------
Securities.
Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Offering Memorandum. All references herein to
"subsidiaries" or "Subsidiaries" of the Company or PCC, except where
- ------------- ------------
specifically indicated otherwise, refer solely to subsidiaries of the Company or
PCC, as applicable, as of the date of this agreement. Any representation or
warranty or agreement required to be made herein to the best of PCC's knowledge
with respect to Palmer Wireless, Inc., a Delaware corporation and its
subsidiaries ("Palmer"), is based solely on actual knowledge of PCC.
------
The Securities are detachable and, upon sale by you in accordance with
the terms of the Offering Memorandum, the Securities shall be immediately
separated into Notes and Warrants. Unless the context requires otherwise,
references herein to "Securities" shall be deemed to include the Notes and
Warrants upon initial issuance to you as well as following such separation.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Act, the Notes (and all
securities issued in exchange therefor or in substitution thereof) shall bear
-2-
<PAGE>
the following legend (with such additional legend in respect of original issue
discount as the parties shall agree):
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 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)
-3-
<PAGE>
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.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Act, the Warrants (and
the Warrant Shares issued upon exercise thereof) shall bear the following
legend:
THIS SECURITY (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 SECURITY FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS
ACQUIRING THIS SECURITY 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 SECURITY, RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO PRICE COMMUNICATIONS CORPORATION (THE "COMPANY") OR ANY
SUBSIDIARY THEREOF, (B) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (C) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE,
BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY), (D) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (E) 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
-4-
<PAGE>
PERSON TO WHOM THIS SECURITY 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 TRANSFER OF THIS SECURITY
IN VIOLATION OF THE FOREGOING RESTRICTIONS.
You have advised the Company that you will make offers (the "Exempt
------
Resales") of the Securities purchased hereunder on the terms set forth in the
- -------
Offering Memorandum, as amended or supplemented by the Company, if applicable,
solely to persons whom you reasonably believe to be "qualified institutional
-----------------------
buyers," as defined in Rule 144A under the Act ("QIBs") and who represent in
- ------ ----
writing to the Company that such person is a QIB and is buying the Securities
not with a view to distribution, subject to usual qualifications and
limitations, or institutional "accredited investors," as defined in Rule
501(a)(1),(2),(3) or (7) under the Act ("Institutional Accredited Investors")
and who represent in writing to the Company that such person is an Institutional
Accredited Investor and is buying the Securities not with a view to
distribution, subject to usual qualifications and limitations. The QIBs and
Institutional Accredited Investors that purchase Securities from the Purchasers
in the initial placement thereof are referred to herein as the "Eligible
--------
Purchasers." You have advised the Company that you will offer the Securities to
- ----------
such QIBs and Institutional Accredited Investors initially at the price set
forth on the cover of the Offering Memorandum, and that such price may be
changed at any time without notice.
The Company, the Guarantor, PCC and the Purchasers agree to enter into
(i) a registration rights agreement (the "Registration Rights Agreement"), to be
-----------------------------
dated the Closing Date, having customary and reasonable terms and conditions
taking into consideration the circumstances of the Offering; (ii) a warrant
registration rights agreement (the "Warrant Registration Rights Agreement" and
-------------------------------------
together with the Registration Rights Agreement, the "Registration Rights
-------------------
Agreements") to be dated the Closing Date, having customary and reasonable terms
- ----------
and conditions taking into consideration the circumstances of the Offering, and
(iii) the Guarantee, to be dated the Closing Date, having customary and
reasonable terms and conditions taking into consideration the circumstances of
the Offering. Pursuant to the Registration Rights Agreement, the Company and
the Guarantor will agree to file with the Securities and Exchange Commission
(the
-5-
<PAGE>
"Commission"), under the circumstances set forth therein, (i) a registration
----------
statement under the Act (the "Exchange Offer Registration Statement")
-------------------------------------
registering notes substantially identical to the Notes (the "Exchange Notes") to
--------------
be offered in exchange for the Notes (the "Exchange Offer"), or (ii) a shelf
--------------
registration statement pursuant to Rule 415 under the Act (the "Shelf
-----
Registration Statement") relating to the resale by certain holders of the Notes,
- ----------------------
and to use its best efforts to cause Registration Statement or the Shelf
Registration Statement, as the case may be, to be declared effective. Pursuant
to the Warrant Registration Rights Agreement, PCC will agree to file with the
Commission, under the terms set forth therein, a shelf registration statement
under the Act (the "Common Stock Shelf Registration Statement") relating to the
-----------------------------------------
offer and sale of the Warrant Shares by the holders of the Warrant Shares and to
use its best efforts to cause such Common Stock Shelf Registration Statement to
be declared effective. The Agreement and Plan of Merger, as amended (the
"Merger Agreement"), dated as of May 23, 1997, by and among Palmer, Palmer
Communication Incorporated, PCC and Price Communications Cellular Merger Corp.,
the Voting Agreement (the "Voting Agreement"), dated as of May 23, 1997, between
PCC and Palmer, this Agreement, the Securities, the Guarantee, the Indenture,
the Warrant Agreement, and the Registration Rights Agreements and the other
documents and agreements contemplated hereby and thereby are hereinafter
sometimes referred to collectively as the "Operative Documents."
-------------------
2. Agreements to Sell and Purchase. On the basis of the
-------------------------------
representations and warranties contained in this purchase agreement, hereinafter
referred to as the "Agreement," and subject to its terms and conditions, the
---------
Company, and PCC agree to issue and sell to you, and each of the Purchasers,
severally but not jointly, agrees to purchase from the Company and PCC, the
Securities in the respective amount set forth opposite its name on Schedule I
hereto. The Company and PCC agree to issue and sell to NatWest Capital Markets
Limited and NatWest Capital Markets Limited agrees to purchase from the Company
and PCC 45,856 Securities at a price equal to 100.00% of the issue price of the
Securities. The Company and PCC agree to issue and sell to NatWest Capital
Markets Limited and NatWest Capital Markets Limited agrees to purchase from the
Company and PCC 78,494 Securities at a price equal to 96.00% of the issue price
of the Securities. The Company and PCC agree to issue and sell to Wasserstein
Perella Securities, Inc. and Wasserstein Perella Securities, Inc. agrees to
purchase from the Company and PCC 29,050 Securities at a price equal to 96.00%
of the issue
-6-
<PAGE>
price of the Securities. The aggregate purchase price for the Securities shall
be $77,932,655 (the "Purchase Price").
--------------
3. Delivery and Payment. Delivery to the Purchasers of and payment
--------------------
for the Securities shall be made at 10:00 A.M., New York City time, on August 7,
1997 (the "Closing Date"), at the offices of White & Case, 1155 Avenue of the
------------
Americas, New York, New York 10036. The Closing Date and the location of
delivery of and the form of payment for the Securities may be varied by
agreement between you and the Company.
One or more of the Notes in definitive form, respectively registered
in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"),
---
including Notes having an aggregate principal amount at maturity equal to
$153,400,000, and shall be delivered by the Company to you (or as you may
direct) and Warrants exercisable for an aggregate of 527,696 shares of common
stock of PCC shall be delivered by the Company to you (or as you may direct),
against payment by you of the Purchase Price therefor by wire transfer in
immediately available funds to such accounts with such financial institutions as
the Company may direct.
4. Agreements of the Company, the Guarantor and PCC. The Company,
------------------------------------------------
the Guarantor and PCC agree with each of you as follows:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of the issuance by any state securities commission
of any stop order suspending the qualification or exemption from
qualification of any of the Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purpose by any
state securities commission or other regulatory authority, and (ii) of the
happening of any event which makes any statement of a material fact made in
the Offering Memorandum untrue or which requires the making of any
additions to or changes in the Offering Memorandum in order to make the
statements therein not misleading; provided, however, that the Company, the
-------- -------
Guarantor and PCC shall have no obligation with respect to any such event
occurring after the Closing Date unless one or more of the Purchasers
notifies the Company in writing at the Closing Date that it has not
completed the initial placement of the Securities, in which case, the
Company, the Guarantor and PCC shall have such obligation until such
Purchaser notifies the Company of the completion of
-7-
<PAGE>
such initial placement, which such Purchaser shall do promptly upon such
completion.
(b) To furnish to you, without charge, such number of copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as you may reasonably request. The
Company, the Guarantor and PCC consent to the use of the Preliminary
Offering Memorandum and the Offering Memorandum, and any amendments and
supplements thereto prepared by the Company, the Guarantor and PCC by you
in connection with offers or sales of the Securities.
(c) Not to make any amendment or supplement to the Preliminary
Offering Memorandum or the Offering Memorandum of which you shall not
previously have been advised or to which you shall reasonably object; and
to prepare and make any amendment or supplement to the Preliminary Offering
Memorandum or the Offering Memorandum which may be necessary or advisable
in connection with the distribution of the Securities by you.
(d) If, after the date hereof, any event shall occur as a result of
which, in the reasonable judgment of the Company and PCC or in your
reasonable judgment, it becomes necessary to amend or supplement the
Offering Memorandum in order to make the statements therein, in light of
the circumstances under which the Offering Memorandum is delivered to an
Eligible Purchaser which is a prospective purchaser, not misleading, or, if
it is necessary to amend or supplement the Offering Memorandum to comply
with any applicable law, forthwith to prepare an appropriate amendment or
supplement to the Offering Memorandum so that the statements in the
Offering Memorandum, as so amended or supplemented, will not, in light of
the circumstances when it is so delivered, be misleading, or so that the
Offering Memorandum will comply with the applicable law; provided, however,
-------- -------
that the Company, the Guarantor and PCC shall have no such obligation with
respect to any event occurring after the Closing Date unless one or more of
the Purchasers notifies the Company in writing at the Closing Date that it
has not completed the initial placement of the Securities, in which case
the Company, the Guarantor and PCC shall have such obligation until such
Purchaser notifies the Company of the completion of such initial placement,
which such Purchaser shall do promptly upon such completion.
-8-
<PAGE>
(e) To cooperate with you and counsel for the Purchasers in
connection with the registration or qualification of the Securities for
offer and sale by the Purchasers and by dealers under the securities or
Blue Sky laws of such jurisdictions as you may request, to continue such
qualification in effect so long as required for the completion of the
initial placement of the Securities and to file such consents to service of
process or other documents as may be necessary in order to effect such
registration or qualification; provided, however, that the Company, the
-------- -------
Guarantor and PCC shall not be required in connection therewith to register
or qualify as a foreign corporation where they are not now so qualified or
to take any action that would subject them to service of process in suits
or taxation, other than as to matters and transactions relating to the
Exempt Resales, in any jurisdiction where it is not now so subject.
(f) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement becomes effective or is terminated, to
pay all costs, expenses, fees and taxes incident to and in connection with:
(i) the printing, filing and distribution of the Preliminary Offering
Memorandum and the Offering Memorandum (including financial statements and
exhibits) and all amendments and supplements thereto, (ii) the preparation
(including, without limitation, word processing and duplication costs) and
delivery of all preliminary and final Blue Sky memoranda, (iii) the
issuance and delivery by the Company, the Guarantor and PCC of the
Securities, (iv) the qualification of the Securities for offer and sale
under the securities or Blue Sky laws of the several states (including,
without limitation, the reasonable fees and disbursements of your counsel
relating to such registration or qualification), (v) furnishing such copies
of the Preliminary Offering Memorandum and the Offering Memorandum and all
amendments and supplements thereto as may be reasonably requested for use
in connection with offers and sales of the Securities, (vi) the preparation
of certificates for the Securities (including, without limitation, any
printing and engraving thereof), (vii) the fees, disbursements and expenses
of the Company's counsel and accountants and the Trustee for the
Securities, (viii) the rating of the Securities by investment rating
agencies (if such Securities are rated), and (ix) the performance by the
Company, the
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<PAGE>
Guarantor and PCC of its other obligations under this Agreement.
(g) To use their best efforts to do and perform all things required
or necessary to be done and performed under this Agreement by the Company,
the Guarantor and PCC prior to the Closing Date.
(h) To use the proceeds from the sale of the Securities in the manner
described in the Offering Memorandum under the caption "Use of Proceeds"
---------------
and consistent with that described therein under the caption "Description
of Notes - Escrow Account."
(i) [Reserved]
(j) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined by the Act) other than the
Securities, in a manner that would require the registration under the Act
of the sale to you or Eligible Purchasers of the Securities.
(k) For so long as any of the Securities remain outstanding and
during any period in which the Company is not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
--------
Act"), to make available to any holder and any prospective purchaser of
such Securities from such holder the information specified by Rule
144A(d)(4) under the Act.
(l) Except following the effectiveness of the Exchange Offer
Registration Statement, not to, and not to authorize or knowingly permit
any person acting on their behalf to, solicit any offer to buy or offer to
sell the Securities by means of any form of general solicitation or general
advertising (as such terms are used in Regulation D under the Act) or in
any manner involving a public offering within the meaning of Section 4(2)
of the Act.
(m) To cause the Exchange Offer to be made on the appropriate form to
permit registration of the Exchange Notes to be offered in exchange for the
Notes and to comply with all applicable federal and state securities laws
in connection with the Exchange Offer.
(n) To comply with all of its agreements set forth in the
Registration Rights Agreements and all agreements
-10-
<PAGE>
set forth in the representation letter of the Company to DTC relating to
the approval of the Notes by DTC for "book-entry" transfer.
(o) To use their best efforts to effect the inclu sion of the Notes
in PORTAL.
5. Representations and Warranties. (a) The Company, the Guarantor
------------------------------
and PCC represent and warrant to each of you that:
(i) The Preliminary Offering Memorandum and the Offering Memorandum
have been prepared in connection with the Exempt Resales. The Offering
Memorandum does not contain and, as amended or supplemented, if applicable,
will not contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph (i) do not apply
to statements in or omissions from the Offering Memorandum based upon
information relating to the Purchasers furnished to the Company in writing
by the Purchasers expressly for use therein. The Company, the Guarantor
and PCC acknowledge for all purposes under this Agreement that the
statements set forth in the table and the second, third and last paragraph
appearing under the caption "Plan of Distribution" in the Preliminary
Offering Memorandum and Offering Memorandum constitute the only written
information furnished to the Company by the Purchasers expressly for use in
the Preliminary Offering Memorandum or the Offering Memorandum,
respectively, and that you shall not be deemed to have provided any
information (and therefore are not responsible for any statement or
omission) pertaining to any arrangement or agreement with respect to any
party other than the Purchasers. No stop order preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act or the applicable laws of any other jurisdiction,
has been issued. The Offering Memorandum, as of its date, contains all the
information specified in, and meeting the requirements of, Rule 144A(d)(4)
under the Act.
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<PAGE>
(ii) When the Securities are issued and delivered pursuant to this
Agreement, none of the Notes will be of the same class (within the meaning
of Rule 144A under the Act) as securities of the Company or PCC that are
listed on a national securities exchange registered pursuant to the
Exchange Act or that are quoted in a United States automated interdealer
quotation system.
(iii) PCC, the Guarantor, the Company and each of its subsidiaries
and Palmer and each of its material subsidiaries (in the case of such
representation with respect to Palmer by PCC, to the best of PCC's actual
knowledge) has been duly organized, is validly existing as a corporation or
limited or general partnership in good standing under the laws of its
respective jurisdiction of organization, has all requisite corporate or
partnership power and authority to carry on its business as is currently
being conducted and as described in the Offering Memorandum and to own,
lease and operate its properties, and is duly qualified and in good
standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure
to be so qualified would not, singly or in the aggregate, have a Material
Adverse Effect (as defined below).
(iv) The entities listed on Schedule II hereto are the only
subsidiaries, direct or indirect, of the Company and/or PCC (other than
subsidiaries with imma terial amounts of assets). The Company owns, and as
of the Closing Date, the Company will own, directly or indirectly through
other subsidiaries, the percentages of the outstanding capital stock or
other securities evidencing equity ownership of such subsidiaries indicated
on Schedule II hereto, and all of such securities have been duly
authorized, validly issued, are fully paid and nonassessable and were not
issued in violation of any preemptive or similar rights; and as of the
Closing Date the Company will own, directly or indirectly, the assets,
properties and interests disclosed in the Offering Memorandum as owned by
the Company and Palmer will own (in the case of such representation with
respect to Palmer, to the best of PCC's knowledge), directly or indirectly,
the assets, properties and interests disclosed in the Offering Memorandum
as owned by it, in each case free and clear of any security interest,
claim, lien, limitation on voting rights or encumbrance other than as is
set forth
-12-
<PAGE>
in the Offering Memorandum. There are no outstanding subscriptions, rights,
warrants, calls, commitments of sale or options to acquire, or instruments
convertible into or exchangeable for, any such shares of capital stock or
other equity interest of such subsidiaries, except as disclosed in the
Offering Memorandum. The Guarantor owns, and as of the Closing Date, the
Guarantor will own directly 100% of the outstanding capital stock or other
securities evidencing equity ownership of the Company. There are no
outstanding subscriptions, rights, warrants, calls, commitments of sale or
options to acquire, or instruments convertible into or exchangeable for,
any such shares of capital stock or other equity interest of the Company,
except as disclosed in the Offering Memorandum.
(v) Each of the Company, the Guarantor and PCC, as applicable, has
all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement, the Indenture, the Guarantee, the
Escrow Agreement, the Registration Rights Agreements, and the Warrant
Agreement and each of the Company, the Guarantor and PCC and their
subsidiaries and, Palmer and its subsidiaries, as applicable, has all
requisite corporate or partnership power and authority to execute, deliver
and perform its obligations under the other Operative Documents to which it
is a party and, in each case, to consummate the transactions contemplated
hereby and thereby, including, without limitation, the corporate power and
authority to issue, sell and deliver the Securities as provided herein and
therein (in the case of such representation with respect to Palmer and its
subsidiaries, to the best of PCC's knowledge).
(vi) This Agreement has been duly and validly authorized, executed
and delivered by each of the Company, the Guarantor and PCC and is a valid
and binding agreement of the Company, the Guarantor and PCC.
(vii) The Guarantee has been duly and validly authorized by the
Guarantor and when duly executed and delivered by the Guarantor, will be a
valid and binding obligation of the Guarantor, enforceable against the
Guarantor in accordance with its terms, except (i) as such enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights and remedies generally and (ii) as to
general principles of equity, regardless of
-13-
<PAGE>
whether enforcement is sought in a proceeding at law or in equity. The
Guarantee, when executed and delivered, will conform to the description
thereof in the Offering Memorandum.
(viii) The Indenture has been duly and validly authorized by the
Company and the Guarantor and when duly executed and delivered by the
Company and the Guarantor, will be a valid and binding obligation of the
Company and the Guarantor, enforceable against the Company and the
Guarantor in accordance with its terms, except (i) as such enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights and remedies generally and (ii) as to
general principles of equity, regardless of whether enforcement is sought
in a proceeding at law or in equity. The Indenture, when executed and
delivered, will conform to the description thereof in the Offering
Memorandum.
(ix) The Notes have been duly and validly authorized for issuance
and sale to you by the Company pursuant to this Agreement and, when issued
and authenticated in accordance with the terms of the Indenture and
delivered against payment therefor in accordance with the terms hereof,
will be valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms and entitled to the benefits of
the Indenture, except (i) as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights and remedies generally and (ii) as to general principles of equity,
regardless of whether enforcement is sought in a proceeding at law or in
equity. The Notes, when issued, authenticated and delivered, will conform
to the description thereof in the Offering Memorandum.
(x) The Warrant Agreement has been duly executed and delivered by
PCC and the Company, will be a valid and binding obligation of PCC,
enforceable against PCC in accordance with its terms, except (i) as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and remedies
generally and (ii) as to general principles of equity, regardless of
whether enforcement is sought in a proceeding at law or in equity. The
Warrants have been duly and validly authorized for issuance and sale to you
by PCC pursuant
-14-
<PAGE>
to this Agreement and, when issued in accordance with the terms of the
Warrant Agreement and delivered against payment therefor in accordance with
the terms hereof, will be valid and binding obligations of PCC, enforceable
against PCC in accordance with their terms and entitled to the benefits of
the Warrant Agreement, except (i) as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights and remedies generally and (ii) as to general
principles of equity, regardless of whether enforcement is sought in a
proceeding at law or in equity. The Warrant Agreement, when executed and
delivered, will conform to the description thereof in the Offering
Memorandum. The Warrants, when issued, and delivered, will conform to the
description thereof in the Offering Memorandum. The Warrant Shares have
been duly authorized for issuance by PCC and when issued upon exercise of
the Warrants in accordance with the terms thereof, will be validly issued,
fully paid and nonassessable. All Warrant Shares upon issuance will be free
of preemptive or similar rights.
(xi) The Exchange Notes have been duly and validly authorized for
issuance by the Company, and when issued and authenticated in accordance
with the terms of the Indenture, the Registration Rights Agreement and the
Ex change Offer, will be valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms and entitled
to the benefits of the Indenture, except (i) as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights and remedies generally and (ii) as to
general principles of equity, regardless of whether enforcement is sought
in a proceeding at law or in equity.
(xii) The Merger Agreement has been duly and validly authorized by
PCC (and, as applicable, each of PCC's subsidiaries party thereto), duly
executed and delivered by PCC (and, as applicable, each of PCC's
subsidiaries party thereto), and is a valid and binding obligation of each
of them, enforceable in accordance with their respective terms, except (i)
as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights and
remedies generally and (ii) as to general principles of equity, regardless
of whether enforcement is sought in a proceeding at law or in equity. The
Merger
-15-
<PAGE>
Agreement conforms to the description thereof in the Offering Memorandum.
(xiii) The Registration Rights Agreements have been duly and
validly authorized by the Company, the Guarantor and PCC, as applicable,
and, when duly executed and delivered by the Company, the Guarantor and
PCC, as applicable, will be valid and binding obligations of the Company,
the Guarantor and PCC, enforceable in accordance with their terms, except
(i) as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights and
remedies generally, (ii) as to general principles of equity, regardless of
whether enforcement is sought in a proceeding at law or in equity and (iii)
that the enforceability of the indemnification and contribution provisions
contained therein may be limited by Federal and state securities laws and
the policies underlying such laws. The Registration Rights Agreements
conform to the descriptions thereof in the Offering Memorandum.
(xiv) None of PCC, the Guarantor, the Company, or any of their
subsidiaries nor Palmer or any of its material subsidiaries is in violation
of its respective charter, bylaws or other organizational document or is in
default in the performance of any bond, debenture, note, indenture,
mortgage, deed of trust, license or other agreement or instrument to which
it is a party or by which it is bound or to which any of its properties is
subject, or is in violation of any law, statute, rule, regulation, judgment
or court decree applicable to them or their assets or properties, except
for any such defaults or violations, which singly or in the aggregate,
would not have a Material Adverse Effect (as defined below). There exists
no condition that, with notice, the passage of time or otherwise, would
constitute a default under any such document or instrument, except for any
such defaults or violations, which singly or in the aggregate, would not
have a Material Adverse Effect (in the case of such representations with
respect to Palmer and its subsidiaries by PCC in this clause 5(xiv), to the
best of PCC's knowledge).
(xv) The execution, delivery and performance by the Company, the
Guarantor and PCC of this Agreement and by each of PCC, the Guarantor, the
Company and their subsidiaries and Palmer and its subsidiaries, as
-16-
<PAGE>
applicable, of the other Operative Documents (except as set forth in the
Offering Memorandum) to which they are parties, the issuance and sale of
the Securities as contemplated by this Agreement and the Offering
Memorandum and the consummation of the transactions contemplated hereby and
thereby will not violate, conflict with or constitute a breach of any of
the terms or provisions of, or a default under (or an event that with
notice or the lapse of time, or both, would constitute a default), or
require consent under, or result in the imposition of a lien or encumbrance
on any properties of PCC, the Guarantor (except for any lien on stock of
the Guarantor created by the Guarantee), the Company or any of their
subsidiaries or Palmer or any of its material subsidiaries, or an
acceleration of indebtedness pursuant to, (i) the charter or bylaws of PCC,
the Guarantor, the Company or any of their subsidiaries or Palmer or any of
its material subsidiaries, (ii) any bond, debenture, note, indenture,
mortgage, deed of trust, license or other agreement or instrument to which
PCC, the Guarantor, the Company or any of their subsidiaries or Palmer or
any of its material subsidiaries is a party or by which any of them or
their property is or may be bound, (iii) any statute, rule or regulation
applicable to PCC, the Guarantor, the Company, any of their subsidiaries or
Palmer or any of its material subsidiaries or any of their assets or
properties or those of Palmer or any of its material subsidiaries, or (iv)
any judgment, order or decree of any court or governmental agency or
authority having jurisdiction over PCC, the Guarantor, the Company, any of
their subsidiaries or Palmer or any of its material subsidiaries or their
assets or properties or those of Palmer or any of its material
subsidiaries. Except as required by the Federal Communications Commission
as disclosed in the Offering Memorandum, no consent, approval,
authorization or order of, or filing, registration, qualification, license
or permit of or with, any court or governmental agency, body or
administrative agency is required for the execution, delivery and
performance of this Agreement and the other Operative Documents (except as
set forth in the Offering Memorandum) by the Company, the Guarantor, or PCC
or, as applicable, any of their subsidiaries or Palmer or any of its
subsidiaries and the consummation of the transactions contemplated hereby
and thereby, except such as have been obtained and made (or, in the case of
the Registration Rights Agreements, will be obtained and made) under the
Act, the Trust Indenture Act of 1939, as
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<PAGE>
amended (the "Trust Indenture Act"), and state securities or Blue Sky laws
-------------------
and regulations or such as may be required by the National Association of
Securities Dealers, Inc. (the "NASD"). No consents or waivers from any
----
other person are required for the execution, delivery and performance of
this Agreement and the other Operative Documents (except as set forth in
the Offering Memorandum) by the Company, the Guarantor, or PCC or, as
applicable, any of its subsidiaries or Palmer or any of its subsidiaries
and the consummation of the transactions contemplated hereby and thereby,
other than such consents and waivers as have been obtained (or, in the case
of the Registration Rights Agreements, will be obtained). In the case of
such representations with respect to Palmer and its subsidiaries in this
clause 5(xv), to the best of PCC's knowledge.
(xvi) There is (i) no action, suit or proceeding before or by any
court, arbitrator or governmental agency, body or official, domestic or
foreign, now pending or, to the best knowledge of the Company, the
Guarantor and PCC, threatened or contemplated to which PCC, the Guarantor,
the Company or any of their subsidiaries or Palmer or any of its material
subsidiaries is a party or to which the business or property of PCC, the
Guarantor, the Company or any of their subsidiaries or Palmer or any of its
material subsidiaries is subject, (ii) no statute, rule, regulation or
order that has been enacted, adopted or issued by any governmental agency
or that has been proposed by any governmental body, (iii) no injunction,
restraining order or order of any nature by a federal or state court or
foreign court of competent jurisdiction to which PCC, the Guarantor, the
Company or any of their subsidiaries or Palmer or any of its material
subsidiaries is subject issued that, in the case of clauses (i), (ii) and
(iii) above, (x) might, singly or in the aggregate, result in a material
adverse effect on the properties, business, results of operations,
condition (financial or otherwise), or prospects of the Company and its
subsidiaries or Palmer or any of its material subsidiaries, taken as a
whole (a "Material Adverse Effect"), (y) would interfere with or adversely
-----------------------
affect the issuance of the Securities or (z) in any manner draw into
question the validity of this Agreement, the Warrant Agreement, the Notes,
the Guarantee, the Warrants, the Indenture, the Registration Rights
Agreements or any other Operative Document (in
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<PAGE>
the case of such representations with respect to Palmer and its
subsidiaries, to the best of PCC's knowledge).
(xvii) To the best knowledge of the Company, the Guarantor and
PCC, no action has been taken and no statute, rule or regulation or order
has been enacted, adopted or issued by any governmental agency that
prevents the issuance of the Securities; to the best knowledge of the
Company, the Guarantor and PCC, no injunction, restraining order or order
of any nature by a federal or state court of competent jurisdiction has
been issued that prevents the issuance of the Securities or suspends the
sale of the Securities in any jurisdiction referred to in Section 4(e)
hereof; and to the best knowledge of the Company, the Guarantor and PCC, no
action, suit or proceeding is pending against PCC, the Company, the
Guarantor or any of their subsidiaries or Palmer or any of its material
subsidiaries before any court or arbitrator or any governmental body,
agency or official which, if adversely determined, would prohibit the
issuance of the Securities or invalidate any Operative Document; and every
request of the Company, the Guarantor or PCC by any securities authority or
agency of any jurisdiction for additional information has been complied
with in all material respects (in the case of such representation with
respect to Palmer and its subsidiaries, to the best of PCC's knowledge).
(xviii) To the best of their knowledge, none of PCC, the Guarantor,
the Company or any of their subsidiaries or Palmer or any of its
subsidiaries has violated any federal, state or local law relating to
discrimination in hiring, promotion or pay of employees (in the case of
such representation with respect to Palmer and its subsidiaries, to the
best of PCC's knowledge).
(xix) To the best of their knowledge, none of PCC, the Guarantor,
the Company or any of their subsidiaries nor, to the best of PCC's or the
Company's knowledge, Palmer or any of its subsidiaries has violated any
environmental, safety or similar law or regulation applicable to it or its
business or property relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), lacks any permit, license or other
------------------
approval required of them under applicable Environmental Laws or is
violating any term or condition of such permit, license or approval
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<PAGE>
which might result in a Material Adverse Effect (in the case of such
representation with respect to Palmer and its subsidiaries, to the best of
PCC's knowledge).
(xx) Each of PCC, the Guarantor, the Company and its subsidiaries
and Palmer and its material subsidiaries has (i) good and marketable title
to all of the properties and assets described in the Offering Memorandum as
owned by it, free and clear of all liens (except for liens created by the
Guarantor on pledged stock of the Guarantor), charges, encumbrances and
restrictions, except such as are described in the Offering Memorandum or as
would not have a Material Adverse Effect, (ii) peaceful and undisturbed
possession under all leases to which it is party as lessee, (iii) all
licenses, certificates, permits, authorizations, approvals, franchises and
other rights from, and has made all declarations and filings with, all
federal, state and local authorities, all self-regulatory authorities and
all courts and other tribunals necessary to engage in the business
currently conducted by it in the manner described in the Offering
Memorandum (each an "Authorization"), except where failure to hold such
-------------
Authorizations would not have a Material Adverse Effect and (iv) no reason
to believe that any governmental body or agency is considering limiting,
suspending or revoking any such Authorization, except as described in the
Offering Memorandum. All such Authorizations are valid and in full force
and effect and PCC, the Guarantor, the Company and its subsidiaries and
Palmer and its material subsidiaries are in compliance in all respects with
the terms and conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities having jurisdiction with respect
thereto, except as would not have a Material Adverse Effect. All leases to
which PCC, the Guarantor, the Company or any of its subsidiaries and Palmer
or any of its material subsidiaries is a party are valid and binding and no
default by the Guarantor, the Company or any of its subsidiaries and Palmer
or any of its material subsidiaries has occurred and is continuing
thereunder, except such as are described in the Offering Memorandum or as
would not have a Material Adverse Effect, and no material defaults by the
landlord are existing under any such lease. In the case of such
representation with respect to Palmer and its subsidiaries in this clause
5(xx), to the best of PCC's knowledge.
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<PAGE>
(xxi) Each of PCC, the Guarantor, the Company and its subsidiaries,
and Palmer and each of its material subsidiaries, owns or possesses all
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names, in each case to the extent
disclosed in the Offering Memorandum as being material to the business of
PCC, the Guarantor, the Company or Palmer (collectively, the "Intellectual
------------
Property"), presently employed by it in connection with the businesses now
--------
operated by them, and neither PCC, the Guarantor, the Company nor any of
its subsidiaries, nor Palmer or any of its material subsidiaries, has
received any notice of infringement of or conflict with asserted rights of
others with respect to any of the foregoing. The use of such Intellectual
Property in connection with the business and operations of PCC, the
Guarantor, the Company and its subsidiaries and Palmer or any of its
material subsidiaries does not infringe on the rights of any person. In
the case of such representations with respect to Palmer and its
subsidiaries in this clause 5(xxi), to the best of PCC's knowledge.
(xxii) All tax returns required to be filed by PCC, the Guarantor,
the Company or any of their subsidiaries or Palmer or any of its material
subsidiaries, in all jurisdictions, have been so filed. All taxes,
including withholding taxes, penalties and interest, assessments, fees and
other charges due or claimed to be due from such entities or that are due
and payable have been paid, other than those being contested in good faith
and for which adequate reserves have been provided or those currently
payable without penalty or interest. None of PCC, the Guarantor, the
Company or any of their subsidiaries, nor Palmer or any of its material
subsidiaries knows of any material proposed additional tax assessments
against it. In the case of such representations with respect to Palmer and
its subsidiaries by PCC in this clause (xxii), to the best of PCC's
knowledge.
(xxiii) Neither the Guarantor, the Company, PCC nor any of their
subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company Act").
----------------------
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<PAGE>
(xxiv) There are no holders of securities of the Company, the
Guarantor or PCC who, by reason of the execution by the Company of this
Agreement or any other Operative Document to which it is a party or the
consummation of the transactions contemplated hereby and thereby, have the
right that has not been waived to request or demand that the Company, the
Guarantor or PCC register under the Act or analogous foreign laws and
regulations securities held by them.
(xxv) The authorized, issued and outstanding capital stock of each
of PCC, the Guarantor, the Company and its subsidiaries, and Palmer and its
material subsidiaries, has been duly and validly authorized and issued, is
fully paid and nonassessable and was not issued in violation of any
preemptive or similar rights (in the case of such representations with
respect to Palmer by PCC and its subsidiaries, to the best of PCC's
knowledge). The Company and its subsidiaries had, at August 1, 1997, an
authorized and outstanding capitalization as set forth in the section
entitled "Capitalization" in the Offering Memorandum.
(xxvi) Each certificate signed by any officer of the Company, the
Guarantor or PCC and delivered to the Purchasers or counsel for the
Purchasers shall be deemed to be a representation and warranty by the
Company, the Guarantor or PCC, as applicable, to each Purchaser as to the
matters covered thereby.
(xxvii) PCC, the Guarantor, the Company and each of their
subsidiaries, and Palmer and each of its material subsidiaries, maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect
thereto.
(xxviii) Except as would not be unlawful, none of PCC, the Company,
the Guarantor or any of their subsidiaries has (i) taken, directly or
indirectly, any action
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designed to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any security of PCC, the
Company, the Guarantor or any of their respective subsidiaries to
facilitate the sale or resale of the Securities or (ii) since the date of
the Preliminary Offering Memorandum (A) sold, bid for, purchased or paid
any person any compensation for soliciting purchases of the Securities or
(B) paid or agreed to pay to any person any compensation for soliciting
another to purchase any other securities of PCC, the Company, the Guarantor
or any of their respective subsidiaries.
(xxix) No registration under the Act of the Securities is required
for the sale of the Securities to the Purchasers as contemplated hereby or
for Exempt Resales to the Eligible Purchasers, assuming (i) that the
Purchasers who buy the Securities in the Exempt Resales are QIBs or
Institutional Accredited Investors and (ii) the accuracy of the Purchasers'
representations regarding the absence of general solicitation in connection
with the sale of Securities to the Purchasers and the Exempt Resales
contained herein. No form of general solicitation or general advertising
was used by PCC, the Guarantor, the Company or any of their representatives
(assuming, for purposes of the Purchasers, the accuracy of the Purchasers'
representations in Section 5(b) hereof) in connection with the offer and
sale of any of the Securities or in connection with Exempt Resales,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising. No securities
of the same class as the Securities have been issued and sold by the
Company, the Guarantor or PCC within the six-month period immediately prior
to the date hereof.
(xxx) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, and each amendment or supplement thereto, as of
its date, contains all the information specified in, and meets the
requirements of, Rule 144A(d)(4) under the Act.
(xxxi) Subsequent to the respective dates as of which information
is given in the Offering Memorandum and up to the Closing Date, except as
set forth in the Offering Memorandum, neither PCC, the Guarantor, the
Company nor
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<PAGE>
any of their subsidiaries, nor Palmer or its material subsidiaries, has
incurred any liabilities or obligations, direct or contingent, which are
material to PCC, the Guarantor, the Company and their subsidiaries and
Palmer and its subsidiaries, taken as a whole, nor entered into any
transaction not in the ordinary course of business, there has not been,
singly or in the aggregate, any material adverse change, or any development
which may reasonably be expected to involve a material adverse change, in
the properties, business, results of operations, condition (financial or
otherwise), or prospects of PCC, the Guarantor, the Company and their
subsidiaries, or Palmer and its material subsidiaries, taken as a whole (a
"Material Adverse Change"), and there have not been dividends or
-----------------------
distributions of any kind declared, paid or made by PCC, the Guarantor, the
Company or any of their subsidiaries, or Palmer or its subsidiaries, on any
class of its capital stock (in the case of such representations with
respect to Palmer and its subsidiaries by PCC to the best of PCC's
knowledge).
(xxxii) Neither the Company, the Guarantor nor PCC, nor any agent
thereof acting on the behalf of any of them (other than the Purchasers, to
the extent applicable) has taken, and none of them will take, any action
that might cause this Agreement or the issuance or sale of the Securities
to violate Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part
220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part
224) of the Board of Governors of the Federal Reserve System.
(xxxiii) Each firm of accountants that has certified or shall certify
the financial statements and supporting schedules included or to be
included as part of the Preliminary Offering Memorandum and the Offering
Memorandum are independent public accountants with respect to the Company,
the Guarantor and PCC and their subsidiaries, and Palmer and its
subsidiaries, as required by the Act for financial statements included in a
registration statement on Form S-1. The consolidated historical statements
fairly present the consolidated financial conditions and results of
operations of PCC, the Guarantor, the Company and their subsidiaries and
Palmer and its subsidiaries at the respective dates and for the respective
periods indicated, in accordance with generally accepted accounting
principles consistently
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<PAGE>
applied throughout such periods. The pro forma financial statements have
been prepared on a basis consistent with such historical statements, except
for the pro forma adjustments specified therein, and give effect to
assumptions made on a reasonable basis and present fairly the historical
and proposed transactions contemplated by the Preliminary Offering
Memorandum, the Offering Memorandum, this Agreement and the other Operative
Documents. Other financial and statistical information and data included in
the offering Memorandum, historical and pro forma, are accurately presented
(including those relating to Palmer and its subsidiaries presented therein)
and prepared on a basis consistent with such financial statements and the
books and records of the Company and its subsidiaries and Palmer and its
subsidiaries, respectively (in the case of such representations with
respect to Palmer and its subsidiaries, to the best of PCC's knowledge).
(xxxiv) Immediately prior to and after the Closing Date, the
present fair saleable value of the assets of the Company, the Guarantor and
its subsidiaries and of Palmer and its subsidiaries, taken as a whole, will
exceed the amount that will be required to be paid on or in respect of the
existing debts and other liabilities (including contingent liabilities) of
each such person as they become absolute and matured. The assets of the
Company and the Guarantor, immediately after the Issue Date, will not
constitute unreasonably small capital to permit them to carry out their
business as conducted or as proposed to be conducted. The Company does not
intend to, nor does it believe that it will, incur debts beyond its ability
to pay such debts as they mature. The Guarantor does not intend to, nor
does it believe that it will, incur debts beyond its ability to pay such
debts as they mature. Upon the issuance of the Notes, the present fair
saleable value of the assets of the Company will exceed the amount that
will be required to be paid on or in respect of the existing debts and
other liabilities (including contingent liabilities) of the Company as they
become absolute and matured. The assets of the Company, upon the issuance
of the Notes, will not constitute unreasonably small capital to carry out
its business as now conducted, including the capital needs of the Company,
taking into account the projected capital requirements and the capital
availability of the Company.
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<PAGE>
(xxxv) There are no contracts, agreements or understandings between
the Company, the Guarantor, PCC or any of their subsidiaries and any person
that would give rise to a valid claim against PCC, the Guarantor, the
Company, their subsidiaries or any Purchaser for a brokerage commission,
finder's fee or like payment in connection with the issuance, purchase and
sale of any of the Securities.
(xxxvi) The Company, the Guarantor and PCC acknowledge that the
Purchasers and, for purposes of the opinions to be delivered to the
Purchasers pursuant to Section 7 hereof, counsel to the Company, the
Guarantor and PCC and counsel to the Purchasers will rely upon the accuracy
and truth of the foregoing representations and hereby consent to such
reliance.
(b) Each Purchaser represents and warrants to PCC, the Guarantor and
the Company and the other Purchaser and agrees that:
(i) Such Purchaser is a QIB with such knowledge and experience in
financial and business matters as are necessary in order to evaluate the
merits and risks of an investment in the Securities.
(ii) Such Purchaser (A) is not acquiring the Securities with a view
to any distribution thereof that would violate the Act or the securities
laws of any state of the United States or any other applicable jurisdiction
and (B) will be reoffering and reselling the Securities only to QIBs and
Institutional Accredited Investors in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A or other
available exemption from the registration requirements of Section 5 of the
Act.
(iii) No form of general solicitation or general advertising has
been or will be used by such Purchaser or any of its representatives in
connection with the offer and sale of any of the Securities, which would
render unavailable to the Company and PCC reliance upon the exemption from
the registration requirements of the Act afforded by Section 4(2) thereof,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.
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<PAGE>
(iv) Such Purchaser agrees that, in connection with the Exempt
Resales, it will solicit offers to buy the Securities only from, and will
offer to sell the Securities only to, QIBs and Institutional Accredited
Investors. Such Purchaser further agrees (A) that it will offer to sell
the Securities only to, and will solicit offers to buy the Securities only
from, QIBs and Institutional Accredited Investors who in purchasing such
Securities will, and will be deemed to, have represented and agreed that
they are purchasing such Securities for their own accounts or accounts with
respect to which they exercise sole investment discretion and that they or
such accounts are QIBs or Institutional Accredited Investors, that they are
aware that the sale to them is being made in reliance on Rule 144A or other
available exemption from the registration requirements of Section 5 of the
Act, and that they are acquiring such Securities for investment and not
with a view to, or for offer or sale in connection with, any distribution
(within the meaning of the Act) or fractionalization thereof or with any
intention of reselling the Securities or any part thereof, subject to any
requirement of law that the disposition of their property or the property
of such investor account or accounts be at all times within their control
and subject to their ability to resell such Securities pursuant to Rule
144, 144A, Regulation S or other exemption from registration available
under the Act, and (B) that, in the case of such QIBs and Institutional
Accredited Investors, such QIBs and Institutional Accredited Investors
will, and will be deemed to, have acknowledged that the Securities have not
been and will not be registered under the Act and may not be sold except as
permitted below, and (C) that, in the case of such QIBs and Institutional
Accredited Investors, such QIBs and Institutional Accredited Investors will
be deemed to have agreed that if they should sell, pledge or otherwise
transfer the Securities prior to the second anniversary of the later of the
original issuance of the Securities or the sale thereof by any affiliate
(within the meaning of Rule 144 under the Act or any successor rule
thereto, an "Affiliate") of the Company, the Guarantor or PCC (computed in
---------
accordance with paragraph (d) of Rule 144 under the Act) or if they were at
the date of such transfer or during the three months preceding such date of
transfer an Affiliate of the Company, the Guarantor or PCC, they would do
so in compliance with any applicable state securities or "Blue Sky" laws
and only (v) to the Company or PCC, as
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<PAGE>
applicable (w) in accordance with Rule 144A, if available (as indicated by
the box checked by the transferor on the form of assignment on the reverse
of the Note), (x) pursuant to any exemption from registration in accordance
with Regulation S under the Act (as indicated by the box checked by the
transferor on the form of assignment on the reverse of the Note), (y) to an
Institutional Accredited Investor that is an "accredited investor" within
the meaning of Rule 501(a) (1), (2), (3) or (7) under the Act which
delivers a certificate in the form of Exhibit B to the Indenture to the
Trustee, or (z) any other applicable exemption under the securities laws
and (D) that, in the case of such QIBs and Institutional Accredited
Investors, such QIBs and Institutional Accredited Investors will, and will
be deemed to, have acknowledged that they have received the information, if
any, requested by them pursuant to Rule 144A, have had full opportunity to
review such information and have received all additional information
necessary to verify such information and that they (i) are able to fend for
themselves in the transactions contemplated by the Offering Memorandum,
(ii) have such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of their prospective
investment in the Securities and (iii) have the ability to bear the
economic risks of their prospective investment and can afford the complete
loss of such investment.
(v) This Agreement has been duly and validly executed and delivered
by the Purchasers and is a valid and binding agreement of the Purchasers
enforceable in accordance with its terms.
(vi) Such Purchaser also understands that the Company, PCC and the
Guarantor and, for purposes of the opinions to be delivered to you pursuant
to Section 7 hereof, counsel to the Company, PCC and the Guarantor and
counsel to the Purchasers will rely upon the accuracy and truth of the
foregoing representations and hereby consents to such reliance. For this
purpose, each such representation and warranty shall be true and correct on
the date hereof and on the Closing Date with the same force and effect as
if made on and as of the date hereof and the Closing Date, respectively.
6. Indemnification. (a) The Company, the Guarantor and PCC agree
---------------
jointly and severally to indemnify and hold harmless (i) each of the Purchasers
and (ii) each
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person, if any, who controls (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) any of the Purchasers (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 any of the Purchasers 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 the Preliminary Offering
Memorandum or the Offering Memorandum (as amended or supplemented if the
Company, the Guarantor or PCC shall have furnished any amendments or supplements
thereto), 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 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
Purchaser furnished in writing to the Company by or on behalf of any Purchaser
expressly for use therein; provided that the foregoing indemnity with respect to
any Preliminary Offering Memorandum 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 statement or
omission or alleged untrue statement or omission made in such Preliminary
Offering Memorandum is eliminated or remedied in the Offering Memorandum and a
copy of the Offering Memorandum shall not have been furnished to such person in
a timely manner due to the wrongful action or wrongful inaction of any
Purchaser.
(b) In case any action shall be brought against any Indemnified
Person, based upon the Preliminary Offering Memorandum or the Offering
Memorandum or any amendment or supplement thereto and with respect to which
indemnity may be sought against the Company, the Guarantor and PCC, such
Indemnified Person shall promptly notify the Company in writing and the Company,
the Guarantor and PCC 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
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<PAGE>
shall have been specifically authorized in writing by the Company, the Guarantor
or PCC, (ii) the Company, the Guarantor or PCC 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 PCC,
the Guarantor or 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 PCC, the Guarantor or the
Company (in which case PCC, the Guarantor or 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 PCC, the Guarantor and 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
NatWest Capital Markets Limited, and that all such fees and expenses shall be
reimbursed as they are incurred. PCC, the Guarantor and the Company shall not be
liable for any settlement of any such action effected without their written
consent but if settled with the written consent of PCC, the Guarantor or the
Company, PCC, the Guarantor and the Company agree 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 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) Each Purchaser agrees, severally and not jointly, to indemnify
and hold harmless each of PCC, the Guarantor, or the Company, its directors, its
officers, employees, representatives and agents and any person controlling PCC,
the Guarantor or 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 PCC, the Guarantor and 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 the
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Preliminary Offering Memorandum or Offering Memorandum. In case any action shall
be brought against PCC, the Guarantor or the Company, any of their respective
directors, any such officer, employees or any person controlling PCC, the
Guarantor or the Company based on the Preliminary Offering Memorandum or
Offering Memorandum and in respect of which indemnity may be sought against any
of the Purchasers, such Purchaser shall have the rights and duties given to PCC,
the Guarantor and the Company (except that if PCC, the Guarantor and the Company
shall have assumed the defense thereof, such Purchaser shall not be required to
do so, but may employ separate counsel therein and participate in the defense
thereof but the fees and expenses of such counsel shall be at the expense of
such Purchaser), and PCC, the Guarantor and the Company, their respective
directors, any such officer, employees and any person controlling PCC, the
Guarantor or the Company shall have the rights and duties given to the
Purchasers, by Section 6(b) hereof.
(d) If the indemnification provided for in this Section 6 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 PCC, the Guarantor and the Company on
the one hand and each Purchaser on the other hand from the offering of the
Securities 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 PCC, the Guarantor and the Company and each Purchaser in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by PCC, the Guarantor and the
Company on the one hand and each Purchaser on the other shall be deemed to be in
the same proportion as the total net proceeds from the Offering (before
deducting expenses) received by PCC, the Guarantor and the Company, and the
total discounts received by each Purchaser, bear to the total price to investors
of the Securities. The relative fault of PCC, the Guarantor and the Company on
the one hand and each Purchaser on the other 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
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supplied by (i) PCC, the Guarantor or the Company or (ii) such Purchaser and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
PCC, the Guarantor and the Company and the Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 6 (d)
were determined by pro rata allocation (even if the Purchasers 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 6, no Purchaser
shall be required to contribute any amount in excess of the amount by which the
total discounts received by it in connection with the sale of the Securities
pursuant to this Agreement exceeds the amount of any damages which such
Purchaser 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 Purchasers' obligations to contribute
pursuant to this Section 6(d) are several in proportion to the respective amount
of Securities purchased by each of the Purchasers hereunder and not joint.
7. Conditions of the Purchasers' Obligations. The several
-----------------------------------------
obligations of the Purchasers under this Agreement are subject to the
satisfaction of each of the following conditions:
(a) All of the representations and warranties of the Company, the
Guarantor and PCC contained in this Agreement shall be true and correct on
the date hereof and on the Closing Date with the same force and effect as
if made on and as of the date hereof and the Closing Date, respectively.
The Company, the Guarantor and PCC shall have performed or complied with
all of the agreements herein contained and required to be performed
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or complied with by them at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Purchasers not later than the date immediately following
the date of this Agreement or at such later date and time as you may
approve in writing, and, at the Closing Date, no stop order suspending the
qualification or exemption from qualification of any of the Securities in
any jurisdiction referred to in Section 4(e) shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
or threatened.
(c) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency which would, as of the Closing Date, prevent the issuance or sale of
any of the Securities; no action, suit or proceeding shall be pending
against or, to the knowledge of PCC, the Guarantor or the Company,
threatened against, PCC, the Guarantor or the Company or any of their
subsidiaries before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable possibility of an adverse
decision that would prohibit, interfere with or adversely affect the
issuance or sale of the Securities or would have a Material Adverse Effect,
or in any manner draw into question the validity of this Agreement, the
Indenture, the Warrant Agreement, the Securities, the Guarantee, the
Registration Rights Agreements or the other Operative Documents; and no
stop order, injunction, restraining order, or order of any nature
preventing the use of the Offering Memorandum, or any amendment or
supplement thereto, or any order asserting that any of the transactions
contemplated by this Agreement are subject to the registration requirements
of the Act shall have been issued.
(d) Since the dates as of which information is given in the Offering
Memorandum, (i) there shall not have been any material change, or any
development that is reasonably likely to result in a material change, in
the capital stock or the long-term debt, or material increase in the short-
term debt, of PCC, the
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Guarantor, the Company and Palmer or their respective subsidiaries, taken
as a whole, from that set forth in the Offering Memorandum, (ii) no
dividend or distribution of any kind shall have been declared, paid or made
by PCC, the Guarantor, the Company or Palmer on any class of its capital
stock, and (iii) neither PCC, the Guarantor, the Company nor any of their
subsidiaries nor Palmer nor any of its subsidiaries shall have incurred any
liabilities or obligations, direct or contingent, that are material,
individually or in the aggregate, to PCC, the Guarantor, the Company and
their subsidiaries and Palmer and its subsidiaries, taken as a whole, and
that are required to be disclosed on a balance sheet in accordance with
generally accepted accounting principles and are not disclosed on the
latest balance sheet included or incorporated by reference in the Offering
Memorandum. Since the date hereof and since the dates as of which
information is given in the Offering Memorandum, there shall not have been
any Material Adverse Change.
(e) You shall have received certificates, dated the Closing Date,
signed by (i) the President, Executive Vice-President or any Vice-President
and (ii) a principal financial or accounting officer of the Company and the
Guarantor confirming, as of the Closing Date, the matters set forth in
paragraphs (a), (b), (c), (d), (m), (n), (o) and (p) of this Section 7.
(f) You shall have received on the Closing Date an opinion
(reasonably satisfactory to you and your counsel), dated the Closing Date,
of outside counsel to the Company which will be Proskauer Rose LLP to the
effect that:
(i) Each of the Company, the Guarantor and PCC and each of
their respective subsidiaries set forth on Schedule II hereto has been
duly organized and is validly existing as a corporation in good
standing under the laws of its respective jurisdiction of
incorporation, has all requisite corporate power and authority to own,
lease and operate its properties and to conduct its business as it is
currently being conducted and as described in the Offering Memorandum,
and is duly qualified and in good standing as a foreign corporation
authorized to do business in each jurisdiction in which the ownership,
leasing and operation of its property and the conduct of its business
requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect on the Company and
its subsidiaries, taken as a whole.
-34-
<PAGE>
(ii) Each of the Company, the Guarantor and PCC, as applicable,
has all requisite corporate power and authority to execute, deliver
and perform its obligations under this Agreement, the Indenture, the
Warrant Agreement, the Registration Rights Agreements and the other
Operative Documents and to consummate the transactions contemplated
hereby or thereby, including, without limitation, with respect to the
Company, the corporate power and authority to issue, sell and deliver
the Securities as provided herein.
(iii) The Company, the Guarantor and PCC have duly and
validly authorized, executed and delivered this Agreement.
(iv) The Company and the Guarantor have duly and validly
authorized, executed and delivered the Indenture, and (assuming the
due authorization, execution and delivery thereof by the Trustee) the
Indenture is the valid and binding obligation of each such person,
enforceable against each such person in accordance with its terms,
except (i) as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer,
fraudulent conveyance or similar laws affecting creditors' rights and
remedies generally, (ii) as to general principles of equity,
regardless of whether enforcement is sought in a proceeding at law or
in equity, and (iii) to the extent that a waiver of rights under any
usury law may be unenforceable.
(v) The Warrants have been duly and validly authorized for
issuance and sale to you by PCC pursuant to this Agreement and, when
issued in accordance with the terms of the Warrant Agreement and
delivered against payment therefor in accordance with the terms
hereof, will be the valid and binding obligations of PCC, enforceable
against PCC in accordance with their terms and entitled to the
benefits of the Warrant Agreement, except (i) as such enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer, fraudulent conveyance or similar laws affecting
creditors' rights and remedies generally, (ii) as to general
principles of equity, regardless of whether enforcement is sought in a
proceeding at law or in
-35-
<PAGE>
equity and (iii) to the extent that a waiver of rights under any usury
laws may be unenforceable. The Warrants, when issued, and delivered,
will conform as to legal matters in all material respects to the
description thereof in the Offering Memorandum.
(vi) The Warrant Shares have been duly authorized and reserved
for issuance upon exercise of the Warrants, and when issued upon
exercise of the Warrants in accordance with the terms of the Warrant
Agreement, will be validly issued, fully paid and nonassessable and to
such counsel's knowledge, except as otherwise set forth in the
Offering Memorandum, the issuance of such Warrant Shares is not
subject to any preemptive or similar purchase in favor of any other
person.
(vii) The Notes have been duly and validly authorized for
issuance by the Company and, when issued and authenticated in
accordance with the terms of the Indenture and delivered against
payment therefor in accordance with the terms hereof will be the valid
and binding obligations of the Company, enforceable against the
Company in accordance with their terms and entitled to the benefits of
the Indenture, except (i) as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer, fraudulent conveyance or similar laws affecting creditors'
rights and remedies generally, (ii) as to general principles of
equity, regardless of whether enforcement is sought in a proceeding at
law or in equity, and (iii) to the extent that a waiver of rights
under any usury laws may be unenforceable.
(viii) The Guarantee has been duly and validly authorized for
issuance by the Guarantor and, when issued in accordance with the
terms of the Indenture, and the Guarantee, will be the valid and
binding obligation of the Guarantor, enforceable against the Guarantor
in accordance with its terms, except (i) as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer, fraudulent conveyance or similar laws affecting
creditors' rights and remedies generally, (ii) as to general
principles of equity, regardless of whether
-36-
<PAGE>
enforcement is sought in a proceeding at law or in equity, and (iii)
to the extent that a waiver of rights under any usury laws may be
unenforceable. The Guarantee, when issued and delivered will conform
as to legal matters in all material respects to the description
thereof in the Offering Memorandum.
(ix) The Exchange Notes have been duly and validly authorized
for issuance by the Company and, when issued and authenticated in
accordance with the terms of the Indenture, the Registration Rights
Agreement and the Exchange Offer, will be valid and binding
obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the
Indenture, except (i) as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights and remedies generally, (ii) as to general
principles of equity, regardless of whether enforcement is sought in a
proceeding at law or in equity, and (iii) to the extent that a waiver
of rights under any usury laws may be unenforceable.
(x) The Merger Agreement has been duly and validly authorized,
executed and delivered by the Company and, as applicable, PCC and each
of PCC's subsidiaries party thereto, and is the valid and binding
obligation of each of them, enforceable against each of them in
accordance with its terms, except (i) as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights and remedies generally and
(ii) as to general principles of equity, regardless of whether
enforcement is sought in a proceeding at law or in equity. The Merger
Agreement conforms, as to legal matters, in all material respects to
the description thereof in the Offering Memorandum.
(xi) The Warrant Agreement has been duly and validly authorized,
executed and delivered by PCC, and is the valid and binding obligation
of PCC, enforceable against PCC in accordance with its terms, except
(i) as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer, fraudulent conveyance
or similar laws affecting creditors'
-37-
<PAGE>
rights and remedies generally and (ii) as to general principles of
equity, regardless of whether enforcement is sought in a proceeding at
law or in equity.
(xii) The Registration Rights Agreements have been duly and
validly authorized by the Company, the Guarantor and PCC and, when
duly executed and delivered by the Company, the Guarantor and PCC,
will be the valid and binding obligation of the Company, the Guarantor
and PCC, as the case may be, enforceable in accordance with its terms,
except (i) as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors, rights and remedies generally, (ii) as to general
principles of equity, regardless of whether enforcement is sought in a
proceeding at law or in equity and (iii) that the enforceability of
the indemnification and contribution provisions contained therein may
be limited by Federal and state securities laws and the policies
underlying such laws.
(xiii) Each of this Agreement, the Securities, the Guarantee, the
Warrant Agreement, the Registration Rights Agreements and the
Indenture conform as to legal matters in all material respects to the
description thereof in the Offering Memorandum.
(xiv) When the Notes are issued and delivered pursuant to
this Agreement, none of the Notes will be of the same class (within
the meaning of Rule 144A under the Act) as securities of the Company
or PCC that are listed on a national securities exchange registered
pursuant to the Exchange Act or that are quoted in a United States
automated inter-dealer quotation system.
(xv) Registration of the Securities under the Act or
qualification of the Indenture under the Trust Indenture Act of 1939,
as amended, is not required in connection with the offer, sale and
delivery of the Securities to the Purchasers or the initial placement
of the Securities by the Purchasers in the manner contemplated by the
Offering Memorandum to QIBs and Institutional Accredited Investors, it
being understood that in
-38-
<PAGE>
rendering this opinion such counsel may assume the accuracy of the
representations of the Purchasers and the Company contained herein and
that the offer, sale and delivery of the Securities have been made as
contemplated by this Agreement and the Offering Memorandum.
(xvi) The execution, delivery and performance by each of the
Company, the Guarantor and PCC, as applicable, of this Agreement, the
Indenture, the Guarantee, the Warrant Agreement, and the Registration
Rights Agreements and the issuance and sale of the Securities as
contemplated by the Offering Memorandum and this Agreement, will not
violate, conflict with or constitute a breach of any of the terms or
provisions of, or a default under (or an event that with notice or the
lapse of time, or both, would constitute a default), or require
consent under, or result in the imposition of a lien (except for the
lien created by the pledge of the stock of the Guarantor and the lien
in favor of the Trustee under the Indenture) or encumbrance on any
properties of PCC, the Company or any of their material subsidiaries,
or an acceleration of indebtedness pursuant to, (i) the charter or
bylaws of PCC, the Guarantor, the Company or any of their material
subsidiaries, (ii) any material bond, debenture, note, indenture,
mortgage, deed of trust, license or other agreement or instrument to
which PCC, the Guarantor, the Company or any of its subsidiaries is a
party or by which any of them or their property is or may be bound,
(iii) to such counsel's knowledge any statute, rule or regulation
applicable to PCC, the Guarantor, the Company, any of their material
subsidiaries or any of their assets or properties, except such as may
be required under the Act, the Trust Indenture Act of 1939 and state
securities or Blue Sky laws and regulations or by the NASD, or (iv) to
such counsel's knowledge any judgment, order or decree of any court or
governmental agency or authority having jurisdiction over PCC, the
Guarantor, the Company, any of their material subsidiaries or their
assets or properties. No consent, approval, authorization or order
of, or filing, registration, qualification, license or permit of or
with, any court or governmental agency, body or administrative agency
is required for the
-39-
<PAGE>
execution, delivery and performance of this Agreement, the Warrant
Agreement, the Indenture, the Guarantee, the Securities or the
Registration Rights Agreements, except (subject to clause (xv), above,
and assuming reliance by such counsel on the accuracy of the
representations referred to therein) such as may be required under the
Act, the Trust Indenture Act and state securities or Blue Sky laws and
regulations or such as may be required by the NASD.
(xvii) To the best knowledge of such counsel, no action has
been taken and no statute, rule or regulation or order has been
enacted, adopted or issued by any governmental agency that prevents
the issuance of the Securities; no injunction, restraining order or
order of any nature by a federal or state court of competent
jurisdiction has been issued that prevents the issuance of the
Securities; and no action, suit or proceeding is pending against or
affecting or, to the best knowledge of such counsel, threatened
against, PCC, the Company, the Guarantor or any of their subsidiaries
before any court or arbitrator or any governmental body, agency or
official which, if adversely determined, would prohibit the issuance
of the Securities.
(xviii) None of PCC, the Guarantor, the Company nor any of
their subsidiaries listed on Schedule II hereto is an "investment
company" within the meaning of the Investment Company Act.
(xix) The Offering Memorandum, as of its date, and each
amendment or supplement prepared by the Company, the Guarantor and PCC
if any, thereto, as of its date (except for the financial statements,
including the notes thereto, and supporting schedules and other
financial, statistical, and accounting data included therein or
omitted therefrom, as to which no opinion need be expressed), comply
as to form in all material respects with the requirements of, Rule
144A(d)(4) under the Act.
(xx) The authorized, issued and outstanding capital stock
of PCC, the Guarantor and the Company has been duly and validly
authorized and issued, is fully paid and nonassessable and was
-40-
<PAGE>
not issued in violation of or subject to preemptive or similar rights.
(xxi) The Indenture creates a valid, perfected, security
interest in the collateral purported to be secured thereby.
(xxiii) The Indenture permits the Trustee to invest any
moneys deposited in the Collateral Account established pursuant
thereto solely in United States Treasury Bills. Pursuant to the
Indenture the Trustee may invest in Treasury Bills so long as the
Treasury Bills are credited to the Trustee's account at the Federal
Reserve Bank of New York (the "Federal Reserve") and the Trustee
credits the Treasury Bills to the Collateral Account. Assuming that
(i) the Trustee has a direct account with the Federal Reserve, (ii)
the Trustee follows the procedures mandated in the Indenture for the
purchase and possession of such Treasury Bills and the making of book
entries with respect thereto and (iii) the "securities intermediary's
jurisdiction" (as defined in 31 C.F.R. (S) 357.2) with respect to the
Trustee for purposes relating to the Collateral Account is the State
of New York, the provisions of the Indenture, together with such
procedures, are sufficient to create a valid and perfected security
interest in favor of the Trustee for the benefit of the Noteholders in
a security entitlement with respect to such Treasury Bills, provided
--------
that such counsel need express no opinion as to the priority of such
security interest or as to the existence of, or nature and extent of
the Company's title to, any such Treasury Bills.
In addition, Proskauer Rose LLP shall state that it has generally
reviewed and discussed with certain officers and other representatives of
the Company, representatives of the independent public accountants for PCC
and the Company, your representatives and your counsel in connection with
the preparation of the Preliminary Offering Memorandum and the Offering
Memorandum and the statements contained therein and, although such counsel
has not independently verified the accuracy, completeness or fairness of
such statements (except as indicated above), such counsel advises you that,
on the basis of the foregoing, no facts came to its attention that caused
it to believe that the
-41-
<PAGE>
Offering Memorandum (as amended or supplemented, if applicable) as of its
date or at the Closing Date, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary in
order to make the statements, in light of the circumstances under which
they were made, not misleading. Without limiting the foregoing, such
counsel may further state that they assume no responsibility for, and have
not independently verified, the accuracy, completeness or fairness of the
financial statements, notes and schedules and other financial data included
in the Preliminary Offering Memorandum or the Offering Memorandum.
The opinions of such counsel described in this subsection shall be
rendered to you at the request of the Company and shall so state therein.
(g) You shall have received on the Closing Date an opinion
(reasonably satisfactory to you and your counsel), dated the Closing Date,
of Roberts & Eckard, P.C., counsel for the Company with respect to FCC and
related matters. The opinions of such counsel shall be rendered to you at
the request of the Company and shall so state therein.
(h) You shall have received on the Closing Date an opinion
(reasonably satisfactory to you and your counsel), dated the Closing Date,
of Hogan & Hartson L.L.P., counsel for Palmer. The opinions of such
counsel shall be rendered to you at the request of the Company and shall so
state therein.
(i) You shall have received on the Closing Date an opinion
(reasonably satisfactory to you and your counsel), dated the Closing Date,
of Lukas, McGowan, Nace & Gutierrez, counsel for Palmer, with respect to
FCC and related matters. The opinions of such counsel shall be rendered to
you at the request of the Company and shall so state therein.
(j) You shall have received an opinion, dated the Closing Date, of
White & Case, your counsel, in form and substance reasonably satisfactory
to you, covering such matters as are customarily covered in such opinions.
(k) At the time this Agreement is executed and delivered by PCC, the
Guarantor and the Company and on the Closing Date, you shall have received
letters,
-42-
<PAGE>
substantially in the form previously approved by you, from Arthur Anderson
LLP and KPMG Peat Marwick LLP with respect to the financial statements and
certain financial information contained in the Offering Memorandum.
(l) White & Case shall have been furnished with such documents and
opinions, in addition to those set forth above, as they may reasonably
require for the purpose of enabling them to review or pass upon the matters
referred to in this Section 7 and in order to evidence the accuracy,
completeness or satisfaction in all material respects of any of the
representations, warranties or conditions herein contained.
(m) Prior to the Closing Date, PCC, the Guarantor and the Company
shall have furnished to you such further information, certificates and
documents as you may reasonably request.
(n) The Company, the Guarantor and the Trustee shall have entered
into the Indenture and you shall have received counterparts, conformed as
executed, thereof.
(o) The rights, property and assets disclosed in the Offering
Memorandum as being owned or exercisable, directly or indirectly, by PCC,
the Guarantor or the Company shall be so owned and exercisable, as
applicable, by PCC, the Guarantor or the Company on the Closing Date.
(p) The Company, the Guarantor and PCC, as applicable, shall have
entered into the Registration Rights Agreements and you shall have received
counterparts, conformed as executed, thereof.
(q) PCC and The Bank of Montreal Trust Company as Warrant Agent shall
have entered into the Warrant Agreement and you shall have received
counterparts, conformed as executed, thereof.
(r) The Trustee and the Purchasers shall have received evidence
satisfactory to them of the creation, priority and perfection of the
security interests created pursuant to the Escrow Agreement and as required
by the Indenture.
All opinions, certificates, letters and other documents required by
this Section 7 to be delivered by the Company will be in compliance with the
provisions hereof only
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<PAGE>
if they are reasonably satisfactory in form and substance to you. The Company
will furnish the Purchasers with such conformed copies of such opinions,
certificates, letters and other documents as they shall reasonably request.
8. Defaults. If, on the Closing Date, any of the Purchasers shall
--------
fail or refuse to purchase Securities that it has agreed to purchase hereunder
on such date and the aggregate principal amount of such Securities that such
defaulting Purchaser agreed but failed or refused to purchase does not exceed
10% of the total principal amount of such Securities that all of the Purchasers
are obligated to purchase on such Closing Date, the non-defaulting Purchasers
shall be obligated to purchase the amount of such Securities that such
defaulting Purchaser agreed but failed or refused to purchase. If, on the
Closing Date, any of the Purchasers shall fail or refuse to purchase Securities
in an aggregate principal amount that exceeds 10% of such total principal amount
and arrangements satisfactory to the other Purchasers and the Company for the
purchase of such Securities are not made within 48 hours after such default,
this Agreement shall terminate without liability on the part of the non-
defaulting Purchasers or the Company, except as otherwise provided in Section 9.
In any such case that does not result in termination of this Agreement, the
Purchasers or the Company may postpone the Closing Date for not longer than
seven (7) days, in order that the required changes, if any, in the Offering
Memorandum or any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve a defaulting Purchaser from
liability in respect of any default by any such Purchaser under this Agreement.
9. Effective Date of Agreement and Termination. This Agreement shall
-------------------------------------------
become effective upon the execution hereof.
This Agreement may be terminated at any time on or prior to the
Closing Date by you by notice to the Company if any of the following has
occurred: (i) subsequent to the date information is provided in the Offering
Memorandum, any Material Adverse Change which, in your judgment, materially
impairs the investment quality of the Securities, (ii) any outbreak or
escalation of hostilities or other national or international calamity or crisis
or Material Adverse Change in the financial markets of the United States or
elsewhere, or any other substantial national or international calamity or
emergency if the effect of such outbreak, escalation, calamity, crisis, Material
Adverse Change or emergency would, in your judgment, make it impracticable or
inadvisable to
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<PAGE>
market the Securities or to enforce contracts for the sale of the Securities,
(iii) any suspension or limitation of trading generally in securities on the New
York Stock Exchange or in the over-the-counter markets or any setting of minimum
prices for trading on such exchange or markets, (iv) any declaration of a
general banking moratorium by either federal or New York authorities, (v) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs that in your judgment has a Material
Adverse Effect on the financial markets in the United States, and would, in your
judgment, make it impracticable or inadvisable to market the Securities or to
enforce contracts for the sale of any of the Securities, (vi) the enactment,
publication, decree, or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which, in
your judgment, would have a Material Adverse Effect, or (vii) any securities of
PCC or the Company or any of its subsidiaries shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally recognized
statistical rating organization.
The indemnities and contribution provisions and the other agreements,
representations and warranties of PCC, the Guarantor and the Company, their
respective officers and directors and of the Purchasers set forth in or made
pursuant to this Agreement shall remain operative and in full force and effect,
and will survive delivery of and payment for the Securities, regardless of (i)
any investigation, or statement as to the results thereof, made by or on behalf
of any of the Purchasers or by or on behalf of PCC, the Guarantor, or the
Company, the officers or directors of PCC, the Guarantor, or the Company or any
controlling person of PCC, the Guarantor, or the Company, (ii) acceptance of the
Securities and payment for them hereunder and (iii) termination of this
Agreement.
If this Agreement shall be terminated by the Purchasers pursuant to
clause (i) of the second paragraph of this Section 9 or because of the failure
or refusal on the part of the Company to comply with the terms or to fulfill any
of the conditions of this Agreement, PCC, the Guarantor and the Company agree to
reimburse you for all reasonable out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by you. Notwithstanding any termination of
this Agreement, PCC, the Guarantor and the Company shall be liable for all
expenses which they have agreed to pay pursuant to Section 4(f) hereof.
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<PAGE>
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon PCC, the Guarantor, the
Company, the Purchasers, any Indemnified Person referred to herein and their
respective successors and permitted assigns, all as and to the extent provided
in this Agreement, and no other person shall acquire to have any right under or
by virtue of this Agreement. The terms "successors and assigns," shall not
include a purchaser of any of the Securities from any of the Purchasers merely
because of such purchase.
10. Miscellaneous. Notices given pursuant to any provision of this
-------------
Agreement shall be addressed as follows: (a) if to the Company, Price
Communications Cellular Holdings, Inc. at 45 Rockefeller Plaza, Suite 3201, New
York, New York 10020, Attention: President, with a copy to Proskauer Rose LLP,
1585 Broadway, New York, New York 10036, Attention: Peter G. Samuels, Esq., and
(b) if to the Purchasers, c/o NatWest Capital Markets Limited c/o NatWest
Markets, 175 Water Street, 30th Floor, New York, New York 10036, Attention: Max
Holmes, with copies to Wasserstein Perella Securities, Inc., 31 West 52nd
Street, New York, New York 10019, Attention: Frederic M. Seegal; and White &
Case, 1155 Avenue of the Americas, New York, New York 10036, Attention: Timothy
B. Goodell, Esq., or in any case to such other address as the person to be
notified may have requested in writing, and shall be effective upon receipt.
The failure to mail copies of notices to any of the foregoing shall not affect
notices mailed to the Company and the Purchasers in accordance with clauses (a)
and (b) above, as the case may be.
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York as applied to contracts made and
performed in such state. This Agreement may be signed in various counterparts
which together shall constitute one and the same instrument.
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<PAGE>
Please confirm that the foregoing correctly sets forth the Agreement
among PCC, the Guarantor, the Company and the Purchasers.
Very truly yours,
PRICE COMMUNICATIONS
CORPORATION
By: /s/ Robert Price
--------------------------------
Title: President
PRICE COMMUNICATIONS CELLULAR
INC.
By: /s/ Robert Price
--------------------------------
Title: President
PRICE COMMUNICATIONS CELLULAR
HOLDINGS, INC.
By: /s/ Robert Price
--------------------------------
Title: President
Accepted and agreed to as of
the date first above written:
NATWEST CAPITAL MARKETS LIMITED
By: /s/ Chip Kruger
--------------------------
Title: Co-Chief Executive
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<PAGE>
WASSERSTEIN PERELLA SECURITIES, INC.
By: /s/ James C. Kingsbery
--------------------------
Title: Treasurer
-48-
<PAGE>
SCHEDULE I
----------
<TABLE>
<CAPTION>
Number
Of
Securities
----------
<S> <C>
NatWest Capital Markets Limited .................................... 124,350
Wasserstein Perella Securities, Inc. ............................... 29,050
Total ............................................................ 153,400
</TABLE>
<PAGE>
SCHEDULE II
-----------
SUBSIDIARIES OF THE COMPANY
% Ownership
-----------
Price Communications Wireless, Inc. 100
SUBSIDIARIES OF PCC
% Ownership
-----------
Price Communications Cellular Inc. 100
Price Communications Cellular
Holdings, Inc. 100
Price Communications Wireless, Inc. 100
<PAGE>
EXHIBIT 10.21
11 3/4% SENIOR SUBORDINATED NOTES DUE 2007
REGISTRATION RIGHTS AGREEMENT
Dated July 10, 1997
by and among
PRICE COMMUNICATIONS WIRELESS, INC.,
as the Company,
and
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION,
WASSERSTEIN PERELLA SECURITIES, INC.,
NATWEST CAPITAL MARKETS LIMITED,
LEHMAN BROTHERS, INC.,
and
PAINEWEBBER INCORPORATED
as Purchasers
<PAGE>
This Registration Rights Agreement is made and entered into this July 10, 1997,
by and between Price Communications Wireless, Inc., a Delaware corporation
(the "Company"), and Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), on behalf of itself and Wasserstein Perella Securities, Inc.
("Wasserstein"), NatWest Capital Markets Limited ("NatWest"), Lehman Brothers
("Lehman"), and PaineWebber Incorporated (together with DLJ, Wasserstein,
NatWest, and Lehman, the "Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated July
3, 1997, among the Company, Price Communications Corporation and the Purchasers
(the "Purchase Agreement"), relating to the Notes. 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.
2
<PAGE>
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 authorized or required by law or other government actions to
close.
Company: Price Communications Wireless, Inc., a Delaware corporation,
-------
and any successor corporation thereto.
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 this Agreement.
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 11 3/4% Senior Subordinated 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 pursu-
3
<PAGE>
`ant 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 of Exchange
Notes, which offer shall be made by the Company pursuant to Section 2 hereof.
Holder: Each registered holder of any Transfer Restricted Securities.
------
Indemnified Person: As defined in Section 7(a) hereof.
------------------
Indenture: The Indenture, dated the date hereof, between the Company
---------
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: The $175,000,000 aggregate principal amount of 11 3/4% Senior
-----
Subordinated 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 proceed ing (including, without
----------
limitation, an investigation or partial proceeding, such as a deposition),
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
4
<PAGE>
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 refer
ence 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.
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 there to 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
regula-
5
<PAGE>
tion 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: Any special counsel to the Holders of Transfer
---------------
Restricted Securities, for which Holders of Transfer Restricted Securities will
be reimbursed pursuant to Section 6.
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 accor-
dance 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, the trustee under the
-------
Indenture.
underwritten registration or underwritten offering: A registration in
--------------------------------------------------
connection with which securities of the Company are sold to an underwriter for
6
<PAGE>
reoffering to the public pursuant to an effective Registration Statement.
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
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
7
<PAGE>
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 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 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:
8
<PAGE>
(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 to the principal amount 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 Broker-Dealers 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.
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
9
<PAGE>
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 DLJ
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.
(e) The Purchasers shall have no liability to any person with respect
to any request made pursuant to Section 2(d).
10
<PAGE>
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 understand ing
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 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 keep
the Shelf Registration continuously effective under the Securities Act, until
(A) 36 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 20 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
11
<PAGE>
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 4 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 this Agreement, 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 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 principal amount 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 of Transfer Restricted
Securi ties, 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
12
<PAGE>
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.
(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 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
13
<PAGE>
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 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
14
<PAGE>
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 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
Registra tion 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 either 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
15
<PAGE>
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 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 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
16
<PAGE>
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 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 they are
not then so qualified or to take any action that would subject them to general
service of process in any such jurisdiction where they are 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 under
writers, 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 regis-
17
<PAGE>
tered in such names as the managing underwriters, if any, or Holders may request
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 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 them 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 or to require the Company 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;
18
<PAGE>
(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 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
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
19
<PAGE>
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 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 of the Transfer Restricted Securities
being sold, their Special Counsel and the managing 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 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 the
officers, directors, agents and employees 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) to supply all
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
20
<PAGE>
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 available to such Person from a source
other than the Company and such source is not bound by a confidentiality
agreement;
(o) Provide an indenture trustee for the Transfer Restricted
Securities and the Exchange Notes, as the 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
21
<PAGE>
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 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
22
<PAGE>
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.
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 them 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 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 under-
23
<PAGE>
writers, 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 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 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
24
<PAGE>
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 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
25
<PAGE>
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 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 and any person controlling the
Company within the meaning of Section 15 of the Act or Section 20 of the
26
<PAGE>
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 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 infor-
27
<PAGE>
mation 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.
28
<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
29
<PAGE>
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 written consent of the Holders of a majority in aggregate principal
amount 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 either of
them 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 either of them or an Affiliate of either of them 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
30
<PAGE>
except in accordance with 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,
(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
31
<PAGE>
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.
(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 Agree-
32
<PAGE>
ment, 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.
33
<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 WIRELESS INC.,
By: /s/ Robert Price
------------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION, on behalf of
and as Representative of the Purchasers
By: /s/ Steven D. Smith
------------------------------
Name:
Title:
34
<PAGE>
EXHIBIT 10.22
===============================================================================
PRICE COMMUNICATIONS WIRELESS, INC.,
Issuer,
and
BANK OF MONTREAL TRUST COMPANY,
Trustee
____________________
INDENTURE
Dated as of July 10, 1997
___________________
$175,000,000
11 3/4% Senior Subordinated Notes due 2007
================================================================================
<PAGE>
TABLE OF CONTENTS
_____________
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions................................................ 1
Section 1.02. Incorporation by Reference of TIA.......................... 25
Section 1.03. Rules of Construction...................................... 25
ARTICLE 2
THE SECURITIES
Section 2.01. Form and Dating............................................ 26
Section 2.02. Execution and Authentication............................... 26
Section 2.03. Registrar and Paying Agent................................. 27
Section 2.04. Paying Agent to Hold Assets in Trust....................... 28
Section 2.05. Securityholder Lists....................................... 29
Section 2.06. Transfer and Exchange...................................... 29
Section 2.07. Replacement Securities..................................... 36
Section 2.08. Outstanding Securities..................................... 36
Section 2.09. Treasury Securities........................................ 37
Section 2.10. Temporary Securities....................................... 37
Section 2.11. Cancellation............................................... 37
Section 2.12. Defaulted Interest......................................... 38
ARTICLE 3
REDEMPTION
Section 3.01. Redemption................................................. 39
Section 3.02. Notices to Trustee......................................... 40
Section 3.03. Selection of Securities to Be Redeemed..................... 40
Section 3.04. Notice of Redemption....................................... 41
Section 3.05. Effect of Notice of Redemption............................. 42
Section 3.06. Deposit of Redemption Price................................ 42
Section 3.07. Securities Redeemed in Part................................ 43
ARTICLE 4
COVENANTS
Section 4.01. Transactions Not Subject to Covenants...................... 43
Section 4.02. Payment of Securities...................................... 45
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 4.03. Maintenance of Office or Agency............................ 45
Section 4.04. Limitation on Restricted Payments.......................... 46
Section 4.05. Corporate Existence........................................ 47
Section 4.06. Payment of Taxes and Other Claims.......................... 47
Section 4.07. Maintenance of Properties and Insurance.................... 48
Section 4.08. Compliance Certificate; Notice of Default.................. 48
Section 4.09. Reports.................................................... 49
Section 4.10. Limitation on Status as Investment Company................. 49
Section 4.11. Limitation on Transactions with Related Persons............ 49
Section 4.12. Limitation on Incurrence of Additional Indebtedness........ 50
Section 4.13. Limitations on Restricting Subsidiary Dividends............ 52
Section 4.14. Limitations on Layering of Indebtedness; Liens............. 53
Section 4.15. Limitation on Asset Sales and Sales of Subsidiary Stock.... 54
Section 4.16. Waiver of Stay, Extension or Usury Laws.................... 60
Section 4.17. Rule 144A Information Requirement.......................... 61
Section 4.18. Limitation on Lines of Business............................ 61
Section 4.19. Restriction on Sale and Issuance of Subsidiary Stock....... 61
Section 4.20. Deposit of Proceeds with Trustee Pending Consummation
of the Merger....................................................... 61
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Merger, Sale or Consolidation................ 62
Section 5.02. Successor Corporation Substituted.......................... 63
ARTICLE 6
EVENTS OF DEFAULT AND REMEDIES
Section 6.01. Events of Default.......................................... 63
Section 6.02. Acceleration of Maturity Date; Rescission and Annulment.... 65
Section 6.03. Collection of Indebtedness and Suits for Enforcement by
Trustee............................................................. 67
Section 6.04. Trustee May File Proofs of Claim........................... 67
Section 6.05. Trustee May Enforce Claims Without Possession of
Securities.......................................................... 68
Section 6.06. Priorities................................................. 69
Section 6.07. Limitation on Suits........................................ 69
Section 6.08. Unconditional Right of Holders to Receive Principal,
Premium and Interest................................................ 70
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Section 6.09. Rights and Remedies Cumulative............................. 70
Section 6.10. Delay or Omission Not Waiver............................... 70
Section 6.11. Control by Holders......................................... 71
Section 6.12. Waiver of past Default..................................... 71
Section 6.13. Undertaking for Costs...................................... 71
Section 6.14. Restoration of Rights and Remedies......................... 72
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.......................................... 72
Section 7.02. Rights of Trustee.......................................... 73
Section 7.03. Individual Rights of Trustee............................... 75
Section 7.04. Trustee's Disclaimer....................................... 75
Section 7.05. Notice of Default.......................................... 75
Section 7.06. Reports by Trustee to Holders.............................. 75
Section 7.07. Compensation and Indemnity................................. 75
Section 7.08. Replacement of Trustee..................................... 77
Section 7.09. Successor Trustee by Merger, Etc........................... 78
Section 7.10. Eligibility; Disqualification.............................. 78
Section 7.11. Preferential Collection of Claims Against Company.......... 78
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance.......................................................... 78
Section 8.02. Legal Defeasance and Discharge............................. 78
Section 8.03. Covenant Defeasance........................................ 79
Section 8.04. Conditions to Legal or Covenant Defeasance................. 79
Section 8.05. Deposited U.S. Legal Tender Equivalents and U.S.
Government Obligations to be Held in Trust; Other Miscellaneous
Provisions.......................................................... 81
Section 8.06. Repayment to the Company................................... 81
Section 8.07. Reinstatement.............................................. 82
ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01. Supplemental Indentures Without Consent of Holders......... 82
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Section 9.02. Amendments, Supplemental Indentures and Waivers with
Consent of Holders.................................................. 83
Section 9.03. Compliance with TIA....................................... 85
Section 9.04. Revocation and Effect of Consents......................... 85
Section 9.05. Notation on or Exchange of Securities..................... 86
Section 9.06. Trustee to Sign Amendments, Etc........................... 86
ARTICLE 10
COLLATERAL ACCOUNT AND RELEASES
Section 10.01. Collateral Account........................................ 86
Section 10.02. Eligible Investments...................................... 87
Section 10.03. Release of Collateral..................................... 88
ARTICLE 11
RIGHT TO REQUIRE REPURCHASE
Section 11.01. Repurchase of Securities at Option of the Holder Upon a
Change of Control................................................... 88
ARTICLE 12
SUBORDINATION
Section 12.01. Securities Subordinated to Senior Indebtedness............ 91
Section 12.02. No Payment on Securities in Certain Circumstances......... 92
Section 12.03. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization.......... 94
Section 12.04. Securityholders to Be Subrogated to Rights of Holders of
Senior Indebtedness................................................. 95
Section 12.05. Obligations of the Company Unconditional.................. 96
Section 12.06. Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice................................................... 96
Section 12.07. Application by Trustee of Assets Deposited with It........ 97
Section 12.08. Subordination Rights Not Impaired by Acts or Omissions
of the Company or Holders of Senior Indebtedness.................... 97
Section 12.09. Securityholders Authorize Trustee to Effectuate
Subordination of Securities......................................... 97
Section 12.10. Right of Trustee to Hold Senior Indebtedness.............. 98
Section 12.11. Article Not to Prevent Events of Default................. 98
Section 12.12. No Fiduciary Duty of Trustee to Holders of Senior
Indebtedness........................................................ 98
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ARTICLE 13
MISCELLANEOUS
Section 13.01. TIA Controls............................................... 99
Section 13.02. Notices.................................................... 99
Section 13.03. Communications by Holders with Other Holders............... 100
Section 13.04. Certificate and Opinion as to Conditions Precedent......... 100
Section 13.05. Statements Required in Certificate or Opinion.............. 100
Section 13.06. Rules by Trustee, Paying Agent, Registrar.................. 101
Section 13.07. Legal Holidays............................................. 101
Section 13.08. Governing Law.............................................. 101
Section 13.09. No Adverse Interpretation of Other Agreements.............. 102
Section 13.10. No Recourse Against Others................................. 102
Section 13.11. Successors................................................. 102
Section 13.12. Duplicate Originals........................................ 102
Section 13.13. Severability............................................... 102
Section 13.14. Table of Contents, Headings, Etc........................... 103
Section 13.15. Qualification of Indenture................................. 103
Section 13.16. Registration Rights........................................ 103
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INDENTURE, dated as of July 10, 1997 between Price Communications Wireless,
Inc., a Delaware corporation (the "COMPANY") 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 11 3/4% Series
A Senior Subordinated Notes due 2007 and the 11 3/4% Series B Senior
Subordinated Notes due 2007 which may be exchanged for the 11 3/4% Series A
Senior Subordinated 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.
"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 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.
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"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.
"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.
"BANK" shall have the meaning specified in Section 10.01.
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"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.
"CAPITALIZED LEASE OBLIGATIONS" means obligations under a lease that
are required to be capitalized for financial reporting purposes in accordance
with GAAP, and the amount of Indebtedness represented by such obligations shall
be the capitalized amount of such obligations, as determined in accordance with
GAAP.
"CAPITAL STOCK" means, with respect to any Person, any capital stock of
such Person and shares, interests, participations or other ownership interests
(however designated) of any Person and any rights (other than debt securities
convertible into capital stock), warrants and options to purchase any of the
foregoing, including (without limitation) each class of common stock and
preferred stock of such Person if such Person is a corporation 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
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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, 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 Parent 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.
"CHANGE OF CONTROL OFFER" shall have the meaning specified in Section
1101.
"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 are from time to time 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.
"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
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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 and (iv) the net income, if positive, of any Subsidiary of such
Person to the extent that the declaration or payment of dividends or similar
distributions is not at the time permitted by operation of the terms of its
charter or any agreement or instrument applicable to such Subsidiary. 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.
"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 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 entered into by the Company
and a syndicate of banks, financial institutions and other "accredited
investors" (as defined in Regulation D under the Securities Act); led by
Donaldson, Lufkin & Jenrette Securities Corporation, as arranger, and DLJ
Capital Funding, as syndication agent, or any other senior loan facility
syndicated by DLJ Capital Funding 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) and all or any portion
of the Indebtedness under such agreement or any successor or replacement
agreement 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 Incurred pursuant to
the second paragraph of Section
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4.12 may be Incurred pursuant to the terms of the Credit Agreement, provided
that such Indebtedness so Incurred shall be deemed to have been Incurred
pursuant to the Credit Agreement for all purposes of the Indenture other than
with respect to Section 4.12 and clause (3) of the first paragraph of Section
4.15.
"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.
"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 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" mean United States Treasury Bills maturing no
later than the Business Day preceding December 31, 1997.
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"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.
"EXCHANGED CAPITAL STOCK" shall have the meaning specified in Section
4.15.
"EXCHANGE SECURITIES" means the 11 3/4% Series B Senior Subordinated
Notes due 2007 to be issued pursuant to this Indenture in connection with the
offer to exchange Exchange Securities for the Initial Securities that may be
made by the Company pursuant to the Registration Rights Agreement.
"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 Parent 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 415.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board ("FASB") or, if FASB ceases to exist,
any successor thereto; provided, however, that for purposes of determining
compliance with covenants in the Indenture, "GAAP" means such generally accepted
accounting principles as in effect as of the Issue Date.
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"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.
"HOLDER" or "SECURITYHOLDER" 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.
"HOLDINGS" means Price Communications Cellular Holdings, Inc., the
direct parent of the Company, and a subsidiary of Price Communications
Corporation.
"HOLDINGS SECURITIES" means preferred stock or debt securities issued
by Holdings prior to the Merger.
"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 not 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
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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 Donaldson, Lufkin & Jenrette Securities
Corporation, Wasserstein Perella Securities, Inc., NatWest Capital Markets
Limited, Lehman Brothers Inc. and PaineWebber Incorporated.
"INITIAL SECURITIES" means the 11 3/4% Series A Senior Subordinated
Notes due 2007, as supplemented from time to time in accordance with the terms
hereof, issued pursuant to this Indenture.
"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 Agreement, 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
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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.
"JUNIOR SECURITIES" of any Person means securities (including Capital
Stock but excluding Disqualified Capital Stock) issued by such Person to a
Holder on account of the Securities that (i) has a Weighted Average Life and
maturity or mandatory redemption obligation, if any, longer than, or occurring
after the final maturity date of, all Designated Senior Indebtedness of such
Person outstanding on the date of issuance of such Junior Securities, (ii by
their terms or by law are subordinated to Designated Senior Indebtedness of such
Person outstanding on the date of issuance of such Junior Securities at least to
the same extent as the Securities and (ii are not secured by any assets or
property of the Company or any of its Subsidiaries. As used herein, "Designated
Senior Indebtedness of such Person outstanding on the date of issuance of such
Junior Securities" shall include securities issued in connection with a
reorganization pursuant to the bankruptcy laws of any jurisdiction to Persons
which held "Designated Senior Indebtedness" in such reorganization proceeding.
"LEGAL DEFEASANCE" shall have the meaning specified in Section 8.02.
"LEGAL HOLIDAY" shall have the meaning specified in Section 13.07.
"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
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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 the Company 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 PCC, the Company and Palmer.
"MERGER DATE" means the time and date of the consummation of the
Merger.
"MSA" shall have the meaning specified in the definition of "POPS."
"MINIMUM ACCUMULATION DATE" shall have the meaning specified in Section
4.15.
"NET OFFERING PROCEEDS" shall have the meaning specified in Section
4.20.
"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 Senior Indebtedness of
the Company 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.
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"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 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.
"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.
"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 July 2, 1997 relating to the original issuance and sale of the
Initial Securities to the Initial Purchasers.
"OFFICER" means, with respect to the Company, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, the
Treasurer, the Controller, or the Secretary of the Company.
"OFFICERS' CERTIFICATE" means, with respect to the Company or the
Parent, a certificate signed by two Officers or by an Officer and an Assistant
Secretary of the Company or the Parent, respectively, and otherwise complying
with the requirements of Sections 13.04 and 13.05.
"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
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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.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of Sections
13.04 and 13.05.
"PALMER" means Palmer Wireless, Inc., a Delaware corporation.
"PARENT" shall mean PCC or any directly or indirectly wholly owned
subsidiary of PCC 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.
"PAYING AGENT" shall have the meaning specified in Section 2.03.
"PAYMENT BLOCKAGE PERIOD" shall have the meaning specified in Section
12.02.
"PAYMENT DEFAULT" shall have the meaning specified in Section 12.02.
"PAYMENT NOTICE" shall have the meaning specified in Section 12.02.
"PCC" means Price Communications Corporation, a New York corporation.
"PCC EQUITY CONTRIBUTION" means the $128.3 million equity contribution
from PCC or a Subsidiary of PCC which is a Parent of the Company in the form of
cash or common stock of Palmer to the Company in accordance with the terms
thereof described in the Offering Memorandum.
"PERMITTED ACQUISITION INDEBTEDNESS" means, with respect to any Person,
Indebtedness Incurred in connection with the acquisition of property,
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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 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 consolidated Senior Indebtedness,
divided by the Net Pops of the Company 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 consolidated Indebtedness divided by the Net
Pops of the Company 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 a Wholly Owned
Restricted Subsidiary of the Company, 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 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
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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 Senior
Indebtedness 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 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 Senior Indebtedness that
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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; (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 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.
"POPS" means the estimate of the population of a Metropolitan Statistical
Area ("MSA") or Rural Service Area ("RSA") as derived from 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 the Rand McNally
Commercial Atlas is no longer published, such other nationally recognized source
of such information.
"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 3,
1997 by and among the Company, PCC and the Initial Purchasers, as such agreement
may be amended, modified or supplemented from time to time in accordance with
the terms thereof.
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"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.
"REDEMPTION DATE," when used with respect to any Security to be redeemed,
means the date fixed for such redemption (including the Special Redemption Date)
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
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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.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated July 10, 1997 by and among the Initial Purchasers and the Company, 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 by such Person 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
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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 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 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
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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 Depositary
with respect to the Securities in global form, or any successor entity thereto.
"SENIOR INDEBTEDNESS" means all Indebtedness of the Company (including,
with respect to the Credit Agreement, all Obligations) including interest
thereon, whether outstanding on the Issue Date or thereafter issued, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Securities.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
shall not include (a) Indebtedness that is expressly subordinated or junior in
right of payment to any Indebtedness of the Company, (b) Indebtedness
represented by Disqualified Capital Stock, (c) any liability for federal,
state, local or other taxes owed or owing by the Company, (d) Indebtedness of
the Company to any Subsidiary of the Company or any Affiliate of the Company
(other than Purchase Money Indebtedness constituting at least 75% but not more
than 100% of the cost of wireless cellular communication system equipment and
other related fixed assets, Incurred in compliance with Section 4.12), (e) trade
payables and (f) Indebtedness to the extent incurred in violation of the
Indenture.
"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.
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"SPECIAL REDEMPTION AMOUNT" shall have the meaning specified in Section
4.20.
"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 (S)(S) 77aaa-
77bbbb) 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 (a) book-entry United States Treasury bills (i) held
in a Participant's Securities Account (as defined in 31 C.F.R. (S)357.2) with
the Federal Reserve Bank of New York pursuant to the Treasury/Reserve Automated
Debt Entry System and (ii) maturing no later than the Business Day preceding
December 31, 1997 and (b) securities entitlements in respect of United States
Treasury bills referred to in (a) above.
"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.
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"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.
"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.
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"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.
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 or a Securityholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee.
"OBLIGOR" on the indenture securities means the Company 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;
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(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;
(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.
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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. The
Company's seal may be impressed, affixed, imprinted or reproduced on the
Securities and may be in facsimile form.
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.
The Trustee shall authenticate Initial Securities for original issue in the
aggregate principal amount of up to $175,000,000 and shall authenticate Exchange
Securities for original issue in the aggregate principal amount of up to
$175,000,000, 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 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 of Securities outstanding at any time may not exceed
$175,000,000, 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.
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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 may act as Registrar or
Paying Agent, except that, for the purposes of Articles 3, 8, 10, 11, Section
4.15 and as otherwise specified in the Indenture, neither the Company nor any
Affiliate of the Company 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.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depository with respect to the Global Securities.
The Company initially appoints the Trustee to act as Securities Custodian
with respect to the Global Securities.
Section 2.04. Paying Agent to Hold Assets in Trust. The Company 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 or any other obligor on the Securities), and shall notify
the Trustee in writing of any Default in making any such payment. If either of
the Company or a Subsidiary of the Company 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 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
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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 to the
Paying Agent, the Paying Agent (if other than the Company) shall have no further
liability for such assets.
Section 2.05. Securityholder 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 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
(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
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(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
(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
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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 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.
(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
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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 5.01(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 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 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 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:
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(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 equal to the principal amount 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 Securities issued in exchange therefor or substitution
thereof) shall bear a legend 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"), OR (B) 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
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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 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) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (D) 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), (E)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR (F) 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 REGULATIONS 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.
(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:
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(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 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 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 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,
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assessments, or similar governmental charge payable upon exchanges or
transfers pursuant to Section 2.02 (fourth paragraph), 2.10, 3.07, 4.15(8),
905, or 1101 (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
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.
Every replacement Security is an additional obligation of the Company.
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 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.
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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 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 reasonably and
in good faith considers 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 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.
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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 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).
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(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. Redemption.
(a) Right of Redemption. 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 July 15, 2002. On or after July 15, 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 (a), prior to July 10, 2002, in the
event that the Company or Parent consummates one or more offerings of their
Qualified Capital Stock on or before the third anniversary of the date of the
issuance of the Securities, the Company may at its option, use all or a portion
of the cash contributed to it from such offerings to redeem up to 35% of the
original aggregate principal amount of the Securities at a cash redemption price
equal to 111.75% of the principal amount of the Securities plus accrued and
unpaid interest thereon, if any, to the redemption date; provided that at least
65% of the original aggregate principal amount of the Securities remains
outstanding thereafter.
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(b) Special Redemption. Notwithstanding paragraph (a) of this section, if
(i) the Merger is not consummated on or before December 31, 1997 or (ii) if it
appears, in the sole judgment of the Company evidenced by a Board Resolution,
that the Merger will not be consummated by December 31, 1997, the Company shall
redeem the Securities (the "SPECIAL REDEMPTION") on, or at any time prior to,
December 31, 1997 at a redemption price of 101% of the principal amount of the
Securities plus accrued interest to the date of the Special Redemption (the
"SPECIAL REDEMPTION DATE").
SECTION 3.02. Notices to Trustee. If the Company elects or is required 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 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 with respect to any optional redemption pursuant to Section 3.01(a)
at least 45 days before the 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 Para
graph 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 in denominations of $1,000 may be redeemed only in whole.
The
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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 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 the Trustee and 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;
(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 Article 12 hereof or other laws,
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, 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 equal to the unre deemed portion thereof will be issued;
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(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.
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 a 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.
One Business Day prior to the Special Redemption Date, the Trustee shall
withdraw Treasury Bills and proceeds from the Collateral Account, sell such
Treasury Bills and deliver to the Paying Agent on behalf of the Company an
amount equal to the Redemption Price, and the Paying Agent shall on behalf of
the
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Company apply that amount to redeem the Securities on the Special Redemption
Date as provided by Section 3.01.
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
authenticate and deliver to the Holder, without service charge to the Holder, a
new Security or Securities equal in principal amount 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 this 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 the
Company 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 of the Company 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, (ii 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
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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; and
(b) any transaction involving FMT Ltd. or any subsidiary of FMT Ltd. or
any of their assets or the Company's partnership interest in FMT Ltd. (each
"FMT-RELATED ASSETS") provided that, in the case of this clause (b), 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 asset of the Company
other than FMT-Related Assets, (ii 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, (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., (vi cause or
result in the Incurrence of any Indebtedness of the Company ranking senior to
the Notes but junior to any Senior Indebtedness; 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
Section 4.01, 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) 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.
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The Company shall pay interest on overdue principal and on overdue
installments of interest at the rate specified in the Securities compounded
semi-annually, 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 13.02.
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 PCC
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Equity Contribution) 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 Holdings sufficient to pay the
scheduled interest or dividends, as applicable, owed by Holdings on the Holdings
Securities as such interest or dividends become due and payable and so long as
(A) Holdings is the direct Parent of the Company owning 100% of the capital
stock of the Company, and (B) such Holdings Securities contain no scheduled
requirement for the payment of cash interest or dividends, as applicable, until
at least five years from the date of their original issuance 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 Section 4.04, 100% of
the amounts expended under clauses (i) through (v) of the immediately preceding
paragraph shall be deducted.
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None of the transactions described in Section 4.01 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
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the corporate or other existence of
each of its 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.
Section 4.06. Payment of Taxes and Other Claims. Except with respect to
immaterial items, the Company shall, and 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 Company or any of its 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 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
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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.
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
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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
shall not become, nor shall it 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
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
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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, 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 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 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
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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
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 and the Holdings Securities, (iii) Indebtedness of the Company
evidenced by the Securities, (iv)(A) Permitted Acquisition Indebtedness by the
Company that satisfies the provisions of clause (x) of the definition thereof or
(B) Permitted Acquisition Indebtedness by 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) any guarantee by any Restricted Subsidiary of any Senior
Indebtedness Incurred in compliance with this Section 4.12, (ix) 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 limited in aggregate amount to
$5,000,000 at any one time outstanding, (x) Indebtedness of the Company (other
than Indebtedness permitted by clauses (i) through (ix) or (xi) hereof) not to
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exceed $100,000,000 at any one time outstanding and (xi) 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 (xi) 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.
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)
the Indenture and the Securities, (ii any Existing Indebtedness, (ii the Credit
Agreement, (iv any applicable law or any governmental or administrative
regulation or order, (v) 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, (vi 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, (vi 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 (vi any agreement (other
than those referred to in clause (vii)) of a Person acquired by the Company or a
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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 Senior 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.
Section 4.14. Limitations on Layering of Indebtedness; Liens. The Company
will not incur or suffer to exist any Indebtedness that is subordinate in right
of payment to any other Indebtedness of the Company, unless, by its terms, such
Indebtedness is subordinate in right of payment to, or ranks pari passu with,
the Securities. 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 (the "ASSET SALE OFFER AMOUNT") are applied to the optional redemption
of the Securities in accordance with the terms of Article 3 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 principal amount thereof in the case of the
Securities or 100% of the principal amount of such other Indebtedness (or
accreted value in
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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 Senior Indebtedness or 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) Senior Indebtedness (and any Refinancing Indebtedness
issued to refinance any such Indebtedness) or the 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 (incluing 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.
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
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$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;
(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
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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)
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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:
(1) that the Asset Sale Offer is being made pursuant
to such notice and this Section 4.15;
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(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
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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);
(8) that Holders whose Securities were purchased only
in part will be issued new Securities equal in principal
amount 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
applicable Federal and state laws, rules and regulations, 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
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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
covenants (to the extent that it 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 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 it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will 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
concluded 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 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
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Special Rights no more favorable than those held by the Company or such
Restricted Subsidiary in such Restricted Partnership.
Section 4.20. Deposit of Proceeds with Trustee Pending Consummation of the
Merger.
On the Issue Date, the Company shall pay to the Trustee for deposit in the
Collateral Account the net proceeds from the issuance of the Securities (the
"NET OFFERING PROCEEDS") and such additional amount as, when added to the Net
Offering Proceeds, equals $186,517,187.50, representing 101% of the aggregate
principal amount of the Securities plus the interest that would accrue up to and
including December 31, 1997 were all $175,000,000 aggregate principal amount of
the Securities to be outstanding from the Issue Date to such date (the "SPECIAL
REDEMPTION AMOUNT"), as set forth in Article 10.
ARTICLE 5
Successor Corporation
Section 5.01. Limitation on Merger, Sale or Consolidation. (a) 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 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.
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(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.
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 principal of, 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;
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(c) failure by the Company 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 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 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, fails generally to
pay its debts as they become
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due, or takes 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 for 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 Section 6.01 or
(f) relating to the Company or any of its Restricted Subsidiaries) occurs and is
continuing, then, and 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 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 all of the principal of the
Securities (or the Change of Control Purchase Price if the Event of Default
includes failure to pay the Change of Control Purchase Price), determined as set
forth below, including in each case accrued interest thereon, 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 or (f)
relating to the Company or any Significant Restricted Subsidiary occurs, all
principal (or the Change of Control Purchase Price, as applicable) and accrued
interest 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 of then outstanding Securities, by written notice to
the
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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 principal 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 principal 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 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 any
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
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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
principal, 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 principal, 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 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 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.
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 or any other obligor upon the Securities or the property of the
Company 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
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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
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(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 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 principal 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 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
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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.
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 principal of, premium, if any, or
interest on, any Security as specified in clauses (a) and (b) of
Section 6.01, 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
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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.
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
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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 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 13.04 and 13.05. The Trustee shall not be liable for
any
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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 shall be sufficient if
signed by an Officer of the Company.
(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, 6.01 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 or any of the Company'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
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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 Securityholder 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
Redemption Price on the 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 Securityholders.
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 Securityholder a brief
report dated as of such February 15 that complies with TIA (S) 313(a). The
Trustee also shall comply with TIA (S)(S) 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.
A copy of each report at the time of its mailing to Securityholders 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 agrees 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 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 agrees 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
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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
promptly of any claim asserted against the Trustee for which it may seek
indemnity. The Company shall defend the claim and the Trustee shall provide
reasonable cooperation at the Company's expense in the defense. The Trustee may
have separate counsel and the Company shall pay the reasonable fees and expenses
of such counsel; provided that the Company 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 Trustee in connection with such defense.
The Company need not pay for any settlement made without their written consent.
The Company 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 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 or (f) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company'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 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 710;
(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
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(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 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.
If the Trustee fails to comply with Section 7.10, any Securityholder 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 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 (S) 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 (S) 310(b).
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Section 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA (S) 311(a), excluding any creditor relationship
listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be
subject to TIA (S) 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 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
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than the obligation of any successor to assume the obligations of the Company
hereunder) 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, 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 pay and discharge and which shall be applied by the
Trustee (or other qualifying trustee) to pay and discharge (i) 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
satisfactory 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
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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, in so far as
Section 6.01 or 6.01 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 or 6.01 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;
(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 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 or the Covenant Defeasance under
Section 8.03 (as the case may be) have been complied with as contemplated by
this Section 8.04.
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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 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 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 makes any payment of principal of, premium, if any, or interest on any
Security following the reinstatement of its obligations, the Company 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.
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ARTICLE 9
Amendments, Supplements and Waivers
Section 9.01. Supplemental Indentures Without Consent of Holders. Without
the consent of any Holder, the Company, 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 for the
benefit of the Holders, or to surrender any right or power
herein conferred upon the Company or to make any other
change that does not adversely affect the rights of any
Holder, provided that the Company 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 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 of then outstanding
Securities, by written act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by Board Resolutions, and the Trustee may
amend or supplement this Indenture or the Securities or enter into an
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indenture or indentures 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 of then
outstanding Securities may waive compliance by the Company 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 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) 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
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payable) and the Securities as in effect on the date hereof;
or
(8) make the Securities subordinated in right of
payment to any extent or under any circumstances to any
other indebtedness.
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
9.4 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
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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
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 Securityholder, unless it makes a change described in any of clauses (1)
through (8) 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
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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, 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 Securities and the Collateral securing the
Securities, and funds in such account shall not be commingled with any other
moneys or properties, tangible or intangible. All payments to be made from time
to time by the Trustee to the Holders of Securities out of funds in the
Collateral Account as payment of the Redemption Price in connection with a
Special Redemption shall be made by the Trustee as Paying Agent. 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. Any payments of principal of or interest on, or proceeds from the
sale of, Treasury Bills held in the Collateral Account shall be credited and
deposited into the Collateral Account. The Collateral Account shall be titled
"Bank of Montreal Trust Company, Trustee for benefit of holders of securities of
Price Communications Wireless, Inc., under an Indenture dated July 10, 1997
Collateral Account."
(b) The Collateral Account shall be maintained with the Bank until release
by the Trustee contemporaneously with 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 $325.0 million pursuant to the Credit
Agreement and (C) the receipt by the Company of the PCC Equity Contribution, and
(D) receipt by the Trustee of an order from the Company requesting that the
Trustee release the Collateral to the order of the Company; or (ii) the Business
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Day prior to the Special Redemption Date or (iii) the date of which no
Securities remain outstanding.
Section 10.02. Eligible Investments. Upon 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. (S)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 10.02.
Section 10.03. Release of Collateral.
Upon order from the Company to the Trustee pursuant to clause (i) of
Section 10.01, 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 Redemption Price on the
Special Redemption Date in respect of the Special Redemption and (ii)
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,
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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 (provided that the principal amount of such
Securities at stated maturity must be $1,000 or an integral multiple thereof)
pursuant to an unconditional, irrevocable offer by the Company (the "CHANGE OF
CONTROL OFFER") on a 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
aggregate principal amount thereof, plus accrued and unpaid interest, if any, to
and including the Change of Control Purchase Date.
(b) 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 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 and not
in Section 6.01.
(c) In the event that, pursuant to this Section 11.01, the Company shall
be required to commence 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;
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(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
Securityholders, 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;
(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
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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 withdraw 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, rules and regulations,
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 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 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.
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ARTICLE 12
Subordination
Section 12.01. Securities Subordinated to Senior Indebtedness.
The Company and each Holder, by its acceptance of Securities, agree that
(a) the payment of the principal of and interest on the Securities and (b) any
other payment in respect of the Securities, including on account of the
acquisition or redemption of the Securities by the Company (including, without
limitation, pursuant to Section 4.15 or 11.01) is subordinated, to the extent
and in the manner provided in this Article 12, to the prior payment of Senior
Indebtedness of the Company and that these subordination provisions are for the
benefit of the holders of Senior Indebtedness. Notwithstanding anything
contained in this Article 12, no payments to any holders of Senior Indebtedness
shall be made out of investments or proceeds held in the Collateral Account,
which shall be applied solely as provided in Article 10 hereof.
This Article 12 shall constitute a continuing offer to all Persons who, in
reliance upon such provisions, become holders of, or continue to hold, Senior
Indebtedness, and such provisions are made for the benefit of the holders of
Senior Indebtedness, and such holders are made obligees hereunder and any one or
more of them may enforce such provisions.
Section 12.02. No Payment on Securities in Certain Circumstances.
(a) No payment may be made by or on behalf of the Company on account of
the principal of, premium, if any, or interest on the Securities (including any
repurchases of Securities) or on account of any other monetary obligation for
the payment of money due on the Securities, including the redemption provisions
of the Securities, for cash or property (other than Junior Securities issued in
connection with a reorganization pursuant to the Bankruptcy Laws of any
jurisdiction), (i) upon the maturity of any Senior Indebtedness by lapse of
time, acceleration (unless waived) or otherwise, unless and until all principal
of, premium, if any, and interest (and with respect to the Credit Agreement, any
other Obligations) on such Senior Indebtedness are first paid in full in cash or
Cash Equivalents (or, with respect to Senior Indebtedness other than the Credit
Agreement, such payment is duly provided for), or otherwise to the extent such
holders expressly acknowledge satisfaction of amounts due by settlement other
than in cash or Cash Equivalents, or (ii) in the event of default in the payment
of any principal of, premium, if any, or interest on Senior Indebtedness of the
Company when it becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise (a "PAYMENT DEFAULT"),
unless and
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until such Payment Default has been cured or waived or otherwise has
ceased to exist.
(b) Upon (i) the happening of an event of default (other than a Payment
Default) that permits the holders of Senior Indebtedness (or a trustee or agent
on behalf of such holders) to declare such Senior Indebtedness to be due and
payable and (ii) written notice of such event of default given to the Trustee by
the holders (or a trustee, agent or other representative of such holders) of an
aggregate of at least $25 million principal amount outstanding of any Designated
Senior Indebtedness (a "PAYMENT NOTICE"), then, unless and until such event of
default has been cured or waived or otherwise has ceased to exist, no payment
may be made by or on behalf of the Company on account of the principal of,
premium, if any, or interest on the Securities, or to repurchase any of the
Securities, or on account of any other obligation for the payment of money in
respect of the Securities, including the redemption provisions of the
Securities, in any such case (other than payments made with Junior Securities
issued in connection with a reorganization pursuant to the Bankruptcy Laws of
any jurisdiction). Notwithstanding the foregoing, unless the Senior Indebtedness
in respect of which such event of default exists has been declared due and
payable in its entirety within 179 days after the Payment Notice is delivered as
set forth above (the "PAYMENT BLOCKAGE PERIOD") and such declaration has not
been rescinded or waived, at the end of the Payment Blockage Period, the Company
shall be required, unless the provisions described in Section 12.02 are then
applicable, to pay all sums not paid to the Holders of the Securities during the
Payment Blockage Period, due to the foregoing prohibitions and to resume all
other payments as and when due on the Securities. Any number of Payment Notices
may be given; provided, however, that (i) not more than one Payment Notice shall
be given within a period of any 360 consecutive days, and (ii) no default that
existed upon the date of such Payment Notice or the commencement of such
Payment Blockage Period (whether or not such event of default relates to the
same issue of Senior Indebtedness) shall be made the basis for the commencement
of any other Payment Blockage Period (it being acknowledged that any subsequent
action, or any breach of any financial covenant for a period commencing after
the expiration of such Payment Blockage Period that, in either case, would give
rise to a new event of default, even though it is a breach pursuant to any
provision under which a prior event of default previously existed, shall
constitute a new event of default for this purpose).
(c) In furtherance of the provisions of Section 12.01, in the event that,
notwithstanding the foregoing provisions of this Section 12.02, any payment or
distribution of assets of the Company (other than Junior Securities issued in
connection with a reorganization pursuant to the Bankruptcy Laws of any
jurisdiction) shall be received by the Trustee or the Holders at a time when
such payment or distribution is prohibited by the foregoing provisions, such
payment or
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distribution shall be held in trust for the benefit of the holders of such
Senior Indebtedness, and shall be paid or delivered by the Trustee or such
Holders, as the case may be, to the holders of such Senior Indebtedness
remaining unpaid (or, with respect to Senior Indebtedness other than the Credit
Agreement, unprovided for) or to their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Indebtedness may have been issued, ratably
according to the aggregate principal amounts remaining unpaid on account of such
Senior Indebtedness held or represented by each, for application to the payment
of all such Senior Indebtedness remaining upaid, to the extent necessary to
pay (or, with respect to Senior Indebtedness other than the Credit Agreement to
provide for the payment) of all such Senior Indebtedness in full, or otherwise
to the extent holders expressly acknowledge satisfaction of amounts due after
giving effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness.
SECTION 12.03. Securities Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization.
Upon any distribution of assets of the Company upon any dissolution,
winding up, total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, in bankruptcy, insolvency, receivership or
similar proceeding or upon assignment for the benefit of creditors or any
marshalling of assets or liabilities:
(a) the holders of all Senior Indebtedness of the Company will first be
entitled to receive payment in full in cash or Cash Equivalents (or, with
respect to Senior Indebtedness other than the Credit Agreement to have such
payment duly provided for), or with respect to any holder, otherwise to the
extent such holders expressly acknowledge satisfaction of amounts due in
settlement other than in cash or Cash Equivalents (it being acknowledged that
approval of a plan of reorganization in a bankruptcy proceeding shall not
constitute satisfaction of amounts due in settlement), before the Holders are
entitled to receive any payment on account of the principal of, premium, if any,
and interest on the Securities (other than Junior Securities issued in
connection with a reorganization pursuant to the Bankruptcy Laws of any
jurisdiction);
(b) any payment or distribution of assets of the Company of any kind or
character from any source, whether in cash, property or securities (other than
with Junior Securities issued in connection with a reorganization pursuant to
the Bankruptcy Laws of any jurisdiction) to which the Holders or the Trustee on
behalf of the Holders would be entitled, except for the provisions of this
Article 12, will be paid by the liquidating trustee or agent or other Person
making such a payment or distribution directly to the holders of such Senior
Indebtedness or their
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representative to the extent necessary to make payment in full on all such
Senior Indebtedness remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character from any source,
whether in cash, property or securities (excluding payments made with Junior
Securities issued in connection with a reorganization pursuant to the Bankruptcy
Laws of any jurisdiction), shall be received by the Trustee or the Holders or
any Paying Agent (or, if the Company is acting as its own Paying Agent, money
for any such payment or distribution shall be segregated or held in trust) on
account of any principal, premium, interest, or other obligation for the payment
of money in respect of the Securities, before all Senior Indebtedness of the
Company is paid in full in cash or Cash Equivalents, such payment or
distribution (subject to the provisions of Section 12.07) shall be received
and held in trust by the Trustee or such Holder or Paying Agent for the benefit
of the holders of such Senior Indebtedness, or their respective representatives,
ratably according to the respective amounts of such Senior Indebtedness held or
represented by each, to the extent necessary to make payment as provided herein
of all such Senior Indebtedness remaining unpaid after giving effect to all
concurrent payments and distributions and all provisions therefor to or for the
holders of such Senior Indebtedness, but only to the extent that as to any
holder of such Senior Indebtedness, as promptly as practical following notice
from the Trustee to the holders of such Senior Indebtedness that such prohibited
payment has been received by the Trustee, Holder(s) or Paying Agent (or has been
segregated as provided above), such holder (or a representative therefor)
notifies the Trustee of the amounts then due and owing on such Senior
Indebtedness, if any, held by such holder and only the amounts specified in such
notices to the Trustee shall be paid to the holders of such Senior Indebtedness.
SECTION 12.04. Securityholders to Be Subrogated to Rights of Holders of
Senior Indebtedness.
Subject to the payment in full in cash or Cash Equivalents of all Senior
Indebtedness as provided herein, the Holders of Securities shall be subrogated
to the rights of the holders of such Senior Indebtedness to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness
until all amounts owing on the Securities shall be paid in full, and for the
purpose of such subrogation no such payments or distributions to the holders of
such Senior Indebtedness by or on behalf of the Company, or by or on behalf of
the Holders by virtue of this Article 12, which otherwise would have been made
to the Holders shall, as between the Company and the Holders, be deemed to be
payment by the Company or on account of such Senior Indebtedness, it being
understood that the provisions of this Article 12 are and are intended solely
for the purpose of defining
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the relative rights of the Holders, on the one hand, and the holders of such
Senior Indebtedness, on the other hand.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article 12 shall have been
applied, pursuant to the provisions of this Article 12, to the payment of
amounts payable under Senior Indebtedness of the Company, then the Holders shall
be entitled to receive from the holders of such Senior Indebtedness any payments
or distributions received by such holders of Senior Indebtedness in excess of
the amount sufficient to pay all amounts payable under or in respect of such
Senior Indebtedness in full in cash or Cash Equivalents.
SECTION 12.05. Obligations of the Company Unconditional.
Nothing contained in this Article 12 or elsewhere in this Indenture or in
the Securities is intended to or shall impair, as between the Company and the
Holders, the obligation of each such Person, which is absolute and
unconditional, to pay to the Holders the principal of, premium, if any, and
interest on the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of the Company other than the holders of the
Senior Indebtedness, nor shall anything herein or therein prevent the Trustee or
any Holder from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article 12, of the holders of Senior Indebtedness in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy. Notwithstanding anything to the contrary in this Article 12 or
elsewhere in this Indenture or in the Securities, upon any distribution of
assets of the Company referred to in this Article 12, the Trustee, subject to
the provisions of Sections 7.01 and 7.02, and the Holders shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction in
which such dissolution, winding up, liquidation or reorganization proceedings
are pending, or a certificate of the liquidating trustee or agent or other
Person making any distribution to the Trustee or to the Holders for the purpose
of ascertaining the Persons entitled to participate in such distribution, the
holders of the Senior Indebtedness and other Indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 12 so long as
such court has been apprised of the provisions of, or the order, decree or
certificate makes reference to, the provisions of this Article 12. Nothing in
this Section 12.05 shall apply to the claims of, or payments to, the Trustee
under or pursuant to Section 7.07.
SECTION 12.06. Trustee Entitled to Assume Payments Not Prohibited in
Absence of Notice.
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The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee unless and until a Trust Officer of the Trustee or any Paying Agent
shall have received, no later than one Business Day prior to such payment,
written notice thereof from the Company or from one or more holders of Senior
Indebtedness or from any representative therefor and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Sections 7.01
and 7.02, shall be entitled in all respects conclusively to assume that no such
fact exists.
Section 12.07. Application by Trustee of Assets Deposited with It.
Amounts deposited in trust with the Trustee pursuant to and in accordance
with Article 8 shall be for the sole benefit of the Holders and shall not be
subject to the subordination provisions of this Article 12. Otherwise, any
deposit of assets with the Trustee or the Paying Agent (whether or not in trust)
for the payment of principal of or interest on any Securities shall be subject
to the provisions of Sections 12.01, 12.02, 12.03 and 12.04; provided, that,
if prior to one Business Day preceding the date on which by the terms of this
Indenture any such assets may become distributable for any purpose (including
without limitation, the payment of either principal of or interest on any
Security) the Trustee or such Paying Agent shall not have received with respect
to such assets the written notice provided for in Section 12.06, then the
Trustee or such Paying Agent shall have full power and authority to receive such
assets and to apply the same to the purpose for which they were received, and
shall not be affected by any notice to the contrary which may be received by it
on or after such date.
Section 12.08. Subordination Rights Not Impaired by Acts or Omissions of
the Company or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior Indebtedness to
enforce subordination provisions contained in this Article 12 shall at any time
in any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms of this Indenture,
regardless of any knowledge thereof which any such holder may have or be
otherwise charged with. The holders of Senior Indebtedness may extend, renew,
modify or amend the terms of the Senior Indebtedness or any security therefor
and release, sell or exchange such security and otherwise deal freely with the
Company, all without affecting the liabilities and obligations of the parties
to this Indenture or the Holders.
Section 12.09. Securityholders Authorize Trustee to Effectuate
Subordination of Securities .
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Each Holder of the Securities by his acceptance thereof authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provisions contained in
this Article 12 and to protect the rights of the Holders pursuant to this
Indenture, and appoints the Trustee his attorney-in-fact for such purpose,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company), the immediate filing of
a claim for the unpaid balance of his Securities in the form required in said
proceedings and cause said claim to be approved. If the Trustee does not file a
proper claim or proof of debt in the form required in such proceeding prior to
30 days before the expiration of the time to file such claim or claims, then the
holders of the Senior Indebtedness or their representative are or is hereby
authorized to have the right to file and are or is hereby authorized to file an
appropriate claim for and on behalf of the Holders of said Securities. Nothing
herein contained shall be deemed to authorize the Trustee or the holders of
Senior Indebtedness or their representative to authorize or consent to or accept
or adopt on behalf of any Securityholder any plan of reorganization,
arrangement, adjustment or composition affecting the Securities or the rights of
any Holder thereof, or to authorize the Trustee or the holders of Senior
Indebtedness or their representative to vote in respect of the claim of any
Securityholder in any such proceeding.
Section 12.10. Right of Trustee to Hold Senior Indebtedness.
The Trustee shall be entitled to all of the rights set forth in this
Article 12 in respect of any Senior Indebtedness at any time held by it to the
same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall be construed to deprive the Trustee of any of its rights as such
holder.
Section 12.11. Article 12 Not to Prevent Events of Default.
The failure to make a payment on account of principal of, premium, if any,
or interest or any other monetary obligation for the payment of money on the
Securities by reason of any provision of this Article 12 shall not be construed
as preventing the occurrence of a Default or an Event of Default under Section
6.01 or in any way prevent the Trustee or the Holders from exercising any right
hereunder, subject to the rights, if any, under this Article of the holders of
Senior Indebtedness in respect of cash, property, securities or other assets
received upon the exercise of any such right.
Section 12.12. No Fiduciary Duty of Trustee to Holders of Senior
Indebtedness.
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The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Indebtedness, and shall not be liable to any such holders (other than for
its willful misconduct or negligence) if it shall in good faith mistakenly pay
over or distribute to the Holders of Securities or the Company or any other
Person, cash, property or securities to which any holders of Senior Indebtedness
shall be entitled by virtue of this Article 12 or otherwise. Nothing in this
Section 12.12 shall affect the obligation of any other such Person to hold such
payment for the benefit of, and to pay such payment over to, the holders of
Senior Indebtedness or their representative.
ARTICLE 13
Miscellaneous
Section 13.01. 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 13.02. Notices. Any notices or other communications to the Company
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 Company:
Price Communications Wireless, Inc.
45 Rockefeller Plaza
New York, New York 10020
Attention: Chief Financial Officer
Telecopy: (212) 397-3755
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
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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 Securityholder 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 Securityholder or any defect
in it shall not affect its sufficiency with respect to other Securityholders.
If a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 13.03. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other Person shall
have the protection of TIA (S) 312(c).
Section 13.04. Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, such Person shall furnish to the Trustee:
(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 13.05. 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:
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(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 13.06. Rules by Trustee, Paying Agent, Registrar. The Trustee may
make reasonable rules for action by or at a meeting of Securityholders. The
Paying Agent or Registrar may make reasonable rules for its functions.
Section 13.07. 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 13.08. 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. 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 INDENTURE AND
THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND
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UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY 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
SECURITYHOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
Section 13.09. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or any of its respective Subsidiaries. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
Section 13.10. No Recourse Against Others. No direct or indirect employee,
stockholder, director or officer, 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 Securities or this Indenture by
reason of his or its status as such stockholder, employee, director or officer.
Each Securityholder 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 13.11. Successors. All agreements of the Company in this Indenture
and the Securities shall bind its successor. All agreements of the Trustee in
this Indenture shall bind its successor.
Section 13.12. 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 13.13. 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 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.
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Section 13.14. 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 13.15. 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 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 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 13.16. 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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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the date first written above.
PRICE COMMUNICATIONS WIRELESS,
INC., a Delaware corporation
By: /s/ Robert Price
----------------------------
Name:
Title:
Attest: /s/ Ashley Dixon
------------------------
Secretary
BANK OF MONTREAL TRUST
COMPANY, Trustee
By: /s/ Amy Roberts
----------------------------
Name:
Title:
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Exhibit A
[FORM OF SECURITY]
11 3/4% SERIES [A/B] SENIOR SUBORDINATED NOTE DUE 2007
No.
CUSIP No.
Price Communications Wireless, 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 Cede &
Co., or registered assigns, the principal sum of $___________ Dollars, on July
15, 2007.
Interest Payment Dates: January 15 and July 15; commencing January 15,
1998.
Record Dates: January 1 and July 1
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 WIRELESS,
INC., a Delaware corporation
By:___________________________
Name:
Title:
A-1
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned Indenture.
[Name of Trustee]
as Trustee
By:______________________________________
Authorized Signatory
Dated:
A-2
<PAGE>
PRICE COMMUNICATIONS WIRELESS, INC.
11 3/4% Series [A/B] Senior Subordinated 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"), OR (B) 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 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
_____________________
/1/ This paragraph should only be added if the Security is issued in
global form
A-3
<PAGE>
WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D)
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), (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR (F) 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
REGULATIONS 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./2/
1. Interest.
Price Communications Wireless, 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 11 3/4% per annum and will be payable semi-annually in cash on each
January 15 and July 15, commencing January 15, 1998, 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 1 or July 1, 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
_______________________
/2/ This paragraph should be included only for the Initial Securities.
A-4
<PAGE>
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 or any of its
Subsidiaries 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 July 10,
1997 (the "Indenture"), between the Company and the Trustee. 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 to $175,000,000.
5. Redemption. (a) The Company will not have the right to redeem any
Securities prior to July 15, 2002. On or after July 15, 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 July 15 of the years indicated below:
Year Redemption Price
---- ----------------
A-5
<PAGE>
2002 105.875%
2003 104.406%
2004 102.938%
2005 101.469%
2006 and thereafter 100.000%
Notwithstanding the optional redemption provisions described in the
preceding paragraph (a), prior to July 10, 2002, in the event that the Company
or Parent consummates one or more offerings of their Qualified Capital Stock on
or before the third anniversary of the date of the issuance of the Securities,
the Company may at its option, use all or a portion of the cash contributed to
it from such offerings to redeem up to 35% of the original aggregate principal
amount of the Securities at a cash redemption price equal to 111.75% of the
principal amount of the Securities, plus accrued and unpaid interest thereon, if
any, to the redemption date; provided that at least $113,750,000 aggregate
principal amount of Securities remains outstanding thereafter.
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 must be redeemed (the "SPECIAL REDEMPTION") on, or at
any time prior to, December 31, 1997 at a redemption price of 101% of the
principal amount of the Securities, plus accrued interest to the date of the
Special Redemption, 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.
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.
A-6
<PAGE>
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.
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 two
years, 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.
A-7
<PAGE>
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 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. Ranking.
Payment of principal, premium, if any, and interest on the Securities is
subordinated, in the manner and to the extent set forth in the Indenture, to the
prior payment in full of all Senior Indebtedness.
14. 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
A-8
<PAGE>
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.
15. 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.
16. 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 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.
17. 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 or
its Affiliates, and may otherwise deal with the Company or its Affiliates as if
it were not the Trustee.
A-9
<PAGE>
18. No Recourse Against Others.
No stockholder, director, officer or employee, as such, past, present or
future, of the Company or any successor corporation shall have any personal
liability in respect of the obligations of the Company 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.
19. 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.
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.
A-10
<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 name appears on the other side of this Security)
A-11
<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 11 of the Indenture, check the appropriate
box:
[_] Section 4.15 [_] Article XI
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.15 or Article XI of the Indenture, as the case may
be, state the principal amount you want to be purchased: $________
Date:_____________________ Signature:__________________________________
(Sign exactly as your name appears
on the other side of this Security)
A-12
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES/3/
The following exchanges of a part of this Global Security for Definitive
Securities have been made:
<TABLE>
AMOUNT OF
DECREASE IN AMOUNT OF PRINCIPAL AMOUNT SIGNATURE OF
PRINCIPAL INCREASE IN OF THIS GLOBAL AUTHORIZED OFFICER
DATE OF AMOUNT PRINCIPAL AMOUNT SECURITY FOLLOWING OF TRUSTEE OR
EXCHANGE OF THIS GLOBAL OF THIS GLOBAL SUCH DECREASE (OR SECURITIES
SECURITY SECURITY INCREASE) CUSTODIAN
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
________________________
/3/ This schedule should only be added if the Security is issued in global
form.
A-13
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF SECURITIES/4/
Re: 11 3/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2007 OF PRICE
COMMUNICATIONS WIRELESS, 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 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 reliance on Rule
144A (in satisfaction of Section
________________________________
/*/ The following should be included only for Initial Securities.
/T/ /1*/Check applicable box
A-14
<PAGE>
Section 2.0(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(a)(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:
________________________________.
TO BE COMPLETED BY TRANSFEREE IF 2(b) ABOVE IS CHECKED AND THE TRANSFEROR IS NOT
A QUALIFIED INSTITUTIONAL BUYER:
A-15
<PAGE>
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.......
A-16
<PAGE>
EXHIBIT B
Bank of Montreal Trust Company
Dear Sirs:
In connection with our proposed purchase of $_______ principal amount of 11
3/4% Senior Subordinated Notes due 2007 (the "Notes") of Price Communications
Wireless, 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 July 2, 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 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 July 10, 1997 between 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 Issuer or an Affiliate of 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
B-1
<PAGE>
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 Issuer
may reasonably require 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 Issuer or an Affiliate of
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:
B-2
