<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 5, 1995
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934 (AMENDMENT NO. 3)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Confidential, for Use of the
[_] Preliminary Proxy Statement Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
LIN BROADCASTING CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[_]$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_]$500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[X]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.01 per share
(2) Aggregate number of securities to which transaction applies:
25,613,644
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
CALCULATION OF FILING FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRANSACTION VALUATION AMOUNT OF FILING FEE
- ------------------------------------------------------------------------------
<S> <C>
$3,323,370,309* $664,674.06
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
*For purposes of calculation of fee only. This amount assumes the purchase
of 25,613,644 shares of Common Stock, par value $.01 per share, of LIN
Broadcasting Corporation at $129.75 net in cash per share. The amount of
the filing fee calculated in accordance with Regulation 240.0-11 of the
Securities Exchange Act of 1934 equals 1/50 of 1% of the value of the
shares to be purchased.
(4) Proposed maximum aggregate value of transaction:
$3,323,370,309
(5) Total fee paid:
$664,674.06
[X]Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
LIN Broadcasting Corporation . 5295 Carillon Point . Kirkland, WA
LOGO 98033 . (206) 828-1902 . Fax (206) 828-1900
Dear Stockholder: September 5, 1995
You are cordially invited to attend the Annual Meeting of Stockholders of LIN
Broadcasting Corporation, which will be held on Tuesday, October 3, 1995 at
10:00 a.m., local time, at the offices of AT&T Corp. located at 5 Wood Hollow
Road, Parsippany, New Jersey 07054.
At the Annual Meeting you will be asked to consider and vote upon a proposal
to approve and adopt an Agreement and Plan of Merger among LIN, McCaw Cellular
Communications, Inc., a wholly owned subsidiary of AT&T, and two subsidiaries
of McCaw. If the Merger is consummated, each publicly held share of LIN Common
Stock (other than Dissenting Shares (as defined in the accompanying Proxy
Statement)) will be converted into the right to receive $129.50 in cash, plus,
under certain circumstances as set forth in the accompanying Proxy Statement,
up to an additional $0.25, plus an amount equal to interest on such $129.50 to
$129.75 per share at an annual rate of 5.5% from September 15, 1995 until the
closing of the Merger. The total value of the consideration to be paid to the
LIN public stockholders in the Merger is approximately $3.2 billion. The
economic terms of the Merger were determined in connection with the proposed
settlement of litigation relating to the original merger agreement among LIN,
McCaw and two subsidiaries of McCaw, in which McCaw would have acquired the
publicly held shares of LIN Common Stock for $127.50 in cash, without interest,
and in connection with discussions with the LIN Independent Directors (as
defined in the accompanying Proxy Statement). The original price of $127.50 per
share had been determined as the private market value of the LIN Common Stock
pursuant to the Private Market Value Guarantee ("PMVG") entered into by McCaw
and LIN in 1989 in connection with McCaw's acquisition of control of LIN. At
the Annual Meeting, you will also be asked to elect ten directors to serve
until the next Annual Meeting or earlier consummation of the Merger.
The Board of Directors of LIN, consisting of eight designees of McCaw and
three LIN Independent Directors, has unanimously approved the Merger Agreement
and the Merger and determined that the Merger is fair to the public
stockholders of LIN, and unanimously recommends that LIN stockholders vote in
favor of the Merger Agreement and the Merger.
The affirmative vote of the holders of shares of LIN Common Stock
representing at least a majority of the shares not held by McCaw and its
affiliates (or any Group Members as defined in the accompanying Proxy
Statement) present and entitled to vote at the Annual Meeting is necessary to
approve the Merger Agreement and the Merger. Pursuant to the PMVG, a majority
of the publicly held shares of LIN Common Stock must be present (or represented
by proxy) at the Annual Meeting for purposes of such vote. In addition, McCaw's
obligation to complete the Merger is conditioned on, among other things, final
court approval of the proposed settlement of litigation, as described in the
accompanying Proxy Statement. As described in the accompanying Proxy Statement,
dissenters' rights will be available in connection with the Merger to persons
meeting certain statutory requirements.
You should read carefully the accompanying Notice of Annual Meeting of
Stockholders and the Proxy Statement for further details of the Merger and
additional related information. Whether or not you plan to attend the Annual
Meeting, please complete, sign and date the enclosed proxy card and return it
promptly in the enclosed postage prepaid envelope. Properly executed proxies
for which no instruction is given will be voted for approval and adoption of
the Merger and for the election of the ten nominees for director described in
the accompanying Proxy Statement. If you attend the Annual Meeting, you may
vote in person if you wish, even though you previously have returned your proxy
card. Your prompt cooperation will be greatly appreciated.
<PAGE>
Please do not send your share certificates with your proxy card. If the
Merger Agreement and the Merger are approved by the LIN stockholders and all
other conditions to the Merger are satisfied or waived, you will receive a
transmittal form and instructions for the surrender of your shares and payment
with respect thereto.
Sincerely,
/s/ Lewis M. Chakrin
Lewis M. Chakrin
Chairman
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD.
2
<PAGE>
LIN BROADCASTING CORPORATION
5295 CARILLON POINT
KIRKLAND, WASHINGTON 98033
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 3, 1995
TO THE STOCKHOLDERS OF LIN BROADCASTING CORPORATION:
Notice is hereby given that the Annual Meeting of the Stockholders (the
"Annual Meeting") of LIN Broadcasting Corporation, a Delaware corporation
("LIN"), will be held on Tuesday, October 3, 1995 at 10:00 a.m., local time,
at the offices of AT&T Corp., a New York corporation ("AT&T"), located at 5
Wood Hollow Road, Parsippany, New Jersey 07054, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger, dated April 28, 1995, as amended and restated June 30,
1995 (the "Merger Agreement"), among LIN, McCaw Cellular Communications,
Inc., a Delaware corporation ("McCaw") and a wholly owned subsidiary of
AT&T, MMM Holdings, Inc., a Delaware corporation ("Holdings") and a wholly
owned subsidiary of McCaw, and MMM Acquisition Corp., a Delaware
corporation ("Merger Sub") and a wholly owned subsidiary of Holdings, and
the merger of Merger Sub into LIN upon the terms and subject to the
conditions set forth in the Merger Agreement (the "Merger"). Pursuant to
the Merger Agreement, LIN will become a wholly owned subsidiary of
Holdings, and each share of Common Stock, par value $.01 per share (the
"LIN Common Shares"), of LIN issued and outstanding immediately prior to
the Merger (other than LIN Common Shares held by McCaw or any of its wholly
owned subsidiaries, in the treasury of LIN or by any wholly owned
subsidiary of LIN, which LIN Common Shares, by virtue of the Merger and
without any action on the part of the holders thereof, will automatically
be cancelled and retired and will cease to exist with no payment being made
with respect thereto, and other than any Dissenting Shares (as defined in
the accompanying Proxy Statement)) will be converted into the right to
receive $129.50 in cash, plus up to an additional $0.25 under certain
circumstances as set forth in the accompanying Proxy Statement, plus an
amount equal to interest on such $129.50 to $129.75 per share at an annual
rate of 5.5% from September 15, 1995 until the closing of the Merger. The
total value of the consideration to be paid to the LIN public stockholders
in the Merger is approximately $3.2 billion. As described in the
accompanying Proxy Statement, dissenters' rights will be available in
connection with the Merger to persons meeting certain statutory
requirements. THE MERGER IS MORE COMPLETELY DESCRIBED IN THE ACCOMPANYING
PROXY STATEMENT, AND A COPY OF THE MERGER AGREEMENT IS ATTACHED AS APPENDIX
A THERETO.
2. To elect ten directors to serve until the next Annual Meeting or
earlier consummation of the Merger or until their successors are duly
elected and qualified.
3. To transact such other business as may properly be brought before the
Annual Meeting or any adjournments or postponements thereof.
Only holders of record of LIN Common Shares at the close of business on
August 11, 1995, the record date for the Annual Meeting (the "Record Date"),
are entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE PREPAID ENVELOPE. PROPERLY EXECUTED PROXIES FOR WHICH NO INSTRUCTION
IS GIVEN WILL BE VOTED FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND
FOR THE ELECTION OF THE TEN NOMINEES FOR DIRECTOR DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT. PLEASE DO NOT SEND ANY SHARE CERTIFICATES AT
THIS TIME. YOUR PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED BY SIGNING
AND RETURNING A LATER-DATED PROXY WITH RESPECT TO THE SAME LIN COMMON SHARES,
BY FILING WITH THE SECRETARY OF LIN A WRITTEN REVOCATION BEARING A LATER DATE,
OR BY ATTENDING AND VOTING AT THE ANNUAL MEETING.
LIN Broadcasting Corporation
/s/ Gayle C. Toney
By: _______________________________
Assistant Secretary
Kirkland, Washington
September 5, 1995
<PAGE>
LIN BROADCASTING CORPORATION
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 3, 1995
LIN Broadcasting Corporation, a Delaware corporation ("LIN"), is furnishing
this Proxy Statement to its stockholders in connection with the solicitation
of proxies by the Board of Directors of LIN (the "LIN Board") for use at the
Annual Meeting of Stockholders of LIN to be held on Tuesday, October 3, 1995
and at any adjournments or postponements thereof (the "Annual Meeting").
At the Annual Meeting, LIN stockholders will consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger, dated April 28,
1995, as amended and restated June 30, 1995 (the "Merger Agreement"), among
LIN, McCaw Cellular Communications, Inc., a Delaware corporation ("McCaw") and
a wholly owned subsidiary of AT&T Corp., a New York corporation ("AT&T"), MMM
Holdings, Inc., a Delaware corporation ("Holdings") and a wholly owned
subsidiary of McCaw, and MMM Acquisition Corp., a Delaware corporation
("Merger Sub") and a wholly owned subsidiary of Holdings, and the merger of
Merger Sub into LIN upon the terms and subject to the conditions set forth in
the Merger Agreement (the "Merger"). In the Merger, LIN will become a wholly
owned subsidiary of Holdings (and an indirect wholly owned subsidiary of AT&T
and McCaw), and each share of Common Stock, par value $.01 per share (the "LIN
Common Shares," which term shall include, unless the context requires
otherwise, the associated LIN Rights, as defined herein), of LIN issued and
outstanding immediately prior to the Merger (other than LIN Common Shares held
by McCaw or any of its wholly owned subsidiaries, in the treasury of LIN or by
any wholly owned subsidiary of LIN, which LIN Common Shares, by virtue of the
Merger and without any action on the part of the holders thereof, will be
automatically cancelled and retired and will cease to exist with no payment
being made with respect thereto, and other than any Dissenting Shares (as
defined herein)), will be converted into the right to receive (i) $129.50 in
cash, plus (ii) the Additional Amount (as defined below), if any, plus (iii)
the Accretion Amount (as defined below), if any (collectively, the "Merger
Consideration"). The term "Additional Amount" means $0.25 less an amount equal
to (x) the excess over $4 million of the total fee awarded by a final and
nonappealable order of the Delaware Chancery Court to the plaintiffs'
attorneys in connection with the settlement of certain lawsuits (the
"Stockholders Litigation") described under "SPECIAL FACTORS--Litigation"
divided by (y) the number of LIN Common Shares issued and outstanding
immediately prior to the Effective Time, other than LIN Common Shares owned by
McCaw or any of its wholly owned subsidiaries and LIN Common Shares held in
the treasury of LIN or by any wholly owned subsidiary of LIN. The term
"Accretion Amount" means an amount equal to the amount of simple interest that
would accrue on $129.50 plus the Additional Amount (if any) at a rate of five
and one-half percent (5.5%) per annum from, but not including, September 15,
1995 through, and including, the date upon which the Closing (as defined
herein) occurs. The total value of the consideration to be paid to the LIN
public stockholders in the Merger is approximately $3.2 billion. See "THE
MERGER--Terms of the Merger." At the Annual Meeting, stockholders will also be
asked to elect ten directors to serve until the next Annual Meeting or earlier
consummation of the Merger or until their successors are duly elected and
qualified.
(continued on following page)
THE MERGER HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
----------------
The date of this Proxy Statement is September 5, 1995.
<PAGE>
(continued from previous page)
The economic terms of the Merger were determined in connection with the
proposed settlement of the Stockholders Litigation and discussions with the
LIN Independent Directors (as defined below). The original merger agreement
among McCaw, Holdings, Merger Sub and LIN, prior to its amendment and
restatement (the "Original Merger Agreement"), provided for the acquisition by
McCaw of the publicly held LIN Common Shares at a price of $127.50 per share,
without interest. The price of $127.50 per LIN Common Share had been
determined as the private market value per LIN Common Share under the Private
Market Value Guarantee, dated December 11, 1989, as amended (the "PMVG"),
between McCaw and LIN. See "SPECIAL FACTORS--Background of the Merger" and "--
Terms of the PMVG."
The LIN Board, consisting of eight designees of McCaw and three directors
designated as "Independent Directors" pursuant to the terms of the PMVG (the
"LIN Independent Directors"), has unanimously approved the Merger Agreement
and the Merger and determined that the Merger is fair to the public
stockholders of LIN, and unanimously recommends that LIN stockholders vote in
favor of the Merger Agreement and the Merger. See "SPECIAL FACTORS--Fairness
of the Transaction; Recommendations" and "--Interests of Certain Persons in
the Merger; Conflicts of Interest."
In the event the Merger Agreement and the Merger are not approved by the
requisite vote of the LIN stockholders at the Annual Meeting (assuming the
Annual Meeting and such vote occur by December 31, 1995), the PMVG will remain
in effect in accordance with its terms, except that McCaw's obligation either
to acquire the LIN Public Shares (as defined herein) or to put all of LIN up
for sale will terminate. In the event the Merger Agreement and the Merger are
approved by the requisite vote of the LIN stockholders by December 31, 1995,
the PMVG provides that McCaw will have until August 31, 1996 to complete the
Merger, so long as the Merger is being pursued in good faith by McCaw and the
failure to complete the Merger is due to regulatory delays or litigation.
Otherwise, under the PMVG, McCaw will have until December 31, 1995 to complete
the Merger. In either case, if the Merger is not completed by the applicable
date, the PMVG provides that McCaw will put LIN in its entirety up for sale
under the direction of the LIN Independent Directors in a manner intended by
the LIN Independent Directors to maximize value for all LIN Common Shares. See
"SPECIAL FACTORS--Terms of the PMVG."
This Proxy Statement and the accompanying form of proxy are first being
mailed to LIN stockholders on or about September 5, 1995.
ii
<PAGE>
ADDITIONAL INFORMATION
Pursuant to the requirements of Section 13(e) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and Rule 13e-3 promulgated
thereunder, LIN, as issuer of the class of equity securities which is the
subject of the Rule 13e-3 transaction, and AT&T, McCaw, Holdings and Merger
Sub, as its affiliates, have filed with the Securities and Exchange Commission
(the "Commission") a Transaction Statement on Schedule 13E-3 (the "Schedule
13E-3") relating to the transactions contemplated by the Merger Agreement. As
permitted by the rules and regulations of the Commission, this Proxy Statement
omits certain information, exhibits and undertakings contained in the Schedule
13E-3. Such additional information can be inspected at and obtained from the
Commission in the manner set forth below under "AVAILABLE INFORMATION."
Statements contained herein concerning any documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Schedule 13E-3. Each such statement is qualified in
its entirety by such reference.
AVAILABLE INFORMATION
LIN is subject to the information and reporting requirements of the Exchange
Act and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at certain regional offices of the Commission located at Suite
1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661; and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies
of such information can be obtained at prescribed rates from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS, OTHER
THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT IS DELIVERED UPON WRITTEN OR
ORAL REQUEST TO SECRETARY, LIN BROADCASTING CORPORATION, 5295 CARILLON POINT,
KIRKLAND, WASHINGTON 98033, TELEPHONE NUMBER (206) 828-1902. TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS PRIOR TO THE ANNUAL MEETING, ANY REQUEST SHOULD BE
MADE BEFORE SEPTEMBER 19, 1995.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by LIN with the Commission pursuant
to the Exchange Act are incorporated herein by this reference:
1. LIN's Annual Report on Form 10-K for the year ended December 31, 1994,
as amended by Amendment Nos. 1 and 2 thereto on Form 10-K/A;
2. LIN's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1995, as amended by Amendment No. 1 thereto on Form 10-Q/A, and June 30,
1995;
3. LIN's Current Reports on Form 8-K dated December 28, 1994, March 7,
1995, April 28, 1995 and June 30, 1995; and
4. The description of the LIN Rights contained in LIN's Registration
Statement on Form 8-A dated as of May 2, 1988, as amended by amendments on
Form 8 dated as of January 13, 1989, June 19, 1989, September 10, 1989 and
March 2, 1990 and on Form 8-A/A dated as of November 12, 1993.
iii
<PAGE>
All documents filed by LIN pursuant to Sections 13(a), 13(c), 14 and 15(d) of
the Exchange Act subsequent to the date hereof and prior to the date of the
Annual Meeting shall be deemed to be incorporated by reference herein and to
be a part hereof from the date any such document is filed.
Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to constitute a part hereof except as so
modified or superseded. All information appearing in this Proxy Statement is
qualified in its entirety by the information and financial statements
(including notes thereto) appearing in the documents incorporated herein by
reference, except to the extent set forth in the immediately preceding
statement.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY STATEMENT
OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN. ANY INFORMATION OR REPRESENTATIONS WITH RESPECT TO SUCH
MATTERS NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY LIN. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF LIN SINCE THE DATE HEREOF OR THAT THE INFORMATION IN THIS PROXY
STATEMENT OR IN THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
iv
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ADDITIONAL INFORMATION..................................................... iii
AVAILABLE INFORMATION...................................................... iii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ iii
INDEX OF DEFINED TERMS..................................................... vii
SUMMARY.................................................................... 1
THE ANNUAL MEETING......................................................... 12
Annual Meeting........................................................... 12
Record Date; Shares Entitled to Vote; Vote Required...................... 12
Proxies; Proxy Solicitation.............................................. 13
SPECIAL FACTORS............................................................ 14
Background of the Merger................................................. 14
Purpose, Structure and Reasons for the Merger............................ 21
Fairness of the Transaction; Recommendations............................. 21
Fairness Opinion of Wasserstein Perella.................................. 24
Private Market Value View of Morgan Stanley.............................. 30
Private Market Value View of Bear Stearns and Lehman Brothers............ 36
Private Market Value Determination of Wasserstein Perella................ 45
Certain Projections...................................................... 50
Accounting Treatment..................................................... 58
Interests of Certain Persons in the Merger; Conflicts of Interest........ 58
Certain Effects of the Merger; Operations of LIN After the Merger........ 59
Certain Federal Income Tax Consequences.................................. 59
Terms of the PMVG........................................................ 60
Litigation............................................................... 63
THE MERGER................................................................. 67
Terms of the Merger...................................................... 67
Effective Time of the Merger............................................. 68
Payment for Shares....................................................... 68
Representations and Warranties........................................... 69
Certain Covenants of McCaw............................................... 70
Business of LIN Pending the Merger....................................... 70
Reasonable Efforts....................................................... 70
Conditions; Waivers...................................................... 70
Termination, Amendment and Waiver........................................ 71
Regulatory Approvals..................................................... 72
Expenses and Fees........................................................ 72
FINANCING OF THE MERGER.................................................... 73
RIGHTS OF DISSENTING STOCKHOLDERS.......................................... 73
ELECTION OF DIRECTORS...................................................... 74
Nominees for Director.................................................... 74
Arrangements for the Election of Directors............................... 75
LIN Board Committees and Meetings........................................ 75
Director Compensation.................................................... 76
EXECUTIVE OFFICERS......................................................... 76
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
EXECUTIVE COMPENSATION.................................................... 77
Summary Compensation Table.............................................. 77
Option Grants in Fiscal Year 1994....................................... 78
Aggregated Option Exercises in Fiscal Year 1994 and Fiscal Year-End Op-
tion Values............................................................ 79
Pension Plan............................................................ 79
Pension Plan Table...................................................... 80
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements........................................................... 80
Board Committee Report on Executive Compensation........................ 82
Stock Price Performance................................................. 84
Compliance with Section 16(a) of the Exchange Act....................... 84
CERTAIN INFORMATION REGARDING AT&T, McCAW, HOLDINGS, MERGER SUB AND LIN... 85
AT&T.................................................................... 85
McCaw................................................................... 85
Holdings................................................................ 85
Merger Sub.............................................................. 85
LIN..................................................................... 85
Certain Transactions Among LIN, AT&T and McCaw.......................... 85
Relationship with LIN Television........................................ 87
CERTAIN PRO FORMA FINANCIAL INFORMATION................................... 89
MARKET PRICES OF LIN COMMON SHARES; DIVIDEND HISTORY...................... 91
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............ 92
Principal Stockholders.................................................. 92
Security Ownership of Management........................................ 93
Beneficial Ownership of AT&T Common Shares.............................. 94
CURRENT INFORMATION: DELISTING AND DEREGISTRATION......................... 95
INDEPENDENT AUDITORS...................................................... 95
PROPOSALS BY LIN STOCKHOLDERS............................................. 95
</TABLE>
<TABLE>
<C> <S> <C>
APPENDIX A --Agreement and Plan of Merger, dated April 28, 1995, as
amended and restated June 30, 1995, among McCaw, Holdings,
Merger Sub and LIN.
APPENDIX B --Fairness Opinion of Wasserstein Perella.
APPENDIX C --Summary of Appraisal Rights.
APPENDIX D --Private Market Value Guarantee, dated December 11, 1989,
between McCaw and LIN, as amended.
APPENDIX E --Certain Information Regarding Directors and Executive
Officers of AT&T, McCaw, Holdings and Merger Sub.
</TABLE>
vi
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
1969 Plan.................................................................. 80
Accretion Amount........................................................... i
Additional Amount.......................................................... i
AirTouch................................................................... 27
Annual Meeting............................................................. i
ARPU....................................................................... 39
Associated................................................................. 28
Assumption Ratio........................................................... 67
AT&T....................................................................... i
AT&T Common Shares......................................................... 16
Audit Committee............................................................ 76
Base Case.................................................................. 25
Bear Stearns............................................................... 3
Bell Atlantic.............................................................. 28
BellSouth.................................................................. 14
BellSouth Merger Agreement................................................. 14
CDPD....................................................................... 51
Cellular Communications.................................................... 27
Centel..................................................................... 28
Centennial................................................................. 27
Certificates............................................................... 68
churn...................................................................... 50
CICC....................................................................... 86
Class Notice............................................................... 63
Closing.................................................................... 70
Code....................................................................... 62
Commission................................................................. iii
CommNet.................................................................... 27
Compensation Committee..................................................... 75
Contel..................................................................... 28
CRSP....................................................................... 83
Definition................................................................. 37
Delaware Chancery Court.................................................... C-2
DGCL....................................................................... 4
Dissenting Shares.......................................................... 5
EBITDA..................................................................... 27
Effective Time............................................................. 4
ERISA...................................................................... 80
Escrow Account............................................................. 69
Escrow Amount.............................................................. 69
ESMR....................................................................... 39
ESPP....................................................................... 91
Exchange Act............................................................... iii
Executive Plan............................................................. 81
Fairness Opinion........................................................... 3
Fees....................................................................... 65
Group Members.............................................................. 16
GTE........................................................................ 28
Holdings................................................................... i
</TABLE>
vii
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Indemnified Parties........................................................ 7
Initial public trading view................................................ 44
LCH........................................................................ 10
LCH Preferred Stock........................................................ 10
Lehman Brothers............................................................ 3
LIN........................................................................ i
LIN Board.................................................................. i
LIN Closing................................................................ 81
LIN Common Shares.......................................................... i
LIN Independent Directors.................................................. ii
LIN Management Base Case................................................... 25
LIN Merger Shares.......................................................... 65
LIN Public Shares.......................................................... 1
LIN Rights................................................................. 69
LIN Television............................................................. 10
LIN Television Common Stock................................................ 87
LTM........................................................................ 27
Majority Vote of the LIN Public Stockholders............................... 1
McCaw...................................................................... i
McCaw Management Case...................................................... 25
McCaw Offer................................................................ 14
McCaw/AT&T Closing......................................................... 81
McCaw/AT&T Merger.......................................................... 77
Memorandum of Understanding................................................ 7
Merger..................................................................... i
Merger Agreement........................................................... i
Merger Consideration....................................................... i
Merger Date................................................................ C-2
Merger Sub................................................................. i
Metromedia................................................................. 28
Minimum Merger Consideration............................................... 3
Morgan Stanley............................................................. 3
named executive officers................................................... 77
NYNEX...................................................................... 28
Option..................................................................... 67
Option Plan................................................................ 67
Original Merger............................................................ 18
Original Merger Agreement.................................................. ii
Pacific Telesis............................................................ 28
Paying Agent............................................................... 68
PCS........................................................................ 35
Pension Plan............................................................... 79
PMVG....................................................................... ii
pops....................................................................... 27
Private Market Price....................................................... 16
qualified stock options.................................................... 67
Record Date................................................................ 1
Rights Agreement........................................................... 16
RSA........................................................................ 41
SBC........................................................................ 28
Schedule 13E-3............................................................. iii
</TABLE>
viii
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Section 262................................................................ C-1
Sensitivity Case........................................................... 29
Settled Claims............................................................. 65
Settlement Class........................................................... 64
SFAS....................................................................... 10
SNET....................................................................... 28
Spin-off Date.............................................................. 87
Spin-off Record Date....................................................... 87
Stipulation of Settlement.................................................. 7
Stockholders Litigation.................................................... i
Stock Purchase Plan........................................................ 68
Subsidiary................................................................. 70
Surviving Corporation...................................................... 67
Television Spin-off........................................................ 10
Transaction................................................................ 63
U S Cellular............................................................... 27
U S WEST................................................................... 28
Vanguard................................................................... 27
Wasserstein Perella........................................................ 3
</TABLE>
ix
<PAGE>
SUMMARY
Certain significant matters discussed in this Proxy Statement are summarized
below. This summary is not intended to be complete and is qualified in all
respects by reference to the more detailed information appearing or
incorporated by reference in this Proxy Statement (including the Appendices
hereto).
ANNUAL MEETING OF LIN STOCKHOLDERS
Date, Time and Place of
the Annual Meeting....... The Annual Meeting is to be held on Tuesday,
October 3, 1995 at 10:00 a.m., local time, at the
offices of AT&T located at 5 Wood Hollow Road,
Parsippany, New Jersey 07054.
Purpose of the Annual
Meeting.................. The purpose of the Annual Meeting is (i) to
consider and vote upon a proposal to approve and
adopt the Merger Agreement and the Merger and (ii)
to elect ten directors to serve until the next
Annual Meeting or earlier consummation of the
Merger.
Record Date............... Only holders of record of LIN Common Shares at the
close of business on August 11, 1995 (the "Record
Date") are entitled to notice of and to vote at the
Annual Meeting. On that date, 51,776,606 LIN Common
Shares were outstanding and entitled to vote, held
by approximately 1,222 holders of record. Holders
of LIN Common Shares are entitled to one vote per
share on all matters to be voted on by the holders
of LIN Common Shares.
Vote Required............. The affirmative vote of (i) the holders of at least
a majority of the LIN Common Shares outstanding as
of the Record Date and (ii) the holders of at least
a majority of the LIN Common Shares not owned by
McCaw or any of its affiliates or any member of a
"group", as such term is used for purposes of
Schedule 13D under the Exchange Act, of which McCaw
or its affiliates are members with respect to
securities of LIN (the "LIN Public Shares"),
present (or represented by proxy) and entitled to
vote at the Annual Meeting at which a majority of
the LIN Public Shares is present in person or by
proxy (a "Majority Vote of the LIN Public
Stockholders"), is required for approval and
adoption of the Merger Agreement and the Merger.
For purposes of the foregoing, LIN Common Shares
held by directors or executive officers of AT&T,
McCaw, Holdings or Merger Sub will not be
considered LIN Public Shares. LIN Common Shares
held by directors or executive officers of LIN who
are not directors, executive officers or employees
of AT&T, McCaw or any of their non-LIN subsidiaries
will be considered LIN Public Shares. Under the
Merger Agreement, McCaw has agreed to cause the LIN
Common Shares beneficially owned by it, its
affiliates or any of its subsidiaries to be voted
in favor of the Merger Agreement and the Merger if
the Merger Agreement and the Merger are approved by
a Majority Vote of the LIN Public Stockholders.
To the best knowledge of McCaw and LIN, each of the
directors and executive officers of AT&T, McCaw,
Holdings, Merger Sub and LIN who beneficially owns
LIN Common Shares intends to vote in favor of the
Merger Agreement and the Merger for the reasons set
forth herein
1
<PAGE>
with respect to the recommendations of the LIN
Board. As of the Record Date, such directors and
executive officers beneficially owned less than
0.1% of the outstanding LIN Common Shares.
See "SPECIAL FACTORS--Fairness of the Transaction;
Recommendations."
With respect to the election of directors, the ten
nominees who receive the greatest number of votes
cast for the election of directors at the Annual
Meeting will be elected as directors. In addition,
pursuant to the terms of the PMVG, the LIN
Independent Directors nominated for election at the
Annual Meeting were nominated by the existing LIN
Independent Directors and are required to be
elected by a Majority Vote of the LIN Public
Stockholders. McCaw will vote its and its
subsidiaries' LIN Common Shares for the election of
the LIN Independent Director nominees receiving
such a Majority Vote of the LIN Public
Stockholders. McCaw also intends to cause the LIN
Common Shares beneficially owned by it to be voted
in favor of the seven nominees set forth herein
under "ELECTION OF DIRECTORS" as designees of
McCaw.
See "THE ANNUAL MEETING--Record Date; Shares
Entitled to Vote; Vote Required."
THE MERGER
General................... Upon consummation of the Merger, Merger Sub will
merge into LIN, LIN will become a wholly owned
subsidiary of Holdings (and an indirect wholly
owned subsidiary of AT&T and McCaw) and each LIN
Common Share issued and outstanding immediately
prior to the Merger (other than LIN Common Shares
owned by McCaw or any of its wholly owned
subsidiaries or held in the treasury of LIN or by
any wholly owned subsidiary of LIN, and other than
any Dissenting Shares) will be converted into the
right to receive the Merger Consideration. See
"SPECIAL FACTORS--Background of the Merger" and "--
Terms of the PMVG."
Recommendation of the LIN
Board of Directors....... The LIN Board, consisting of eight designees of
McCaw and three LIN Independent Directors, has
unanimously approved the Merger Agreement and the
Merger and determined that the Merger is fair to
the public stockholders of LIN, and unanimously
recommends that LIN stockholders vote in favor of
the Merger Agreement and the Merger. See "SPECIAL
FACTORS--Fairness of the Transaction;
Recommendations" and "--Interests of Certain
Persons in the Merger; Conflicts of Interest." To
the best knowledge of McCaw and LIN, except for the
recommendation of the LIN Board as described
herein, none of the directors and executive
officers of AT&T, McCaw, Holdings, Merger Sub and
LIN has made a recommendation in support of or
opposed to the Merger Agreement and the Merger.
2
<PAGE>
Fairness Opinion.......... On June 23, 1995, Wasserstein Perella & Co., Inc.
("Wasserstein Perella") was engaged by the LIN
Board to render a fairness opinion concerning the
consideration to be received by the LIN public
stockholders in the Merger. Wasserstein Perella was
selected because it is a nationally recognized
investment banking firm, because of its experience
in the valuation of companies, including companies
in the cellular industry, and because of its
familiarity with LIN acquired while serving as the
"Mutually Designated Appraiser" under the PMVG to
determine the private market value of the LIN
Common Shares thereunder. See "SPECIAL FACTORS--
Private Market Value Determination of Wasserstein
Perella." The LIN Board did not consider
Wasserstein Perella's prior engagement as the
"Mutually Designated Appraiser" under the PMVG to
constitute a conflict of interest with respect to
its engagement to render a fairness opinion. On
June 30, 1995, Wasserstein Perella delivered its
fairness opinion (the "Fairness Opinion") and
financial presentation to the LIN Board to the
effect that the $129.50 per LIN Common Share
representing the minimum consideration to be
received by the LIN public stockholders in the
Merger (the "Minimum Merger Consideration") is fair
from a financial point of view to such
stockholders. A copy of the Fairness Opinion,
setting forth the assumptions made, matters
considered and limits of the review by Wasserstein
Perella in rendering the Fairness Opinion, is
attached as Appendix B. The Fairness Opinion is
directed only to the fairness from a financial
point of view to the LIN public stockholders of the
Minimum Merger Consideration of $129.50 per LIN
Common Share to be received pursuant to the Merger,
and it does not address any other aspect of the
Merger. The Fairness Opinion does not constitute a
recommendation to any stockholder with respect to
whether to vote in favor of the Merger and should
not be relied upon by any stockholder as such. See
"SPECIAL FACTORS--Fairness Opinion of Wasserstein
Perella."
Other Reports and
Appraisals............... As required by the process set forth in the PMVG,
in January 1995, McCaw and the LIN Independent
Directors each designated nationally recognized
investment banking firms to determine such firms'
views of the private market value per LIN Common
Share as defined in the PMVG. McCaw designated
Morgan Stanley & Co. Incorporated ("Morgan
Stanley") for this purpose. The LIN Independent
Directors designated Bear, Stearns & Co. Inc.
("Bear Stearns") and Lehman Brothers Inc. ("Lehman
Brothers"), acting jointly. On February 15, 1995,
Morgan Stanley delivered its final view that the
private market value per LIN Common Share was $105,
assuming a closing date for an acquisition of LIN
of no earlier than June 30, 1995. On the same date,
Bear Stearns and Lehman Brothers delivered their
final view that the private market value per LIN
Common Share was $155, assuming a closing date for
an acquisition of LIN of June 30, 1995. Under the
PMVG, because the final view of Bear Stearns and
Lehman Brothers was more than 110% of the final
view of Morgan Stanley, Morgan Stanley, on the one
hand, and Bear Stearns and Lehman Brothers, on the
other hand, were required to designate jointly
another investment
3
<PAGE>
banking firm to determine the private market value
per LIN Common Share. Pursuant to these provisions,
Wasserstein Perella was engaged for this purpose.
On March 7, 1995, Wasserstein Perella determined,
based on the assumptions and other factors set
forth in its determination letter, that the private
market value per LIN Common Share is $127.50. See
"SPECIAL FACTORS--Background of the Merger," "--
Private Market Value View of Morgan Stanley," "--
Private Market Value View of Bear Stearns and
Lehman Brothers," "--Private Market Value
Determination of Wasserstein Perella" and "--Terms
of the PMVG."
Effective Time of the
Merger................... Following receipt of the required stockholder
approval and satisfaction or waiver (where
permissible) of the other conditions to the Merger,
the Merger will be consummated and become effective
on the date and at the time (the "Effective Time")
at which the certificate of merger to be filed
pursuant to the General Corporation Law of the
State of Delaware (the "DGCL") is accepted for
filing by the Secretary of State of the State of
Delaware or such later date and time as may be
specified, with the approval of LIN and McCaw, in
such certificate of merger. The LIN public
stockholders will continue to be stockholders of
LIN until the Effective Time. See "THE MERGER--
Effective Time of the Merger" and "--Conditions;
Waivers."
Surrender of Certificates
in the Merger............ Promptly after the Effective Time, the Paying Agent
(as defined herein) will mail to each record holder
of certificates that immediately prior to the
Effective Time represented LIN Common Shares a form
of letter of transmittal which will specify
instructions for use in surrendering such
certificates and receiving the Merger Consideration
therefor. See "THE MERGER--Payment for Shares" and
"RIGHTS OF DISSENTING STOCKHOLDERS." LIN
STOCKHOLDERS ARE REQUESTED NOT TO SURRENDER THEIR
CERTIFICATES FOR EXCHANGE UNTIL SUCH TRANSMITTAL
FORM AND INSTRUCTIONS ARE RECEIVED.
Rights of Dissenting
Stockholders............. Under Section 262 of the DGCL, any holder of record
of LIN Common Shares who neither votes in favor of
the Merger nor consents thereto in writing, who
delivers a demand for appraisal prior to the vote
of the LIN stockholders on the Merger, and who has
otherwise complied with the applicable requirements
of Section 262 of the DGCL, has the right to an
appraisal of, and to receive cash payment for, the
"fair value" of such shares at the Effective Time
(excluding any element of value arising from the
accomplishment or expectation of the Merger). In
order to exercise such right, a stockholder must
comply with each of the procedural requirements of
Section 262 of the DGCL, a summary of and the text
of which is set forth in Appendix C hereto. Holders
of LIN Common Shares should read Section 262 of the
DGCL in its entirety. The "fair value" of each LIN
Common Share would be determined in judicial
proceedings, the results of which cannot be
predicted. The failure to take any of the steps
required under Section 262 of the DGCL in a timely
manner will result in a loss of appraisal rights.
LIN Common Shares outstanding immediately prior to
the Effective Time and held by a holder who has not
voted in favor of the
4
<PAGE>
Merger or consented thereto in writing and who has
demanded appraisal for such LIN Common Shares in
accordance with the DGCL ("Dissenting Shares") will
not be converted into the right to receive the
Merger Consideration, unless and until the holder
thereof fails to perfect or withdraws or otherwise
loses such holder's right to appraisal and payment
under the DGCL. See "RIGHTS OF DISSENTING
STOCKHOLDERS" and Appendix C hereto.
Business of LIN Pending
the Merger............... LIN has agreed that, prior to the Effective Time or
earlier termination of the Merger Agreement, except
as contemplated by the Merger Agreement, LIN and
its subsidiaries will each conduct its operations
according to its ordinary course of business
consistent with past practice. Pending the
Effective Time, LIN and its subsidiaries may
convert their cellular systems (to the extent they
are not already so converted) to provide equal
access for long-distance carriers in connection
with long-distance communications using LIN's or
its subsidiaries' services and, following such
conversion, may market their services under the
AT&T service mark, in each case on such schedule as
may be determined by McCaw. AT&T has agreed to make
use of the AT&T service mark available to LIN and
its subsidiaries, for purposes of so marketing
their services, on a non-exclusive, royalty-free
basis. Following the commencement of the marketing
of any service of LIN or any of its subsidiaries
under the AT&T service mark, AT&T has agreed that
it will continue to make the use of the AT&T
service mark available on such basis with respect
to such service, and such service will continue to
be so marketed under the AT&T service mark, for so
long as AT&T directly or indirectly owns at least a
majority of the voting power of LIN's capital stock
entitled to vote generally in the election of
directors, unless a majority of the LIN Independent
Directors otherwise consents. See "THE MERGER--
Business of LIN Pending the Merger."
Certain Effects of the
Merger................... If the proposed Merger is consummated, the present
holders of LIN Public Shares will not share in
LIN's future earnings and growth. Instead, each
holder of a LIN Public Share (other than a holder
of Dissenting Shares, unless such holder fails to
perfect or withdraws or otherwise loses such
holder's appraisal rights) will have the right to
receive the Merger Consideration for each such LIN
Public Share held. See "SPECIAL FACTORS--Certain
Effects of the Merger; Operations of LIN After the
Merger."
Conditions to the Merger.. The consummation of the Merger is conditioned upon
requisite stockholder approval, including approval
by a Majority Vote of the LIN Public Stockholders,
and upon the fulfillment or waiver (where
permissible) of certain other conditions set forth
in the Merger Agreement. See "THE MERGER--
Conditions; Waivers." McCaw's obligation to
consummate the Merger is conditioned on, among
other things, final court approval of the proposed
settlement of the Stockholders Litigation. See
"SPECIAL FACTORS--Litigation."
5
<PAGE>
Termination............... The Merger Agreement may be terminated (i) by
mutual consent of McCaw and LIN, (ii) by LIN if the
Merger has not been consummated by December 31,
1995 (or if the Merger and the Merger Agreement
have been approved by the requisite vote of the LIN
stockholders by December 31, 1995 and the Merger is
being pursued in good faith by McCaw but has not
been completed due to regulatory delays or
litigation, August 31, 1996), (iii) by McCaw if the
Merger has not been consummated by November 30,
1995 and (iv) under certain other circumstances,
including by either McCaw or LIN if, at the Annual
Meeting, the Merger and the Merger Agreement are
not approved by a Majority Vote of the LIN Public
Stockholders. See "THE MERGER--Termination,
Amendment and Waiver."
Certain Federal Income
Tax Consequences......... The exchange of LIN Common Shares for the Merger
Consideration in the Merger will result in the
recognition of gain or loss to the holder in an
amount by which the proceeds received in exchange
for such LIN Common Shares exceed or are less than
the holder's tax basis in the LIN Common Shares.
The gain or loss may be capital or ordinary in
nature, depending upon the holder's circumstances.
HOLDERS OF LIN COMMON SHARES SHOULD CONSULT THEIR
OWN TAX ADVISORS AS TO ANY FEDERAL, STATE, LOCAL,
FOREIGN OR OTHER TAX CONSIDERATIONS RELEVANT TO
THEM. See "SPECIAL FACTORS--Certain Federal Income
Tax Consequences."
Regulatory Approvals...... No regulatory approvals are anticipated to be
required for consummation of the Merger. See "THE
MERGER--Regulatory Approvals."
Expenses and Fees......... Subject to certain exceptions, each party will pay
its own expenses in connection with the Merger. See
"THE MERGER--Expenses and Fees."
Interests of Certain
Persons in the Merger; Eight of the eleven members of the LIN Board are
Conflicts of Interest.... designees and/or employees of AT&T or McCaw and,
therefore, have a conflict with respect to the
Merger and the Merger Agreement, given that McCaw
is the other party to the Merger Agreement and
would acquire all the LIN Public Shares if the
Merger is consummated. In addition, once McCaw
determined to proceed with an acquisition of all
the LIN Public Shares, the PMVG provided that McCaw
was required to enter into an agreement with LIN
(containing customary terms and conditions
applicable in a situation in which the acquiror has
an ownership position comparable to McCaw's
ownership interest in LIN) providing for such
acquisition and to cause a meeting of stockholders
of LIN to be held as soon as practicable to
consider and vote thereon. If McCaw were not to
have done so, it might be deemed to have breached
the PMVG. Holdings owns directly approximately
52.2% of the total number of LIN Common Shares
outstanding and, because they control Holdings,
AT&T and McCaw exercise indirectly the power to
vote and dispose of those LIN Common Shares.
6
<PAGE>
Under the Merger Agreement, McCaw and Holdings have
agreed to cause LIN as the surviving corporation in
the Merger to honor all existing rights to
indemnification in favor of any of the present or
former directors, officers or employees of LIN or
any of its Subsidiaries (as defined herein) (the
"Indemnified Parties") as provided in LIN's
Certificate of Incorporation or By-Laws or
otherwise in effect on the date of the Merger
Agreement (including, without limitation, as
provided in the PMVG). In addition, certain
executive officers and directors of LIN have
entered into employment agreements or are subject
to other bonus or severance arrangements that will
be triggered by consummation of the Merger or by
severance of employment following consummation of
the Merger. Further, in the Merger Agreement, McCaw
agreed that AT&T would assume all outstanding
options granted under LIN's option plans. In the
event the Merger is consummated, vesting of some
or, under certain circumstances, all options to
purchase LIN Common Shares held by certain LIN
executive officers will accelerate.
See "SPECIAL FACTORS--Interests of Certain Persons
in the Merger; Conflicts of Interest" and
"EXECUTIVE COMPENSATION--Employment Contracts and
Termination of Employment and Change-in-Control
Arrangements."
Litigation................ Certain lawsuits were filed in connection with the
Original Merger Agreement, alleging, among other
things, breach of fiduciary duties by AT&T, McCaw
and others in connection with the determination of
the private market value per LIN Common Share under
the PMVG. A Memorandum of Understanding dated June
22, 1995 (the "Memorandum of Understanding") was
executed providing for the settlement of these
lawsuits and a Stipulation and Agreement of
Compromise, Settlement and Release (the
"Stipulation of Settlement") was executed by all
parties with respect to such settlement and filed
with the Delaware Chancery Court (as defined
herein) on July 27, 1995. A hearing with respect to
the Stipulation of Settlement has been scheduled
for September 15, 1995 or such adjourned date as
the Delaware Chancery Court may direct. See
"SPECIAL FACTORS--Litigation."
The entry of a final and nonappealable order of the
Delaware Chancery Court approving the settlement is
a waivable condition to McCaw's obligation to
consummate the Merger. If the Delaware Chancery
Court issues an order approving the settlement, an
appeal of such order may be filed within 30 days of
such order after which, if no appeal is filed, the
order will be final and nonappealable. McCaw does
not intend to waive the condition to its obligation
to consummate the Merger that the Delaware Chancery
Court issue an order approving the settlement.
However, if such an order is issued and no
objections to the settlement have been filed prior
to the issuance of such order, McCaw would consider
waiving the portion of such condition that would
require the 30-day appeal period to expire without
an appeal being filed. If McCaw were to make such a
waiver, and assuming the
7
<PAGE>
satisfaction or waiver of all other conditions to
the Merger, the Merger would be consummated as
promptly as practicable following issuance of the
Delaware Chancery Court's order and receipt of the
requisite approvals of the LIN stockholders. If
such condition were not satisfied or waived by
McCaw, McCaw would be entitled to delay
consummation of the Merger and, if the Merger is
not consummated by November 30, 1995, to terminate
the Merger Agreement. See "THE MERGER--Conditions;
Waivers--Conditions to the Obligations of McCaw,
Holdings and Merger Sub" and "--Termination,
Amendment and Waiver."
Financing of the Merger... The funds necessary for payment of the Merger
Consideration are expected to be obtained by McCaw
and Holdings from the proceeds of capital
contributions and/or loans from AT&T, which expects
to obtain such funds from cash on hand and short-
term borrowings. However, AT&T has not guaranteed
the payment of the Merger Consideration and has no
legal obligation to provide such funds. McCaw's
obligation to consummate the Merger is not
conditioned on financing. Accordingly, if all
conditions to McCaw's obligation to consummate the
Merger were satisfied but such funds were not
available, McCaw would be in breach of the Merger
Agreement. See "FINANCING OF THE MERGER."
Failure to Approve or
Complete the Merger...... In the event the Merger Agreement and the Merger
are not approved by the requisite vote of the LIN
stockholders (assuming the vote thereon occurs by
December 31, 1995), the PMVG will remain in effect
in accordance with its terms, except that McCaw's
obligation either to acquire the LIN Public Shares
or to put all of LIN up for sale will terminate. In
the event the Merger Agreement and the Merger are
approved by the requisite vote of the LIN
stockholders by December 31, 1995, the PMVG
provides that McCaw will have until August 31, 1996
to complete the Merger, so long as the Merger is
being pursued in good faith by McCaw and the
failure to complete the Merger is due to regulatory
delays or litigation. Otherwise, under the PMVG,
McCaw will have until December 31, 1995 to complete
the Merger. In either case, if the Merger is not
completed by the applicable date, the PMVG provides
that McCaw will put LIN in its entirety up for sale
under the direction of the LIN Independent
Directors in a manner intended by the LIN
Independent Directors to maximize value for all LIN
Common Shares. Pursuant to the PMVG, such a sale
would be conducted by the LIN Independent Directors
and the sale procedures would be set by the LIN
Independent Directors. See "SPECIAL FACTORS--Terms
of the PMVG."
ELECTION OF DIRECTORS
Nominees for Election..... Ten persons have been nominated for reelection to
the LIN Board. Three of the nominees are the three
LIN Independent Directors and the remaining seven
nominees have been designated by AT&T and McCaw.
See "ELECTION OF DIRECTORS."
8
<PAGE>
AT&T, MCCAW, HOLDINGS, MERGER SUB AND LIN
AT&T Corp. ............... AT&T is principally engaged in global information
movement and management, financial services and
leasing. The mailing address of AT&T's principal
executive offices is 32 Avenue of the Americas, New
York, New York 10013-2412, and its telephone number
is (212) 387-5400. See "CERTAIN INFORMATION
REGARDING AT&T, McCAW, HOLDINGS, MERGER SUB AND
LIN--AT&T."
McCaw Cellular
Communications, Inc. .... McCaw, a wholly owned subsidiary of AT&T, is
principally engaged in the business of providing
cellular communication services. The mailing
address of McCaw's principal executive offices is
5400 Carillon Point, Kirkland, Washington 98033,
and its telephone number is (206) 827-4500. See
"CERTAIN INFORMATION REGARDING AT&T, McCAW,
HOLDINGS, MERGER SUB AND LIN--McCaw."
MMM Holdings, Inc. ........ Holdings, a wholly owned subsidiary of McCaw, was
formed for the purpose of holding investment
securities and conducts no other business. The
mailing address of Holdings' principal executive
offices is c/o McCaw Cellular Communications, Inc.,
5400 Carillon Point, Kirkland, Washington 98033,
and its telephone number is (206) 827-4500. See
"CERTAIN INFORMATION REGARDING AT&T, McCAW,
HOLDINGS, MERGER SUB AND LIN--Holdings."
MMM Acquisition Corp. .... Merger Sub, a wholly owned subsidiary of Holdings,
was formed for the purpose of effecting the Merger
and has not conducted any other business. The
mailing address of Merger Sub's principal executive
offices is c/o McCaw Cellular Communications, Inc.,
5400 Carillon Point, Kirkland, Washington 98033,
and its telephone number is (206) 827-4500. See
"CERTAIN INFORMATION REGARDING AT&T, McCAW,
HOLDINGS, MERGER SUB AND LIN--Merger Sub."
LIN Broadcasting
Corporation.............. LIN is engaged primarily in the business of
providing cellular voice telephone and data
services. McCaw owns an approximate 52.2% interest
in LIN through McCaw's wholly owned subsidiary,
Holdings. The mailing address of LIN's principal
executive offices is 5295 Carillon Point, Kirkland,
Washington 98033, and its telephone number is (206)
828-1902. See "CERTAIN INFORMATION REGARDING AT&T,
McCAW, HOLDINGS, MERGER SUB AND LIN--LIN."
9
<PAGE>
LIN BROADCASTING CORPORATION
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following summary historical financial data of LIN have been extracted
from financial statements filed with the Commission and should be read in
conjunction with such financial statements and the notes thereto. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." Results for the interim six-
month periods are not necessarily indicative of results to be expected for the
full fiscal year.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------------
1995(1) 1994(1) 1994(1) 1993 1992 1991 1990
---------- --------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenue(6)........ $ 476,721 $ 458,526 $ 971,726 $ 745,893 $ 607,587 $ 496,759 $ 395,762
Operating income........ 73,243 85,080 206,110 128,305 130,015 81,430 134,912
Equity in income of
unconsolidated
affiliates............. 67,546 64,201 115,010 103,125 96,977 82,338 70,607
Cumulative effect of the
change in accounting
for income taxes....... -- -- -- -- -- (693,835)(2) --
Net income (loss)....... $ 37,057 $ 491,666(3) $ 564,150(3) $ (60,727) $ (68,952) $ (838,131) $ (222,844)(4)
Per share amounts:
Income (loss) before
cumulative effect of
the change in
accounting for
income taxes.......... $ 0.71 $ 9.46 $ 10.84 $ (1.18) $ (1.34) $ (2.81) $ (4.33)
Cumulative effect of
the change in
accounting for income
taxes................. -- -- -- -- -- $ (13.50) --
---------- --------- ---------- ---------- ---------- ---------- ----------
Net income (loss)...... $ 0.71 $ 9.46 $ 10.84 $ (1.18) $ (1.34) $ (16.31) $ (4.33)
========== ========= ========== ========== ========== ========== ==========
Net income (loss) on a
fully diluted basis... $ 0.71 $ 9.46 $ 10.84 $ (1.18) $ (1.34) $ (16.31) $ (4.33)
Average common and
common equivalent
shares outstanding(5).. 52,180 51,967 52,040 51,445 51,417 51,395 51,455
Ratio of earnings to
fixed charges.......... 1.45 6.29 4.66 1.34 1.22 0.87 (0.49)
BALANCE SHEET DATA:
Cash, cash equivalents
and
marketable securities.. $ 31,434 $ 90,312 $ 47,467 $ 102,831 $ 122,495 $ 108,924 $ 63,809
Working capital......... (180,209) (87,316) (171,948) (69,269) (6,580) 27,698 63,234
Total assets............ 2,967,264 3,104,944 2,923,873 2,909,523 2,862,910 2,798,944 2,693,117
Total assets less
deferred research and
development charges and
excess of costs of
assets over book value. 1,060,701 1,040,200 983,179 1,013,316 924,985 782,397 596,956
Long-term debt.......... 1,434,250 1,676,633 1,443,125 1,551,447 1,694,338 1,769,682 1,716,250
Redeemable preferred
stock of a subsidiary.. -- -- -- 1,305,248 1,170,948 1,036,648 902,348
Stockholders' equity
(deficit).............. 342,381 175,383 297,738 (1,102,365) (1,046,736) (978,573) (142,334)
Book value per share(7). $ 6.61 $ 3.40 $ 5.76 $ (21.40) $ (20.35) $ (19.04) $ (2.77)
</TABLE>
- -------
(1) On June 24, 1994, LIN disposed of its equity interest in its Philadelphia
cellular operations and its GuestInformant specialty publishing business in
connection with the redemption of the preferred stock (the "LCH Preferred
Stock") of LCH Communications, Inc.("LCH"), a wholly owned subsidiary of
LIN. On December 28, 1994, LIN completed the distribution (the "Television
Spin-off") to the holders of the LIN Common Shares of all of the
outstanding common stock of LIN's wholly owned subsidiary, LIN Television
Corporation ("LIN Television"). As a result of these transactions, LIN's
financial position and results of operations as of and for the year ended
December 31, 1994, and as of and for the six months ended June 30, 1995,
are not directly comparable to prior periods.
(2) LIN adopted Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes," effective January 1, 1991. The effect of the
adoption was the $693.8 million charge for the cumulative effect of the
change in accounting and an increase in deferred taxes.
(3) Includes a gain of $468.7 million related to the redemption of the LCH
Preferred Stock.
(4) Includes nonrecurring charges associated with the completion of the tender
offer by McCaw of $292.9 million on a pretax basis and $245.6 million on an
after-tax basis.
(5) Common equivalent shares are included only in the periods ended June 30,
1995 and 1994 and December 31, 1994, since they would be antidilutive in
any other period.
(6) Prior years' Net Revenues presentation has been reclassified to conform to
current period presentation of Total Revenue. LIN's historical financial
statements filed with the Commission on Form 10-K have reflected Net
Revenues. Net Revenues has been increased by Cost of Equipment Sales to
reflect Total Revenue. Cost of Equipment Sales included in Net Revenues for
the years 1994-1990 was $95,257, $57,336, $35,066, $28,622 and $17,673,
respectively.
(7) The book value per LIN Common Share as of July 31, 1995 was $6.87.
10
<PAGE>
RECENT MARKET PRICES AND DIVIDEND HISTORY
The LIN Common Shares are traded principally on the Nasdaq National Market.
The following table sets forth, for the periods indicated, the high and low
sales prices per LIN Common Share on the Nasdaq National Market:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1993:
First Quarter............................................. $ 90.00 $ 75.50
Second Quarter............................................ 101.00 80.25
Third Quarter............................................. 121.75 98.50
Fourth Quarter............................................ 116.50 108.25
1994:
First Quarter............................................. 117.25 106.50
Second Quarter............................................ 122.25 102.75
Third Quarter............................................. 140.75 119.25
Fourth Quarter............................................ 146.25 133.00
1995:
First Quarter............................................. 141.50 120.25
Second Quarter............................................ 126.75 121.38
Third Quarter (through August 31)......................... 128.50 126.50
</TABLE>
On February 15, 1995, the last trading day prior to public announcement of
the views of Morgan Stanley and of Bear Stearns and Lehman Brothers as to the
private market value per LIN Common Share, the high and low sales prices per
LIN Common Share on the Nasdaq National Market were $141.50 and $138.50,
respectively. On March 7, 1995, the last trading day prior to public
announcement of the determination of Wasserstein Perella as to the private
market value per LIN Common Share, the high and low sales prices per LIN Common
Share on the Nasdaq National Market were $130.25 and $128.25, respectively. On
April 6, 1995, the last trading day prior to the public announcement that McCaw
determined to proceed with an acquisition of the LIN Public Shares at the
Private Market Price (as defined herein) of $127.50 per LIN Common Share, the
high and low sales prices per LIN Common Share on the Nasdaq National Market
were $122.25 and $121.50, respectively. On June 22, 1995, the last trading day
prior to the public announcement by McCaw that it had agreed in principle with
the plaintiffs to settle the Stockholders Litigation, the high and low sales
prices per LIN Common Share on the Nasdaq National Market were $125.25 and
$124, respectively. On August 31, 1995, the latest practicable date prior to
printing this Proxy Statement, the high and low sales prices per LIN Common
Share on the Nasdaq National Market were $128.50 and $128.25, respectively.
LIN has paid no cash dividends with respect to the LIN Common Shares for the
periods set forth above. LIN's two bank credit facilities, a senior secured
facility and a senior unsecured facility, restrict LIN's ability to pay
dividends to its stockholders. There are also restrictions on the ability of
LIN's operating subsidiaries to pay dividends to LIN. It is not anticipated
that any cash dividends will be paid on LIN Common Shares in the foreseeable
future. On December 28, 1994, LIN paid a special dividend of one share of
common stock of LIN Television for every two LIN Common Shares to holders of
record of LIN Common Shares on December 9, 1994. None of the prices above has
been adjusted for that event, but prices for the period including and following
December 28, 1994 reflect its effect. See "SUMMARY--LIN Broadcasting
Corporation Summary Consolidated Financial Data."
11
<PAGE>
THE ANNUAL MEETING
ANNUAL MEETING
This Proxy Statement is being furnished to LIN stockholders in connection
with the solicitation by the LIN Board of proxies for use at the Annual
Meeting to be held on Tuesday, October 3, 1995 at 10:00 a.m., local time, at
the offices of AT&T located at 5 Wood Hollow Road, Parsippany, New Jersey
07054.
At the Annual Meeting, LIN stockholders will consider and vote upon a
proposal to approve and adopt the Merger Agreement and the Merger. The Merger
Agreement provides that, upon the terms and subject to the conditions thereof,
Merger Sub will merge into LIN, LIN will become a wholly owned subsidiary of
Holdings (and an indirect wholly owned subsidiary of AT&T and McCaw) and each
LIN Common Share issued and outstanding immediately prior to the Merger (other
than LIN Common Shares held by McCaw or any of its wholly owned subsidiaries,
in the treasury of LIN or by any wholly owned subsidiary of LIN, which LIN
Common Shares, by virtue of the Merger and without any action on the part of
the holders thereof, will be automatically cancelled and retired and will
cease to exist with no payment being made with respect thereto, and other than
any Dissenting Shares) will be converted into the right to receive the Merger
Consideration, consisting of (i) $129.50 in cash, plus (ii) the Additional
Amount, if any, of up to $0.25 plus (iii) the Accretion Amount at an annual
rate of 5.5% from, but not including, September 15, 1995 through, and
including, the date upon which the Closing occurs. The economic terms of the
Merger were determined in connection with the proposed settlement of the
Stockholders Litigation and discussions with the LIN Independent Directors.
The Original Merger Agreement provided for the acquisition by McCaw of the
publicly held LIN Common Shares at a price of $127.50 per share, without
interest. The price of $127.50 per LIN Common Share had been determined as the
private market value per LIN Common Share under the PMVG. At the Annual
Meeting, stockholders will also be asked to elect ten directors to serve until
the next Annual Meeting or earlier consummation of the Merger or until their
successors are duly elected and qualified.
The LIN Board, consisting of eight designees of McCaw and three LIN
Independent Directors, has unanimously approved the Merger Agreement and the
Merger and determined that the Merger is fair to the public stockholders of
LIN, and unanimously recommends that LIN stockholders vote in favor of the
Merger Agreement and the Merger. See "SPECIAL FACTORS--Fairness of the
Transaction; Recommendations" and "--Interests of Certain Persons in the
Merger; Conflicts of Interest." To the best knowledge of McCaw and LIN, except
for the recommendation of the LIN Board as described herein, none of the
directors and executive officers of AT&T, McCaw, Holdings, Merger Sub and LIN
has made a recommendation in support of or opposed to the Merger Agreement and
the Merger. The Merger Agreement and the Merger have been approved by the
respective Boards of Directors of McCaw, Holdings and Merger Sub and by
Holdings as the sole stockholder of Merger Sub. Approval of the Merger
Agreement and the Merger by McCaw as the sole stockholder of Holdings, or by
AT&T as the sole stockholder of McCaw, is not required.
In the event the Merger Agreement and the Merger are not approved by the
requisite vote of the LIN stockholders (assuming the vote thereon occurs by
December 31, 1995), the PMVG will remain in effect in accordance with its
terms, except that McCaw's obligation either to acquire the LIN Public Shares
or to put all of LIN up for sale will terminate. In the event the Merger
Agreement and the Merger are approved by the requisite vote of the LIN
stockholders by December 31, 1995, the PMVG provides that McCaw will have
until August 31, 1996 to complete the Merger, so long as the Merger is being
pursued in good faith by McCaw and the failure to complete the Merger is due
to regulatory delays or litigation. Otherwise, under the PMVG, McCaw will have
until December 31, 1995 to complete the Merger. In either case, if the Merger
is not completed by the applicable date, the PMVG provides that McCaw will put
LIN in its entirety up for sale under the direction of the LIN Independent
Directors in a manner intended by the LIN Independent Directors to maximize
value for all LIN Common Shares. See "SPECIAL FACTORS--Terms of the PMVG."
RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED
The close of business on August 11, 1995 has been fixed as the Record Date
for determining the holders of LIN Common Shares who are entitled to notice of
and to vote at the Annual Meeting. As of the Record Date,
12
<PAGE>
there were 51,776,606 LIN Common Shares outstanding and entitled to vote, held
by approximately 1,222 holders of record. Holders of LIN Common Shares are
entitled to one vote per share on all matters to be voted on by the holders of
LIN Common Shares.
The presence in person or by proxy of the holders of a majority of the LIN
Common Shares entitled to vote at the Annual Meeting is necessary to
constitute a quorum for the transaction of business at the Annual Meeting. The
LIN Common Shares owned by McCaw through its wholly owned subsidiary,
Holdings, constitute approximately 52.2% of the LIN Common Shares. McCaw
intends for such LIN Common Shares to be represented at the Annual Meeting.
Accordingly, a quorum for the transaction of business at the Annual Meeting is
assured. Pursuant to the PMVG, a majority of the LIN Public Shares is also
required to be present (or represented by proxy) at the Annual Meeting.
Approval and adoption of the Merger Agreement and the Merger require (i) the
affirmative vote of the holders of at least a majority of the LIN Common
Shares outstanding as of the Record Date and (ii) a Majority Vote of the LIN
Public Stockholders. Under the terms of the Merger Agreement, McCaw has agreed
that if the Merger Agreement and the Merger are approved by a Majority Vote of
the LIN Public Stockholders, it will vote, or cause to be voted, all of the
LIN Common Shares beneficially owned by it, its affiliates or any of its
subsidiaries in favor of the approval of the Merger, the adoption of the
Merger Agreement and such other matters as may be necessary to consummate the
transactions contemplated therein. Accordingly, the stockholder approval
requirement described in clause (i) above will be satisfied if the stockholder
approval requirement described in clause (ii) above is satisfied. To the best
knowledge of McCaw and LIN, each of the directors and executive officers of
AT&T, McCaw, Holdings, Merger Sub and LIN who beneficially owns LIN Common
Shares intends to vote in favor of the Merger Agreement and the Merger for the
reasons set forth herein with respect to the recommendation of the LIN Board.
See "SPECIAL FACTORS--Fairness of the Transaction; Recommendations."
The ten nominees for election as directors who receive the greatest number
of votes cast for the election of directors at the Annual Meeting will be
elected as directors. Pursuant to the terms of the PMVG, the LIN Independent
Directors nominated for election at the Annual Meeting were nominated by the
existing LIN Independent Directors and are required to be elected by a
Majority Vote of the LIN Public Stockholders. McCaw will vote its and its
subsidiaries' LIN Common Shares for the election of the LIN Independent
Director nominees receiving such a Majority Vote of the LIN Public
Stockholders. LIN Independent Directors are subject to removal only (a) for
cause, (b) if a majority of the LIN Independent Directors approve such removal
or (c) if such removal is approved by a Majority Vote of the LIN Public
Stockholders. McCaw also intends to cause the LIN Common Shares beneficially
owned by it to be voted in favor of the seven nominees set forth herein under
"ELECTION OF DIRECTORS" as designees of McCaw.
Abstention from voting will have the practical effect of voting against
approval and adoption of the Merger Agreement and the Merger, and against
election of the LIN Independent Director nominees, because abstentions will be
included in the total LIN Common Shares voting and an abstention represents
one fewer vote for such approval and adoption, or election, among the holders
of LIN Public Shares present and entitled to vote on the matter at the Annual
Meeting. In instances where brokers are prohibited from exercising
discretionary authority for beneficial holders who have not returned a proxy
(so-called "broker nonvotes"), such broker nonvotes will have no effect with
respect to the approval and adoption of the Merger Agreement and the Merger or
the election of directors, because they will not be considered LIN Common
Shares voting on such matters. Abstention from voting will have no effect on
the election of the McCaw designees nominated for election as directors.
PROXIES; PROXY SOLICITATION
LIN Common Shares represented by properly executed proxies received at or
prior to the Annual Meeting which have not been revoked will be voted at the
Annual Meeting in accordance with the instructions contained therein. LIN
Common Shares represented by properly executed proxies for which no
instruction is given will be voted "FOR" approval and adoption of the Merger
Agreement and the Merger and "FOR" the election of
13
<PAGE>
each of the nominees for director set forth in this Proxy Statement. LIN
stockholders are requested to complete, sign, date and return promptly the
enclosed proxy card in the postage prepaid envelope provided for this purpose
to ensure that their LIN Common Shares are voted. A stockholder may revoke a
proxy at any time before it is voted by signing and returning a later-dated
proxy with respect to the same LIN Common Shares, by filing with the Secretary
of LIN a written revocation bearing a later date or by attending and voting at
the Annual Meeting. Mere attendance at the Annual Meeting will not in and of
itself revoke a proxy.
If the Annual Meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the Annual Meeting all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the Annual Meeting (except for any proxies which have theretofore effectively
been revoked or withdrawn), notwithstanding that they may have been
effectively voted on the same or any other matter at a previous meeting. McCaw
will have the ability to adjourn the Annual Meeting by virtue of voting the
LIN Common Shares beneficially owned by it without the vote of any other
stockholder.
LIN will bear the cost of soliciting proxies from its stockholders, except
that expenses incurred in connection with printing and mailing this Proxy
Statement will be shared equally by McCaw, Holdings and Merger Sub, on the one
hand, and LIN, on the other. In addition to solicitation by mail, directors,
officers and employees of LIN, AT&T, McCaw and Holdings may solicit proxies by
telephone, telegram or otherwise. Such directors, officers and employees of
LIN, AT&T, McCaw and Holdings will not be additionally compensated for such
solicitation but may be reimbursed for out-of-pocket expenses incurred in
connection therewith. Brokerage firms, fiduciaries and other custodians who
forward soliciting material to the beneficial owners of LIN Common Shares held
of record by them will be reimbursed for their reasonable expenses incurred in
forwarding such material. LIN has retained Morrow & Co. to aid in soliciting
proxies from its stockholders. The fees of such firm, which will be borne by
LIN, are estimated to be $5,500 plus reimbursement of out-of-pocket expenses.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
In April 1988, McCaw and certain of its affiliates filed a Statement on
Schedule 13D with the Commission reporting their aggregate beneficial
ownership of 2,820,400 LIN Common Shares representing approximately 5.5% of
the outstanding LIN Common Shares. Over the course of the next 14 months,
McCaw and its affiliates increased their ownership to 5,089,500 LIN Common
Shares representing approximately 9.9% of the outstanding LIN Common Shares.
On June 8, 1989, McCaw commenced a tender offer (the "McCaw Offer") pursuant
to which it offered to purchase for cash all of the LIN Common Shares it did
not then own for $120 per LIN Common Share. Negotiations between the
managements of LIN and McCaw concerning a possible transaction between the two
companies followed, but did not result in any agreement between the two
companies because the parties were not able to arrive at a mutually
satisfactory price or other terms. On July 28, 1989, McCaw revised the price
at which it was offering to purchase LIN Common Shares to $110 per LIN Common
Share following the conclusion of certain litigation in which LIN was
involved.
On September 11, 1989, LIN entered into a merger agreement (the "BellSouth
Merger Agreement") with BellSouth Corporation ("BellSouth"). Pursuant to the
BellSouth Merger Agreement, the cellular operations of LIN and BellSouth would
be combined into LIN, with BellSouth holding a 50% equity interest in LIN, the
stockholders of LIN would receive a cash payment of $20 per LIN Common Share
and LIN's television operations would be spun off to LIN's stockholders.
On October 10, 1989, McCaw revised the McCaw Offer to offer to purchase 22
million LIN Common Shares for cash for $125 per LIN Common Share. When added
to the LIN Common Shares already owned by McCaw and its affiliates, this
number of LIN Common Shares would have provided McCaw with a majority of LIN's
voting stock. In addition, McCaw indicated its intention to enter into a
mutually satisfactory PMVG-type
14
<PAGE>
agreement, as promptly as practicable following completion of the McCaw Offer.
The PMVG-type agreement was proposed by McCaw in an effort to make the McCaw
Offer more competitive vis a vis the BellSouth Merger Agreement, given the
partial nature of the McCaw Offer. In particular, the proposal was designed to
provide the holders of LIN Public Shares with a procedure under which, within
a specified time frame, McCaw would be required either to purchase the LIN
Public Shares at a price determined pursuant to such procedure or to put all
of LIN up for sale. This was considered beneficial to the holders of LIN
Public Shares because it ensured that, following completion of the McCaw
Offer, those stockholders would not be locked indefinitely into a minority
position but, instead, would be given the opportunity to participate in a
transaction in which all the LIN Public Shares would be purchased if the
holders of a majority of the LIN Public Shares desired to participate in the
transaction.
In response to the revised McCaw Offer, LIN and BellSouth agreed on October
27, 1989 to revise the terms of the BellSouth Merger Agreement. In response,
on November 20, 1989, McCaw again revised the McCaw Offer, to offer to
purchase 22.5 million LIN Common Shares for cash for $150 per LIN Common
Share, to enter into a proposed PMVG agreement (in revised form), and to cause
LIN, following successful completion of the McCaw Offer, to purchase and
distribute to LIN's stockholders, other than McCaw and its affiliates, shares
of Class A Common Stock of McCaw with an aggregate market value of $425
million.
Discussions between LIN and McCaw followed, which ultimately resulted in the
final revision of the McCaw Offer. McCaw agreed to a restructured transaction
that reduced the number of LIN Common Shares that it would offer to purchase
to 21.9 million, increased the purchase price to $154.11 per LIN Common Share,
dropped certain conditions to its tender offer and made certain changes to the
PMVG that resulted in its final form, subject to the LIN Board publicly
announcing its recommendation that LIN's stockholders accept the revised McCaw
Offer. Following discussion and based on advice from LIN's investment advisors
and legal counsel, the LIN Board, by unanimous vote and in accordance with the
BellSouth Merger Agreement, withdrew its earlier recommendation of the
transactions contemplated by that agreement and recommended that LIN's
stockholders accept the McCaw Offer and tender the LIN Common Shares pursuant
to the McCaw Offer once the conditions to the McCaw Offer were satisfied.
These conditions included a requirement that at least 21.9 million LIN Common
Shares be tendered, a financing condition, the absence of a material adverse
change in LIN, and various standard conditions relating to the absence of
legal impediments and the receipt of any necessary governmental approvals.
Among the factors cited for the LIN Board's decision to recommend the McCaw
Offer were the increased purchase price and McCaw's willingness to make
certain changes to the PMVG. Based on the increased price and the superior
financial terms of the McCaw Offer, the revisions to the PMVG, and the lesser
risks as to timing and certainty, the LIN Board determined that the McCaw
Offer was superior to the BellSouth Merger Agreement. The LIN Board was also
informed that BellSouth was not willing to revise further the BellSouth Merger
Agreement to make it superior to the revised McCaw Offer. Thereafter, LIN
requested that BellSouth terminate the BellSouth Merger Agreement. McCaw
subsequently entered into a settlement agreement with BellSouth pursuant to
which the BellSouth Merger Agreement was terminated and McCaw paid $66.5
million to BellSouth in respect of certain termination fees and expenses
contemplated by the BellSouth Merger Agreement. McCaw also paid approximately
$26.5 million to a partnership providing cellular services in Los Angeles in
which BellSouth and McCaw had 85% and 15% beneficial equity interests,
respectively.
On December 11, 1989, LIN and McCaw entered into an agreement pursuant to
which McCaw undertook to proceed with the McCaw Offer on the terms described
above and established other terms, including the execution by McCaw and LIN,
on the same day, of the PMVG. On March 5, 1990, McCaw acquired 21.9 million
LIN Common Shares pursuant to the McCaw Offer, bringing McCaw's aggregate
ownership to 26,989,500 LIN Common Shares, or approximately 52% of the
outstanding LIN Common Shares. McCaw has not increased its beneficial
ownership of LIN Common Shares since the completion of the McCaw Offer.
As set forth above, McCaw and LIN entered into the PMVG on December 11,
1989, as part of the agreement under which McCaw and LIN agreed to McCaw's
acquisition of control of LIN. The high and low sales prices per LIN Common
Share on the Nasdaq National Market on such date were $123.75 and $121.75,
15
<PAGE>
respectively. The PMVG provides that, for as long as McCaw and its affiliates
or any member of a "group", as such term is used for purposes of Schedule 13D
under the Exchange Act, of which McCaw or its affiliates are members with
respect to securities of LIN (collectively "Group Members") beneficially own
in the aggregate at least 25% of the outstanding LIN Common Shares on a fully
diluted basis or McCaw's designees constitute a majority of the LIN Board, and
any LIN Common Shares are held by other persons, a number of provisions apply.
See "SPECIAL FACTORS--Terms of the PMVG." These provisions include a
requirement that three members of the LIN Board will be LIN Independent
Directors. The current LIN Independent Directors are persons who have served
as the LIN Independent Directors since completion of the McCaw Offer and were
members of the LIN Board prior to completion of the McCaw Offer.
On November 4, 1992, AT&T and McCaw announced publicly that they were
discussing a proposed strategic alliance, including a significant investment
by AT&T in McCaw, the purchase by AT&T from McCaw's controlling stockholders
of an option to obtain voting control of McCaw and the grant by AT&T to McCaw
of a 99-year license to use the AT&T service mark on McCaw's wireless
services. Discussions with respect to the proposed alliance continued through
1992 and the first half of 1993. From time to time during this period,
officers of McCaw periodically reported to the LIN Board on the status of the
negotiations with respect to the proposed alliance. In July 1993,
representatives of AT&T informed representatives of McCaw that AT&T wished to
explore the desirability and feasibility of a merger as a possible alternative
to the proposed strategic alliance. On August 14, 1993, AT&T made a merger
proposal to McCaw, and the terms thereof were negotiated on August 14 and 15,
1993.
On August 15, 1993, the LIN Board approved: (i) certain matters related to
the LIN employees (including the establishment of certain employee benefit
plans described under "EXECUTIVE COMPENSATION"), (ii) an amendment to the
Rights Agreement, dated as of May 2, 1988, as amended and restated as of
January 13, 1989 and June 19, 1989 and as subsequently further amended,
between LIN and Manufacturers Hanover Trust Company, as Rights Agent (the
"Rights Agreement"), to provide that execution of the merger agreement
relating to the proposed AT&T/McCaw merger, and consummation of that merger,
would not constitute a "Triggering Event" or result in AT&T's becoming an
"Acquiring Person," as such terms are defined in the Rights Agreement, and
(iii) the proposed AT&T/McCaw merger for purposes of Section 203 of the DGCL.
On August 15, 1993, the proposed AT&T/McCaw merger was approved by the
Boards of Directors of AT&T and McCaw. On August 16, 1993, AT&T and McCaw
executed a merger agreement providing for the merger of McCaw and a subsidiary
of AT&T. On September 19, 1994, the merger was consummated, and AT&T acquired
all of the outstanding shares of McCaw in exchange for shares of common stock,
par value $1.00 per share (the "AT&T Common Shares"), of AT&T. Neither AT&T
nor any of its subsidiaries has acquired any LIN Common Shares except
indirectly through its acquisition of McCaw in such merger. At the time of
AT&T's acquisition of McCaw, there were five McCaw designees, in addition to
the three LIN Independent Directors, on the LIN Board. Subsequent to that
acquisition, two of the five McCaw designees resigned from the LIN Board, the
size of the LIN Board was increased by three and five persons employed by AT&T
were elected to the LIN Board.
On December 28, 1994, LIN divested itself of substantially all of its
television broadcasting operations through the Television Spin-off. The number
of network-affiliated stations owned by LIN was reduced from seven to one due
to the Television Spin-off, with the remaining station also providing
programming and marketing services to another network-affiliated station
pursuant to a local marketing agreement. See "CERTAIN INFORMATION REGARDING
AT&T, McCAW, HOLDINGS, MERGER SUB AND LIN--Relationship with LIN Television."
As required by the PMVG, a process commenced on January 1, 1995 to determine
the private market value per LIN Common Share (the "Private Market Price").
Each of McCaw and LIN commenced this process, which led to the Merger
Agreement and the proposed Merger, at such time because the PMVG required this
process to be commenced on or about January 1, 1995. The PMVG defines private
market value per LIN Common Share as "the private market price per [LIN
Common] Share (including control premium) that an unrelated third party would
pay if it were to acquire all outstanding [LIN Common] Shares (including the
[LIN Common] Shares
16
<PAGE>
held by [McCaw] and its affiliates) in an arm's-length transaction, assuming
that [LIN] was being sold in a manner designed to attract all possible
participants (including the Regional Bell Operating Companies) and to maximize
stockholder value, including if necessary through the sale or other
disposition (including tax-free spin-offs, if possible) of businesses
prohibited by legal restrictions to be owned by any particular buyer or class
of buyers (e.g., the Regional Bell Operating Companies)."
As required by the PMVG, McCaw and the LIN Independent Directors each
designated nationally recognized investment banking firms to determine such
firms' views of the private market value per LIN Common Share as so defined.
McCaw designated Morgan Stanley. The LIN Independent Directors designated Bear
Stearns and Lehman Brothers, acting jointly. Morgan Stanley and Bear Stearns
and Lehman Brothers conducted due diligence with respect to LIN, including
reviewing varying sets of projections for LIN from LIN management and from
McCaw management. See "SPECIAL FACTORS--Certain Projections." Each of the
investment banking firms also conducted various analyses with respect to
determining their views of the private market value of LIN (which are
described below under "SPECIAL FACTORS--Private Market Value View of Morgan
Stanley" and "--Private Market Value View of Bear Stearns and Lehman
Brothers").
Pursuant to the PMVG, on January 31, 1995, Morgan Stanley and Bear Stearns
and Lehman Brothers exchanged their initial views as to the private market
value per LIN Common Share. The initial view of Morgan Stanley was that the
private market value per LIN Common Share was $100. The initial view of Bear
Stearns and Lehman Brothers was that the private market value per LIN Common
Share was $162, assuming a closing date for an acquisition of LIN of June 30,
1995. As contemplated by the PMVG, at their January 31, 1995 meeting and
during the period from January 31, 1995 to February 15, 1995, Morgan Stanley
and Bear Stearns and Lehman Brothers consulted with one another with respect
to these views. This consultation included discussion of the methodologies
used by each of the investment banking firms in reaching their initial views.
On February 15, 1995, Morgan Stanley and Bear Stearns and Lehman Brothers
delivered their final views as to the private market value per LIN Common
Share. The final view of Morgan Stanley was that the private market value per
LIN Common Share was $105, assuming a closing date for an acquisition of LIN
of no earlier than June 30, 1995. The final view of Bear Stearns and Lehman
Brothers was that the private market value per LIN Common Share was $155,
assuming a closing date for an acquisition of LIN of June 30, 1995. The
analyses used to arrive at these final views are described below under
"SPECIAL FACTORS--Private Market Value View of Morgan Stanley" and "--Private
Market Value View of Bear Stearns and Lehman Brothers." Under the PMVG,
because the final view of Bear Stearns and Lehman Brothers was more than 110%
of the final view of Morgan Stanley, Morgan Stanley, on the one hand, and Bear
Stearns and Lehman Brothers, on the other hand, were required to agree upon
and jointly designate another investment banking firm of recognized national
standing to determine the private market value per LIN Common Share. Pursuant
to these provisions, on February 17, 1995, Wasserstein Perella was engaged for
this purpose.
Wasserstein Perella was provided with written presentations from Morgan
Stanley and Bear Stearns and Lehman Brothers, conducted due diligence with
respect to LIN, including reviewing varying projections from LIN management
and McCaw management and other written materials and conducting interviews
with LIN management and McCaw management, conducted two lengthy meetings with
representatives of Morgan Stanley, Bear Stearns and Lehman Brothers and
counsel for McCaw and the LIN Independent Directors, at which extensive
presentations were made, received legal advice with respect to the proper
interpretation of the PMVG and other related issues, and conducted its own
analyses of the private market value per LIN Common Share. The legal advice
provided to Wasserstein Perella by its counsel included advice as to whether,
in determining the private market value in accordance with the definition of
private market value contained in the PMVG, AT&T and McCaw should be
considered as potential buyers, an issue as to which McCaw and the LIN
Independent Directors had a difference of views. Counsel to Wasserstein
Perella provided such advice following a meeting at which counsel for McCaw
and counsel for the LIN Independent Directors made presentations to
Wasserstein Perella's counsel on this and other issues. Wasserstein Perella's
counsel concluded that under this definition (i.e., the price that "an
unrelated third party would pay if it were to acquire all outstanding [LIN
Common] Shares (including the [LIN Common] Shares held by [McCaw] and its
affiliates) in an arm's-length transaction, assuming that [LIN] was being sold
in a manner designed to attract all possible participants
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(including the Regional Bell Operating Companies) and to maximize stockholder
value"), AT&T and McCaw should not be considered potential buyers.
On March 7, 1995, Wasserstein Perella determined that the private market
value per LIN Common Share, as defined under the PMVG, is $127.50. The full
text of Wasserstein Perella's determination letter is set forth below under
"SPECIAL FACTORS--Private Market Value Determination of Wasserstein Perella."
Under the formula set forth in the PMVG, $127.50 per LIN Common Share is the
Private Market Price as defined under the PMVG, because this amount is more
than one-third and less than two-thirds of the way between the $105 per LIN
Common Share and $155 per LIN Common Share determined by Morgan Stanley and
Bear Stearns and Lehman Brothers, respectively, as the private market value
per LIN Common Share. If Wasserstein Perella's determination were not in this
middle range, the Private Market Price would have been the average of
Wasserstein Perella's determination and the closer of the other two
appraisals, except that the Private Market Price could not have been higher
than $155 (the greater of the first two views) nor lower than $105 (the lesser
of the first two views). See "SPECIAL FACTORS--Terms of the PMVG."
Pursuant to the PMVG, McCaw was given 45 days to determine whether it
desired to proceed with an acquisition of all the LIN Public Shares at the
Private Market Price. Under the PMVG, if McCaw desired to proceed, it was
required to enter into an agreement with LIN for such acquisition (containing
customary terms and conditions applicable in a situation in which the acquiror
has an ownership interest in the company comparable to McCaw's ownership
interest in LIN) and to cause a meeting of stockholders of LIN to be held as
soon as practicable to consider and vote thereon. If McCaw determined not to
proceed, the PMVG would require McCaw to put LIN up for sale in its entirety
under the direction of the LIN Independent Directors in a manner intended by
the LIN Independent Directors to maximize value for all LIN Common Shares. See
"SPECIAL FACTORS--Terms of the PMVG."
On April 7, 1995, McCaw determined that it desired to proceed with an
acquisition of the LIN Public Shares at the Private Market Price of $127.50
per LIN Common Share. Subsequent to that determination, representatives of the
LIN Independent Directors had discussions with representatives of McCaw with
respect to the terms on which the LIN Independent Directors would be willing
to vote in favor of, or abstain with respect to, the acquisition of the LIN
Public Shares by McCaw pursuant to the PMVG. These discussions focused on (i)
the possibility of McCaw increasing the price at which it would acquire the
LIN Public Shares and/or adding an accretion to the purchase price in the
event the transaction closed after June 30, 1995, (ii) certain requested
changes in the text of a draft of the Original Merger Agreement circulated by
counsel to McCaw (including adding a guarantee from AT&T and a representation
that the funds for the purchase of the LIN Public Shares would be provided by
AT&T in the form of a capital contribution, narrowing or eliminating the
condition to McCaw's obligation to consummate the merger contemplated by the
Original Merger Agreement (the "Original Merger") that there be no pending
litigation challenging the Original Merger or the PMVG, and certain changes in
the Original Merger Agreement's provisions providing for indemnification of
officers, directors and employees of LIN) and (iii) the possibility of seeking
a fairness opinion from Wasserstein Perella or another investment banking
firm.
The LIN Independent Directors initially requested that the Original Merger
price be increased by $6 per LIN Common Share and that the LIN public
stockholders be given the option to receive the Original Merger price in cash
or in the form of AT&T Common Shares. These proposals were rejected by McCaw.
McCaw rejected the proposal that stockholders be given the option to receive
the Original Merger price in the form of AT&T Common Shares because of AT&T's
concerns as to the dilution that would result from the issuance of such shares
and because the structure of McCaw's holding of its interest in LIN through a
subsidiary made it unclear as to whether tax-free treatment for stockholders
electing to receive AT&T Common Shares could be achieved in any event.
The LIN Independent Directors then requested that the value of the Original
Merger price be protected against a delay of consummation of the Original
Merger beyond June 30, 1995. The LIN Independent Directors, after consulting
with Bear Stearns and Lehman Brothers, initially requested that the Original
Merger price accrete at the rate of 15% per annum from June 30, 1995 through
consummation of the Original Merger. The representatives of McCaw responded
that McCaw would be willing to agree to an accretion of the Original
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Merger price at the rate of 3 1/4% per annum commencing 75 days following the
filing of preliminary proxy material through consummation of the Original
Merger, if such accretion would also result in a satisfactory settlement of
the Stockholders Litigation. In addition, the representatives of McCaw
proposed that McCaw's obligation to consummate the Original Merger under such
circumstances would be conditioned on, among other things, court approval of
such settlement. Various adjustments to these proposals were discussed. The
LIN Independent Directors requested that there be no litigation-related
condition to McCaw's obligation to consummate the Original Merger, other than
the condition to both LIN's and McCaw's obligations that the transaction not
be enjoined. See "THE MERGER--Conditions; Waivers."
At the end of these discussions, the representatives of the LIN Independent
Directors indicated that two of the LIN Independent Directors would be willing
to vote in favor of the Original Merger Agreement if McCaw were willing to
increase the Original Merger price to $128.50 per LIN Common Share, to
increase that price further at an annual rate of 5% (compounded) from June 30,
1995 through September 30, 1995 (or until consummation of the Original Merger,
if earlier) and, if applicable, 3 1/4% thereafter until consummation of the
Original Merger, and agree to satisfactory resolution of the requested changes
in the Original Merger Agreement, and if Wasserstein Perella were willing to
deliver a fairness opinion on the terms as so adjusted. At the end of these
discussions, the representatives of McCaw indicated that McCaw would be
willing to increase the Original Merger price to $128 per LIN Common Share or
to increase the $127.50 per LIN Common Share price at an annual rate of 5%
from June 30, 1995 through September 30, 1995 (or until consummation of the
Original Merger, if earlier) and, if applicable, 3 1/4% thereafter until
consummation of the Original Merger, but only if these modifications also
resulted in a satisfactory settlement of the Stockholders Litigation. See
"SPECIAL FACTORS--Litigation." No settlement of the Stockholders Litigation
was reached at that time. The representatives of McCaw also indicated that
they would be willing, as part of such modifications, to attempt to reach a
satisfactory resolution of the requested changes in the Original Merger
Agreement and to join in a request to Wasserstein Perella for its opinion as
to the fairness of the Original Merger, as so modified. In this regard,
representatives of McCaw and representatives of the LIN Independent Directors
had discussions with representatives of Wasserstein Perella about whether
Wasserstein Perella would be willing to accept an engagement with respect to
its opinion as to the fairness, from a financial point of view, of the
transaction. Because the discussions between the representatives of McCaw and
the representatives of the LIN Independent Directors did not result in any
agreement at that time, however, Wasserstein Perella was not then requested to
provide its opinion as to the fairness of the transaction.
On April 28, 1995, the LIN Board met to consider the Original Merger
Agreement. At this meeting, the LIN Board heard presentations from and asked
questions of representatives of Morgan Stanley, Bear Stearns, Lehman Brothers
and Wasserstein Perella. These presentations, including the answers to these
questions, reviewed the work performed by each firm, as described under
"SPECIAL FACTORS--Private Market Value View of Morgan Stanley," "--Private
Market Value View of Bear Stearns and Lehman Brothers" and "--Private Market
Value Determination of Wasserstein Perella." The LIN Board also heard
presentations on the background of the PMVG, the terms of the proposed
Original Merger Agreement and the status of pending litigation, and were
advised by counsel with respect to their duties under Delaware law. The LIN
Independent Directors raised the concerns about the Original Merger Agreement
described under "SPECIAL FACTORS--Fairness of the Transaction;
Recommendations--LIN Independent Directors." In addition to these issues,
Messrs. Tom A. Alberg and Harold S. Eastman expressed concern regarding the
absence of a fairness opinion and an analysis of the issues raised in the
pending Stockholders Litigation and expressed their view that they had not had
sufficient time to review the Original Merger Agreement to determine whether
its terms satisfied the requirements of the PMVG. The LIN Board then approved
the Original Merger Agreement and the Original Merger by a vote of six to
three, with two directors abstaining. The three LIN Independent Directors each
voted no on the proposal to approve the Original Merger Agreement presented to
the LIN Board, and Messrs. Alberg and Eastman abstained. Following the meeting
of the LIN Board, McCaw, Holdings, Merger Sub and LIN entered into the
Original Merger Agreement. The high and low sales prices per LIN Common Share
on the Nasdaq National Market on April 28, 1995 were $125 and $123.50,
respectively.
Under the Original Merger Agreement, upon consummation of the Original
Merger, each LIN Common Share issued and outstanding immediately prior to the
Merger (other than LIN Common Shares owned by
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McCaw or any of its wholly owned subsidiaries or held in the treasury of LIN
or by any wholly owned subsidiary of LIN, and other than any Dissenting
Shares) would have been converted into the right to receive $127.50 in cash,
without interest thereon. The conditions to McCaw's obligation to consummate
the Original Merger under the Original Merger Agreement were similar to the
conditions in the Merger Agreement, except that they included a condition that
no litigation be pending that questioned the validity or legality of the PMVG
or the proceedings thereunder or of the Original Merger Agreement or the
transactions contemplated thereby, or which imposed or could have imposed any
remedy, condition or restriction in connection therewith unacceptable to
McCaw.
In early June 1995, counsel for McCaw contacted counsel for certain of the
plaintiffs in the Stockholders Litigation with respect to the possibility of a
settlement of the Stockholders Litigation. Settlement discussions ensued,
which focused on the possibility of an increase in the consideration to be
offered to the LIN public stockholders and the possibility of further
accretion of the consideration at a specified rate of interest in the event
the transaction were not to be completed by a specified date. Counsel for the
plaintiffs also stated that they would require, as part of the settlement, the
delivery of an opinion from a mutually acceptable investment banking firm as
to the fairness, from a financial point of view, of the consideration to be
offered to the LIN public stockholders, and that Wasserstein Perella would be
an acceptable investment banking firm for this purpose. Counsel for McCaw also
stated that McCaw's willingness to consider an increase in the consideration
to be offered to the LIN public stockholders was contingent on gaining the
support of the LIN Independent Directors for the Merger and the settlement of
the Stockholders Litigation, including (i) the assent of the LIN Independent
Directors to the conversion of certain LIN systems to equal access and the
marketing of certain LIN services under the AT&T service mark and (ii) the
agreement of the LIN Independent Directors to amend the PMVG in order to move
the December 31, 1995 deadline for a stockholder vote on an acquisition under
the PMVG to March 31, 1996 (which would give McCaw enough time to solicit a
stockholder vote on an acquisition at the Private Market Price of $127.50 in
the event the Merger Agreement at the higher price were terminated because the
settlement of the Stockholders Litigation was not finally approved by November
30, 1995). Counsel for McCaw also stated that McCaw would require final court
approval of settlement of the Stockholders Litigation as a condition to
McCaw's obligation to consummate the transaction.
By mid-June 1995, the discussions between counsel for McCaw and counsel for
the plaintiffs in the Stockholders Litigation had focused on an increase in
the consideration to be offered to the LIN public stockholders from $127.50 to
$129.50 per LIN Common Share, with up to an additional $0.25 per LIN Common
Share depending on the amount of the attorneys' fee to be awarded to
plaintiffs' counsel, plus an amount, if any, equal to interest on the
increased consideration at an annual rate of 5.5% from September 15, 1995
until closing if the transaction did not close by September 15, 1995. The
discussions also contemplated that Wasserstein Perella would be requested to
render an opinion as to the fairness of such terms to the LIN public
stockholders. Counsel for McCaw contacted counsel for the LIN Independent
Directors to discuss the potential settlement and revision of the transaction
terms. The LIN Independent Directors objected to the proposed amendment to the
PMVG to move the December 31, 1995 deadline for a stockholder vote to March
31, 1996, and objected to the condition to McCaw's obligation to consummate
the transaction that the settlement of the Stockholders Litigation receive
final court approval. The LIN Independent Directors also requested further
information with respect to the conversion of LIN systems to equal access and
the marketing of LIN services under the AT&T service mark. Following further
discussions between representatives of AT&T and McCaw, and the LIN Independent
Directors and their representatives, McCaw agreed to withdraw its requirement
that the PMVG be amended and the LIN Independent Directors agreed that McCaw's
obligation to consummate the transaction would be conditioned on final court
approval of the settlement.
Following these discussions, the Memorandum of Understanding with respect to
the settlement of the Stockholders Litigation was executed by counsel for AT&T
and McCaw and by lead counsel for the plaintiffs on June 22, 1995. On June 23,
1995, representatives of AT&T and McCaw agreed with the LIN Independent
Directors that the marketing of LIN services under the AT&T service mark would
be on a non-exclusive, royalty-free basis and, following the commencement of
the marketing of any service of LIN or any of its subsidiaries under the AT&T
service mark, such service would continue to be so marketed under the AT&T
service mark for so long as AT&T directly or indirectly owns at least a
majority of the voting power of LIN's capital stock entitled
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to vote generally in the election of directors, unless a majority of the LIN
Independent Directors otherwise consents.
On June 30, 1995, the LIN Board met to consider the revised Merger
Agreement. At this meeting, the LIN Board heard a presentation on the
Memorandum of Understanding and the revised terms reflected in the proposed
Merger Agreement. The LIN Board then heard the financial presentation of
Wasserstein Perella, and answers to questions with respect thereto, as
described under "SPECIAL FACTORS--Fairness Opinion of Wasserstein Perella,"
and received Wasserstein Perella's opinion to the effect that the Minimum
Merger Consideration of $129.50 per LIN Common Share to be received by the LIN
public stockholders in the Merger is fair from a financial point of view to
such stockholders. Following these presentations and discussion, the LIN Board
unanimously approved the Merger Agreement and the Merger. After the meeting of
the LIN Board, McCaw, Holdings, Merger Sub and LIN entered into the Merger
Agreement, and AT&T executed the Merger Agreement with respect to the
provisions thereof relating to the use by LIN and its Subsidiaries of the AT&T
service mark. The high and low sales prices per LIN Common Share on the Nasdaq
National Market on such date were $126.75 and $126.375, respectively.
On July 27, 1995, the Stipulation of Settlement with respect to the
Stockholders Litigation was filed with the Delaware Chancery Court. A hearing
with respect to court approval of the Stipulation of Settlement has been
scheduled for September 15, 1995 or such adjourned date as the Delaware
Chancery Court may direct. See "SPECIAL FACTORS--Litigation."
PURPOSE, STRUCTURE AND REASONS FOR THE MERGER
The purpose of the Merger is to effect the acquisition of all the LIN Public
Shares by McCaw, as contemplated by the PMVG. AT&T, McCaw, Holdings and LIN
did not consider any other means to accomplish that purpose because the PMVG
provides that McCaw will enter into an agreement with LIN for the acquisition
of all the LIN Public Shares should it determine to proceed with an
acquisition, and the Merger is the most direct means of effecting the
acquisition of all the LIN Public Shares. The transactions contemplated by the
Merger Agreement and the Merger are being submitted to a vote of the holders
of the LIN Public Shares at the Annual Meeting pursuant to the procedures set
forth in the PMVG.
FAIRNESS OF THE TRANSACTION; RECOMMENDATIONS
LIN. The LIN Board has unanimously approved the Merger Agreement and
determined that the Merger is fair to the public stockholders of LIN, and
unanimously recommends that LIN stockholders vote in favor of the Merger
Agreement and the Merger. In reaching this determination and recommendation,
the LIN Board considered the following:
(i) the Fairness Opinion and financial presentation of Wasserstein
Perella, as described under "SPECIAL FACTORS--Fairness Opinion of
Wasserstein Perella," which the LIN Board believed supported its
determination that the Merger is fair to the public stockholders of LIN;
(ii) the knowledge of the LIN Board as to the business, financial results
and prospects of LIN, which are reflected in the reports and financial
statements incorporated by reference herein (see "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE"), as well as the cellular industry generally, which
the LIN Board believed was consistent with the analyses utilized by
Wasserstein Perella in connection with its Fairness Opinion and financial
presentation and, therefore, was consistent with the LIN Board's use of the
Fairness Opinion in determining that the Merger is fair to the public
stockholders of LIN;
(iii) the determination of the Private Market Price under the PMVG of
$127.50 per LIN Common Share (as to which certain members of the LIN Board
requested but the LIN Board was not provided with any further explanation
as to the manner in which Wasserstein Perella made its determination, other
than as set forth in the determination letter and the related materials
which are filed as an exhibit to the Schedule 13E-3, because Wasserstein
Perella believed such letter and materials were an appropriate explanation
of
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Wasserstein Perella's determination given its role under the PMVG), and the
facts that (A) the procedure for determining the Private Market Price set
by the PMVG was negotiated at arm's length by McCaw and LIN in 1989 prior
to McCaw's acquisition of control of LIN and was approved by the LIN Board
prior to the time that any of the members of the LIN Board were designated
by or otherwise affiliated with McCaw and (B) the PMVG specifically
contemplates an acquisition by McCaw of the LIN Public Shares at the
Private Market Price, if McCaw so desires, as the second step of an
acquisition transaction negotiated at arm's length between McCaw and LIN in
1989; the LIN Board believed that these facts supported its determination
that the Merger is fair to the public stockholders of LIN in light of the
fact that the Merger Consideration is greater than the Private Market Price
determined pursuant to the PMVG and the proposed settlement of the
Stockholders Litigation will resolve challenges to the procedural fairness
of the PMVG process;
(iv) the fact that the increase in the Merger Consideration above the
Private Market Price contemplated as the merger consideration in the
Original Merger Agreement, the condition that the LIN Board obtain a
fairness opinion, and the amendment of the litigation condition to require
only receipt of a final and nonappealable order of the Delaware Chancery
Court approving the settlement of the Stockholders Litigation, were
negotiated at arm's length between counsel for McCaw and counsel for the
plaintiffs in the Stockholders Litigation as the basis for the proposed
settlement of the Stockholders Litigation, and that the settlement of the
Stockholders Litigation avoided the expense of such litigation and the risk
that it would result in substantial delay or possible nonconsummation of
the Merger, which the LIN Board believed supported its determination that
the Merger is fair to the public stockholders of LIN;
(v) the Merger Consideration is substantially above the prices at which
Morgan Stanley estimated the LIN Common Shares would trade in the public
trading market in the absence of the PMVG (see "SPECIAL FACTORS--Private
Market Value View of Morgan Stanley"); and, in connection with the Original
Merger Agreement, the LIN Independent Directors were advised by Bear
Stearns and Lehman Brothers (in separate letters dated April 28, 1995,
which are attached as exhibits to the Schedule 13E-3 (see "ADDITIONAL
INFORMATION")) that if the Original Merger were abandoned because it was
not approved by a Majority Vote of the LIN Public Stockholders, following
such abandonment there was a substantial likelihood that the LIN Common
Shares would initially trade below $127.50 per LIN Common Share; the LIN
Board believed these facts were consistent with its determination that the
Merger is fair to the LIN public stockholders; and
(vi) as required by the PMVG, the Merger is conditioned on the Majority
Vote of the LIN Public Stockholders, which the LIN Board believed supported
its view that the Merger is fair procedurally to the LIN public
stockholders.
The members of the LIN Board believe that these factors operate both
individually and in combination to support their determination that the Merger
is fair to the LIN public stockholders and did not assign relative weights to
particular factors. The members of the LIN Board recognized that the LIN
Common Shares had recently traded in the market at prices in excess of the
Merger Consideration. See "MARKET PRICES OF LIN COMMON SHARES; DIVIDEND
HISTORY." However, the members of the LIN Board believed such trading prices
were based on the existence of the PMVG and speculation as to the outcome of
the PMVG process and that, in the absence of the PMVG, the LIN Common Shares
would trade at lower prices, as indicated by the advice referred to in
paragraph (v) above. In addition, the members of the LIN Board did not
consider the liquidation value of LIN as they viewed LIN's businesses as more
valuable as continuing businesses. Eight of the eleven members of the LIN
Board are designees and/or employees of AT&T or McCaw and, therefore, have a
conflict with respect to the Merger and the Merger Agreement. See "SPECIAL
FACTORS--Interests of Certain Persons in the Merger; Conflicts of Interest."
LIN Independent Directors. Each of the LIN Independent Directors (Ms. Jordan
and Messrs. Herbster and Kislik) voted in favor of the proposal to approve the
Merger Agreement presented to the LIN Board on June 30, 1995. The LIN
Independent Directors are joining in the recommendation to the LIN public
stockholders by the full LIN Board that they vote their LIN Common Shares in
favor of the proposal to approve the Merger Agreement. The three LIN
Independent Directors have provided the following additional statement
relating to
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their vote in favor of the Merger Agreement and their vote against the
Original Merger Agreement presented to the LIN Board on April 28, 1995.
The Original Merger Agreement provided for the Original Merger between LIN
and a subsidiary of McCaw pursuant to which the LIN public stockholders would
have received $127.50 per LIN Common Share. The LIN Independent Directors
voted against approving the Original Merger Agreement. The LIN Independent
Directors were disappointed that the Original Merger consideration was not
higher. In addition, the LIN Independent Directors believed that the Original
Merger Agreement did not adequately provide for the protection of the LIN
public stockholders. This belief was based on various factors, including the
omission of a price adjustment mechanism in the event that the closing of the
Original Merger was delayed, and the inclusion of a closing condition which
would have relieved McCaw of the obligation to close the transaction merely
because of the pendency of certain types of litigation. The litigation
condition was particularly troubling in that at the time that the Original
Merger Agreement was approved by the LIN Board, there was litigation pending
which, if not withdrawn, settled or concluded in a manner acceptable to McCaw,
would have permitted McCaw not to close the transaction even if all other
conditions precedent had been satisfied or waived. Therefore, McCaw would have
had the option to defer the effective time of the Original Merger and the
payment of the Original Merger consideration, or perhaps not to proceed with
the transaction at all, if the pending litigation condition was not satisfied.
Following the execution of the Original Merger Agreement, the LIN
Independent Directors were requested by McCaw to grant their approval to LIN's
conversion to equal access for long distance carriers and the marketing of LIN
wireless services under the AT&T brand name. This request was refused by the
LIN Independent Directors because they did not believe they had been provided
with sufficient information to make a judgment. The LIN Independent Directors
also believed that it would be inappropriate for LIN to market its wireless
services under the AT&T brand name before the Original Merger had been
consummated unless AT&T agreed to make use of the AT&T brand name available to
LIN so long as AT&T was a majority shareholder of LIN. In addition, the LIN
Independent Directors desired that McCaw increase the merger consideration
contemplated by the Original Merger and amend the Original Merger Agreement in
order to address the concerns raised by the LIN Independent Directors with
respect to the Original Merger Agreement, to obtain their approval of equal
access conversion and marketing of LIN wireless services under the AT&T brand
name and to obtain their approval of the Merger. Thereafter, as set forth
below, the LIN Independent Directors received the requested information, the
merger consideration contemplated by the Original Merger was increased, the
Original Merger Agreement was amended, the LIN Independent Directors gave the
requested consent and they joined in the unanimous approval by the LIN Board
of the Merger Agreement.
In mid-June 1995, the LIN Independent Directors were advised that a proposed
settlement of the pending litigation relating to the transaction was being
discussed by counsel to McCaw and counsel to the plaintiffs in such pending
litigation. Pursuant to the proposed settlement, the Original Merger Agreement
would be amended and restated to provide that the LIN public stockholders
would receive a minimum of $129.50 per LIN Common Share and a maximum of
$129.75 per LIN Common Share (depending upon the amount of attorneys' fees set
by the Delaware Chancery Court in connection with the settlement of the
pending stockholder litigation). In addition, if the Merger is not completed
by September 15, 1995, McCaw would pay an additional amount equal to interest
on the revised Merger Consideration from that date until closing at an annual
rate of 5.5%. The proposed settlement also required the assent of the LIN
Independent Directors to LIN's scheduled conversion to equal access for long
distance carriers and the marketing of LIN wireless services under the AT&T
brand name.
At a meeting on June 23, 1995, the LIN Independent Directors were presented
with information by officers of LIN, McCaw and AT&T on the business benefits
to LIN and all of its stockholders which are expected to result from LIN's
conversion to equal access for long distance carriers and the commencement of
marketing of LIN wireless services under the AT&T brand name at an early date,
rather than waiting for the closing of the Merger. In addition, it was agreed
that the Merger Agreement would contain an AT&T covenant that would survive
any termination of the Merger Agreement providing that LIN would have a
royalty-free right to utilize the AT&T brand name in its marketing efforts so
long as AT&T continued to own directly or indirectly at least a majority of
the LIN voting stock. The LIN Independent Directors concluded that this
provision should protect the interests of the LIN public stockholders in the
event that the Merger was not consummated.
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At its meeting on June 30, 1995, the LIN Board received the Fairness Opinion
and financial presentation of Wasserstein Perella to the effect that the
Minimum Merger Consideration of $129.50 per LIN Common Share as provided in
the Merger Agreement is fair from a financial point of view to the LIN public
stockholders. (See Appendix B for the full text of the Fairness Opinion.) The
LIN Independent Directors joined in the unanimous approval by the LIN Board of
the Merger Agreement, and also indicated their acceptance of the Memorandum of
Understanding setting forth the terms of the proposed litigation settlement.
The LIN Independent Directors believed that the Merger Agreement provided a
significant improvement from the Original Merger Agreement. In addition to the
increase in the Merger Consideration, the agreement to pay an amount equal to
interest on the Merger Consideration after September 15, 1995 provided price
protection and the Memorandum of Understanding providing for settlement of the
litigation makes it more likely, though not certain, that the Merger will
close before November 30, 1995. See "THE MERGER--Conditions; Waivers--
Conditions to the Obligations of McCaw, Holdings and Merger Sub."
In addition, the LIN Independent Directors noted that if the Merger is not
approved by a Majority Vote of the LIN Public Stockholders, and the Merger is
abandoned, certain provisions of the PMVG would survive (e.g., provisions
relating to approvals of a merger and certain other transactions between LIN
and its affiliates, certain acquisitions and dispositions of businesses by
LIN, allocation of corporate opportunities between LIN and McCaw, restrictions
on purchases by McCaw and its affiliates of additional LIN Common Shares and
restrictions on transfer of LIN Common Shares by McCaw and its affiliates);
however, McCaw would not be obligated to acquire the 48% of LIN it does not
own and would not be obligated to put 100% of LIN up for sale.
If the Merger is abandoned because it is not approved by a Majority Vote of
the LIN Public Stockholders, the LIN Independent Directors have been advised
by Bear Stearns and Lehman Brothers (in separate letters dated April 28, 1995,
which are attached as exhibits to the Schedule 13E-3 (see "ADDITIONAL
INFORMATION")) that, following such abandonment, there is a substantial
likelihood that the LIN Common Shares would initially trade below $127.50 per
LIN Common Share.
Based on all of the foregoing, the LIN Independent Directors determined that
the Merger is fair to the LIN public stockholders and recommend that such
stockholders vote in favor of the Merger.
AT&T and McCaw. AT&T and McCaw believe the Merger is fair to the LIN public
stockholders for the same reasons as are set forth above with respect to the
LIN Board, and AT&T and McCaw expressly adopt the conclusions and analyses of
the LIN Board described above. However, AT&T and McCaw have a conflict with
respect to the Merger Agreement and the Merger, given that McCaw is the other
party to the Merger Agreement and would acquire all the LIN Public Shares if
the Merger is consummated. In addition, once McCaw determined to proceed with
an acquisition of all the LIN Public Shares, the PMVG provided that McCaw was
required to enter into an agreement with LIN providing for such acquisition
and to cause a meeting of stockholders of LIN to be held as soon as
practicable to consider and vote thereon. If McCaw were not to have done so,
it might be deemed to have breached the PMVG.
FAIRNESS OPINION OF WASSERSTEIN PERELLA
On June 30, 1995, Wasserstein Perella delivered the Fairness Opinion and
financial presentation to the LIN Board to the effect that the Minimum Merger
Consideration of $129.50 per LIN Common Share to be received by the LIN public
stockholders in the Merger is fair from a financial point of view to such
stockholders. A copy of the Fairness Opinion is attached hereto as Appendix B.
Stockholders are urged to read the Fairness Opinion in its entirety for
information with respect to the procedures followed, assumptions made, matters
considered and limits of the review by Wasserstein Perella in rendering the
Fairness Opinion. References to the Fairness Opinion herein and the summary of
the Fairness Opinion set forth below are qualified by Appendix B, which is
incorporated herein by reference. The Fairness Opinion is directed only to the
fairness from a financial point of view to the LIN public stockholders of the
Minimum Merger Consideration of $129.50 per LIN Common Share to be received
pursuant to the Merger, and it does not address any other aspect of the
Merger. The Fairness Opinion does not constitute a recommendation to any
stockholder with respect to whether to vote in favor of the Merger and should
not be relied upon by any stockholder as such.
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Prior to undertaking the engagement to render the Fairness Opinion,
Wasserstein Perella was retained to act as the "Mutually Designated Appraiser"
to determine the private market value per LIN Common Share pursuant to the
PMVG (see "SPECIAL FACTORS--Background of the Merger"). On March 7, 1995,
Wasserstein Perella delivered to McCaw and the LIN Independent Directors its
written determination of the private market value of the LIN Common Shares
(see "SPECIAL FACTORS--Private Market Value Determination of Wasserstein
Perella").
In its capacity as the "Mutually Designated Appraiser" pursuant to the PMVG,
Wasserstein Perella was required to determine the private market value of the
LIN Common Shares in accordance with, and based upon the contractual
requirements of, the PMVG. The Fairness Opinion, however, was prepared based
on criteria and judgments customarily applied in rendering fairness opinions
in circumstances similar to those of the Merger.
In connection with arriving at its determination of the private market value
of the LIN Common Shares and its opinion set forth in the Fairness Opinion,
Wasserstein Perella reviewed, among other things (i) the PMVG; (ii) the
reports and materials prepared and delivered by Morgan Stanley on behalf of
McCaw and by Lehman Brothers and Bear Stearns on behalf of the LIN Independent
Directors relating to their determinations of the private market value of the
LIN Common Shares pursuant to the PMVG; (iii) certain publicly available
information with respect to LIN, including publicly available consolidated
financial statements of LIN for recent years and interim periods that were
available at the relevant times; (iv) certain financial and operating
information, including certain projections of financial performance, relating
to LIN, its principal operating subsidiaries and certain entities in which LIN
or its subsidiaries hold partnership interests prepared by each of the
management of LIN and the management of McCaw (the projections prepared by the
management of LIN, which are referred to in Wasserstein Perella's report as
the "LIN Management Case," are referred to herein as the "LIN Management Base
Case" or the "Base Case," and the projections prepared by the management of
McCaw are referred to in Wasserstein Perella's report and herein as the "McCaw
Management Case"); (v) a draft of this Proxy Statement dated June 26, 1995,
including financial information and projections contained therein; and (vi)
certain publicly available information concerning the public trading prices of
LIN Common Shares, certain market indices and the stock of certain other
companies in businesses similar to that of LIN.
Wasserstein Perella had discussions with the management of LIN and its
representatives concerning the businesses, operations, assets, financial
condition and future prospects of LIN and its subsidiaries. Wasserstein
Perella also performed such studies and analyses as it considered appropriate
for purposes of arriving at and preparing the Fairness Opinion.
Other than certain information referred to in clause (iv) above, Wasserstein
Perella was not provided with any internal non-public information prepared by
McCaw or AT&T relating to the operations or assets of McCaw, AT&T or LIN.
Wasserstein Perella was not provided with any valuations of LIN prepared by
McCaw, AT&T or LIN or their financial advisors, except for the reports
delivered pursuant to the PMVG referred to in clause (ii) above. No special
instructions were given to Wasserstein Perella related to its review and,
other than with respect to such limitations on access to non-public
information of AT&T and McCaw and, if any, such valuations of LIN, no
limitations were imposed with respect to investigations made or procedures
followed by Wasserstein Perella in rendering the Fairness Opinion.
In conducting its analysis and arriving at its opinion, Wasserstein Perella
assumed and relied upon the accuracy and completeness of all financial and
other information provided or that was publicly available, without independent
verification, and assumed, with LIN's consent, that the financial forecasts
and projections provided by LIN and by McCaw were prepared in good faith and
on bases reflecting the best currently available judgments and estimates of
the party preparing such forecasts and projections, and that the reports
prepared by Morgan Stanley and by Lehman Brothers and Bear Stearns in
connection with the PMVG process were prepared in good faith and on bases
reflecting the best currently available judgments and estimates of the parties
preparing such reports. Wasserstein Perella also assumed that LIN does not
have contingent liabilities exceeding the reserves therefor established in
LIN's financial statements. Wasserstein Perella consulted with and relied on
the advice of counsel for LIN and its own counsel with respect to certain
legal and tax matters.
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Wasserstein Perella was not asked to and did not solicit any third parties
regarding their possible interest in acquiring LIN or any of its business or
assets or investigate alternative transactions which may be available to LIN
apart from those considered in connection with its analysis of private market
value of the LIN Common Shares under the PMVG.
The Fairness Opinion was prepared and delivered based upon conditions as
they existed and could be evaluated by Wasserstein Perella as of the date
thereof and based upon the draft of this Proxy Statement and the Merger
Agreement in the forms provided to Wasserstein Perella prior to rendering the
Fairness Opinion.
At the June 30, 1995 meeting of the LIN Board, Wasserstein Perella reviewed
with the members of the LIN Board certain financial, industry and market
information with respect to LIN and the procedures used and the analyses
underlying the Fairness Opinion. In connection with its presentation to the
LIN Board, Wasserstein Perella provided the directors with a written report
summarizing such information, procedures and analyses. The full text of the
report presented to the LIN Board on June 30, 1995 is attached as an exhibit
to the Schedule 13E-3 (see "ADDITIONAL INFORMATION"), and is also available
for inspection and copying at the principal offices of LIN during LIN's
regular business hours by any interested holder of LIN Common Shares or such
holder's representative who has been so designated in writing. The summary set
forth below does not purport to be a complete description of the Fairness
Opinion or Wasserstein Perella's analysis as set forth in the exhibit to
Schedule 13E-3. The preparation of a fairness opinion is a complex process
that is not purely mathematical and is not necessarily susceptible to partial
analyses or summary description. It involves complex considerations and
judgments. Interested stockholders are encouraged to review the Fairness
Opinion in its entirety and to obtain a copy of the Wasserstein Perella report
for a more complete description of the procedures used and the analysis
underlying the Fairness Opinion.
In performing its analysis for the Fairness Opinion, Wasserstein Perella
relied on numerous assumptions made by the managements of LIN and McCaw, as
reflected in the LIN Management Base Case and the McCaw Management Case, and
made numerous judgments of its own with regard to the performance of LIN,
industry performance, general business and economic conditions and other
matters, many of which are beyond LIN's ability to control. Any estimates
contained in such analysis are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
suggested in the Wasserstein Perella report. In addition, analyses relating to
values of companies do not purport to be appraisals or to reflect the prices
at which companies may actually be sold. Since such estimates are inherently
subject to uncertainty, none of LIN, Wasserstein Perella or any other person
assumes responsibility for their accuracy.
In delivering the Fairness Opinion and making its presentation to the LIN
Board, representatives of Wasserstein Perella considered and discussed various
financial and other matters that it deemed relevant. General valuation
considerations deemed to be relevant by Wasserstein Perella include, without
limitation, those outlined in the Wasserstein Perella report, such as: (i)
wireless communication and demographic trends as a whole and in LIN's markets;
(ii) LIN's historical financial and operating performance and future prospects
in the context of its business strategy, market position and current and
prospective competition; (iii) LIN's technological, marketing and product
strategy; (iv) the LIN Management Base Case and the McCaw Management Case;
(v) LIN's size and asset mix; (vi) LIN's shared control of the Los Angeles and
Houston cellular markets; (vii) the breadth and depth of the potential
acquisition universe for LIN; (viii) the potential public market trading value
of LIN as a stand-alone entity; (ix) publicly available commentary, research
and valuation estimates of industry analysts; (x) McCaw's ownership of a
majority of the voting and economic interests in LIN; (xi) McCaw's ability to
act as a buyer of the publicly held LIN Common Shares, and an assumption that
McCaw would not necessarily be a willing seller of the LIN Common Shares it
owns; (xii) regulatory restrictions applicable to AT&T with respect to its
ability to receive equity as consideration from certain potential purchasers
of LIN if AT&T and McCaw were to consider selling the LIN Common Shares owned
by McCaw; and (xiii) the feasibility of various possible value-maximizing
transaction structures if AT&T and McCaw were to consider selling the LIN
Common Shares owned by McCaw, including certain legal, tax, antitrust and
regulatory considerations and issues arising from potential multiparty
transactions.
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The financial analyses underlying the Fairness Opinion are outlined in the
Wasserstein Perella report and are summarized below. The report contains
reference ranges of implied prices per LIN Common Share based on Wasserstein
Perella's judgment of the data analyzed. These reference ranges include
reference points, implicit in the Minimum Merger Consideration of $129.50 in
cash to be paid per LIN Common Share in the Merger, including a multiple of
earnings before interest, taxes, depreciation and amortization ("EBITDA") for
the latest twelve months ("LTM") of 20.8x, an estimated 1995 EBITDA multiple
of 15.4x, an estimated 1996 EBITDA multiple of 12.2x and a price of $320 per
"pop". ("Pops" refer to the population of a market multiplied by a percentage
ownership interest in an entity licensed or designated to receive a license by
the Federal Communications Commission to construct or operate a cellular
telephone system in such market. Pops do not represent actual subscribers in a
cellular system.) These reference points were all considered in the context of
the analyses described below. Each of these analyses supports the conclusion
in the Wasserstein Perella Fairness Opinion because the Minimum Merger
Consideration of $129.50 per LIN Common Share, and the per pop prices and the
LTM EBITDA, estimated 1995 EBITDA and estimated 1996 EBITDA multiples implied
by the Minimum Merger Consideration, are within the reference ranges for such
prices and multiples calculated using a precedent merger and acquisition
transactions analysis and discounted cash flow analysis and are higher than
the relevant reference ranges for such prices and multiples calculated using a
public company trading analysis.
1. Public Company Trading Analysis. Wasserstein Perella reviewed, analyzed
and compared certain operating, financial, and trading information of LIN and
eight other publicly traded cellular companies (AirTouch Communications, Inc.
("AirTouch"), Cellular Communications, Inc. ("Cellular Communications"),
CommNet Cellular, Inc. ("CommNet"), Vanguard Cellular Systems, Inc.
("Vanguard"), Centennial Cellular Corp. ("Centennial"), PriCellular
Corporation, United States Cellular Corporation ("US Cellular") and Palmer
Wireless, Inc.), including market values, adjusted market values (defined as
market value plus debt, preferred stock and minority interests less cash and
cash equivalents), estimated adjusted market values of non-U.S. and non-
cellular operations, estimated adjusted market values of domestic cellular
operations, numbers of domestic pops, estimated implied enterprise values per
pop, and multiples derived by dividing estimated adjusted market values of
cellular operations by each of LTM cellular revenues, LTM cellular EBITDA and
estimated 1995 cellular EBITDA. These values and multiples are set forth
below.
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED ADJUSTED MARKET VALUE
ADJUSTED MARKET ESTIMATED OF CELLULAR OPERATIONS
VALUE OF DOMESTIC IMPLIED --------------------------------------
CELLULAR ENTERPRISE LTM LTM 1995E
OPERATIONS VALUE PER CELLULAR CELLULAR CELLULAR
($MM) DOMESTIC POP REVENUES EBITDA EBITDA
----------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
AirTouch................ $8,369 $236 6.9x 16.4x 12.7x
Cellular Communications. 1,955 243 6.4 17.1 15.1
Centennial.............. 719 111 9.5 22.7 16.5
CommNet................. 558 177 7.6 44.8 29.4
PriCellular Corporation. 229 125 8.3 43.0 32.7
US Cellular............. 2,759 109 7.5 28.2 19.4
Vanguard................ 1,385 185 7.5 35.0 17.6
Palmer Wireless, Inc. .. 568 236 6.7 19.9 N/A
</TABLE>
Wasserstein Perella noted, among other things, that the trading pattern of
the LIN Common Shares has been affected by the existence of the PMVG and that
LIN lacks a precise analogue among publicly traded cellular companies due to
its predominant major-market presence and its lack of international assets.
Wasserstein Perella noted that while the per pop approach to analyzing the
cellular industry has become less influential among analysts than cash-flow
multiples as the cellular business matures, many companies continue to express
valuations on a per pop basis. In addition, Wasserstein Perella compared the
recent public trading history of LIN with a cellular company composite index
comprised of AirTouch, Cellular Communications, Centennial, CommNet, US
Cellular and Vanguard and with the Standard and Poor's industrial index.
Based on the above values and multiples and in Wasserstein Perella's
judgment, the appropriate reference ranges derived from its public company
trading analysis were a reference range of implied public trading prices
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of $95-$110 per LIN Common Share, implied reference ranges of multiples for
LIN of 16.2x-18.2x LTM EBITDA, 12.0x-13.5x estimated 1995 EBITDA, and 9.5x-
10.7x estimated 1996 EBITDA, and an implied per pop range for LIN of $249-
$280.
2. Precedent Merger and Acquisition Transactions. Wasserstein Perella
reviewed and analyzed selected going private transactions and merger and
acquisition transactions involving other companies in the cellular industry
that it deemed relevant. Wasserstein Perella noted that, while there have been
a number of recent transactions in the cellular industry, with the exception
of the AirTouch/U S WEST, Inc. ("U S WEST") and Bell Atlantic Corporation
("Bell Atlantic")/NYNEX Corporation ("NYNEX") joint venture transactions, only
the acquisition of McCaw by AT&T has been of comparable scale. Wasserstein
Perella also noted that the amounts paid to stockholders in going private
transactions have historically been affected by the existence of a controlling
shareholder. Among other factors, Wasserstein Perella indicated that the
merger and acquisition transaction environment has a degree of volatility over
time because of macroeconomic factors such as interest rate and equity market
fluctuations and microeconomic factors such as industry results and growth
expectations. Wasserstein Perella pointed out that the wireless communication
industry in particular has undergone dramatic changes in recent years and
faces continued dynamic evolution.
Wasserstein Perella performed an analysis of the AT&T acquisition of McCaw
because of its size and scope and its relevance to the parties, including the
fact that it involved the acquisition of an indirect majority interest in LIN.
Wasserstein Perella indicated that, based on the transaction value at the time
of announcement, the per pop price paid for McCaw was $283. Wasserstein
Perella's analysis also yielded for LIN an implied price of $162.79 per LIN
Common Share based on LTM EBITDA, an implied price of $198.21 per LIN Common
Share based on estimated EBITDA for the twelve month period ending March 31,
1996, an implied price of $174.43 per LIN Common Share based on estimated
EBITDA for the twelve month period ending March 31, 1997, and a price of
$111.32 per LIN Common Share based on price per pop.
In its analysis for the Fairness Opinion, Wasserstein Perella recognized
that the AT&T acquisition of McCaw involved a change of control transaction in
which a change of control premium was paid. Since the AT&T acquisition of
McCaw was not a going private transaction analogous to McCaw's proposal to
acquire the LIN Common Shares held by the LIN public stockholders, Wasserstein
Perella made appropriate and necessary qualitative judgments regarding its
precedential value.
In addition to reviewing AT&T's acquisition of McCaw, Wasserstein Perella
reviewed and analyzed selected transactions involving other companies in the
cellular industry since October of 1989 that it deemed relevant, including
selected going private transactions. The transactions reviewed included the
following, which are listed by acquiror/seller: AT&T/McCaw, SBC
Communications, Inc. ("SBC")/Associated Communications Corporation
("Associated"), Southern New England Telecommunications Corporation
("SNET")/Bell Atlantic-NYNEX, Cie Generale des Eaux/SBC, SBC/GTE Corporation
("GTE"), Associated/McCaw, Sprint Corp./Centel Corp. ("Centel"), Lincoln
Telecommunications Company/Centel, BellSouth/McCaw, BellSouth/Graphic Scanning
Corp., Bell Atlantic/Metro Mobile Corporation, Pacific Telesis Group ("Pacific
Telesis")/McCaw, Pacific Telesis/Cellular Communications, McCaw/Crowley
Cellular Communications, Comcast Cellular Corp./Metromedia Co. ("Metromedia"),
Ameritech Corporation/CyberTel Financial Corp., BellSouth/GTE Mobilnet, Inc.,
Centel/Rochester Telephone Corporation, McCaw/Cellular Communications,
McCaw/LIN and LIN/Metromedia. The going private transactions reviewed included
GTE/Contel Cellular Inc. ("Contel") and U S WEST /U S WEST New Vector Group,
Inc., and the joint ventures reviewed included U S WEST/Air Touch and Bell
Atlantic/NYNEX. Wasserstein Perella's analysis of the selected going private
transactions yielded per pop values in the range of $148.20-$191.00. The
analysis also yielded for LIN implied prices of $163.54-$344.19 per LIN Common
Share based on LTM EBITDA, implied prices of $125.59-$229.22 per LIN Common
Share based on estimated EBITDA for the twelve month period ending March 31,
1996, implied prices of $105.65-$167.20 per LIN Common Share based on
estimated EBITDA for the twelve month period ending March 31, 1997, and
implied prices of $46.31-$67.08 per LIN Common Share based on per pop prices.
Wasserstein Perella also analyzed selected recent merger and acquisition
transactions, that it deemed relevant, other than the AT&T/McCaw merger and
the going private transactions referred to above. This analysis yielded per
pop values in the range of $79-$321 and implied prices of $12.87-$129.77 per
LIN Common Share based on these per pop values.
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Based on the above values and multiples and in Wasserstein Perella's
judgment, the appropriate reference ranges derived from its comparable
transaction analysis were a reference range of implied prices of $120-$145 per
LIN Common Share, implied reference ranges of multiples for LIN of 19.5x-22.9x
LTM EBITDA, 14.5x-17.0x estimated 1995 EBITDA and 11.5x-13.5x estimated 1996
EBITDA, and an implied per pop range for LIN of $301-$353.
3. Discounted Cash Flow Analysis. Wasserstein Perella performed discounted
cash flow analyses based on two different sets of financial projections for
LIN: the LIN Management Base Case and the McCaw Management Case. Solely for
comparative purposes, Wasserstein Perella also prepared a sensitivity case
using different assumptions (the "Sensitivity Case"). The Sensitivity Case
does not purport to be projections for LIN; instead, it is a sensitivity
analysis using different assumptions for comparative purposes. Wasserstein
Perella noted in its report that, given the nature of the cellular and
wireless data industries, discounted cash flow valuation ranges are extremely
sensitive to changes in both operating assumptions and valuation parameters.
In performing its discounted cash flow analysis, Wasserstein Perella
considered various different assumptions that it deemed appropriate. It noted
that there is a high variability regarding appropriate valuations of the
wireless data segment, which is not unusual in industries that are in a
relatively early stage of development. Wasserstein Perella applied valuation
parameters that it deemed appropriate to the LIN Management Base Case and the
McCaw Management Case.
In its report, Wasserstein Perella highlighted certain assumptions that were
common to both the LIN Management Base Case and the McCaw Management Case.
Wasserstein Perella also noted that there were several major areas of
difference between these two sets of projections: the McCaw Management Case
attempted to strip out AT&T synergies from the LIN Management Base Case (LIN
management stated that it did not incorporate meaningful AT&T synergies in the
LIN Management Base Case); the McCaw Management Case assumed lower penetration
by LIN (14.5% vs. 16.9% in year 2004); the McCaw Management Case assumed lower
revenue per subscriber per month (approximately $49 vs. approximately $54 in
the LIN Management Base Case in the year 2004); the McCaw Management Case
assumed higher marketing costs throughout the period to 2004, especially in
the last five years of the period; and the McCaw Management Case projections
regarding wireless data transmission were significantly more modest
(approximately one-half the cash flow of the LIN Management Base Case in the
year 2004).
Wasserstein Perella believed it appropriate to, and did, utilize different
discount rates for each of the major industry segments of LIN's business: 11%-
13% for cellular, 19%-21% for wireless data and 11%-13% for television assets.
Wasserstein Perella felt it appropriate to use terminal valuations based on
perpetuity growth rates of 5% to 6% for cellular, 6% to 10% for wireless data
and 4% to 6% for television assets. These were deemed appropriate with respect
to the respective industry segments of LIN's business.
As determined by Wasserstein Perella, the values per LIN Common Share based
on a discounted cash flow analysis were as follows: $102.99-$180.69 based on
the LIN Management Base Case; $66.09-$118.73 based on the McCaw Management
Case and $95.52-$168.71 based on the Sensitivity Case.
Taking the foregoing into account, in Wasserstein Perella's judgment, its
discounted cash flow analysis yielded a summary reference range of implied
prices of $110-$150 per LIN Common Share, implied reference ranges of
multiples for LIN of 18.2x-23.6x LTM EBITDA, 13.5-17.5x estimated 1995 EBITDA,
and 10.7x-14.6x estimated 1996 EBITDA and an implied per pop range for LIN of
$280-$363.
In addition to the above outlined analyses, Wasserstein Perella performed
such other valuation analyses as it deemed appropriate in determining the
fairness to the LIN public stockholders of the Minimum Merger Consideration of
$129.50 per LIN Common Share to be received in the Merger. Wasserstein Perella
concluded, based on the full range of its analyses, that the Minimum Merger
Consideration of $129.50 per LIN Common Share to be paid in the Merger was
fair from a financial point of view to the LIN public stockholders.
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Wasserstein Perella is an investment banking firm engaged, among other
things, in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings, and
secondary distributions of listed and unlisted securities and private
placements. Wasserstein Perella was selected to render its opinion regarding
the fairness of the consideration to be received by the LIN public
stockholders in the Merger because it is a nationally recognized investment
banking firm and because of its experience in the valuation of companies,
including companies in the cellular industry. In addition to acting as the
"Mutually Designated Appraiser" pursuant to the PMVG and its service in
providing the Fairness Opinion, Wasserstein Perella acted as LIN's financial
advisor in connection with the acquisition of control of LIN by McCaw in 1990.
The LIN Board did not consider these prior engagements to constitute a
conflict of interest with respect to Wasserstein Perella's engagement to
render a fairness opinion.
Terms of Wasserstein Perella's Engagement: Pursuant to the terms of an
engagement letter dated June 23, 1995, LIN agreed to pay Wasserstein Perella a
fee of $1.5 million to render an opinion as to the fairness of the
consideration to be received by the LIN public stockholders in the Merger. LIN
also agreed to reimburse Wasserstein Perella for its out-of-pocket expenses,
including reasonable fees and disbursements of its counsel. LIN agreed to
indemnify Wasserstein Perella and its affiliates, their respective directors,
officers, partners, agents and employees and each person, if any, controlling
Wasserstein Perella or any of its affiliates against certain liabilities and
expenses, including certain liabilities under the federal securities laws,
relating to or arising out of such engagement. The fees, expense reimbursement
and indemnification described above are additional to those provided to
Wasserstein Perella for its service as the "Mutually Designated Appraiser"
(see "SPECIAL FACTORS--Private Market Value Determination of Wasserstein
Perella").
PRIVATE MARKET VALUE VIEW OF MORGAN STANLEY
Morgan Stanley was engaged by McCaw, in accordance with the terms of the
PMVG, to determine the private market value per LIN Common Share, as defined
in the PMVG. McCaw selected Morgan Stanley because, as required by the PMVG,
Morgan Stanley is a nationally recognized investment banking firm and because
Morgan Stanley has substantial experience in the valuation of companies
generally and in the cellular industry. McCaw imposed no limitations on Morgan
Stanley in connection with Morgan Stanley's arriving at its view of the
private market value per LIN Common Share, except that, in accordance with the
view of both McCaw and the LIN Independent Directors, Morgan Stanley did not
solicit third-party interest with respect to the acquisition of all the LIN
Common Shares.
As required by the PMVG, on January 31, 1995, Morgan Stanley stated its
initial view that the private market value per LIN Common Share, as defined in
the PMVG, was $100. Between January 31, 1995 and February 15, 1995, Morgan
Stanley met and consulted with Bear Stearns and Lehman Brothers with respect
to Morgan Stanley's initial view and Bear Stearns' and Lehman Brothers'
initial view of the private market value per LIN Common Share. In addition,
during this period, Morgan Stanley met with McCaw and AT&T to discuss such
initial views and the wide disparity between the initial view of Morgan
Stanley, on the one hand, and the initial view of Bear Stearns and Lehman
Brothers, on the other hand. As required by the PMVG, on February 15, 1995,
Morgan Stanley delivered its final view that the private market value per LIN
Common Share, as defined in the PMVG, was $105, assuming a closing date for an
acquisition of LIN of no earlier than June 30, 1995. The full text of the
reports by Morgan Stanley relating to such view is attached as an exhibit to
the Schedule 13E-3 (see "ADDITIONAL INFORMATION"), and is also available for
inspection and copying at the principal executive offices of McCaw (see
"CERTAIN INFORMATION REGARDING AT&T, McCAW, HOLDINGS, MERGER SUB AND LIN--
McCaw") during McCaw's regular business hours by any interested holder of LIN
Common Shares or such holder's representative who has been so designated in
writing.
Morgan Stanley considered a wide variety of factors in arriving at its view
of the private market value per LIN Common Share (as defined in the PMVG),
including, but not limited to, its view of the following: (i) LIN's intrinsic
value implied by LIN management projections, as well as by equity research
analyst projections, using a discounted cash flow analysis; (ii) values
implied by precedent transactions; (iii) an evaluation of potential unrelated
third party acquirors of LIN; (iv) the price that could be attributed to LIN
in the context of AT&T's acquisition of McCaw and LIN; (v) the private market
value price for LIN projected by McCaw in 1992 in the
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context of its financial planning process; (vi) an evaluation of the 1989
contested takeover battle for LIN; and (vii) the likely public market trading
value for LIN absent the PMVG agreement.
In arriving at its view of the private market value per LIN Common Share (as
defined in the PMVG), Morgan Stanley (i) reviewed the PMVG and participated in
discussions with its legal counsel, AT&T and the LIN Independent Directors'
financial advisors with respect to Morgan Stanley's role as "Offeror's
Appraiser" under the PMVG, including with respect to the interpretation of the
definition of "private market value" contained therein (concluding that, under
the definition, AT&T and McCaw should be considered as sellers, not as buyers,
of LIN Common Shares), (ii) analyzed certain publicly available financial
statements of LIN, (iii) reviewed certain internal financial statements and
other financial and operating data concerning LIN prepared by the management
of LIN, (iv) reviewed certain financial projections of LIN prepared by the
managements of McCaw and of LIN, (v) met with senior officers of McCaw and LIN
to discuss the projections of LIN prepared by the managements of McCaw and LIN
and past and current operations of LIN and LIN's financial condition and
prospects, (vi) visited LIN's facilities in Kirkland, Washington, Los Angeles,
California, New York, New York and Dallas, Texas, (vii) reviewed the reported
prices and trading activity of the LIN Common Shares, (viii) compared the
financial performance of LIN and the prices and trading activity of the LIN
Common Shares with that of certain other comparable publicly traded companies,
(ix) reviewed the terms of the acquisition by AT&T of McCaw and the financial
terms, to the extent publicly available, of certain comparable acquisition
transactions, (x) performed discounted cash flow analyses using the LIN
Management Base Case, adjusted as described below, (xi) reviewed potential
third party interest in an acquisition of LIN, including the possibility of
tax efficient transaction structures (although, as instructed by McCaw, Morgan
Stanley did not contact any third parties to determine their potential
interest in acquiring LIN), (xii) reviewed historical operating and financial
results of the wireless industry, (xiii) reviewed equity research analysts'
and cellular industry experts' analyses and estimates of the private market
value of LIN, and (xiv) reviewed such other information and performed such
other analyses (including the information and analyses described below and in
the reports of Morgan Stanley filed as an exhibit to the Schedule 13E-3) and
took into account such other matters as Morgan Stanley deemed appropriate.
The following is a summary of the analyses performed by Morgan Stanley in
arriving at its final view of the private market value per LIN Common Share,
as defined in the PMVG.
Discounted Cash Flow Analysis. Morgan Stanley's discounted cash flow
analysis yielded values of $93 to $110 per LIN Common Share. This analysis was
based on (i) LIN management's Base Case projections, but excluding that
portion of the Base Case attributable to LIN management's projections with
respect to revenue streams from LIN's wireless data, new features and long
distance services, (ii) discount rates of 13% to 14% and (iii) exit multiples
of 9.5x to 10.5x EBITDA projected for the year 2004. Using the Base Case
projections, Morgan Stanley derived a range of discounted cash flow values by
calculating the present value as of February 15, 1995 of (i) LIN's projected
free cash flow for the ten and one-half months ended December 31, 1995 and the
calendar years 1996 through 2004 and (ii) a terminal value based on a multiple
of EBITDA projected for the year 2004. In reviewing this range for purposes of
determining the private market value per LIN Common Share, Morgan Stanley
stated its view that discounted cash flow analysis has its limitations for
this specific purpose. Morgan Stanley expressed its view that while discounted
cash flow analysis is a useful benchmark for intrinsic valuation, it does not
in and of itself necessarily equate to what an unrelated third party would pay
for all of LIN. (Morgan Stanley also noted its view that the PMVG provides for
a determination of what an unrelated third party would pay for all the LIN
Common Shares, as opposed to a determination of the intrinsic value of LIN.)
While Morgan Stanley's discounted cash flow analysis utilized LIN
management's Base Case projections, adjusted as described above, Morgan
Stanley also noted certain factors that caused it to view such projections as
aggressive for a potential buyer of LIN. In particular, Morgan Stanley viewed
the Base Case projections as more aggressive with respect to revenue (both
before and after Morgan Stanley's adjustments), and more aggressive in the
later years with respect to cash flows (before Morgan Stanley's adjustments),
than the LIN base case projections that were prepared on behalf of McCaw
management and presented to the McCaw Board of Directors in the fall of 1992.
In Morgan Stanley's view, the 1992 projections, in turn, while underestimating
certain
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measures such as penetration, overestimated LIN's actual performance with
respect to revenue and cash flow in 1993 and with respect to cash flow in
1994. Further, the Base Case projections were created by LIN management solely
for purposes of the PMVG process and not in the ordinary course planning
process.
In addition, Morgan Stanley found various aspects of the Base Case
projections to be either internally inconsistent or overly optimistic in
Morgan Stanley's view. For example, Morgan Stanley noted that projected
capital expenditures appeared to Morgan Stanley to be inconsistent with the
operating assumptions projected by LIN management in the Base Case, in that
annual capital expenditures per net customer addition were projected to
decline despite projected increases in minutes of usage per subscriber.
Moreover, in Morgan Stanley's view, annual capital expenditures did not seem
to factor in replacement cost, given that Morgan Stanley's analysis of the
Base Case projections found that net plant, property and equipment was
projected to decline from $1,055 million in 1998 to $461 million in 2004.
Morgan Stanley separately analyzed LIN management's Base Case projections
with respect to revenue streams from wireless data, new features and long
distance. This analysis suggested to Morgan Stanley that potential purchasers
of LIN would be unlikely to assign significant value to those services. In
particular, Morgan Stanley indicated its view that LIN management's Base Case
projections for wireless data were aggressive and inconsistent with McCaw's
Wireless Data Division projections for LIN. In Morgan Stanley's view, wireless
data opportunities, appropriately valued, represent only a potential $5 to $6
of value per LIN Common Share and, given potential purchasers' experience with
wireless data, Morgan Stanley thought it unlikely that such purchasers would
pay any meaningful value for such opportunities. In addition, Morgan Stanley
expressed its view that buyers would assign little value to projections
related to new features which included features "yet to be identified." With
respect to long distance services, Morgan Stanley noted its view that
strategic buyers might be unable to capitalize on the revenue stream from
these services due to regulatory constraints relating to equal access for
customers. Morgan Stanley also noted that, in its view, the LIN Base Case
projections excluding wireless data, long distance and new features were
consistent with the LIN projections prepared by industry analysts which, in
its view, included AT&T synergies.
Morgan Stanley separately performed a discounted cash flow analysis based on
a variety of long-term projections created by certain equity research
analysts, which yielded values of $101 to $120 per LIN Common Share. Morgan
Stanley's analysis used discount rates of 13% to 14%, and exit multiples of
9.5x to 10.5x EBITDA in the year 2004. In certain cases, Morgan Stanley
adjusted these exit multiples upward for analysts whose projections did not
extend through the year 2004. Morgan Stanley stated, however, that certain of
the equity research analysts' projections for LIN reflected certain benefits
attributable to being owned by AT&T that would not be available to LIN if it
were acquired by an unrelated third party buyer, such as access to the AT&T
brand name; these benefits, however, were not detailed separately in the
projections. Morgan Stanley also stated that certain equity research analysts
had increased their estimates of the 1995 private market value per LIN Common
Share following the announcement of AT&T's acquisition of McCaw and its
majority stake in LIN. Morgan Stanley believed that one component of the
increased private market value estimates was the inclusion by equity research
analysts of synergies attributable exclusively to the benefits of being owned
by AT&T. Morgan Stanley observed that the average increase in such private
market value estimates after the announcement of AT&T's acquisition of McCaw
was $12 per LIN Common Share. Morgan Stanley's discounted cash flow analysis
based on projections created by equity research analysts, adjusted by Morgan
Stanley to exclude $12 per LIN Common Share, yielded values of $89 to $108 per
LIN Common Share.
In arriving at its view of the appropriate discount rate to apply to the
various sets of projections, Morgan Stanley reviewed and analyzed, among other
things, its views of the following items: (i) the current and historic yield
on U.S. Treasury bonds, (ii) estimates of LIN's predicted asset beta since
January 1993, (iii) the existing capital structure and credit ratings of
various potential purchasers of LIN, (iv) the likely capitalization a
hypothetical purchaser of LIN would require in order to avoid a negative
impact on its existing credit rating, (v) potential credit rating impacts on
various potential purchasers of various capital structures for LIN if it were
to be acquired, (vi) the range of discount rates employed by selected equity
research analysts to value cellular properties, and (vii) the range of
discount rates employed by other financial advisors to value cellular
properties
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in other transactions. Based on such analysis, Morgan Stanley indicated its
view that 13% to 14% was the appropriate range of discount rates to use in its
discounted cash flow analysis of the Base Case projections as adjusted as
described above for LIN. Morgan Stanley also stated its view that its
determination of the appropriate weighted average cost of capital was
consistent with the views of financial advisors employed to value cellular
properties in other transactions, adjusted by Morgan Stanley to reflect
changes in interest rates since the date of such transactions.
In arriving at its view of the appropriate exit multiples to apply to EBITDA
in the year 2004, Morgan Stanley reviewed and analyzed, among other things,
the following items: (i) the range of exit multiples implied by a range of
perpetual free cash flow growth rates of 4% to 8% and a range of weighted
average costs of capital of 13% to 14%, (ii) the range of exit multiples
utilized by selected equity research analysts in their discounted cash flow
analysis (which projections extended to the years 1999 and 2000), and (iii)
the range of exit multiples employed by selected financial advisors to value
cellular properties in other transactions. Based on such analysis, Morgan
Stanley indicated its view that 9.5x to 10.5x was the appropriate range of
exit multiples to utilize in its discounted cash flow valuation of the
projections for LIN. Morgan Stanley also stated its view that its
determination of the appropriate exit multiples was consistent with the views
of financial advisors employed to value cellular properties in other
transactions, adjusted by Morgan Stanley to reflect differences in the length
of the projections utilized (i.e., exit multiples in the year 2000 compared to
exit multiples in the year 2004).
Precedent Transactions. Morgan Stanley reviewed and analyzed selected
precedent transactions in the cellular industry, including an analysis of the
prices paid per pop (cellular asset value divided by potential customers) and
prices paid as a multiple of actual historical and projected future EBITDA
(proportionate cellular asset value divided by proportionate cellular EBITDA).
In Morgan Stanley's view, an examination of precedent cellular transactions
was the most relevant method of determining the private market value per LIN
Common Share because this method provided empirical evidence as to what an
acquiror would actually pay for a company similar to LIN.
Although Morgan Stanley examined all the prior cellular transactions it
deemed relevant, in its view, AT&T's acquisition of McCaw was the most
relevant precedent transaction in determining the private market value per LIN
Common Share because of similarities in the size and financial operating
characteristics of LIN and McCaw and because of the relevance of LIN itself in
AT&T's acquisition of McCaw. Morgan Stanley's analysis of the consideration
received by McCaw shareholders indicated valuation multiples, based on the
price of AT&T stock at the consummation of the acquisition of McCaw on
September 19, 1994, of approximately $247 per pop, 16.1x and 11.3x estimated
1994 and 1995 cellular EBITDA, respectively, and 6.9x and 5.3x estimated 1994
and 1995 revenues, respectively. Such analysis was based on publicly available
equity research analyst projections for McCaw and LIN prior to the closing,
and represented consideration on a blended basis for both McCaw and its
approximately 52% stake in LIN. Morgan Stanley also compared the amount of
proportionate pops, revenue, and EBITDA represented by the LIN properties and
by the McCaw properties (excluding LIN), and analyzed the valuation multiples
at both announcement and closing of AT&T's acquisition of McCaw as calculated
by dividing the transaction value by the proportionate number of combined
pops, and by estimates of cellular revenue and cellular EBITDA for 1994 and
1995 of various equity research analysts. Morgan Stanley stated its conclusion
that applying these valuation benchmarks to LIN implied prices per LIN Common
Share in the range of $98-$112 based on estimates at the time of announcement
of the transaction, and in the range of $93-$97 at the time of the closing of
the transaction. Morgan Stanley concluded that its estimate of the private
market value for LIN of $105 per LIN Common Share implied valuation multiples
of $267 per pop and 17.7x and 12.8x 1994 actual and 1995 estimated EBITDA,
respectively, which Morgan Stanley stated were consistent with, and assigned a
premium to LIN over, those observed in AT&T's acquisition of McCaw.
Morgan Stanley also compared certain financial and operating information for
LIN and for McCaw (excluding LIN) for the twelve-month period ending June 30,
1994, adjusted to reflect full-year ownership of the various properties owned
by LIN as of June 30, 1994. Morgan Stanley stated that (i) LIN had market
penetration of 3.57% versus penetration of 3.66% for McCaw (excluding LIN),
(ii) LIN had generated revenue per subscriber per month of $85 versus $82 for
McCaw (excluding LIN), (iii) LIN had generated EBITDA margins of 44%
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versus 42% for McCaw (excluding LIN), (iv) LIN had generated revenue per pop
of $30.91, versus $30.00 for McCaw (excluding LIN), and (v) LIN had generated
EBITDA of $13.64 per pop, versus EBITDA of $12.62 for McCaw (excluding LIN).
Morgan Stanley expressed its view that because many cellular properties now
have substantial operating histories, the true measure of a cellular
property's value is best reflected by that company's operating performance,
rather than by its demographic characteristics. Morgan Stanley stated its view
that LIN had not demonstrated significantly superior operating performance
compared to McCaw (excluding LIN), and that the operating characteristics
noted above represented a range of premium performance of -2% to 8% for LIN
markets versus McCaw markets only.
In addition, Morgan Stanley believed that the price paid in AT&T's
acquisition of McCaw, including McCaw's 52% stake in LIN, incorporated a
"strategic premium" to reflect the benefits to AT&T of the cellular footprint
acquired (which cellular footprint was, at the time of the acquisition, the
largest in the United States). Morgan Stanley believed, however, that this
"strategic premium" was equally allocable to all of the assets acquired,
rather than partially to McCaw and partially to LIN, because of Morgan
Stanley's views that (i) McCaw, without LIN, was of lesser strategic value to
AT&T, (ii) LIN, without McCaw, was of lesser strategic value to AT&T, and
(iii) McCaw, combined with its 52% stake in LIN, was of significant strategic
value to AT&T. In particular, Morgan Stanley stated its view that the
strategic value of LIN, without McCaw, would have been lower due to, among
other things, LIN's limited geographic coverage and co-control positions in
certain markets. Moreover, Morgan Stanley noted that it did not believe that
AT&T had assigned higher valuation multiples to LIN properties than to the
McCaw properties (excluding LIN) in the context of its acquisition of McCaw.
Morgan Stanley stated, however, that in its view AT&T's acquisition of McCaw
has limitations as a precedent transaction as the result of certain
significant differences between the circumstances of that transaction and a
hypothetical third party acquisition of LIN taking place at the present time,
including the following: (i) AT&T was prepared to pay for synergies in its
acquisition of McCaw for which an unrelated third party might not pay in an
acquisition of LIN; (ii) AT&T was able to account for its acquisition of McCaw
as a pooling of interests, whereas a third party would be required to account
for an acquisition of LIN using purchase accounting treatment; (iii) interest
rates had risen significantly since the original announcement of AT&T's
acquisition of McCaw; and (iv) in the period since the announcement of the
AT&T/McCaw transaction, LIN might be viewed as less attractive to third
parties as a result of the formation of strategic alliances whose partners are
operators in LIN's markets, which alliances both increased competition in
LIN's markets and lessened third party interest due to conflicts.
As set forth above, in addition to reviewing AT&T's acquisition of McCaw and
LIN, Morgan Stanley reviewed and analyzed selected transactions involving
other companies in the cellular industry that Morgan Stanley deemed relevant.
Morgan Stanley observed that transactions had historically been analyzed
utilizing per pop multiples as the most relevant valuation benchmark (due
largely to the lack of significant positive EBITDA or operating history) and
that, in its view, recently transactions have been increasingly analyzed
utilizing multiples of EBITDA as the most relevant valuation benchmark given
the maturing of the operations of cellular properties and the corresponding
existence of EBITDA. In addition, Morgan Stanley stated that few if any
cellular properties were ever sold for more than $300 per pop. Morgan Stanley
observed that recent transaction valuation benchmarks, as calculated by Morgan
Stanley, were in a range of 10x--13x projected 1995 EBITDA for the selected
cellular transactions that Morgan Stanley deemed to be the most relevant. The
transactions reviewed included (acquiror/target) GTE/Contel (10% stake),
SBC/Associated, AT&T/McCaw and SBC/GTE (10% stake in Dallas). Morgan Stanley
stated its view that the multiple of 1995 estimated EBITDA of 12.8x implied by
its estimate of the private market value per LIN Common Share of $105 was
consistent with multiples of EBITDA in these selected recent transactions.
Review of Potential Purchasers. Morgan Stanley explained its view that a
necessary element of the determination of the private market value per LIN
Common Share (as defined in the PMVG) is an assessment of the universe of
potential purchasers for LIN. Morgan Stanley stated that at a price of $105
per LIN Common
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Share, a purchase of all of LIN would be by far the largest U.S.
telecommunications purchase transaction ever. Morgan Stanley identified and
reviewed a broad group of companies in order to assess the universe of
potential purchasers of LIN, including cellular operators with over 10 million
pops, entities bidding on personal communications services ("PCS") spectrum
with over $5 billion of market equity value and telecommunications service
companies with over $5 billion of market equity value.
Morgan Stanley indicated its view that a potential unrelated third party
acquiror of LIN would consider, among other things, the likely projected cash
flows that it would expect to realize, and that such projections might be
lower than those projected in the LIN Base Case, because an unrelated third
party (i) would not have access to any potential benefits of being owned by
AT&T, and (ii) would most likely expect to compete against AT&T as a potential
provider of wireless communication services through, for example, AT&T's
acquisition of PCS spectrum in LIN's markets. In reviewing the universe of
potential purchasers other than AT&T that could acquire all the LIN Common
Shares in a hypothetical auction process, as contemplated by the PMVG, Morgan
Stanley indicated its view that many potential purchasers could be limited due
to regulatory conflicts, strategic interests and financial constraints.
Morgan Stanley utilized a variety of methodologies in its assessment of the
limitations of each company in the universe of potential purchasers identified
by Morgan Stanley, including (i) analyzing the strategic interests and
initiatives of each potential purchaser as observed by Morgan Stanley, (ii)
performing individual pro forma financial analyses and examining potential
earnings dilution and capital financing impacts of a purchase of LIN at a
range of purchase prices, and (iii) reviewing regulations governing the
ownership of cellular properties and existing contractual arrangements among
potential purchasers pertaining to ownership of cellular properties. For
example, Morgan Stanley noted its understanding that Bell Atlantic, NYNEX,
AirTouch and U S WEST would each be prohibited from purchasing LIN's New York
and Los Angeles properties (aggregating 81% of LIN's pops) either because of
existing market ownership or due to conflicts created by their strategic
alliances and related contractual obligations. Morgan Stanley stated its
conclusion that the most feasible bidders for LIN would be MCI Communications
Corp., SBC and BellSouth, although Morgan Stanley questioned whether any of
those three entities would be willing to pay $105 or more for each LIN Common
Share given certain strategic concerns that those purchasers might have, and
that the size of the LIN transaction would raise significant financing and
dilution issues for those purchasers. Morgan Stanley also examined the
possibility of consortium bids, or a breakup of LIN and the sale of pieces of
LIN, but Morgan Stanley believed that, in light of tax and regulatory
constraints, greater value would not be obtained for LIN through these
methods.
Reconciliation to Public Market Value. Morgan Stanley reviewed the
historical trading prices for the LIN Common Shares and noted that LIN's
public market trading value had increased to approximately 30% above an index
of certain other publicly traded cellular companies including AirTouch,
Cellular Communications, Vanguard, CommNet, US Cellular, and Centennial, since
year-end 1993. Morgan Stanley suggested that such increase was driven in part
by the continually increasing equity research analyst estimates of the private
market value per LIN Common Share. Morgan Stanley noted that these increases
in the LIN stock price and private market value estimates occurred in spite of
the fact that LIN's 1994 EBITDA was below analyst operating projections and
LIN's 1994 revenues did not surpass projections. As discussed above under
"Discounted Cash Flow Analysis," Morgan Stanley believed that one component of
the increased private market value estimates was the inclusion by certain
equity research analysts of synergies attributable exclusively to the benefits
of being owned by AT&T, such as access to the AT&T brand name, in their
projections for LIN. In addition, Morgan Stanley observed that the research
analysts appeared to have considered AT&T as the only possible purchaser of
LIN and, accordingly, did not analyze the financial, strategic or regulatory
implications of such a purchase by any other entity. Morgan Stanley also
questioned whether certain equity research analysts had used appropriate
discount rates and exit multiples, and identified what it viewed as logical
and arithmetic errors in certain analysts' calculations. Morgan Stanley
observed that equity research analyst estimates of private market value in
certain recent precedent cellular transactions had exceeded actual transaction
prices by an average of approximately 35%.
Implied Public Trading Value. Morgan Stanley reviewed, analyzed and compared
certain operating, financial, and trading information of LIN and eight other
publicly traded cellular companies (AirTouch, Cellular
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Communications, Centennial, CommNet, Contel, Intercel Inc., US Cellular and
Vanguard). Among other things, Morgan Stanley presented data comparing LIN's
penetration, revenue per subscriber per month, revenue per pop, EBITDA per
pop, subscriber growth, revenue growth, EBITDA growth, EBITDA margin, pops in
top markets and pops under majority control to that of these public cellular
companies. Morgan Stanley noted that, among all of these public cellular
companies, it considered AirTouch to be the most comparable to LIN with
respect to financial characteristics, growth and market demographics. Based on
a range of assumptions used by equity research analysts for AirTouch's non-
U.S. cellular assets, Morgan Stanley indicated its conclusion that the public
market price for AirTouch implied valuation benchmarks in a range of $196 to
$219 per pop and 14.3x--16.0x and 10.4x--11.7x 1994 actual and 1995 estimated
EBITDA, respectively. Morgan Stanley noted that applying these valuation
benchmarks to LIN would yield a public market trading price for LIN of
approximately $80 to $95 per LIN Common Share.
The summary set forth above does not purport to be a complete description of
the analyses considered by Morgan Stanley in reaching its view under the PMVG
as to the private market value of the LIN Common Shares, as defined in the
PMVG. Morgan Stanley believes that its analyses must be considered as a whole
and that selecting portions of its analyses and the factors considered by it,
without considering all analyses and factors, could create an incomplete view
of the process underlying its determination. In addition, the PMVG provided
only for a determination by Morgan Stanley of the private market value of the
LIN Common Shares as defined in the PMVG. Accordingly, the view reached by
Morgan Stanley as described above does not purport to be an appraisal of the
LIN Common Shares. Moreover, Morgan Stanley is not rendering, and was not
requested to render, an opinion as to the fairness to LIN or the LIN
stockholders, from a financial point of view, of the consideration to be paid
pursuant to the Merger. Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
supplied to it in connection with reaching its view of the private market
value of the LIN Common Shares under the PMVG, and in arriving at such view,
Morgan Stanley did not make an independent valuation or appraisal of the
assets or liabilities of LIN, nor has it been furnished with any such
appraisal. In addition, Morgan Stanley's view was necessarily based on
economic, market and other conditions as in effect on, and the information
made available to it as of, the date of its determination except that, as
discussed with McCaw, Morgan Stanley assumed a closing date for an acquisition
of LIN of no earlier than June 30, 1995.
Morgan Stanley's Engagement. Morgan Stanley has provided investment banking
services to AT&T from time to time in the past, for which it has received
customary fees. Among other things, Morgan Stanley represented AT&T in
connection with AT&T's 1994 acquisition of McCaw, for which Morgan Stanley
received an aggregate fee of $20 million.
In consideration for Morgan Stanley's services under the PMVG, McCaw has
agreed to pay Morgan Stanley an additional fee of $3 million, which is not
contingent on completion of the Merger or any other transaction. McCaw has
also agreed to reimburse Morgan Stanley for its out-of-pocket expenses,
including reasonable fees and disbursements of counsel. McCaw has agreed to
indemnify Morgan Stanley and its affiliates, their respective directors,
officers, partners, agents and employees and each person, if any, controlling
Morgan Stanley or any of its affiliates against certain liabilities and
expenses, including certain liabilities under the federal securities laws,
relating to or arising out of its engagement.
In the ordinary course of its business, Morgan Stanley may actively trade in
securities of AT&T for its own account and the account of its customers and,
accordingly, may at any time hold a long or short position in any such
security.
PRIVATE MARKET VALUE VIEW OF BEAR STEARNS AND LEHMAN BROTHERS
Determination of Private Market Value Per LIN Common Share. Pursuant to the
terms of the PMVG, Bear Stearns and Lehman Brothers were engaged by the LIN
Independent Directors to determine the private market
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value per LIN Common Share, as defined in the PMVG. Bear Stearns and Lehman
Brothers were selected by the LIN Independent Directors because, as is
required by the PMVG, both firms are nationally recognized investment banking
firms and both have substantial experience valuing companies in the cellular
industry. In connection with Bear Stearns' and Lehman Brothers' determining
the private market value per LIN Common Share, the LIN Independent Directors
placed no limitations on Bear Stearns and Lehman Brothers, except that Bear
Stearns and Lehman Brothers were directed not to solicit third party interest
with respect to an acquisition of all or any part of LIN.
The definition of private market value per LIN Common Share set forth in the
PMVG (the "Definition") is as follows:
the private market price per [LIN Common] Share (including control premium)
that an unrelated third party would pay if it were to acquire all
outstanding [LIN Common] Shares (including the [LIN Common] Shares held by
[McCaw] and its affiliates) in an arm's length transaction, assuming that
[LIN] was being sold in a manner designed to attract all possible
participants (including the Regional Bell Operating Companies) and to
maximize stockholder value, including, if necessary, through the sale or
other disposition (including tax-free spin-offs, if possible) of businesses
prohibited by legal restrictions to be owned by any particular buyer or
class of buyers (e.g., the Regional Bell Operating Companies).
Based on the advice of their legal counsel, Fried, Frank, Harris, Shriver &
Jacobson, and on the advice rendered to the LIN Independent Directors by their
legal counsel, Simpson Thacher & Bartlett, Bear Stearns and Lehman Brothers
interpreted the Definition to require a determination of the private market
value per LIN Common Share based on a hypothetical auction to a broad spectrum
of buyers, including AT&T.
Bear Stearns' and Lehman Brothers' views of the private market value per LIN
Common Share described herein in each case were stated as of the date of
determination thereof but, with the permission of the LIN Independent
Directors, assumed a closing date for an acquisition of LIN of June 30, 1995.
On January 19, 1995, Bear Stearns and Lehman Brothers reported to the LIN
Independent Directors their preliminary view that the private market value per
LIN Common Share was in a range of $140 to $170, and they reviewed with the
LIN Independent Directors their rationale therefor.
As required by the PMVG, on January 31, 1995, Bear Stearns and Lehman
Brothers stated their initial view that the private market value per LIN
Common Share was $162. Between January 31, 1995 and February 15, 1995, as
required by the PMVG, Bear Stearns and Lehman Brothers met and consulted with
Morgan Stanley with respect to Bear Stearns' and Lehman Brothers' initial view
and Morgan Stanley's initial view of the private market value per LIN Common
Share. In addition, during that period, Bear Stearns and Lehman Brothers met
and consulted with the LIN Independent Directors to discuss Morgan Stanley's
initial view and the wide disparity between the initial view of Morgan Stanley
and the initial view of Bear Stearns and Lehman Brothers.
As required by the PMVG, on February 15, 1995, Bear Stearns and Lehman
Brothers delivered to the LIN Independent Directors their final view that the
private market value per LIN Common Share was $155.
In arriving at their final view of the private market value per LIN Common
Share, Bear Stearns and Lehman Brothers, (i) reviewed the PMVG; (ii) reviewed
LIN's Annual Reports to Shareholders and Annual Reports on Form 10-K for the
years ended December 1990 through 1993, and its Quarterly Reports on Form 10-Q
for the periods ended March 31, 1994, June 30, 1994 and September 30, 1994;
(iii) reviewed certain operating and financial information, including
projections provided to them by LIN management relating to LIN's business,
operations and prospects; (iv) met with certain members of LIN's and McCaw's
senior managements to discuss LIN's business, operations, historical financial
results, financial condition and prospects; (v) visited LIN's facilities in
Kirkland, WA, Los Angeles, CA, New York, NY, and Dallas, TX; (vi) reviewed
various business, financial and legal information and documents relating to
LIN and its subsidiaries and partnerships, including a review of the
organizational structure, partnership agreements, tax basis and loan
documentation provided to them by LIN; (vii) reviewed the historical prices
and trading volume of the LIN Common Shares;
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(viii) performed discounted cash flow analyses, including discounted cash flow
analyses based on the projections provided by LIN management; (ix) reviewed
publicly available financial data, stock market performance data and valuation
parameters of certain other companies which they deemed relevant; (x) reviewed
the terms of the AT&T/McCaw merger and the terms of certain other precedent
acquisitions of cellular companies which they deemed relevant; (xi) reviewed
potential third-party interest in an acquisition of or an investment in all or
part of LIN, including the possibility of tax-efficient transaction structures
(although, at the direction of the LIN Independent Directors, they did not
contact any third parties to determine their potential interest); (xii)
reviewed historical operating and financial results of the wireless industry
and equity research analysts' and cellular industry experts' analyses of the
prospects and projected trends of the wireless industry; (xiii) reviewed
equity research analysts' and cellular industry experts' analyses and
estimates of the private market value per LIN Common Share; (xiv) reviewed the
projections for LIN prepared by AT&T and McCaw furnished to them on January
18, 1995 (and additional backup to such projections furnished to them on
February 9, 1995), LIN management's comments on such projections, and Bear
Stearns' and Lehman Brothers' due diligence inquiries on January 25, 1995 of
AT&T and McCaw regarding such projections; and (xv) conducted such other
studies, analyses, inquiries and investigations as they deemed appropriate.
In performing their financial and valuation analyses, Bear Stearns and
Lehman Brothers considered a wide variety of factors, including their views as
to (i) trends in the wireless communications industry, (ii) LIN's preeminent
position in the cellular industry, (iii) LIN's business strategy, market
position, historical financial and operating performance and future prospects,
(iv) the ownership and control characteristics of LIN's markets, (v) potential
third-party interest in all or part of LIN and the potential for tax-efficient
sale transactions, and (vi) equity research analysts' estimates of operating
statistics and valuation parameters relating to LIN and to the cellular
industry.
The following is a summary of the analyses performed by Bear Stearns and
Lehman Brothers in connection with providing their final view of the private
market value per LIN Common Share to the LIN Independent Directors pursuant to
the PMVG.
1. Discounted Cash Flow Analysis. Bear Stearns and Lehman Brothers performed
discounted cash flow analyses based on three different sets of financial
projections for LIN: (a) a Base Case provided by LIN management, (b) an Upside
Case provided by LIN management and (c) a Sensitivity Case derived by Bear
Stearns and Lehman Brothers from the Base Case (each described below).
Applying discount rates and terminal value multiples of EBITDA for the year
2004 (as discussed below), Bear Stearns and Lehman Brothers calculated a range
of discounted cash flow values per LIN Common Share on a fully diluted basis
of $141 to $194 utilizing the Base Case projections, $172 to $235 utilizing
the Upside Case projections and $104 to $144 utilizing the Sensitivity Case
projections. In reviewing these ranges for purposes of determining the private
market value per LIN Common Share, Bear Stearns and Lehman Brothers considered
the impact on valuation of (i) their view of the aggressiveness or
conservatism, as applicable, of the various sets of projections, (ii) applying
higher discount rates and higher terminal multiples to LIN's wireless data
business projections and (iii) LIN's shared control of the Los Angeles and
Houston markets. Bear Stearns and Lehman Brothers considered the results of
their discounted cash flow analyses as one of the primary factors for
determining their view of the private market value per LIN Common Share.
For each set of projections, Bear Stearns and Lehman Brothers derived a
range of discounted cash flow values by calculating the present value as of
June 30, 1995 of (i) LIN's projected free cash flow on an unleveraged basis
for the six months ended December 31, 1995 and the calendar years 1996 through
2004 and (ii) a terminal value based on a multiple of EBITDA projected for the
year 2004.
Bear Stearns and Lehman Brothers utilized discount rates, reflecting their
determination of LIN's weighted average cost of capital, ranging from 11% to
13%. In arriving at their view of the appropriate discount rate to apply to
the various sets of projections, Bear Stearns and Lehman Brothers reviewed and
analyzed, among other things, their views of the following items: (i) LIN's
business strategy, market position, future prospects and financial
projections, (ii) general wireless industry trends and projections, (iii) a
derived cellular industry asset
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beta based on the average of unleveraged equity betas for certain publicly
traded cellular companies, (iv) a long term target capitalization ratio which
was based on a leverage analysis of companies in other communications
industries which were viewed as proxies for cellular companies at a more
mature stage of development, (v) the historical and current yields on U.S.
Treasury Bonds, (vi) the historical and current trading levels of various
cellular companies' high yield debt, (vii) an estimate of LIN's current cost
of bank debt based on its most recent bank credit agreement, and (viii) an
estimate of the stock market's long-term risk premium. To calculate LIN's
terminal value, Bear Stearns and Lehman Brothers applied multiples of EBITDA
for the year 2004 ranging from 10.5x to 12.5x. The range of multiples of
terminal year EBITDA were calculated using assumed perpetual nominal growth
rates, taking into account Bear Stearns' and Lehman Brothers' views of (i)
LIN's business strategy, market position, future prospects and financial
projections; (ii) general wireless industry trends and projections; and (iii)
the perpetual growth rates implied by certain expectations for the U.S.
economy in terms of real gross domestic product growth and inflation. Bear
Stearns and Lehman Brothers compared these discount rates and terminal value
multiples to, and viewed them to be consistent with, the discount rates and
terminal value multiples used by (i) selected equity research analysts in
estimating the potential private market value per LIN Common Share, (ii)
selected equity research analysts in estimating the private market values of
other cellular companies, and (iii) selected financial advisors in performing
discounted cash flow analyses in connection with certain precedent merger and
acquisition transactions in the cellular industry.
The Base Case projections utilized by Bear Stearns and Lehman Brothers in
their discounted cash flow analysis were provided by LIN management. These
projections assume that LIN's revenue, subscriber and cash flow growth will be
highest in 1995 and that the rate of growth will decline in each year
thereafter, with more rapid declines in the first several years as the
wireless communications industry matures and becomes more competitive.
Although McCaw informed Bear Stearns and Lehman Brothers that in its view the
Base Case projections were unreasonably optimistic, Bear Stearns and Lehman
Brothers determined to utilize the Base Case projections because of their view
that the Base Case projections had been prepared by LIN management in good
faith based on reasonable assumptions. Bear Stearns and Lehman Brothers noted
that, in their view, the Base Case projections were materially similar to the
consensus of equity research analysts' projections for LIN specifically and
for the cellular industry generally.
The Upside Case projections utilized by Bear Stearns and Lehman Brothers
also were provided by LIN management. These projections are similar to the
Base Case projections, except that they assume (i) greater market penetration
for the cellular industry (based on wireless telephones replacing a portion of
landline telephones) than is assumed in the Base Case; (ii) new PCS and
enhanced specialized mobile radio ("ESMR") entrants gaining less market share
than is anticipated under the Base Case; (iii) average revenue per subscriber
per month ("ARPU") of LIN decreasing at a slower rate than is assumed in the
Base Case, as a result of a greater use of advanced services (such as wireless
data transfer, two-way alphanumeric messaging, voice mail, call waiting, call
forwarding, caller identification and other services); and (iv) LIN's
providing more long distance services than is anticipated under the Base Case.
The Sensitivity Case projections utilized by Bear Stearns and Lehman
Brothers were derived by them in order to take into consideration the impact
on LIN that would result if LIN were not to meet its projections in certain
respects. The Sensitivity Case projections are based on the Base Case
projections but assume growth in the wireless industry at a rate less than is
assumed by the Base Case such that (i) the wireless industry in general and
LIN in particular will achieve a lower degree of market penetration; (ii) ARPU
of the wireless industry will be reduced due to price reductions and reduced
use of wireless data transfer; and (iii) profit margins in the wireless
industry will be squeezed due to increased competition and wireless carriers'
increased pursuit of low usage customers.
Bear Stearns and Lehman Brothers also received and took into consideration
projections for LIN prepared by McCaw. Bear Stearns and Lehman Brothers
requested that AT&T provide any projections and valuations for LIN which had
been prepared by AT&T at any time, including in connection with the AT&T/McCaw
merger consummated in 1994. AT&T responded that, although it understood that
McCaw had prepared certain projections for LIN that had been provided to Bear
Stearns and Lehman Brothers, AT&T had not independently
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prepared any projections for LIN and that, although AT&T had prepared various
analyses of McCaw and LIN, AT&T believed that such analyses constituted
proprietary material and did not believe that it would be appropriate to share
them with Bear Stearns and Lehman Brothers.
2. Analysis of Precedent Merger and Acquisition Transactions. Bear Stearns
and Lehman Brothers reviewed and analyzed selected merger and acquisition
transactions involving other companies in the wireless industry that Bear
Stearns and Lehman Brothers deemed relevant. Bear Stearns and Lehman Brothers
considered the valuation benchmarks reflected in such precedent transactions,
including per pop values (i.e., enterprise values per potential customer) and
EBITDA multiples (i.e., enterprise values divided by EBITDA). Bear Stearns and
Lehman Brothers noted that valuations of cellular companies have historically
been expressed primarily on the basis of per pop values, but that, in their
view, valuations of more mature companies in the cellular industry (i.e.,
those which have already started to generate material EBITDA) are currently
expressed primarily on the basis of EBITDA multiples.
Bear Stearns and Lehman Brothers concluded that, because of their view as to
LIN's preeminent position in the wireless sector, the strategic importance and
high quality of its portfolio of properties and its large size and significant
cash flow, EBITDA multiples were the most relevant benchmarks for valuing LIN
Common Shares, and that the number of relevant precedent merger and
acquisition transactions was limited.
In Bear Stearns' and Lehman Brothers' view, the most relevant precedent
merger and acquisition transaction for determining the private market value
per LIN Common Share was the AT&T/McCaw merger which was announced in August
1993 and completed in September 1994 (at which time McCaw owned approximately
52% of the LIN Common Shares). In addition to the fact that the AT&T/McCaw
merger included an indirect acquisition of approximately 52% of the LIN Common
Shares, Bear Stearns and Lehman Brothers concluded that the AT&T/McCaw merger
was generally the most comparable transaction for determining the private
market value per LIN Common Share because of (i) McCaw's large size, with
approximately 60 million proportionate pops (including LIN's proportionate
pops) and in excess of $1 billion in proportionate EBITDA (including LIN's
proportionate EBITDA); (ii) the purchase being of McCaw in its entirety; and
(iii) the transaction having been recently completed.
Bear Stearns and Lehman Brothers analyzed the AT&T/McCaw merger and
concluded that, based on the transaction value at the time of announcement and
based on McCaw's estimated 1993 proportionate EBITDA and estimated 1994
(acquisition year) proportionate EBITDA (based on a consensus of equity
research analysts' estimates at the time the AT&T/McCaw merger was announced),
the implied proportionate EBITDA multiples for McCaw were 21.1x (using McCaw's
estimated 1993 proportionate EBITDA) and 15.9x (using McCaw's estimated 1994
(acquisition year) proportionate EBITDA). They also concluded that the implied
value per pop for McCaw was $280.
Bear Stearns and Lehman Brothers further stated their view that the
valuation benchmarks for LIN on a stand-alone basis should be at a premium to
those derived from the AT&T/McCaw merger, which represented a valuation of all
of McCaw's markets including LIN's markets and a significant number of markets
which were smaller than those of LIN, because (a) LIN's four principal markets
(New York, Los Angeles, Dallas and Houston) are four of the five largest
markets controlled by or under the shared control of McCaw; (b) LIN controls
or shares control of two of the top five cellular markets compared with
McCaw's (excluding LIN) control or shared control of none of such markets; (c)
LIN controls or shares control of four of the top ten cellular markets
compared to McCaw's (excluding LIN) control or shared control of one such
market; (d) LIN controls or shares control of 100% of its pops compared to the
96% controlled or shared controlled pops of McCaw (excluding LIN); and (e) in
Bear Stearns' and Lehman Brothers' view: (i) LIN's four principal markets
would be a vital component to any prospective acquiror's national wireless
strategy; (ii) each of LIN's properties would be very attractive to a number
of potential acquirors; (iii) most of LIN's operating statistics were superior
to those of McCaw (excluding LIN); and (iv) the demographic profile of LIN's
markets was superior to those of McCaw (excluding LIN).
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Bear Stearns and Lehman Brothers derived a range of imputed private market
values per LIN Common Share by applying to LIN (i) an acquisition year EBITDA
multiple at a premium to the acquisition year EBITDA multiple calculated for
the AT&T/McCaw merger and (ii) a value per pop at a premium to the value per
pop in the AT&T/McCaw merger. Specifically, Bear Stearns and Lehman Brothers,
based on their views as to the relative values of the LIN markets and those of
McCaw (excluding LIN), (i) calculated the 1994 (acquisition year) EBITDA
multiple range for LIN's markets in the AT&T/McCaw merger to be 17.2x to 19.5x
(representing a 10% to 30% premium over such EBITDA multiple range for the
McCaw properties not affiliated with LIN which was 15.6x to 15.0x) and (ii)
imputed the private market value per LIN Common Share based on the
aforementioned EBITDA multiples to be in a range of $148 to $171. Bear Stearns
and Lehman Brothers, based on such views, also (i) calculated the enterprise
value per pop range for LIN's markets in the AT&T/McCaw merger to be $335 to
$447 (and such enterprise value per pop range for the McCaw properties which
were not affiliated with LIN to be $265 to $235) and (ii) imputed the private
market value per LIN Common Share based on the aforementioned per pop values
to be in a range of $135 to $188. Bear Stearns and Lehman Brothers considered
the imputed value per LIN Common Share based on the AT&T/McCaw merger,
calculated as set forth above, as one of the primary factors for determining
their view of the private market value per LIN Common Share.
The qualitative demographic profile of LIN and McCaw (excluding LIN)
compared by Bear Stearns and Lehman Brothers included (i) the 1.6% Rural
Statistical Area ("RSA") pops of LIN compared to the 5.6% RSA pops of McCaw
(excluding LIN); (ii) the 38.7% of households with an income of greater than
$50,000 in areas controlled by or under the shared control of LIN compared to
the 27.2% of households with such an income in the areas controlled by or
under the shared control of McCaw (excluding LIN); (iii) the 46.1% of the
population in the areas controlled by or under the shared control of LIN with
a daily commute greater than thirty minutes compared to the 28.1% of the
population with such a commute in the areas controlled by or under the shared
control of McCaw (excluding LIN); and (iv) the 2,453 pops per square mile in
areas in which LIN had a proportionate interest compared to the 496 pops per
square mile in areas in which McCaw (excluding LIN) had a proportionate
interest.
Bear Stearns and Lehman Brothers also compared certain quantitative
operating statistics of LIN and McCaw (excluding LIN) for the twelve months
ending June 30, 1994 (the last period for which McCaw financial information
was publicly reported), including (i) the 3.7% market penetration achieved by
LIN compared to the 3.8% market penetration achieved by McCaw (excluding LIN);
(ii) LIN's proportionate revenue of approximately $427 million compared to
McCaw's (excluding LIN) proportionate revenue of approximately $791 million;
(iii) LIN's revenue per subscriber per month of $85.45 compared to McCaw's
(excluding LIN) revenue per subscriber per month of $80.69; (iv) LIN's
proportionate EBITDA of approximately $351 million compared to McCaw's
(excluding LIN) proportionate EBITDA of approximately $615 million; (v) LIN's
proportionate EBITDA margin of 44.3% compared to McCaw's (excluding LIN)
proportionate EBITDA margin of 42.1%; and (vi) LIN's proportionate EBITDA per
pop of $14.17 compared to McCaw's (excluding LIN) proportionate EBITDA per pop
of $12.96.
Bear Stearns and Lehman Brothers also reviewed the 1989 transaction in which
McCaw acquired 21.9 million LIN Common Shares for $154.11 in cash per share
(at which time LIN owned a subsidiary, LIN Television, which was subsequently
spun off by LIN), thereby increasing its ownership to approximately 52% of LIN
Common Shares. Bear Stearns and Lehman Brothers noted that, based on the price
paid per share in McCaw's 1989 acquisition of LIN Common Shares, Bear Stearns
and Lehman Brothers estimated a per pop value for LIN of $385 in that
transaction.
Bear Stearns and Lehman Brothers also reviewed and analyzed certain other
precedent merger and acquisition transactions involving cellular companies.
Bear Stearns and Lehman Brothers viewed such transactions as having only
limited relevance for assessing the private market value per LIN Common Share
because of Bear Stearns' and Lehman Brothers' views as to LIN's preeminent
position in the wireless sector, the strategic importance and high quality of
its portfolio of properties and its large size and significant cash flow. In
addition to the view of Bear Stearns and Lehman Brothers that those other
transactions involved the acquisition
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of less attractive cellular properties than those owned or controlled by LIN,
some involved joint ventures rather than outright acquisitions, and several
involved minority buyouts, which in Bear Stearns' and Lehman Brothers' view
may not include full control premiums. The acquisitions reviewed included
(acquiror/target) GTE /Contel, SNET/Bell Atlantic-NYNEX (Rhode Island and
Connecticut markets), Compagnie Generale des Eaux SA/SBC (Washington/Baltimore
market), LIN/Cellular Systems, Inc. and SBC/Associated. The joint ventures
reviewed included U S WEST/AirTouch and Bell Atlantic/NYNEX.
3. Analysis of Selected Publicly Traded Cellular Companies. Bear Stearns and
Lehman Brothers reviewed, analyzed and compared certain operating, financial,
trading and valuation information of LIN and seven other publicly traded
cellular companies (AirTouch, Cellular Communications, Contel, US Cellular,
Vanguard, Centennial and CommNet). Bear Stearns and Lehman Brothers noted that
they considered AirTouch to be most comparable to LIN for a variety of
business, operational and financial reasons, although not completely
comparable because of AirTouch's international cellular properties and because
AirTouch had a smaller percentage of domestic pops in the top ten U.S. markets
than did LIN. No other cellular company was deemed by Bear Stearns and Lehman
Brothers to be comparable to LIN due to LIN's domestic large-market focus.
Among other things, Bear Stearns and Lehman Brothers compared LIN's revenue
and EBITDA growth, EBITDA per pop ratio and EBITDA margins to, and reviewed
the trading and valuation parameters of, these other publicly traded cellular
companies. Bear Stearns and Lehman Brothers stated their view that, if LIN
were to trade in the public equity market on a fully distributed basis,
without a control shareholder such as AT&T and absent any control premium,
LIN's public market trading value would be approximately $116 per LIN Common
Share on a fully distributed basis. Bear Stearns and Lehman Brothers stated
their view that this implied public market trading value was consistent with
their final view of the private market value per LIN Common Share of $155,
which reflected a 34% premium over such implied public market trading value.
4. Review of Potential Third-Party Interest in LIN. At the direction of the
LIN Independent Directors, Bear Stearns and Lehman Brothers did not contact
any third parties to determine whether they had an interest in an acquisition
of all or any part of LIN. However, based on their respective experiences
representing various buyers and sellers in the cellular industry, Bear Stearns
and Lehman Brothers noted that, in their view, a broad universe of potential
buyers would exist if LIN were to be sold in an auction. Bear Stearns and
Lehman Brothers stated that they expected such demand to come from strategic
buyers and consortia because, in Bear Stearns' and Lehman Brothers' view: (i)
LIN has a premier collection of cellular assets and markets; (ii) LIN's
cellular assets, which include control or shared control of New York, Los
Angeles, Dallas and Houston, could form the cornerstone of a potential
acquiror's nationwide wireless strategy; (iii) a potential acquiror's
strategic considerations could offset the financial impact on a potential
acquiror from an acquisition of LIN; (iv) a number of acquisition structures
would be available to potential acquirors; (v) potential tax-efficient
structures could likely be implemented to allow for different combinations of
LIN's properties to be sold separately; and (vi) an acquisition of LIN by a
party other than AT&T would impair AT&T's nationwide wireless strategy. Based
on the foregoing and an analysis of the interest that they expected potential
acquirors could have in LIN as a whole and in each of LIN's individual
markets, Bear Stearns and Lehman Brothers identified a broad pool of potential
domestic acquirors (in addition to AT&T) for all or part of LIN. Additionally,
Bear Stearns and Lehman Brothers noted their view that certain foreign buyers
could have an interest in participating as partners of a U.S. buyer in a
transaction involving one or more properties owned by LIN. In their review and
assessment of potential acquirors, Bear Stearns and Lehman Brothers considered
factors that they viewed as potentially affecting the degree of interest of
potential acquirors, including (i) regulatory ownership restrictions; (ii)
financial impacts (i.e., earnings dilution, credit rating, etc.) on the
potential acquirors of LIN; (iii) LIN's shared control in the Los Angeles and
Houston markets; and (iv) sources of financing available to potential
acquirors.
5. Other Analyses and Considerations. Bear Stearns and Lehman Brothers
performed such other financial and valuation analyses, and considered such
other factors, as they deemed appropriate in determining the private market
value per LIN Common Share. Among other things, Bear Stearns and Lehman
Brothers considered the available estimates of equity research analysts with
respect to the private market value per LIN Common Share. These estimates,
which were made between December 1994 and January 1995, placed the private
market value
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per LIN Common Share within a range from $138 to $159, with the average
estimate of the private market value per LIN Common Share at $148. In making
their judgments generally regarding the private market value per LIN Common
Share, Bear Stearns and Lehman Brothers assigned significant weight to their
views as to LIN's unique position in the cellular industry, including (i)
LIN's control or shared control of New York, Los Angeles, Dallas and Houston,
four of the country's largest cellular markets; (ii) LIN's 1.1 million
proportionate subscribers; (iii) LIN's almost $1 billion in proportionate
revenues; (iv) LIN's having the highest EBITDA/pop ratio and revenue per
subscriber per month of any publicly traded cellular company; and (v) their
view that LIN has operations well positioned to capitalize on new revenue
sources such as wireless data and other services.
After Bear Stearns and Lehman Brothers determination of their final view,
Bear Stearns and Lehman Brothers were informed of the advice of counsel to
Wasserstein Perella that, in determining the private market value per LIN
Common Share as defined under the PMVG, AT&T and McCaw should not be
considered to be potential buyers. In response to an inquiry by Wasserstein
Perella regarding how the exclusion of AT&T from the possible buyer universe
would have changed the final view of Bear Stearns and Lehman Brothers, Bear
Stearns and Lehman Brothers responded that the exclusion of AT&T from the
buyer pool would not have changed their final view since, in their judgment,
there remained other potential third-party acquirors with an interest in
acquiring LIN in a transaction or series of transactions which could provide
$155 per LIN Common Share.
The determination of Bear Stearns' and Lehman Brothers' views of the private
market value per LIN Common Share pursuant to the PMVG involved complex
processes not necessarily susceptible to summary description. Selecting
portions of the analyses or of the summaries set forth herein, without
considering all of the analyses together, could create an incomplete view of
the processes underlying Bear Stearns' and Lehman Brothers' views. The
analyses relating to private market value were prepared solely for the purpose
of Bear Stearns and Lehman Brothers providing their final view of the private
market value per LIN Common Share to the LIN Independent Directors in
connection with the PMVG, and do not reflect the price at which LIN Common
Shares would trade if the Merger were not approved. In arriving at their
views, Bear Stearns and Lehman Brothers did not perform or obtain any
independent evaluation or appraisal of the assets or liabilities of LIN. The
views of Bear Stearns and Lehman Brothers delivered to the LIN Independent
Directors do not purport to be an appraisal of LIN, and Bear Stearns and
Lehman Brothers are not rendering any opinion as to the fairness to LIN or any
of the holders of LIN Common Shares, from a financial point of view, of the
consideration to be paid pursuant to the Merger.
Certain of the analyses performed by Bear Stearns and Lehman Brothers
assumed and relied upon the accuracy and completeness of the financial and
other information provided by LIN management. Bear Stearns and Lehman Brothers
assumed that the Base Case and Upside Case projections (described below)
provided by LIN were reasonably prepared on a basis reflecting the best
currently available estimates and assumptions of LIN management as to LIN's
expected future financial performance. Bear Stearns and Lehman Brothers also
reviewed and considered Sensitivity Case projections, which Bear Stearns and
Lehman Brothers derived based on the Base Case, and reviewed and considered
financial projections for LIN prepared and provided to them by McCaw. Bear
Stearns and Lehman Brothers did not assume any responsibility for independent
verification of the information or projections provided to them and relied
upon the assurances of LIN management that it was unaware of any facts that
would make such information or projections inaccurate, incomplete or
misleading.
The views of Bear Stearns and Lehman Brothers were necessarily based on
economic, market and other conditions and information as they existed on, and
could be evaluated as of, the dates of determination thereof. The summary
herein does not purport to be a complete description of the analyses performed
by Bear Stearns and Lehman Brothers and is qualified in its entirety by
reference to their separate letters, dated February 15, 1995, and their
reports relating thereto, all of which are attached as exhibits to the
Schedule 13E-3 (see "ADDITIONAL INFORMATION") and are available for inspection
and copying at the principal executive offices of LIN (see "CERTAIN
INFORMATION REGARDING AT&T, MCCAW, HOLDINGS, MERGER SUB AND LIN--LIN") during
LIN's regular business hours by any interested holder of LIN Common Shares or
such holder's designated representative.
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View as to LIN's Trading Price if the Merger Is Not Approved. Although not
required by the PMVG, at the request of the LIN Independent Directors, on
April 28, 1995, Bear Stearns and Lehman Brothers delivered to the LIN
Independent Directors the view of Bear Stearns and Lehman Brothers that, as of
such date, there was a substantial likelihood that, assuming the vote of the
holders of LIN Public Shares regarding the Original Merger had been held and
the Original Merger had not been approved by a Majority Vote of the LIN Public
Stockholders, the price at which LIN Public Shares would initially trade would
be less than $127.50 per share. This "initial public trading view" was based
on the additional stated assumptions that (i) the LIN Public Shares held by
arbitrageurs and others holding such shares in anticipation of consummation of
the Original Merger or an alternative transaction were fully redistributed,
(ii) there were no change in market, economic, financial and other conditions
(including, without limitation, conditions affecting the cellular industry
generally or LIN specifically) as they existed on and could be evaluated as of
April 28, 1995 and (iii) AT&T had no intention to acquire LIN Public Shares in
the event that the Original Merger were not consummated.
In arriving at their initial public trading view, Bear Stearns and Lehman
Brothers considered the factors set forth in their letters dated February 15,
1995 in connection with arriving at their view of the private market value per
LIN Common Share, as well as additional considerations, including a review of
(i) LIN's Annual Report to Shareholders and Annual Report on Form 10-K for the
year ended December 31, 1994, (ii) other publicly available financial data,
stock market performance data, ownership profiles and valuation parameters of
LIN and of certain other companies that were made available after February 15,
1995 and that Bear Stearns and Lehman Brothers deemed relevant, (iii) equity
research analysts' views of the public market trading value of LIN Common
Shares in the event the Original Merger were not consummated by reason of its
not being approved by a Majority Vote of the LIN Public Stockholders, (iv) the
ongoing protections afforded to the holders of Public Shares under the PMVG in
the event the Original Merger were not consummated by reason of its not being
approved by a Majority Vote of the LIN Public Stockholders and (v) such other
analyses as Bear Stearns and Lehman Brothers deemed relevant. Bear Stearns'
and Lehman Brothers' initial public trading view was based on market,
economic, financial and other conditions as they existed on, and could be
evaluated as of, April 28, 1995.
The determination by Bear Stearns and Lehman Brothers of the likely initial
public trading price of LIN Common Shares in the event the Original Merger
were not approved by a Majority Vote of the LIN Public Stockholders was
delivered solely for the use of the LIN Independent Directors. There can be no
assurance that Bear Stearns' and Lehman Brothers' initial public trading view
will conform with the actual public market trading price of LIN Common Shares.
The estimation of public trading prices of securities is subject to
uncertainties and contingencies, all of which are difficult to predict and
beyond the control of the firm making such estimates. The market prices of
securities will fluctuate with changes in market conditions, the conditions
and prospects of the industry and the particular company involved, and other
factors which generally influence the prices of securities.
In arriving at their initial public trading view, Bear Stearns and Lehman
Brothers did not perform or obtain any independent evaluation or appraisal of
the assets or liabilities of LIN. Their initial public trading view, which was
delivered by Bear Stearns and Lehman Brothers to the Independent Directors,
does not purport to be an appraisal of LIN, and Bear Stearns and Lehman
Brothers are not rendering any opinion as to the fairness to LIN or any of the
holders of LIN Common Shares, from a financial point of view, of the
consideration to be paid pursuant to the Original Merger.
The summary herein of Bear Stearns' and Lehman Brothers' view of the likely
initial public trading price of LIN Common Shares in the event the Original
Merger were not approved by a Majority Vote of the LIN Public Stockholders
does not purport to be a complete description of such view and is qualified in
its entirety by reference to the separate letters of Bear Stearns and Lehman
Brothers, dated April 28, 1995, which are attached as exhibits to the Schedule
13E-3 (see "AVAILABLE INFORMATION") and are available for inspection and
copying at the principal executive offices of LIN (see "CERTAIN INFORMATION
REGARDING AT&T, McCAW, HOLDINGS, MERGER SUB AND LIN--LIN") during LIN's
regular business hours by any interested holder of LIN Common Shares or such
holder's designated representative.
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Terms of Engagement. The terms of LIN's engagement of Bear Stearns and
Lehman Brothers acting jointly as the Independent Directors' Appraiser (as
defined in the PMVG) are set forth in letter agreements, dated December 18,
1994, between LIN and each of Bear Stearns and Lehman Brothers. Beginning in
May of 1994, Bear Stearns and Lehman Brothers were retained to provide general
services to the LIN Independent Directors in connection with the PMVG. LIN has
paid each of Bear Stearns and Lehman Brothers fees of approximately $1.5
million for its prior background work and for the preparation and delivery of
their letters, dated February 15, 1995, to the LIN Independent Directors and
will pay each of them an additional fee of approximately $3.6 million upon the
consummation of the acquisition of LIN Public Shares by McCaw in the Merger.
The amount of such additional fee for each is based on 0.15% of the aggregate
acquisition price for the LIN Public Shares to be paid by McCaw in the Merger
less the fees already paid. Accordingly, the amount of the additional fee
would be higher if the Merger Consideration were higher. If the Merger is not
completed, such additional fee will not be payable.
If despite McCaws good faith efforts the Merger has not been completed by
December 31, 1995 (or, if the Merger is approved by a Majority Vote of the LIN
Public Stockholders and is being pursued in good faith by McCaw but has not
been completed due to regulatory delays or litigation, August 31, 1996), the
PMVG provides that McCaw will put LIN in its entirety up for sale under the
direction of the LIN Independent Directors in a manner intended by the LIN
Independent Directors to maximize value for all LIN Common Shares. In the
event of a sale of LIN to a third party or to McCaw pursuant to these
provisions, Bear Stearns and Lehman Brothers would each receive (i) upon
delivery to the LIN Independent Directors of a formal written opinion or
opinions with respect to the fairness, from a financial point of view, to the
holders of the LIN Public Shares of the consideration to be received by the
holders of the LIN Public Shares in the transaction, a fee in an amount equal
to 33% of 0.15% of the consideration to be received by the holders of all the
LIN Common Shares (including those beneficially owned by McCaw) less $1.25
million in fees already paid and (ii) upon the closing of such transaction,
0.15% of the consideration received by the holders of all the LIN Common
Shares (including those beneficially owned by McCaw) less the sum of (x) the
fee paid pursuant to clause (i) above and (y) the $1.5 million in fees
previously paid. Accordingly, the fee payable to each of Bear Stearns and
Lehman Brothers in the event of such a sale would likely be substantially
greater than the fee payable in connection with the Merger, even if the
consideration to be received by the holders of LIN Common Shares in such a
sale were substantially lower than the Merger Consideration.
LIN also has agreed to reimburse each of Bear Stearns and Lehman Brothers
for its reasonable out-of-pocket expenses, including fees and disbursements of
its counsel arising in connection with its engagement, and to indemnify each
of Bear Stearns and Lehman Brothers (and their respective controlling persons,
affiliates, directors, officers, employees and agents) against certain
liabilities arising out of or relating to its engagement.
Lehman Brothers has in the past performed various investment banking
services for the LIN Independent Directors, including the evaluation of the
fairness of LIN's purchase of WTNH-TV New Haven-Hartford and concurrent
Television Spin-off, for which Lehman Brothers received customary fees.
Each of Bear Stearns and Lehman Brothers has performed various investment
banking services for AT&T in the past (including the underwriting of debt and
equity securities) and has received customary compensation for such services.
Each of Bear Stearns and Lehman Brothers also trades the debt and equity
securities of LIN and AT&T for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities.
PRIVATE MARKET VALUE DETERMINATION OF WASSERSTEIN PERELLA
Set forth below is the full text of the determination letter from
Wasserstein Perella delivered to McCaw and the LIN Independent Directors on
March 7, 1995 in connection with Wasserstein Perella's final determination
under the PMVG of the private market value per LIN Common Share. Wasserstein
Perella was jointly designated by Morgan Stanley, Bear Stearns and Lehman
Brothers as the "Mutually Designated Appraiser" under the PMVG to determine
the private market value per LIN Common Share. Wasserstein Perella was
selected for this
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purpose because it is a nationally recognized investment banking firm (as
specified by the PMVG) and because of its experience in the valuation of
companies, including companies in the cellular industry. Wasserstein Perella
was also engaged to render a fairness opinion on the Minimum Merger
Consideration to be paid in the Merger (see "SPECIAL FACTORS--Background of
the Merger" and "--Fairness Opinion of Wasserstein Perella") and served as
financial advisor to LIN in connection with the acquisition of control of LIN
by McCaw in 1990. No limitations were imposed on Wasserstein Perella in
connection with its determination of the private market value per LIN Common
Share, other than the following: (i) Wasserstein Perella was not allowed
access to internal AT&T and McCaw analyses (other than those projections
referenced herein), and (ii) in accordance with the view of both McCaw and the
LIN Independent Directors, Wasserstein Perella was not permitted to solicit
third party interest with respect to the acquisition of all the LIN Common
Shares. The full text of the materials delivered by Wasserstein Perella in
connection with its determination letter is attached as an exhibit to the
Schedule 13E-3 (see "ADDITIONAL INFORMATION"), and is also available for
inspection and copying at the principal executive offices of McCaw and of LIN
(see "CERTAIN INFORMATION REGARDING AT&T, McCAW, HOLDINGS, MERGER SUB AND
LIN--McCaw" and "--LIN") during McCaw's and LIN's respective regular business
hours by any interested holder of LIN Common Shares or such holder's
representative who has been so designated in writing.
As is more fully described under "SPECIAL FACTORS--Background of the
Merger," Wasserstein Perella received and considered written presentations
from Morgan Stanley, Bear Stearns and Lehman Brothers, conducted extensive due
diligence with respect to LIN, met with management representatives of LIN and
McCaw, conducted lengthy meetings with representatives of Morgan Stanley, Bear
Stearns and Lehman Brothers and counsel for McCaw and the LIN Independent
Directors, at which extensive presentations were made (reviewing and
discussing in detail the analyses of Morgan Stanley and of Lehman Brothers and
Bear Stearns described under "SPECIAL FACTORS--Private Market Value View of
Morgan Stanley" and "SPECIAL FACTORS--Private Market Value View of Bear
Stearns and Lehman Brothers," respectively, and the implications thereof),
received legal advice with respect to the proper interpretation of the PMVG
and other related issues, and considered the information set forth in the
materials delivered by Wasserstein Perella together with its determination
letter, which are filed as an exhibit to the Schedule 13E-3.
Based on the foregoing, Wasserstein Perella used its judgment to reach its
determination of the private market value per LIN Common Share under the PMVG.
Wasserstein Perella did not regard the final views as to private market value
of Lehman Brothers and Bear Stearns or of Morgan Stanley as setting high or
low boundaries on Wasserstein Perella's determination. Wasserstein Perella's
judgment did not involve a formulaic analysis, but, instead, reflected the
experience of those professionals participating in Wasserstein Perella's
internal discussions. The determination was reached through discussions among
professionals of Wasserstein Perella in which such professionals evaluated the
presentations and other information as set forth above, and applied their
extensive experience in representing purchasers and sellers of cellular
properties. Based on such experience, the professionals of Wasserstein Perella
participating in such discussions reached a judgment of the firm as to what
they believed would be the result of a hypothetical sale process involving the
sale of all of the LIN Common Shares to an unrelated third party on an arm's-
length basis with a view to maximizing value in accordance with the terms of
the PMVG. Given the nature of its assignment, Wasserstein Perella did not
prepare reference ranges of values for LIN or prepare independent financial
analyses suggesting any ranges of values for LIN.
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The full text of the Wasserstein Perella determination letter is as follows:
McCaw Cellular Communications, Inc.
5400 Carillon Point
Kirkland, Washington 98033
Independent Directors
LIN Broadcasting Corporation
5295 Carillon Point
Kirkland, Washington 98033
Dear Ladies and Gentlemen:
We have been designated by you as the "Mutually Designated Appraiser" to
resolve the dispute concerning, and determine, the private market value per
share of the Common Stock, par value $0.01 per share (the "Shares"), of LIN
Broadcasting Corporation ("LIN"), pursuant to Section 2(C) of the Private
Market Value Guarantee dated December 11, 1989 (the "PMVG"), between McCaw
Cellular Communications, Inc. ("McCaw") and LIN.
As detailed below, in arriving at our determination of private market
value per Share, we have applied the definition of private market value per
Share contained in Section 2(B) of the PMVG, consistent with the
interpretations of our counsel, Paul, Weiss, Rifkind, Wharton & Garrison
("Paul, Weiss"), and have, upon the advice of Paul, Weiss, among other
things, not considered McCaw and its parent AT&T Corp. ("AT&T") to be
potential buyers of the outstanding Shares under such definition but rather
have considered them to be sellers of their Shares and also have considered
the tax, accounting and regulatory consequences thereof.
In our analysis of various legal, regulatory, accounting and tax issues
related to possible transaction structures or potential acquirers or forms
of consideration, we took account of regulatory restrictions applicable to
AT&T and the effect of LIN's status as a majority owned subsidiary of
another corporation on the feasibility of tax free transactions and the
method of accounting for an acquisition of LIN.
Section 2(B) of the PMVG defines "private market value per Share" as:
"the private market price per Share (including control premium) that an
unrelated third party would pay if it were to acquire all outstanding
Shares (including the Shares held by [McCaw] and its affiliates) in an
arm's-length transaction, assuming [LIN] was being sold in a manner
designed to attract all possible participants (including the Regional
Bell Operating Companies) and to maximize stockholder value, including
if necessary through the sale or other disposition (including tax-free
spin-offs, if possible) of businesses prohibited by legal restrictions
to be owned by any particular buyer or class of buyers (e.g., the
Regional Bell Operating Companies)."
We understand that Morgan Stanley & Co. Incorporated (the "Offeror's
Appraiser") was designated by McCaw as the appraiser to determine the
private market value per Share pursuant to Section 2(C) of the PMVG and
that the Offeror's Appraiser determined the private market value per Share
to be $105. We understand that Lehman Brothers and Bear Stearns & Co. (the
"Independent Directors' Appraisers") were designated by the Independent
Directors of LIN as the appraisers to determine the private market value
per Share pursuant to Section 2(C) of the PMVG and that the Independent
Directors' Appraisers determined the private market value per Share to be
$155.
We have been advised that counsel for McCaw and counsel for the
Independent Directors of LIN disagree as to whether, in determining the
private market value per Share as defined in Section 2(B) of the PMVG,
McCaw and AT&T should be considered as potential buyers of the outstanding
Shares. We have also been advised that counsel for McCaw and counsel for
the Independent Directors of LIN disagree as to
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the conditions under which, in determining the private market value per
Share as defined in Section 2(B) of the PMVG, it should be assumed that
McCaw and the public stockholders of LIN must receive and be entitled to
retain the same form of consideration from any potential buyer or buyers of
LIN or any portion of its business or assets.
At the request of counsel for McCaw and counsel for the Independent
Directors of LIN, we have consulted with Paul, Weiss concerning the
requirements of Section 2(B) of the PMVG and have applied their
interpretations in arriving at our determination of private market value
per Share set forth below. With respect to the matters described in the
preceding paragraph, such counsel have advised us that, in their opinion,
(i) in determining the private market value per Share under the PMVG, we
should not consider McCaw or AT&T to be potential buyers of all of the
outstanding Shares, and should consider them to be sellers of the Shares
owned by McCaw and consider the tax, accounting and regulatory consequences
thereof; (ii) although we should not include McCaw or AT&T in the analysis
of what an unrelated third party would pay, we may consider other
transactions involving McCaw and AT&T, such as AT&T's acquisition of McCaw,
in a comparable acquisition analysis, and give such other transactions
whatever weight we deem appropriate in our judgment; (iii) we may take into
account potential transactions in which McCaw or AT&T would receive
consideration equal in value but different in kind from that to be received
by the holders of the Public Shares (as the term "Public Shares" is defined
in the PMVG); and (iv) the PMVG should be construed as requiring
consideration of transactions designed to overcome the legal barriers
resulting from AT&T's indirect ownership of the Shares, provided that the
kinds of transactions to be so considered are those in which such legal
barriers can reasonably be overcome, and in which AT&T receives value per
Share equal to the value received by the holders of the Public Shares.
We have been advised by counsel for McCaw and counsel for the Independent
Directors of LIN that the Modification of Final Judgment entered by the
United States District Court for the District of Columbia in United States
v. American Telephone & Telegraph Co., 552 F. Supp. 131 (D.D.C., 1982),
relating to the divestiture by AT&T of the Regional Bell Operating
Companies prohibits AT&T and its affiliates, including McCaw, from holding
stock issued by a Regional Bell Operating Company and that any waiver of
this prohibition would require the divestiture by McCaw of any such stock
within a relatively short period of time and, in any event, within one
year. As described above, in determining the private market value per Share
we have taken into account, among other matters, these restrictions on
AT&T's ownership of certain securities. We also took into account, among
other matters, the unavailability of pooling of interests accounting for a
disposition by a parent of its subsidiary.
In arriving at our determination of the private market value per Share,
we have reviewed, among other things:
(i) the PMVG;
(ii) the reports and other materials (the "Other Appraisers'
Reports") prepared and delivered to us by the Offeror's Appraiser and
the Independent Directors' Appraisers relating to their determinations
of the private market value per Share pursuant to Section 2(C) of the
PMVG;
(iii) certain publicly available information with respect to LIN,
including the publicly available consolidated financial statements of
LIN for recent years and interim periods to date;
(iv) certain internal financial and operating information, including
certain projections of financial performance, relating to LIN, its
principal operating subsidiaries and certain entities in which LIN or
its subsidiaries hold partnership interests prepared by each of the
management of LIN and the management of McCaw;
(v) certain publicly available information concerning the public
trading prices of the Shares and the stock of certain other companies
in businesses similar to LIN; and
(vi) certain publicly available information concerning merger and
acquisition transactions involving McCaw, LIN and certain other
companies in businesses similar to LIN.
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In addition, we have had discussions with the managements of LIN and
McCaw and representatives of the Offeror's Appraiser and the Independent
Directors' Appraisers concerning (i) the businesses, operations, assets,
financial condition and future prospects of LIN and its subsidiaries and
(ii) the Other Appraisers' Reports.
In accordance with the terms of our letter agreement dated February 17,
1995, with you (the "Engagement Letter"), we have not been provided with
any internal nonpublic information prepared by McCaw or AT&T relating to
the operations or assets of McCaw or AT&T or (except for the projections
prepared by the management of McCaw referred to above) LIN, or any
valuations of LIN prepared by LIN, McCaw or AT&T or their financial
advisors other than those contained in the Other Appraisers' Reports. As
instructed by you, we have not solicited any third parties regarding their
interest in acquiring LIN or any of its business or assets, and you have
advised us that, except for certain general inquiries that did not include
any indication of price, none of LIN, McCaw and AT&T and their respective
advisors have solicited or received any proposals or expressions of
interest from third parties in any such acquisition.
In preparing this letter, we have assumed and relied upon the accuracy
and completeness of all factual or historical information supplied or
otherwise made available to us by or on behalf of LIN, McCaw, the Offeror's
Appraiser or the Independent Directors' Appraisers and have assumed that
all financial projections provided to us (including those included in the
Other Appraisers' Reports) were prepared in good faith, reflecting the best
estimates of the party which prepared such projections. We also have
assumed that LIN does not have any contingent liabilities exceeding the
reserves therefor established in LIN's financial statements. We have not
independently verified the accuracy or completeness of, and we do not
assume responsibility for, any of such information or undertaken an
independent appraisal of any of the assets of LIN and its subsidiaries.
We have relied on the advice of counsel for McCaw, counsel for the
Independent Directors of LIN and our other counsel on this matter, Cravath,
Swaine & Moore, with respect to legal and tax matters other than the issues
relating to the interpretation of the PMVG described above.
In arriving at our determination of the private market value per Share,
we have performed such analyses and studies as we considered appropriate,
including those set forth in the report which accompanies this letter. In
arriving at such determination, we have assumed that the closing of any
acquisition by one or more parties of outstanding Shares or any of LIN's
business or assets would occur on June 30, 1995, and have not taken into
account any possible impediments to such a closing by a particular buyer
regarding the need for regulatory approval.
Our determination of the private market value per Share, is necessarily
based on market and other conditions as they exist on the date of this
letter.
Based upon and subject to the foregoing, and such other matters as we
consider relevant, we have determined that the private market value per
Share as defined under Section 2(B) of the PMVG, interpreted as described
above, is $127.50.
We are not expressing any views on the value of the Shares determined by
any method, or on any basis, other than pursuant to the standards of the
PMVG, interpreted as described herein. Values determined by other methods
or on other bases could differ materially from the amount set forth above.
We understand that Section 2(F) of the PMVG provides that under certain
circumstances McCaw will put LIN up for sale under the direction of the
Independent Directors of LIN and pursuant to sale procedures to be set by
them, and that McCaw may or may not be requested by the Independent
Directors of LIN to bid in such sale process. Our determination of private
market value per Share set forth above is not necessarily indicative of the
value per Share that may be received by LIN stockholders pursuant to any
such sale process.
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It is understood that this letter is for the information of McCaw and LIN
and is not a recommendation to any LIN stockholder to accept or vote for a
transaction proposed pursuant to the PMVG. This letter is not to be
circulated, quoted or referred to, in whole or in part, orally or in any
registration statement, proxy statement or any other document or any press
release or public statement without our written consent, except that it may
be disclosed in its entirety.
Very truly yours,
Wasserstein Perella & Co.
Terms of Wasserstein Perella's Engagement. McCaw and LIN have paid
Wasserstein Perella aggregate fees of $2.5 million in consideration for
Wasserstein Perella's services in connection with its determination of the
private market value per LIN Common Share under the PMVG. McCaw and LIN have
also agreed to reimburse Wasserstein Perella for its out-of-pocket expenses,
including reasonable fees and disbursements of counsel. McCaw and LIN have
agreed to indemnify Wasserstein Perella and its affiliates, their respective
directors, officers, partners, agents and employees and each person, if any,
controlling Wasserstein Perella or any of its affiliates against certain
liabilities and expenses, including certain liabilities under the federal
securities laws, relating to or arising out of its engagement. The fees,
expense reimbursement and indemnification described above are additional to
those provided to Wasserstein Perella for rendering the Fairness Opinion in
connection with the Merger. See "SPECIAL FACTORS--Fairness Opinion of
Wasserstein Perella."
CERTAIN PROJECTIONS
LIN and McCaw do not as a matter of course make public forecasts or
projections as to future sales or earnings. However, in connection with the
PMVG process, Morgan Stanley, Bear Stearns, Lehman Brothers and Wasserstein
Perella were provided with certain projections of the cellular operations of
LIN (on a proportionate basis based on LIN's proportionate interests in each
of its markets). See "SPECIAL FACTORS--Background of the Merger," "--Fairness
Opinion of Wasserstein Perella," "--Private Market Value View of Morgan
Stanley," "--Private Market Value View of Bear Stearns and Lehman Brothers"
and "--Private Market Value Determination of Wasserstein Perella." Separate
projections were prepared by certain members of the management of LIN in
November 1994 and, in response thereto, by certain members of the management
of McCaw in January 1995, in each case in connection with the PMVG process. In
addition, Morgan Stanley, Bear Stearns, Lehman Brothers and Wasserstein
Perella were provided with LIN projections that were prepared on behalf of
McCaw management and presented to the McCaw Board of Directors in October
1992. None of the three sets of projections was prepared with a view towards
complying with published guidelines of the Commission regarding projections
and forecasts.
Because the estimates and assumptions underlying the accompanying
projections are inherently subject to significant economic and competitive
uncertainties beyond the control of LIN and McCaw, no assurances are made or
implied as to their reliability. Moreover, the projections prepared by McCaw
management, and McCaw management's underlying assumptions, differ in
substantial respects from the projections prepared by LIN management and LIN
management's underlying assumptions. Actual results are likely to vary, and
may vary significantly, from those reflected in any of the projections. In
addition, the projections do not necessarily conform with generally accepted
accounting principles. The fact that these projections were furnished to
Morgan Stanley, Bear Stearns, Lehman Brothers and Wasserstein Perella or
reprinted in this Proxy Statement should not be regarded as an indication that
McCaw, LIN or any persons who received such information consider it an
accurate prediction of future events. These projections are included in this
Proxy Statement only because such information was provided to Morgan Stanley,
Bear Stearns, Lehman Brothers and Wasserstein Perella in connection with the
PMVG process. Neither LIN nor McCaw intends to update any of the following
projections.
The following subsections summarize the projected proportionate results for
the cellular operations of LIN taken as a whole, and underlying assumptions,
as set forth in each of the three sets of projections provided to Morgan
Stanley, Bear Stearns, Lehman Brothers and Wasserstein Perella.
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LIN Management Projections for LIN's Cellular Operations. LIN management
prepared Base Case projections and Upside Case projections for LIN's cellular
operations in connection with the PMVG process. The LIN management projections
solely reflect LIN management's beliefs and assumptions, which are not
necessarily shared or considered reasonable by any other parties.
The Base Case projections were intended by LIN management to be a moderate
and attainable view of the future expected business of LIN. In LIN
management's view, the Base Case does not include any adjustments for
synergies assuming a hypothetical sale of LIN to any particular buyer. The
Upside Case projections represent LIN management's more aggressive view of the
business of LIN and assume (i) new revenues from offering PCS services (a new
form of wireless communication) in LIN's markets using LIN's existing
infrastructure with the new PCS frequencies, (ii) a more rapid growth in
revenues compared to the LIN management Base Case projections from long
distance, a form of wireless data transmission termed Cellular Digital Packet
Data ("CDPD") and other new services, (iii) increased penetration and (iv)
decreased marketing costs and customer turnover (or "churn") because of new
programs and changes in the business. The LIN management Base Case and the
Upside Case projections are based on the following programs and assumptions:
1. Each of the four major markets (New York, Los Angeles, Dallas and
Houston) as well as the adjacent smaller markets owned by LIN was modeled
by LIN management. LIN management assumed that the relatively small size of
these other markets will cause them to be run as "satellites" with the same
overall economics as their adjacent larger markets. As of the year 2000,
the smaller markets are projected to represent about 1% of the total
revenue from LIN's cellular business.
2. The LIN management Base Case is intended to reflect LIN management's
belief that increasing competition will have a significant impact on
operating results as additional wireless operators enter the market. (The
primary effects are increased marketing costs, reduced price per minute and
a slowing of the penetration rate.) The LIN management Base Case assumes
that the competitive position of the cellular operators in individual
markets will equalize between them over time. In the LIN management Upside
Case, it is assumed that competition from PCS and ESMR services is not as
strong as in the LIN management Base Case, resulting in increased
penetration for cellular services and contributing to reduced marketing
costs and churn. LIN management assumed that the winning bidders for the 30
MHZ licenses in the PCS auctions will make every effort to enter operation
as quickly as possible, but that it is unlikely they could be fully
deployed in any of LIN's four major markets before late 1996, and that mid-
to-late 1997 is more likely.
3. In the LIN management Base Case, the existing market penetration for
LIN of approximately 4.3% of its population base in 1994 is projected to
reach 12% by the end of 1999 and nearly 17% by the end of 2004. These
estimates are intended by LIN management to take into account total
penetration expected by LIN management for all wireless voice services and
competition from ESMR and PCS services. The estimates assume that the two
cellular competitors in each market will have approximately the same number
of customers. Because LIN management believes that LIN's markets cover
large urban areas that are major centers of corporate headquarters,
business and trade, characterized by higher than average incomes, economic
activity, commuting times and other factors likely to increase cellular
penetration, the LIN management Base Case projections for LIN's markets
assume higher penetration rates than are projected in national averages for
all cellular markets. In the LIN management Upside Case, the annual
penetration rate is projected to increase in 1995 and 1996, based on the
rapid growth in 1994, and to decline each year thereafter.
4. In the view of LIN management, LIN and McCaw have instituted
aggressive programs to reduce churn. LIN management believes that LIN's
markets will be able to make substantial reductions in churn during each of
the next several years. The LIN management Upside Case assumes that churn
can be reduced to 12% per year by 2004.
5. The LIN management projections assume that LIN's subscriber base will
become substantially more consumer-oriented with lower monthly charges. The
LIN management projections also assume that a significant portion of the
growth in revenues will come from business users because LIN management
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believes that the business market is still relatively lightly penetrated
and that significant opportunities exist with services which are not yet
offered to customers.
6. Overall, the average rate per minute is expected by LIN management to
decline because of competition and declining costs per minute. At the same
time, average minutes of use are expected by LIN management to increase
because of lower rates per minute, more user friendly phones, improved
quality, longer battery lives and new features and services on the network.
The actual number of average minutes will depend significantly on the use
of various pricing plans, such as low per minute or flat rates from
residences and for off-peak periods and flat rates for in-office use, which
LIN management expects will substantially increase minutes of use.
7. The LIN management Base Case assumes that long distance revenues
generated by customers in markets in which LIN has an interest will equal
about 2.5% of local service revenues compared to about 4% or 5% in most LIN
and McCaw markets at the present time. The LIN management Base Case also
assumes that in New York and Dallas, LIN will continue to provide
essentially all the long distance service to its customers and will receive
100% of the long distance revenues generated by those customers. In Los
Angeles and Houston, the LIN management Base Case assumes that BellSouth,
LIN's partner in these markets, will not receive a waiver from the equal
access requirements for wireless and that LIN's share of the market as an
equal access carrier will decline over the next five years from 20% to 10%
of the long distance revenues. Cash flow margin is assumed by LIN
management to be 40% based on LIN's current margins in its long distance
business and LIN management's view that LIN will continue to be able to
purchase long distance services from competing long distance carriers on a
commodity basis at a substantial discount, which rate is likely in LIN
management's view to decline further in the future. The LIN management
Upside Case makes the following changes in the LIN management Base Case
assumptions: (i) long distance revenues are assumed to be approximately 4%
rather than 2.5% of revenues, reflecting existing percentages and assuming
continued growth in long distance usage from cellular phones; (ii) in New
York and Dallas, the proportion of customers purchasing long distance from
LIN has been reduced to 90% on LIN management's assumption that even
without equal access, some large customers will insist on direct connection
to other carriers but that in most such cases LIN may be able still to
resell such services; (iii) in Los Angeles and Houston it is assumed that
by 1997, whether or not these markets are freed from equal access, LIN will
continue to be able to capture about 20% of the business.
8. Although LIN management expects that significant additional revenues
will come from new features and services, LIN management believes that it
is difficult to determine fully the size of these additional revenues.
Included in the basic revenues for each market in the LIN management
projections are revenues from existing services such as voice mail, call
forwarding and call waiting packages, detailed billing, Voice Touch and
other miscellaneous features and services. Also included in the LIN
management projections is some growth in these revenues for basic features,
including some of the identified new features such as Caller ID and
Universal Number. The LIN management Base Case includes assumptions
considered by LIN management to be moderate for additional revenue growth
from such new features and services as sophisticated call screening,
routing and storing, text messaging to cellular phones, information
services and other services described above, as well as features and
services that have not yet been identified, by assuming an additional
revenue stream beginning in 2000 of $10 million and growing at an annual
rate of 20% with an additional new revenue source of $10 million being
added each year. As incremental products go on the network, operating costs
are projected by LIN management at 10% of revenue and marketing costs at
20% of revenue. The LIN management Upside Case assumes that this revenue
stream begins in 1998 rather than 2000.
9. CDPD networks were installed by cellular carriers for the transmission
of wireless data and became operational in many major markets across the
United States by the end of 1994, including LIN's markets in New York and
Dallas. Full coverage in most major cellular markets, including LIN's
markets in Los Angeles and Houston, is expected by LIN management to be
completed by the end of 1995. In the LIN management Base Case, LIN
management assumes average revenues of approximately $42 per month from
mobile users (portable computers, personal intelligent communicators, etc.)
and $5 per month from remote
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monitoring and control devices, and projects CDPD revenues to be $213
million, $360 million and $608 million in 2000, 2002 and 2004,
respectively. Capital expenditures are projected at between $5 million and
$10 million per year between 1996 and 2004. The LIN management Upside Case
further increases projected CDPD revenues beginning in 1998 to reflect
further penetration in the portable computer market, wireless delivery of
information services, remote monitoring and servicing and increased speeds
for CDPD. In the LIN management Upside Case, assuming the same average
monthly revenues, the CDPD revenues are projected by LIN management to be
$284 million, $597 million and $970 million in 2000, 2002 and 2004,
respectively.
10. The LIN management Upside Case also includes an additional revenue
stream from PCS-type services in LIN's existing markets, assuming that LIN
enters into some type of "resale" or operating arrangement or partnership
or acquires or "leases" 10 MHZ spectrum licenses that will be auctioned by
the FCC later in 1995. The LIN management Upside Case assumes that
beginning in 1998, a residential service is introduced that produces
initial revenues of $10 million in 1998, growing by 50% per year.
11. The costs of serving a customer are projected by LIN management to
decline because of economies of scale, automation of back room processes
and functions and a re-definition of services. With certain fixed costs and
declining average revenue per customer, cash flow margins before marketing
expenses are projected to be reduced. Nonetheless, LIN management projects
considerably greater operating efficiencies from streamlined operating
systems, improved information systems and greater use of outsourcing.
12. Total marketing costs are expected by LIN management to continue to
be driven by gross subscriber additions over the next several years. LIN
management believes that cash flow margins after marketing costs in 1994
and 1995 have been or will be significantly reduced compared to recent
years because of increased subscriber growth. In addition, the development
of competition from ESMR and 30 MHZ PCS providers are assumed in the LIN
management Base Case to increase marketing expenditures per gross
subscriber addition in 1997, 1998 and 1999. In the longer term, LIN
management expects growth rates in the subscriber base and revenue stream
to slow, and marketing costs (including advertising) are projected to
become approximately 10-15% of total costs. The LIN management Upside Case
assumes that new programs will be successful in reducing retail sales
commissions, but that this reduction will be offset somewhat by increased
advertising and that an average marketing and sales cost of $360 per gross
subscriber addition can be achieved by 1997.
13. LIN management expects capital expenditures per net customer addition
to increase in the next few years with the full deployment of digital
service, the creation of the CDPD network, the addition of micro-cells for
PCS-type cellular services and other enhancements. LIN management expects
that as the customer base becomes mostly digital, capital costs per net
subscriber addition will decline. The LIN management Upside Case includes
higher capital costs for CDPD beginning in 1999 because of higher growth
rates for CDPD, including technical improvements.
53
<PAGE>
LIN BROADCASTING CORPORATION CELLULAR OPERATIONS
CONDENSED PROPORTIONATE CONSOLIDATED FINANCIAL PROJECTIONS --LIN MANAGEMENT
FISCAL YEARS ENDING DECEMBER 31, 1995-2004
(IN MILLIONS)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASE CASE:
Revenue................. $1,180 $1,485 $1,756 $2,026 $2,268 $2,542 $2,823 $3,121 $3,413 $3,666
Direct Operating
Expenses............... 348 480 591 716 812 935 1,075 1,226 1,362 1,480
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Cash Flow Before
Marketing............. 832 1,005 1,165 1,310 1,456 1,607 1,748 1,895 2,051 2,186
Marketing Expense....... 297 331 363 382 394 391 375 349 337 338
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Operating Cash Flow:
Total (with Wireless
Data)................. $ 535 $ 674 $ 802 $ 928 $1,062 $1,216 $1,373 $1,546 $1,714 $1,848
Wireless Data.......... $ (9) $ (6) $ 7 $ 24 $ 63 $ 104 $ 136 $ 176 $ 229 $ 298
Capital Expenditures:
Total (with Wireless
Data)................. $ 301 $ 294 $ 280 $ 202 $ 187 $ 170 $ 142 $ 130 $ 102 $ 76
Wireless Data.......... $ 19 $ 5 $ 5 $ 10 $ 10 $ 5 $ 5 $ 5 $ 5 $ 5
UPSIDE CASE:
Revenue................. $1,188 $1,520 $1,827 $2,176 $2,458 $2,793 $3,187 $3,619 $4,049 $4,450
Direct Operating
Expenses............... 353 491 624 776 901 1,040 1,232 1,451 1,642 1,833
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Cash Flow Before
Marketing............. 835 1,029 1,203 1,400 1,557 1,753 1,955 2,168 2,407 2,617
Marketing Expense....... 297 311 327 321 325 342 348 354 361 372
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Operating Cash Flow:
Total (with Wireless
Data)................. $ 538 $ 718 $ 876 $1,079 $1,232 $1,411 $1,607 $1,814 $2,046 $2,245
Wireless Data.......... $ (9) $ (6) $ 7 $ 28 $ 76 $ 139 $ 209 $ 292 $ 380 $ 475
Capital Expenditures:
Total (with Wireless
Data)................. $ 301 $ 300 $ 348 $ 224 $ 207 $ 189 $ 164 $ 155 $ 138 $ 120
Wireless Data.......... $ 19 $ 5 $ 5 $ 10 $ 20 $ 11 $ 11 $ 11 $ 11 $ 11
</TABLE>
1995 McCaw Management Projections for LIN Cellular Operations. McCaw
management prepared projections for LIN's cellular operations in connection
with the PMVG process. The McCaw management projections solely reflect McCaw
management's beliefs and assumptions, which are not necessarily shared or
considered reasonable by any other parties.
In McCaw management's view, the McCaw management projections are based on an
operational view of each of the seven markets in which LIN has interests. The
McCaw management's market level projections were consolidated into
proportionate projections for LIN's cellular operations as a whole based on
LIN's economic ownership in each market as follows: New York 98.3%; Los
Angeles 40.0%; Dallas 60.4%; Houston 56.3%; Galveston, TX 34.6%; Newton, TX
100%; and Litchfield, CT 100%.
In McCaw management's view, the McCaw management projections include certain
benefits relating to McCaw capabilities, including sales to national accounts
and technical and research and development programs supporting wireless data
services. While McCaw management did not believe that an independent third
party acquiror of LIN would likely be able to provide McCaw's level of
synergies, these synergies were included because of the difficulty, in McCaw
management's view, of separating the contribution McCaw makes to LIN's
business. McCaw management's projections were not intended to reflect the
potential of AT&T to add value to LIN or the potential impact on LIN of facing
AT&T as a competitor were LIN to be purchased by an entity other than AT&T.
In McCaw management's view, the McCaw management projections include a
number of aggressive, but achievable, programs and assumptions which have a
significant impact on the value of LIN, as set forth below:
1. McCaw management expects that lower priced mass market cellular phones
to be introduced in late 1995 and early 1996 will attract new users and
result in growing penetration rates prior to the introduction
54
<PAGE>
of competition from PCS providers. McCaw management believes that similar
innovations, not yet defined, will be needed in the future to meet the
penetration and revenue projections.
2. McCaw management believes that revenues per subscriber will stabilize
beyond 2000 (declining 1% per annum) despite maturing of the market and
likely competitive pressure from PCS and ESMR providers. The McCaw
management projections also assume that new digital features will provide
additional value and support price levels.
3. The McCaw management projections assume that the wireless data market,
and the technical capability to satisfy it, will develop and result in LIN
incremental revenues and EBITDA of $300 million and $150 million,
respectively, in 2004.
4. Capital expenditures per net subscriber addition projected by McCaw
management assume only incremental growth of the existing cellular network.
Neither wholesale "change-out" nor technological obsolescence is reflected
in the projections.
5. The McCaw management projections assume that market shares of LIN and
its cellular competitors equalize over time.
6. McCaw management seeks to manage its cellular businesses by closely
monitoring and targeting penetration growth and revenue per subscriber per
month. The McCaw management projections assume efficiencies in such areas
as direct expense per subscriber per month, monthly churn, monthly cost per
gross new subscriber, and capital expenditures per net subscriber addition.
7. LIN's aggregate penetration (proportionally weighted) is projected in
the McCaw management projections to grow from 4.3% in 1994 to 14.5% in
2004. As the McCaw management projections assume that LIN will reach an
aggregate 50% market share, this implies the "A-block" and "B-block"
cellular providers will collectively reach a 29% penetration rate
(excluding penetration by potential PCS and ESMR competitors).
8. The monthly churn rate is projected in the McCaw management
projections to decline from 2.1% in 1994 to 1.2% in 2002 and remain
constant thereafter. McCaw management believes that this decline could be
adversely affected if competition from new entrants or fraud rates are
higher than expected by McCaw management. McCaw management also believes
that churn rates will be adversely affected when number portability (i.e.,
the ability to change service providers while retaining the same telephone
number) is available.
9. Revenue per subscriber (excluding potential wireless data revenue) is
projected by McCaw management to decrease from $83 per month to $49 per
month within 10 years. The most significant declines are projected by McCaw
management in 1995, 1996 and 1997 (to $61 per subscriber per month) due to:
(i) the relatively large projected increase in subscribers joining in
response to lower rate plans and mass market offerings and, less
significantly, (ii) the projected 1995/1996 phase-out of long distance
revenues in New York and Dallas in response to equal access requirements
(collectively projected by McCaw management to account for a decrease of $4
to $5 in revenues per subscriber).
10. The McCaw management projections assume a decline in direct expense
per subscriber from $26 per month in 1994 to $20 to $21 per month in 1995
and beyond. The improvement in direct expenses in 1995 in the McCaw
management projections results largely from: (i) economies of scale, (ii)
the development of lower cost delivery and support systems for the low-end
mass market customer, and (iii) reduction of costs associated with long
distance revenues.
11. The McCaw management projections assume that marketing expenses
continue to rise through 1999 as cellular providers seek to expand their
customer base in advance of the entry of PCS providers, and in 1998 and
1999 as cellular providers are assumed to compete directly with these new
entrants. In 2000 and beyond, marketing expense declines are assumed in the
McCaw projections as the rate of growth of the subscriber base falls (and
the cost of cellular phones continues to fall as well).
12. Capital expenditures per net subscriber addition are assumed in the
McCaw management projections to decline as conversion to digital networks
is completed by 1998. Additionally, economies of
55
<PAGE>
scale are assumed in the McCaw management projections to allow capital cost
per net subscriber addition to fall to $396 by 2001 and remain level
thereafter. This projection assumes no major technological obsolescence.
LIN BROADCASTING CORPORATION CELLULAR OPERATIONS
CONDENSED PROPORTIONATE CONSOLIDATED FINANCIAL PROJECTIONS--MCCAW MANAGEMENT
FISCAL YEARS ENDING DECEMBER 31, 1995-2004
(IN MILLIONS)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $1,162 $1,393 $1,579 $1,734 $1,887 $2,043 $2,205 $2,365 $2,531 $2,680
Direct Operating
Expenses............... 351 438 524 607 680 755 842 933 1,030 1,101
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Operating Cash Flow
Before Marketing...... 811 955 1,055 1,127 1,207 1,288 1,363 1,432 1,501 1,579
Marketing Expense....... 297 320 330 343 350 353 354 352 351 352
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Operating Cash Flow:
Total (with Wireless
Data)................. $ 514 $ 635 $ 725 $ 784 $ 857 $ 935 $1,009 $1,080 $1,150 $1,227
Wireless Data.......... $ (5) $ (3) $ 3 $ 12 $ 32 $ 52 $ 67 $ 87 $ 114 $ 148
Capital Expenditures:
Total (with Wireless
Data)................. $ 254 $ 259 $ 221 $ 160 $ 148 $ 134 $ 112 $ 103 $ 81 $ 60
Wireless Data.......... $ 19 $ 5 $ 5 $ 10 $ 10 $ 5 $ 5 $ 5 $ 5 $ 5
</TABLE>
1992 Projections of LIN Cellular Operations. Morgan Stanley, Bear Stearns,
Lehman Brothers and Wasserstein Perella were also provided with projections of
LIN's cellular operations that had been prepared on behalf of McCaw management
and presented to the Board of Directors of McCaw in the fall of 1992 in the
context of AT&T's then-proposed equity investment in and strategic alliance
with McCaw. See "SPECIAL FACTORS--Background of the Merger." The 1992
projections consisted of a base case, an upside case and a downside case and,
for each case, a version intended to reflect AT&T synergies and a version
intended to reflect no AT&T synergies. The 1992 projections solely reflect the
beliefs and assumptions in 1992 of the persons preparing such projections,
which are not necessarily shared or considered reasonable by any other parties
or by any parties in 1995.
The 1992 projections were provided to Morgan Stanley, Bear Stearns, Lehman
Brothers and Wasserstein Perella without any description of underlying
assumptions, except for the following introductory note that was provided to
the McCaw Board of Directors in 1992:
Subject to the limitations in the scope of the business described above
[i.e., that LIN's business was limited to a single service, namely,
cellular voice service], the financial models summarized here are based on
assumptions which management believes are reasonable. These assumptions may
not prove to be appropriate or accurate and the actual results of
operations are subject to numerous contingencies. Moreover, because the
cellular industry has only a limited operating history, these assumptions
necessarily include unverifiable expectations about the market for personal
communications services. Consequently, [LIN's] actual results of operations
may vary materially from the financial models.
56
<PAGE>
LIN BROADCASTING CORPORATION CELLULAR OPERATIONS
CONDENSED PROPORTIONATE CONSOLIDATED FINANCIAL PROJECTIONS--1992 PROJECTIONS
PRESENTED TO MCCAW BOARD
FISCAL YEARS ENDING DECEMBER 31, 1992-2002
(IN MILLIONS)
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASE CASE WITHOUT AT&T:
Revenue................. $562 $707 $865 $1,031 $1,190 $1,341 $1,490 $1,640 $1,795 $1,957 $2,128
Direct Operating
Expenses............... 153 198 250 301 348 394 439 486 536 588 643
---- ---- ---- ------ ------ ------ ------ ------ ------ ------ ------
Operating Cash Flow
Before Marketing...... 408 509 615 730 842 948 1,051 1,154 1,260 1,370 1,485
Marketing Expenses...... 127 135 147 144 140 137 134 131 128 125 122
---- ---- ---- ------ ------ ------ ------ ------ ------ ------ ------
Operating Cash Flow.... $281 $374 $468 $ 586 $ 702 $ 811 $ 917 $1,023 $1,132 $1,245 $1,363
Capital Expenditures.... $116 $164 $176 $ 154 $ 131 $ 114 $ 105 $ 97 $ 89 $ 81 $ 72
BASE CASE WITH AT&T:
Revenue................. $562 $675 $890 $1,100 $1,325 $1,520 $1,688 $1,858 $2,034 $2,218 $2,411
Direct Operating
Expenses............... 153 198 255 315 376 433 483 535 589 647 708
---- ---- ---- ------ ------ ------ ------ ------ ------ ------ ------
Operating Cash Flow
Before Marketing...... 408 477 635 785 949 1,087 1,205 1,323 1,445 1,571 1,703
Marketing Expenses...... 127 123 134 138 144 132 129 126 123 119 97
---- ---- ---- ------ ------ ------ ------ ------ ------ ------ ------
Operating Cash Flow.... $281 $354 $501 $ 647 $ 805 $ 955 $1,076 $1,197 $1,322 $1,452 $1,607
Capital Expenditures.... $116 $164 $181 $ 167 $ 146 $ 119 $ 109 $ 101 $ 93 $ 85 $ 76
UPSIDE CASE WITHOUT
AT&T:
Revenue................. $562 $728 $922 $1,133 $1,352 $1,553 $1,731 $1,911 $2,096 $2,292 $2,500
Direct Operating
Expenses............... 153 198 255 315 376 433 483 535 589 646 707
---- ---- ---- ------ ------ ------ ------ ------ ------ ------ ------
Operating Cash Flow
Before Marketing...... 408 530 667 818 976 1,120 1,247 1,376 1,507 1,646 1,792
Marketing Expense....... 127 121 130 133 137 123 121 119 117 114 112
---- ---- ---- ------ ------ ------ ------ ------ ------ ------ ------
Operating Cash Flow.... $281 $409 $537 $ 685 $ 839 $ 997 $1,126 $1,257 $1,390 $1,531 $1,680
Capital Expenditures.... $116 $164 $181 $ 167 $ 146 $ 119 $ 109 $ 101 $ 93 $ 85 $ 76
UPSIDE CASE WITH AT&T:
Revenue................. $562 $728 $931 $1,156 $1,393 $1,600 $1,781 $1,966 $2,159 $2,361 $2,575
Direct Operating
Expenses............... 153 198 255 315 376 433 483 535 589 647 708
---- ---- ---- ------ ------ ------ ------ ------ ------ ------ ------
Operating Cash Flow
Before Marketing...... 408 530 676 841 1,017 1,167 1,298 1,431 1,569 1,715 1,868
Marketing Expense....... 127 110 112 116 121 109 107 106 103 100 81
---- ---- ---- ------ ------ ------ ------ ------ ------ ------ ------
Operating Cash Flow.... $281 $419 $564 $ 725 $ 896 $1,058 $1,190 $1,326 $1,466 $1,615 $1,786
Capital Expenditures.... $116 $164 $181 $ 167 $ 146 $ 119 $ 109 $ 101 $ 93 $ 85 $ 76
DOWNSIDE CASE WITHOUT
AT&T:
Revenue................. $562 $685 $810 $ 935 $1,039 $1,145 $1,269 $1,393 $1,521 $1,653 $1,791
Direct Operating
Expenses............... 153 197 245 287 320 354 395 438 482 529 579
---- ---- ---- ------ ------ ------ ------ ------ ------ ------ ------
Operating Cash Flow
Before Marketing...... 408 488 565 648 719 791 874 955 1,039 1,124 1,212
Marketing Expense....... 127 153 160 150 136 145 141 138 134 132 128
---- ---- ---- ------ ------ ------ ------ ------ ------ ------ ------
Operating Cash Flow.... $281 $335 $405 $ 498 $ 583 $ 647 $ 733 $ 818 $ 904 $ 992 $1,083
Capital Expenditures.... $116 $184 $176 $ 136 $ 93 $ 118 $ 108 $ 100 $ 92 $ 84 $ 75
DOWNSIDE CASE WITH AT&T:
Revenue................. $562 $681 $815 $ 977 $1,148 $1,299 $1,443 $1,588 $1,736 $1,888 $2,047
Direct Operating
Expenses............... 153 196 244 294 343 390 437 484 534 587 643
---- ---- ---- ------ ------ ------ ------ ------ ------ ------ ------
Operating Cash Flow
Before Marketing...... 408 485 570 683 805 909 1,007 1,104 1,201 1,301 1,404
Marketing Expense....... 127 135 138 144 142 140 138 135 131 127 103
---- ---- ---- ------ ------ ------ ------ ------ ------ ------ ------
Operating Cash Flow.... $281 $350 $432 $ 539 $ 663 $ 769 $ 869 $ 969 $1,071 $1,175 $1,302
Capital Expenditures.... $116 $176 $187 $ 185 $ 155 $ 134 $ 123 $ 113 $ 103 $ 94 $ 83
</TABLE>
57
<PAGE>
ACCOUNTING TREATMENT
It is expected that the Merger will be accounted for as a purchase for
accounting and financial purposes.
INTERESTS OF CERTAIN PERSONS IN THE MERGER; CONFLICTS OF INTEREST
Affiliation of LIN Directors with AT&T and McCaw. Eight of the eleven
members of the LIN Board are designees and/or employees of AT&T or McCaw and,
therefore, have a conflict with respect to the Merger and the Merger
Agreement, given that McCaw is the other party to the Merger Agreement and
would acquire all the LIN Public Shares if the Merger is consummated. In
addition, once McCaw determined to proceed with an acquisition of all the LIN
Public Shares, the PMVG provided that McCaw was required to enter into an
agreement with LIN providing for such acquisition and to cause a meeting of
stockholders of LIN to be held as soon as practicable to consider and vote
thereon. If McCaw were not to have done so, it might be deemed to have
breached the PMVG.
Holdings, a wholly owned subsidiary of AT&T and McCaw, owns directly
26,989,500 LIN Common Shares, representing approximately 52.2% of the total
number of LIN Common Shares outstanding. None of AT&T, McCaw or Merger Sub
owns any LIN Common Shares directly. To the best knowledge of AT&T, McCaw,
Holdings and Merger Sub, no director or executive officer of any of AT&T,
McCaw, Holdings or Merger Sub beneficially owns any LIN Common Shares, except
as set forth in Appendix E hereto. Holdings has the sole power to vote, or to
direct the vote, and the sole power to dispose of, or to direct the
disposition of, the LIN Common Shares owned by it. Because they control
Holdings, AT&T and McCaw exercise the indirect power to vote and dispose of
such LIN Common Shares. No person other than Holdings has the right to receive
or the power to direct the receipt of dividends from, or the proceeds from the
sale of, the LIN Common Shares beneficially owned by Holdings.
Indemnification of Directors and Officers Pursuant to the Merger
Agreement. Under the Merger Agreement, McCaw and Holdings have agreed that all
rights to indemnification now existing in favor of any of the Indemnified
Parties as provided in its Certificate of Incorporation or By-Laws, or
otherwise in effect on the date of the Merger Agreement (including, without
limitation, as provided in the PMVG), will survive the Merger and continue in
full force and effect and McCaw and Holdings will cause LIN as the Surviving
Corporation (as defined herein) to honor all such rights to indemnification.
In the event of any claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time) subject to the rights to
indemnification provided by the Merger Agreement, (i) the Surviving
Corporation will have the right, from and after the Effective Time, to assume
the defense thereof with counsel reasonably satisfactory to such Indemnified
Parties and McCaw and Holdings will not be liable to such Indemnified Parties
for any legal expenses of other counsel or any other expenses subsequently
incurred by such Indemnified Parties in connection with the defense thereof
(provided that such Indemnified Parties will have the right to be represented
by up to one separate counsel for the LIN Independent Directors and one
separate counsel for the other Indemnified Parties as a group in connection
with the defense thereof, in each case selected by such Indemnified Parties
and reasonably satisfactory to the Surviving Corporation, if such Indemnified
Parties are advised by such counsel that there may be one or more substantial
legal defenses available to them which are different from or additional to
those available to the Surviving Corporation and in the reasonable judgment of
such counsel it is advisable for such Indemnified Parties to be represented by
such separate counsel, in which case, if such Indemnified Parties notify McCaw
and Holdings in writing that they elect to be represented by such separate
counsel at the expense of the Surviving Corporation in accordance with the
terms of this proviso, the Surviving Corporation will not have the right to
assume the defense of such action on behalf of such Indemnified Parties), (ii)
the Indemnified Parties will cooperate in the defense of any such matter and
(iii) McCaw and Holdings will not be liable for any settlement effected
without their prior written consent; provided that McCaw and Holdings will not
have any obligation under the Merger Agreement to any Indemnified Party when
and if a court of competent jurisdiction ultimately determines, and such
determination has become final, that the indemnification of such Indemnified
Party in the manner contemplated by the Merger Agreement is prohibited
58
<PAGE>
by applicable law; and provided, further, that nothing in the Merger Agreement
will prevent the Surviving Corporation from settling any such claim, action,
suit, proceeding or investigation as to any Indemnified Party subject to the
rights to indemnification provided by the Merger Agreement, so long as such
settlement is based on the payment of money and the Surviving Corporation
agrees to make all such payments due in connection with such settlement on
behalf of such Indemnified Party.
McCaw and Holdings will cause to be maintained in effect for not less than
six years after the Effective Time the current policies of directors' and
officers' liability insurance maintained by LIN with respect to matters
occurring prior to and including the Effective Time for all present and past
directors and officers of LIN or any of its subsidiaries; provided, however,
that (i) McCaw and Holdings may substitute therefor policies of at least the
same coverage containing terms and conditions which are no less advantageous
to the directors and officers covered thereby and (ii) McCaw and Holdings will
not be required to pay in the aggregate an annual premium for such insurance
in excess of two times the last annual premium paid prior to the date of the
Merger Agreement, but in such case will purchase as much coverage as possible
for such amount.
Employment Arrangements. Messrs. Alberg and Guthrie, as well as certain non-
executive officers and employees of LIN, have entered into employment
agreements or other bonus or severance arrangements that will be triggered by
consummation of the Merger or by severance of employment following
consummation of the Merger. In addition, in the Merger Agreement, McCaw agreed
that AT&T would assume all outstanding options granted under LIN's option
plans. In the event the Merger is consummated, vesting of some or, under
certain circumstances, all options to purchase LIN Common Shares held by
Messrs. Alberg and Guthrie, as well as certain non-executive officers and
employees of LIN, will accelerate. See "THE MERGER--Terms of the Merger--LIN
Option Plans; Stock Purchase Plan" and "EXECUTIVE COMPENSATION."
CERTAIN EFFECTS OF THE MERGER; OPERATIONS OF LIN AFTER THE MERGER
If the proposed Merger is consummated, the present holders of the LIN Public
Shares will no longer have an equity interest in LIN and, therefore, will not
share in its future earnings and growth. Instead, each holder of a LIN Public
Share will have the right to receive the Merger Consideration for each such
LIN Public Share held.
LIN would, as a result of the Merger, become a wholly owned subsidiary of
AT&T and McCaw. LIN Common Shares would be delisted from the Nasdaq National
Market, the registration of LIN Common Shares under the Exchange Act would
terminate and LIN would cease filing reports with the Commission. Moreover,
LIN would be relieved of the obligation to comply with the proxy rules of
Regulation 14A under Section 14 of the Exchange Act and its officers,
directors and 10% shareholders would be relieved of the reporting requirements
and restrictions on insider trading under Section 16 of the Exchange Act.
Accordingly, less information will be required to be made publicly available
than presently is the case.
Immediately after the Merger, all of the then outstanding LIN Common Shares
would be beneficially owned by AT&T, McCaw and Holdings. The directors of
Merger Sub immediately prior to the Effective Time (who will be designees of
AT&T or McCaw and will not include any LIN Independent Directors) will be the
directors of LIN from and after the Effective Time (until their successors are
duly elected or appointed and qualified). LIN's net book value at December 31,
1994 was $297.7 million and its net income for 1994 was $564.2 million.
Through its 52.2% current beneficial ownership of the outstanding LIN Common
Shares, McCaw's current proportionate interest in such net book value and net
income is $155.4 million and $294.5 million, respectively. McCaw's
proportionate interest will increase, as a result of the Merger, to 100%.
Except as otherwise described in this Proxy Statement, AT&T, McCaw and
Holdings currently expect that LIN will initially be operated after the Merger
in a manner similar to that of its current operations.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the material federal income tax
consequences of the Merger. This summary is for general information only. It
does not address tax consequences that may be relevant to certain types of
investors subject to special treatment under the federal income tax laws (such
as dealers in securities,
59
<PAGE>
banks, insurance companies and foreign individuals and entities). HOLDERS OF
LIN COMMON SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO ANY FEDERAL,
STATE, LOCAL, FOREIGN OR OTHER TAX CONSIDERATIONS RELEVANT TO THEM.
The exchange of LIN Common Shares for the Merger Consideration in the Merger
will be a taxable transaction to holders of LIN Common Shares. A holder of LIN
Common Shares will recognize gain or loss under federal income tax laws in an
amount by which the proceeds received in exchange for such shares exceed or
are less than the holder's tax basis in the shares. If the shares were a
capital asset in the hands of the holder of LIN Common Shares, such gain or
loss will be capital rather than ordinary and, in such instances, will be long
term if the shares are considered to have been held more than one year and
short term if they are considered to have been held one year or less on the
date of the Merger.
The consummation of the Merger will not result in the recognition by LIN of
taxable gain.
Under the backup withholding rules, unless an exemption applies under the
applicable law and regulations, the Paying Agent will be required to withhold,
and will withhold, 31% of all cash payments made in exchange for LIN Common
Shares unless the holder or other payee provides his tax identification number
(social security number, in the case of an individual, or employer
identification number) and certifies that such number is correct. Each holder
of LIN Common Shares and, if applicable, each other payee should complete and
sign the substitute Form W-9 to be included in the transmittal materials and
instructions (relating to stock certificates) to be mailed to stockholders as
soon as practicable after the Effective Time, so as to provide the information
and certification necessary to avoid backup withholding, unless an applicable
exemption exists and is proved in a manner satisfactory to LIN and the Paying
Agent.
TERMS OF THE PMVG
The PMVG provides, among other things, that for as long as McCaw and its
affiliates and Group Members beneficially own in the aggregate at least 25% of
the outstanding shares of the LIN Common Shares on a fully diluted basis or
McCaw's designees constitute a majority of the LIN Board, and McCaw and its
affiliates and Group Members do not beneficially own in the aggregate 100% of
the outstanding LIN Common Shares, the following provisions will apply:
LIN Independent Directors. Three members of the LIN Board, the LIN
Independent Directors, will be independent directors as determined under the
New York Stock Exchange Rules (i.e., independent of management of McCaw and
its affiliates and free of any relationship that, in the opinion of LIN's
Board of Directors, would interfere with the exercise of independent
judgment). The current LIN Independent Directors are persons who served on
LIN's Board of Directors prior to the completion by McCaw of its tender offer
for LIN. At each annual meeting of LIN's stockholders, LIN Independent
Directors are nominated by the then current LIN Independent Directors and
elected by a Majority Vote of the LIN Public Stockholders. LIN Independent
Directors are subject to removal only (a) for cause, (b) if a majority of the
LIN Independent Directors approve such removal or (c) if such removal is
approved by a Majority Vote of the LIN Public Stockholders. For these purposes
and purposes of the other provisions of the PMVG, a "Majority Vote of the LIN
Public Stockholders" includes not only (a) the affirmative vote of the holders
of at least a majority of the LIN Public Shares present and entitled to vote
at any meeting at which the holders of a majority of the LIN Public Shares are
present, but also (b) the action by written consent (in accordance with
applicable provisions of Delaware law and LIN's Certificate of Incorporation
and By-Laws) of the holders of a majority of the LIN Public Shares.
Sale of LIN. The PMVG provided that on or about January 1, 1995, the LIN
Independent Directors would designate an investment banking firm of recognized
national standing and McCaw would designate an investment banking firm of
recognized national standing, in each case to determine the private market
value per LIN Common Share. Pursuant to that provision, the LIN Independent
Directors designated Bear Stearns and Lehman Brothers and McCaw designated
Morgan Stanley. As a result of the disparity in the respective views of the
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private market value per LIN Common Share by Bear Stearns and Lehman Brothers
and by Morgan Stanley, in accordance with the terms of the PMVG, Wasserstein
Perella was mutually designated to determine the private market value per LIN
Common Share, as defined in the PMVG.
Wasserstein Perella arrived at a final determination that the private market
value per LIN Common Share, as defined under the PMVG, is $127.50. Under the
formula set forth in the PMVG, $127.50 per LIN Common Share is the Private
Market Price, because this amount is more than one-third and less than two-
thirds of the way between the $105 per LIN Common Share and $155 per LIN
Common Share determined by Morgan Stanley and Bear Stearns and Lehman
Brothers, respectively, as the private market value per LIN Common Share. If
Wasserstein Perella's determination were not in this middle range, the Private
Market Price would have been the average of Wasserstein Perella's
determination and the closer of the other two appraisals, but not more than
the higher appraisal ($155) nor less than the lower appraisal ($105).
Once the Private Market Price was determined pursuant to the procedures
provided for in the PMVG, McCaw had 45 days to decide whether it desired to
proceed with an acquisition of all the LIN Public Shares at that price. Within
such 45 days, McCaw determined to proceed with the merger contemplated by the
Original Merger Agreement as set forth above and to pay the Private Market
Price in cash, and the Original Merger Agreement was presented to and approved
by the LIN Board by a vote of six to three, with two directors abstaining. The
three LIN Independent Directors each voted no on the proposal to approve the
Original Merger Agreement presented to the LIN Board, and Tom A. Alberg and
Harold S. Eastman abstained. Subsequently, McCaw agreed to increase the
consideration to be received by the LIN public stockholders in the Merger in
connection with the settlement of the Stockholders Litigation and discussions
with the LIN Independent Directors. On June 22, 1995, McCaw entered into the
Memorandum of Understanding. The Merger Agreement (as amended and restated)
was then presented to and approved by the LIN Board. See "SPECIAL FACTORS--
Background of the Merger." Following such approval, McCaw entered into the
Merger Agreement and the Annual Meeting was called, as required by the PMVG.
The Merger may only be completed if it is approved by a Majority Vote of the
LIN Public Stockholders.
Except as set forth in the next paragraph, if despite McCaw's good faith
efforts the Merger has not been completed by December 31, 1995 (or, if the
Merger has been approved by a Majority Vote of the LIN Public Stockholders and
is being pursued in good faith by McCaw but has not been completed due to
regulatory delays or litigation by August 31, 1996), the PMVG provides that
McCaw will put LIN in its entirety up for sale under the direction of the LIN
Independent Directors in a manner intended by the LIN Independent Directors to
maximize value for all LIN Common Shares. The sale will be conducted by the
LIN Independent Directors, whose fees shall be reimbursed by LIN, and McCaw
will not bid unless requested to do so by the LIN Independent Directors. The
sale procedures will be set by the LIN Independent Directors and may include,
if necessary in order to maximize stockholder value, provision for the sale or
other disposition (including tax-free spin-offs, if possible) of businesses
prohibited by legal restrictions to be owned by any particular buyer or class
of buyers (e.g., the Regional Bell Operating Companies). The LIN Independent
Directors will select from among the proposed transactions the one or more
transactions determined by them as being most likely to maximize value for all
LIN Common Shares and will cause a meeting of the holders of LIN Common Shares
to be held as soon as practicable to consider and vote thereon. McCaw will
fully cooperate in this process and, if one or more of the transactions so
selected by the LIN Independent Directors are approved by a Majority Vote of
the LIN Public Stockholders, will cause all LIN Common Shares owned by it or
its affiliates to be voted in favor thereof. Any sale of LIN would be subject
to receipt of FCC and other necessary regulatory approvals.
Survival of PMVG. If a transaction is presented for approval at a meeting of
holders of LIN Common Shares as contemplated above and fails to receive the
requisite Majority Vote of the LIN Public Stockholders, McCaw will have no
further rights or obligations to purchase the remaining interest in LIN or to
put all of LIN up for sale, but the remainder of the PMVG will continue to
apply to the extent described therein.
Continuing Stockholder Protections. Except as described above, neither McCaw
nor any of its non-LIN affiliates may engage in any material transaction
(including, without limitation, agreements, such as roaming
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agreements, which are standard in the industry) with LIN or any of its
subsidiaries (other than pro rata as a stockholder of LIN) unless such
transaction has been approved by a majority of the LIN Independent Directors.
Except as described above, neither McCaw nor any of its non-LIN affiliates
may engage in a merger or consolidation with LIN, or purchase all or
substantially all of LIN's assets, unless the transaction is approved not only
by a majority of the LIN Independent Directors but also by a Majority Vote of
the LIN Public Stockholders. In deciding whether to approve such a
transaction, the LIN Independent Directors will be instructed to consider as a
fair price per LIN Common Share the private market price per LIN Common Share
(including control premium) that an unrelated third party would pay if it were
to acquire all outstanding LIN Common Shares (including the LIN Common Shares
held by McCaw and its affiliates) in an arm's-length transaction, assuming
that LIN was being sold in a manner designed to attract all possible
participants (including the Regional Bell Operating Companies) and to maximize
stockholder value, including if necessary through the sale or other
disposition (including tax-free spin-offs, if possible) of businesses
prohibited by legal restrictions to be owned by any particular buyer or class
of buyers (e.g., the Regional Bell Operating Companies). The LIN Independent
Directors will retain independent financial advisors and counsel to advise
them with respect to any such transaction, whose reasonable costs, expenses
and indemnities will be paid for and provided by LIN.
The PMVG provided that no transaction would be undertaken, and LIN would not
take any action, whether or not approved by a majority of the LIN Board, if
the LIN Independent Directors determine in their good faith judgment by
unanimous vote that such transaction or action would likely depress the value
of LIN on January 1, 1995. In addition, LIN will not acquire or dispose of any
business (other than acquisitions of additional cellular interests in markets
in which LIN has an interest), whether or not approved by a majority of the
LIN Board, if the LIN Independent Directors determine in their good faith
judgment by unanimous vote that such acquisition or disposition is not in the
best interests of LIN.
Additional Share Purchases. Except as permitted above, neither McCaw nor any
of its non-LIN affiliates may purchase additional LIN Common Shares if, after
giving effect thereto, they would beneficially own in the aggregate more than
75% of the outstanding LIN Common Shares on a fully diluted basis.
Corporate Opportunities. McCaw will direct to LIN, and LIN will have a
priority right to pursue, all corporate opportunities to acquire interests in
U.S. cellular telephone systems other than those in markets in which McCaw has
an interest or contiguous to markets in which McCaw has such an interest (in
the latter instance, however, only if such market is not a market in which LIN
has such an interest or contiguous to such a market). For purposes of the
foregoing, a party will not be deemed to have an interest in a cellular
telephone system solely by reason of such party's ownership of less than a
majority equity interest in a public company having such an interest. The LIN
Independent Directors will be afforded an amount of time reasonably necessary
to consider any such transaction, consistent with any time constraints imposed
by the other party to such transaction, and if and for as long as a majority
of the LIN Independent Directors desire to pursue such transaction, McCaw will
not separately pursue that transaction.
Certain Transferees Bound. Except pursuant to a sale of LIN as described
above, neither McCaw nor any of its non-LIN affiliates may sell more than 25%
of the outstanding LIN Common Shares on a fully diluted basis to a third party
or group unless that third party or group agrees in writing to be bound by the
provisions set forth in the PMVG to the same extent as McCaw is so bound.
Amendments. The provisions of the PMVG may be amended in any respect not
materially adverse to the holders of the LIN Public Shares, but only if the
amendment is approved by a majority of the LIN Independent Directors. Any such
amendment will promptly be disclosed in a filing with the Commission. The
determination of the LIN Independent Directors as to whether an amendment is
materially adverse to the holders of the LIN Public Shares will be final and
will bind all holders of the LIN Public Shares. The provisions of the PMVG may
also be amended in any other respect if the amendment is approved by a
Majority Vote of the LIN Public Stockholders.
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Television Spin-off. On June 7, 1994, the PMVG was amended to provide that,
notwithstanding the LIN Independent Directors' ability to veto any transaction
or other action if they should determine in their good faith judgment, by
unanimous vote, that such transaction or action would likely depress the value
of the LIN Public Shares on January 1, 1995, a transaction (the "Transaction")
consisting of (a) the acquisition by LIN Television, a former indirect wholly
owned subsidiary of LIN, of WTNH-TV from Cook Inlet Communications Corp. and
(b) the tax-free distribution pursuant to Section 355 of the Internal Revenue
Code of 1986, as amended (the "Code"), of the remaining shares of LIN
Television could be undertaken if the LIN Independent Directors determined in
their good faith judgment that (i) the Transaction was fair, from a financial
point of view, to the holders of the LIN Public Shares, and (ii) the
consideration to be paid in the proposed acquisition of WTNH-TV was fair, from
a financial point of view, to the holders of the LIN Public Shares.
Termination. The PMVG will cease to be in effect if at any time (i) McCaw,
its affiliates and Group Members beneficially own in the aggregate less than
25% of the outstanding LIN Common Shares on a fully diluted basis and McCaw's
designees no longer constitute a majority of the LIN Board (provided that in
such event the PMVG will come back into effect if, at any time within two
years thereafter, (A) McCaw, its affiliates and Group Members should
beneficially own in the aggregate 25% or more (but less than 100%) of the
outstanding LIN Common Shares on a fully diluted basis or (B) McCaw's
designees shall again constitute a majority of the LIN Board) or (ii) McCaw,
its affiliates and Group Members beneficially own in the aggregate 100% of the
outstanding LIN Common Shares.
The foregoing description of the PMVG is qualified in its entirety by
reference to the full text of the PMVG, which is attached hereto as Appendix
D.
LITIGATION
A number of putative class action lawsuits involving the Original Merger and
the PMVG process were filed in Delaware and New York state courts and in
federal court. In re LIN Broadcasting Corporation Shareholders Litigation,
Delaware Court of Chancery, New Castle County, Consolidated C.A. No. 14039, is
a consolidated action alleging that AT&T, McCaw and Holdings have, by their
conduct in connection with the determination of the private market value of
the LIN Common Shares pursuant to the PMVG, breached the PMVG and certain
fiduciary duties. The relief sought includes an injunction prohibiting AT&T,
McCaw and Holdings from acquiring LIN Common Shares owned by the class
members, an order directing AT&T, McCaw and Holdings to fulfill their
contractual and fiduciary obligations, rescission if a sale pursuant to the
terms of the PMVG to AT&T, McCaw or Holdings is consummated and monetary
damages. LIN was named as a defendant in this action because plaintiffs were
seeking injunctive relief and LIN may have been deemed to be an indispensable
party if a court determined that such relief were appropriate. Plaintiffs have
not alleged any claims against LIN and do not seek damages against LIN. In
Katz v. Robert E. Allen, et al., New York State Supreme Court, New York
County, Index No. 95-104259, plaintiffs allege that AT&T and its directors
violated fiduciary duties by virtue of, among other things, Morgan Stanley's
determination of the private market value per LIN Common Share under the PMVG.
Plaintiff seeks, among other things, injunctive relief and damages. In Luke v.
Wasserstein Perella & Co., AT&T Corp., McCaw Cellular Communications, Inc.,
LIN Broadcasting Corporation, William G. Herbster, Wilma H. Jordan and Richard
W. Kislik, New York Supreme Court, New York County, Index No. 95-105973,
plaintiffs allege: (i) that Wasserstein Perella was negligent and breached its
duty of care; (ii) that AT&T, McCaw and Holdings will be unjustly enriched by
such negligence; and (iii) that the individual defendants may breach their
fiduciary duties as LIN Independent Directors. In addition to seeking
injunctive relief against an acquisition of LIN Common Shares by AT&T, McCaw
or Holdings at the value derived by Wasserstein Perella, declaratory relief
and monetary damages against all defendants other than the LIN Independent
Directors and LIN, the plaintiffs have requested an injunction prohibiting the
LIN Independent Directors from approving any sale of LIN that would result in
the LIN public stockholders receiving a price per LIN Common Share less than a
properly computed private market value per LIN Common Share, as defined in the
PMVG, and an order directing the LIN Independent Directors to take all action
necessary to determine the Private Market Price and to maximize shareholder
value. LIN was named as a defendant in this action because plaintiff is
seeking injunctive relief and LIN may be an indispensable party if a court
determines that such relief
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is appropriate. Plaintiff has not alleged any claims against LIN and does not
seek damages against LIN. In Frank v. Alberg, et al., New York Supreme Court,
New York County, Index No. 95-108949, plaintiff alleges that McCaw and certain
present and former LIN directors (not including the LIN Independent Directors)
violated fiduciary obligations to LIN stockholders in connection with the
acquisition of McCaw by AT&T in that such defendants failed to protect the LIN
stockholders from an interpretation of the PMVG that would exclude McCaw and
AT&T from consideration as an "unrelated third party" in the valuation
process. The complaint further alleges that such defendants are "exacerbating
their initial breach of fiduciary duties" by advancing an interpretation of
the PMVG that excludes AT&T from the term "unrelated third party," which
interpretation plaintiff contends is incorrect. The complaint seeks monetary
damages and rescission. In all of these cases, none of the defendants have yet
filed an answer or otherwise responded to the complaints. All of these cases
have been brought as class actions, but no action has yet been taken with
respect to the consideration of certifying a class.
Another action, Newman v. McCaw Cellular Communications and AT&T Corp.,
United States District Court for the Southern District of New York, C.A. No.
95 Civ. 1583, was brought alleging that defendants failed to disclose that the
private market value per LIN Common Share would be determined in violation of
the method set forth in the PMVG and that this conduct, together with public
statements and other actions taken by the defendants, constituted a violation
of federal securities law. This action was voluntarily dismissed without
prejudice on June 22, 1995 pursuant to the filing of plaintiff's Notice of
Voluntary Dismissal dated June 21, 1995, in which plaintiff stated that based
on facts learned from defendant's counsel subsequent to the commencement of
the action, plaintiff no longer believed it could prevail on its claims.
On June 22, 1995, counsel for the plaintiffs in the Delaware and New York
state court actions and counsel for AT&T, McCaw and Holdings executed a
Memorandum of Understanding setting forth the terms of their agreement in
principle to settle the actions. As contemplated in the Memorandum of
Understanding, the Stipulation of Settlement was executed on behalf of all
parties in In re LIN Broadcasting Corporation Shareholders Litigation and
filed in that action on July 27, 1995. Pursuant to the Stipulation of
Settlement, a Consolidated Amended Class Action Complaint was filed on July
31, 1995, adding certain parties and causes of action that previously were
included in the New York and Delaware state court actions. A Notice of
Pendency of Class Action, Class Action Determination, Proposed Settlement of
Class Action, Settlement Hearing and Right to Appear (the "Class Notice"),
describing, among other things, the terms of the proposed settlement and the
rights of stockholders in connection with the settlement, was distributed to
all persons who have been holders, of record or beneficially, of LIN Common
Shares at any time on or after January 1, 1995 (the "Settlement Class"). A
hearing has been scheduled for September 15, 1995, or such adjourned date as
the Delaware Chancery Court may, without further notice, direct, at which the
Delaware Chancery Court will consider and determine the fairness,
reasonableness and adequacy of the Stipulation of Settlement and whether an
order and final judgment should be entered approving the settlement and will
hear applications for the award of attorneys' fees and expenses.
In summary, the settlement provides that, in exchange for the increased
Merger Consideration and other revisions to the terms of the Original Merger
(See "SPECIAL FACTORS--Background of the Merger"), the Settlement Class will
compromise, settle, release and discharge with prejudice all claims, rights
and causes of action (state or federal), including but not limited to claims
arising under the federal securities laws, the rules or regulations
promulgated thereunder, or otherwise, whether known or unknown that are, could
have been or might in the future be asserted by any of the plaintiffs or any
member of the Settlement Class, whether directly, derivatively,
representatively or in any other capacity against defendants and their
predecessors, successors, parents, subsidiaries, affiliates and agents
(including, without limitation, any investment bankers or attorneys and any
past, present or future officers, directors or employees of defendants and
their predecessors, successors, parents, subsidiaries, affiliates and agents)
which have been, or could have been, asserted relating to the Original Merger
Agreement, the Merger Agreement, the Original Merger, the Merger, the actions
of the LIN Board and the individual LIN director defendants relating to the
AT&T/McCaw merger, the PMVG, this Proxy Statement, the actions of the Boards
of Directors of AT&T, McCaw or LIN and the individual LIN director defendants
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relating to the Original Merger, the Merger, the Original Merger Agreement,
the Merger Agreement, or any of the transactions, disclosures, facts and
allegations that are the subject of the actions (except for appraisal rights
pursuant to Section 262 of the DGCL) (the "Settled Claims").
The Stipulation of Settlement further provides that plaintiffs' counsel will
apply to the Delaware Chancery Court for an award of attorneys' fees and
reasonable out-of-pocket disbursements (together, the "Fees") on the basis of
the benefits provided by the settlement, which represent an aggregate increase
in the Merger Consideration (before the Accretion Amount) of from $50 to $55
million. Subject to the terms and conditions of the Stipulation of Settlement,
plaintiffs' counsel will apply for Fees of up to $4 million plus $.25 per LIN
Merger Share (together with any interest as provided below), which will not be
opposed by the parties. "LIN Merger Shares" means LIN Common Shares issued and
outstanding immediately prior to the Effective Time, other than LIN Common
Shares owned by McCaw or any of its wholly owned Subsidiaries and LIN Common
Shares held in the treasury of LIN or by any wholly owned Subsidiary of LIN.
If final Delaware Chancery Court approval of the settlement is obtained and
the Delaware Chancery Court awards total Fees of $4 million or less by a final
and nonappealable order, McCaw will pay that amount to the plaintiffs'
attorneys and an additional $.25 per LIN Merger Share (plus any portion of the
Accretion Amount allocable to the $.25 per LIN Merger Share) will be paid to
the LIN public stockholders as the Additional Amount (and the Accretion Amount
thereon). If final Delaware Chancery Court approval of the settlement is
obtained and the Delaware Chancery Court finally awards total Fees of more
than $4 million, McCaw will pay that amount to the plaintiffs' attorneys, the
amount in excess of $4 million will be deducted from the $.25 per LIN Merger
Share (together with any portion of the Accretion Amount allocable to the $.25
per LIN Merger Share) and, if any amount remains after such deduction, the
remaining amount will be paid to the LIN public stockholders as the Additional
Amount (and the Accretion Amount thereon). The obligation of McCaw to pay the
Fees in either such event is conditioned upon the dismissal of each of the New
York state court actions.
If final Delaware Chancery Court approval of the settlement is obtained and
all other conditions to the Merger are satisfied or waived but the amount of
the Fees has not been approved by a final Delaware Chancery Court order, McCaw
will close the Merger and pay $129.50 per LIN Merger Share plus the Accretion
Amount allocable to the $129.50 per LIN Merger Share, if any, in the Merger.
In such case, McCaw will deposit $.25 per LIN Merger Share on the date of the
Closing (together with any portion of the Accretion Amount allocable to said
amount) into an interest bearing account. Following final Delaware Chancery
Court determination of the Fees, the amount in such account (including pro
rata interest) will be paid in accordance with the order of the Delaware
Chancery Court to the plaintiffs' attorneys and the balance, if any, will be
paid to the LIN public stockholders who receive the Merger Consideration. The
obligation of McCaw to pay the Fees in such event is conditioned upon the
dismissal of each of the New York state court actions.
In the event that the Merger is consummated and, for whatever reason,
plaintiffs' counsel is not yet entitled to the payment of the Fees, McCaw
will, within five days after the consummation of the Merger, deposit the
lesser of $4 million or, in the event an award has been made, the amount of
Fees awarded by the Delaware Chancery Court into a separate interest bearing
escrow account. Within five days after plaintiffs' counsel is entitled to the
Fees, McCaw will cause the amount finally awarded by the Delaware Chancery
Court, together with the interest allocable to the amount awarded, to be paid
to plaintiffs' counsel.
The Stipulation of Settlement provides that the parties have the option to
withdraw from the settlement in the event that: (a) the Order and Final
Judgment called for in the Stipulation of Settlement is not entered
substantially in the form specified therein (including such modifications
thereto as may be ordered by the Delaware Chancery Court with the consent of
the parties); (b) the settlement is not approved by the Delaware Chancery
Court; or (c) such order is reversed or substantially modified upon appeal.
The settlement is further conditioned upon consummation of the Merger, and
will not be binding upon any party if the Merger Agreement is terminated in
accordance with its terms. AT&T and McCaw have the option to withdraw from the
settlement in the event that the Merger is terminated or in the event that
final Delaware Chancery Court approval of the
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settlement is not obtained by November 30, 1995. Plaintiffs have the option to
withdraw from the settlement in the event that this Proxy Statement is not
substantially in the form in which it was filed by LIN with the Commission on
July 10, 1995, excluding any changes made by LIN in response to comments from
the Commission and any other changes reasonably satisfactory to the Co-Chairs
of the Plaintiffs' Executive Committee.
In the event any option to withdraw from the settlement is exercised by any
party (as provided for in the Stipulation of Settlement), or if the
Stipulation of Settlement and the settlement are not approved by the Delaware
Chancery Court or shall not become effective for any reason whatsoever, the
Stipulation of Settlement, the settlement provided therein (including any
modification thereto made with the consent of the parties), and any actions
taken in connection therewith will be terminated and will become void and have
no further force and effect, except for the obligation of McCaw to pay for any
expenses incurred in connection with the Class Notice. The foregoing
description of the settlement is a summary only. Shareholders are referred to
the Class Notice for a full description of the terms of the settlement.
The entry of a final and nonappealable order of the Delaware Chancery Court
approving the settlement is a waivable condition to McCaw's obligation to
consummate the Merger. If the Delaware Chancery Court issues an order
approving the settlement, an appeal of such order may be filed within 30 days
of such order after which, if no appeal is filed, the order will be final and
nonappealable. McCaw does not intend to waive the condition to its obligation
to consummate the Merger that the Delaware Chancery Court issue an order
approving the settlement. However, if such an order is issued and no
objections to such settlement have been filed prior to the issuance of such
order, McCaw would consider waiving the portion of such condition that would
require the 30-day appeal period to expire without an appeal being filed. If
McCaw were to make such a waiver, and assuming the satisfaction or waiver of
all other conditions to the Merger, the Merger would be consummated as
promptly as practicable following issuance of the Delaware Chancery Court's
order and receipt of the requisite approvals of the LIN stockholders. If such
condition were not satisfied or waived by McCaw, McCaw would be entitled to
delay consummation of the Merger and, if the Merger is not consummated by
November 30, 1995, to terminate the Merger Agreement. See "THE MERGER--
Conditions; Waivers--Condition to the Obligations of McCaw, Holdings and
Merger Sub" and "--Termination, Amendment and Waiver."
Unless the Merger is not approved by a Majority Vote of the LIN Public
Stockholders at the Annual Meeting, in which event McCaw's obligation either
to acquire the LIN Public Shares or to put all of LIN up for sale will
terminate and the PMVG will remain in effect in accordance with its terms, if
the Merger is not completed by December 31, 1995 (or by August 31, 1996, if
the Merger has been approved by the requisite vote of the LIN stockholders by
December 31, 1995 and is being pursued in good faith by McCaw but has not been
completed due to regulatory delays or litigation), the PMVG provides that
McCaw will put LIN in its entirety up for sale under the direction of the LIN
Independent Directors in a manner intended by the LIN Independent Directors to
maximize value for all LIN Common Shares. See "SPECIAL FACTORS--Terms of the
PMVG."
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THE MERGER
THE DESCRIPTION OF THE MERGER AGREEMENT SET FORTH BELOW DOES NOT PURPORT TO
BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER
AGREEMENT, A COPY OF WHICH IS ATTACHED AS APPENDIX A TO THIS PROXY STATEMENT
AND INCORPORATED BY REFERENCE HEREIN.
TERMS OF THE MERGER
The Merger. Subject to the terms and conditions of the Merger Agreement,
Merger Sub will merge with and into LIN at the Effective Time. The separate
corporate existence of Merger Sub will then cease, and LIN will be the
surviving corporation in the Merger (the "Surviving Corporation").
Certificate of Incorporation and By-Laws. The Merger Agreement provides that
the Certificate of Incorporation of Merger Sub as in effect immediately prior
to the Effective Time will become the Certificate of Incorporation of the
Surviving Corporation. The By-Laws of Merger Sub in effect at the Effective
Time will become the By-Laws of the Surviving Corporation.
Directors and Officers. The directors of Merger Sub at the Effective Time
will become the directors of the Surviving Corporation until their successors
have been duly elected or appointed and qualified or until their earlier
death, resignation or removal. The officers of LIN at the Effective Time will
become the officers of the Surviving Corporation until their successors have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal. See "SPECIAL FACTORS--Certain Effects of the Merger;
Operations of LIN After the Merger."
Conversion of LIN Common Shares in the Merger. At the Effective Time, (a)
each issued and outstanding LIN Common Share (other than LIN Common Shares
owned by McCaw or any of its wholly owned subsidiaries and LIN Common Shares
held in the treasury of LIN or by any wholly owned subsidiary of LIN, which
LIN Common Shares will be automatically cancelled and retired and will cease
to exist with no payment being made with respect thereto, and other than any
Dissenting Shares) will be converted into the right to receive the Merger
Consideration, consisting of (i) $129.50 in cash, plus (ii) the Additional
Amount, if any, plus (iii) the Accretion Amount, if any, and (b) each share of
capital stock of Merger Sub issued and outstanding immediately prior to the
Effective Time will be converted into and become one validly issued, fully
paid and nonassessable share of Common Stock, par value $0.01 per share, of
LIN as the Surviving Corporation of the Merger.
LIN Option Plans; Stock Purchase Plan. Pursuant to the terms of the Amended
and Restated 1969 Stock Option Plan of LIN (the "Option Plan"), each option to
purchase LIN Common Shares outstanding at the Effective Time (each, an
"Option") issued pursuant to the Option Plan will be assumed by AT&T and will
constitute an option to acquire, on the same terms and conditions as were
applicable under such assumed Option, a number of AT&T Common Shares equal to
the product of the Assumption Ratio (as defined below) and the number of LIN
Common Shares remaining subject to such Option as of the Effective Time, at a
price per AT&T Common Share equal to the aggregate exercise price for the LIN
Common Shares remaining subject to such Option divided by the number of full
AT&T Common Shares deemed to be purchasable pursuant to such Option; provided,
however, that (i) subject to the provisions of clause (ii) below, the number
of AT&T Common Shares that may be purchased upon exercise of such Option will
not include any fractional shares and, upon the last such exercise of such
Option, a cash payment will be made for any fractional share based upon the
per share closing price of AT&T Common Shares as reported in the New York
Stock Exchange Composite Transactions on the date of such exercise, and (ii)
in the case of any Option to which Section 421 of the Code, applies by reason
of its qualification under Section 422 or Section 423 of the Code ("qualified
stock options"), the option price, the number of shares purchasable pursuant
to such Option and the terms and conditions of exercise of such Option will be
determined in order to comply with Section 424 of the Code. For purposes of
the foregoing, the "Assumption Ratio" means the per share closing price of the
LIN Common Shares on the date of approval of the Merger by the LIN
stockholders, as reported on the Nasdaq National Market System, divided by the
per share closing price of AT&T Common Shares on the date of approval of the
Merger by the LIN stockholders, as
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reported in the New York Stock Exchange Composite Transactions (or if such
date is not a trading day, on the immediately preceding trading day). The
Assumption Ratio will be adjusted appropriately, if necessary, to reflect any
stock split, reverse stock split or similar change in the AT&T Common Shares
or the LIN Common Shares that is not reflected in their respective per share
closing prices on the date of approval of the Merger; provided that in no
event will any such adjustment be made in respect of quarterly cash dividends
payable on the AT&T Common Shares or the LIN Common Shares.
In addition, LIN will take such action as may be necessary so that, from and
after the Effective Time, no employee of LIN will be eligible to purchase LIN
Common Shares pursuant to the LIN Broadcasting Corporation Employee Stock
Purchase Plan (the "Stock Purchase Plan"). In lieu thereof, LIN employees who
meet the eligibility requirements thereof will be eligible to purchase AT&T
Common Shares pursuant to the McCaw Cellular Communications, Inc. Employee
Stock Purchase Plan.
EFFECTIVE TIME OF THE MERGER
Promptly following satisfaction or waiver (where permissible) of the
conditions to the Merger, the Merger will be consummated and become effective
on the date and at the time at which the certificate of merger to be filed
pursuant to the DGCL is accepted for filing by the Secretary of the State of
Delaware or such later date and time as may be specified, with the approval of
LIN and McCaw, in such certificate of merger. See "THE MERGER--Conditions;
Waivers."
PAYMENT FOR SHARES
Payment for Shares. From and after the Effective Time, a bank or trust
company to be designated by McCaw will act as paying agent (the "Paying
Agent") in effecting the payment of the Merger Consideration for certificates
formerly representing LIN Common Shares and entitled to payment of the Merger
Consideration pursuant to the Merger Agreement (the "Certificates"). At the
Effective Time, and from time to time thereafter, McCaw or Merger Sub will
deposit, or cause to be deposited, in trust with the Paying Agent for the
benefit of the holders of LIN Common Shares such amounts as may be necessary
to permit the Paying Agent to make the payments to which holders of
Certificates are entitled. Promptly after the Effective Time, but in no event
later than two business days after the date of the Effective Time, the Paying
Agent will mail to each record holder of Certificates a form of letter of
transmittal which will specify that delivery will be effected, and risk of
loss and title to the Certificates will pass, only upon proper delivery of the
Certificates to the Paying Agent and instructions for use in surrendering such
Certificates and receiving the Merger Consideration therefor. Upon the
surrender of each such Certificate, together with such letter of transmittal
duly executed and any other required documents, the Paying Agent will pay the
holder of such Certificate, in consideration therefor, the Merger
Consideration multiplied by the number of LIN Common Shares formerly
represented by such Certificate (and, if applicable, the Escrow Amount (as
defined herein)), and such Certificate will forthwith be cancelled. Until so
surrendered, each such Certificate (other than Certificates representing
Dissenting Shares and Certificates representing LIN Common Shares owned by
McCaw or any of its wholly owned subsidiaries and LIN Common Shares held in
the treasury of LIN or by any wholly owned subsidiary of LIN) will represent
solely the right to receive the aggregate Merger Consideration relating
thereto (and, if applicable, payment of the Escrow Amount). No interest will
be paid or accrued on the Merger Consideration.
The Merger Consideration (and, if applicable, payment of the Escrow Amount)
will be net to each holder of Certificates in cash, subject to reduction only
for any applicable federal back-up withholding or stock transfer taxes payable
by such holder. If payment of cash in respect of any Certificate is to be made
to a person other than the person in whose name such Certificate is
registered, it will be a condition to such payment that the Certificate so
surrendered will be properly endorsed or will be otherwise in proper form for
transfer and that the person requesting such payment will have paid any
transfer and other taxes required by reason of such payment in a name other
than that of the registered holder of the Certificate surrendered or will have
established to the satisfaction of McCaw or the Paying Agent that such tax
either has been paid or is not payable. After the Effective Time, there will
be no transfers on the stock transfer books of the Surviving Corporation of
any LIN
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Common Shares which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to LIN or the Paying
Agent, they will be surrendered and cancelled in return for the payment of the
aggregate Merger Consideration relating thereto (and, if applicable, payment
of the Escrow Amount), subject to applicable law and the provisions of the
Merger Agreement in the case of Dissenting Shares. See "RIGHTS OF DISSENTING
STOCKHOLDERS."
Payment for Shares If Additional Amount Is Not Determined As of the
Effective Time. In the event the Effective Time occurs prior to the
determination of the Additional Amount, the Merger Consideration will be
determined and paid in accordance with the terms of the Merger Agreement, and
all references in the Merger Agreement to the Merger Consideration will be
construed, as if the Additional Amount were equal to zero. In such case, McCaw
or Merger Sub will deposit or cause to be deposited with the Paying Agent, in
an interest bearing account (the "Escrow Account"), an amount equal to (i)
$0.25 plus the Accretion Amount, if any, applicable to $0.25, multiplied by
(ii) the number of LIN Common Shares issued and outstanding immediately prior
to the Effective Time, other than LIN Common Shares owned by McCaw or any of
its wholly owned subsidiaries and LIN Common Shares held in the treasury of
LIN or by any wholly owned subsidiary of LIN. Such amount and any interest
thereon will be retained in the Escrow Account pending the payments described
below. If the total fee awarded by a final and nonappealable order of the
Delaware Court of Chancery to the plaintiff's attorneys in connection with the
settlement of the Stockholders Litigation is greater than $4 million, the
excess of such fee over $4 million will be paid to the plaintiffs' attorneys
from the Escrow Account (together with any interest accrued on such excess
amount in the Escrow Account). If any amount remains in the Escrow Account
following such payment, an additional payment will be made to former holders
of Certificates who have previously received payment of the Merger
Consideration, in an amount per LIN Common Share formerly represented by such
Certificates equal to (i) the aggregate amount remaining in the Escrow Account
immediately following such payment to the plaintiffs' attorneys divided by
(ii) the total number of LIN Common Shares issued and outstanding immediately
prior to the Effective Time, other than LIN Common Shares owned by McCaw or
any of its wholly owned subsidiaries and LIN Common Shares held in the
treasury of LIN or by any wholly owned subsidiary of LIN (the "Escrow
Amount"). Holders of Certificates who have not received payment of the Merger
Consideration as of the time of determination of the Escrow Amount, if any,
will be entitled to receive, at such time as they receive payment of the
Merger Consideration in accordance with the relevant provisions of the Merger
Agreement, an additional payment, if any, equal to the Escrow Amount, without
interest thereon, with respect to each LIN Common Share in respect of which
such holder receives payment of the Merger Consideration.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of the
parties thereto. The Merger Agreement includes representations and warranties
by LIN as to (i) the corporate organization, standing and power of LIN and its
significant subsidiaries, (ii) approvals by the LIN Board, (iii) its
capitalization, (iv) brokers and finders employed by LIN, (v) the accuracy of
information to be supplied by LIN for inclusion in this Proxy Statement and in
the Schedule 13E-3, (vi) the inapplicability of certain provisions of the DGCL
to the Merger and (vii) the fact that the Merger Agreement and the
transactions contemplated thereby do not constitute a "Triggering Event," as
such term is defined under the Rights Agreement. The preferred share purchase
rights issued pursuant to the Rights Agreement are referred to herein as the
"LIN Rights."
The Merger Agreement also includes representations and warranties by McCaw,
Holdings and Merger Sub as to (i) the corporate organization, standing and
power of each of McCaw, Holdings and Merger Sub, (ii) approval by the
respective Boards of Directors of McCaw, Holdings and Merger Sub, (iii)
brokers and finders employed by AT&T, McCaw, Holdings and Merger Sub, (iv) the
accuracy of information to be supplied by McCaw, Holdings and Merger Sub for
inclusion in this Proxy Statement and in the Schedule 13E-3, (v) certain
activities and obligations of Merger Sub, and (vi) the solvency of LIN as the
Surviving Corporation of the Merger.
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CERTAIN COVENANTS OF MCCAW
Under the Merger Agreement, McCaw has agreed to cause the LIN Common Shares
beneficially owned by it, its affiliates or any of its subsidiaries to be
voted in favor of the Merger Agreement and the Merger if the Merger Agreement
and the Merger are approved by a Majority Vote of the LIN Public Stockholders.
McCaw has also agreed to guarantee the obligations of Holdings, Merger Sub and
the Surviving Corporation under the Merger Agreement.
BUSINESS OF LIN PENDING THE MERGER
Except as contemplated by the Merger Agreement, during the period from the
date of the Merger Agreement to the Effective Time, LIN will, and will cause
each of its Subsidiaries to, conduct its operations according to, and not
enter into any transaction other than in accordance with, its ordinary course
of business consistent with past practice. As used herein, "Subsidiary" means,
as to a corporation, any entity of any kind of which at least 50% of the
equity or voting interest is owned, directly or indirectly, by such
corporation. Notwithstanding the foregoing, pending the Effective Time, LIN
and its Subsidiaries may convert their cellular systems (to the extent they
are not already so converted) to provide equal access for long-distance
carriers in connection with long-distance communications using LIN's or its
Subsidiaries' services and, following such conversion, may market their
services under the AT&T service mark, in each case on such schedule as may be
determined by McCaw. AT&T has agreed to make the use of the AT&T service mark
available to LIN and its Subsidiaries, for purposes of so marketing their
services pursuant to the immediately preceding sentence, on a non-exclusive,
royalty-free basis. Following the commencement of the marketing of any service
of LIN or any of its Subsidiaries under the AT&T service mark pursuant to the
immediately preceding two sentences, AT&T has agreed that it will continue to
make the use of the AT&T service mark available on such basis with respect to
such service, and such service will continue to be so marketed under the AT&T
service mark, for so long as AT&T directly or indirectly owns at least a
majority of the voting power of LIN's capital stock entitled to vote generally
in the election of directors, unless a majority of the LIN Independent
Directors otherwise consents.
REASONABLE EFFORTS
Under the Merger Agreement, LIN, McCaw, Holdings and Merger Sub agree to:
(i) use all reasonable efforts to promptly take all actions and do all things
necessary to satisfy the conditions to the Merger and to consummate and make
effective the transactions contemplated by the Merger Agreement as soon as
practicable and (ii) not take any action which might reasonably be expected to
impair the ability of the parties to consummate the Merger at the earliest
possible time.
CONDITIONS; WAIVERS
Conditions to Each Party's Obligations to Effect the Merger. The respective
obligations of each party to effect the Merger are subject to the satisfaction
of the following conditions, any or all of which may be waived (other than the
condition set forth in clause (a)(ii) below): (a) the Merger Agreement and the
Merger will have been duly approved by (i) the requisite vote of the holders
of LIN Common Shares in accordance with applicable law and the Certificate of
Incorporation and By-Laws of LIN and (ii) the affirmative vote of the holders
of at least a majority of the LIN Public Shares present and entitled to vote
at the Annual Meeting at which a majority of the LIN Public Shares is present
and (b) there will not be in effect any judgment, writ, order, injunction or
decree of any court or governmental body of competent jurisdiction,
restraining, enjoining or otherwise preventing consummation of the
transactions contemplated by the Merger Agreement or permitting such
consummation only subject to any condition or restriction unacceptable to
McCaw in its reasonable judgment; provided, however, that any party invoking
this condition will use reasonable efforts to have any such order or
injunction vacated or any such other restriction eliminated.
Conditions to the Obligations of McCaw, Holdings and Merger Sub. The
respective obligations of McCaw, Holdings and Merger Sub to effect the Merger
are subject to the satisfaction or waiver of the following
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additional conditions: (a) each of the representations and warranties of LIN
contained in the Merger Agreement or otherwise expressly required by the
Merger Agreement to be made after the execution thereof (i) will have been
true in all material respects when made and (ii) except for certain specific
exceptions, will be true in all material respects at the time of the closing
of the Merger (the "Closing") with the same effect as though such
representations and warranties had been made at such time, (b) at or prior to
the Closing, LIN will have performed or complied in all material respects with
all agreements and conditions required of it pursuant to the Merger Agreement,
(c) all authorizations, if any, required in connection with the execution and
delivery of the Merger Agreement and the consummation of the transactions
contemplated thereby will have been made or obtained, in each case without
limitation or restriction unacceptable to McCaw in its reasonable judgment,
except where the failure to have obtained such authorizations would not be
reasonably expected (so far as can be foreseen at the time) to have a material
adverse effect on the business, properties, operations, condition (financial
or other) or prospects of (i) LIN and its Subsidiaries taken as a whole or
(ii) McCaw and its Subsidiaries taken as a whole, (d) a stipulation of
settlement, as contemplated by the Memorandum of Understanding, will have been
entered into providing for the settlement of the Stockholders Litigation on
the terms set forth in the Memorandum of Understanding and such stipulation
will have been approved by a final and nonappealable order of the Delaware
Court of Chancery (provided that such condition will be deemed satisfied if
the only aspect of the settlement not approved by such a final and
nonappealable order is the award of the plaintiffs' attorneys' Fees), and (e)
all required authorizations, consents or approvals in connection with the
Merger of any third party (other than a governmental body), if any, the
failure to obtain which would have a material adverse effect on (i) LIN and
its Subsidiaries taken as a whole or (ii) McCaw and its Subsidiaries taken as
a whole, will have been obtained.
Conditions to the Obligations of LIN. The obligations of LIN to effect the
Merger are subject to the satisfaction or waiver of the following additional
conditions: (a) each of the representations and warranties of McCaw, Holdings
and Merger Sub contained in the Merger Agreement or otherwise expressly
required by the Merger Agreement to be made after the execution thereof (i)
will have been true in all material respects when made and (ii) except for
certain specific exceptions, will be true in all material respects at the time
of the Closing with the same effect as though such representations and
warranties had been made at such time and (b) at or prior to the Closing, each
of McCaw, Holdings and Merger Sub will have performed or complied in all
material respects with all agreements and conditions required of it pursuant
to the Merger Agreement.
TERMINATION, AMENDMENT AND WAIVER
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, before or after the approval by holders
of LIN Common Shares, either by the mutual written consent of McCaw and LIN,
or by mutual action of their respective Boards of Directors.
The Merger Agreement may also be terminated (upon notice from the
terminating party to the other parties) and the Merger may be abandoned (a) by
action of the Board of Directors of McCaw if the Merger has not been
consummated by November 30, 1995, (b) by action of the Board of Directors of
LIN if the Merger has not been consummated by December 31, 1995 or, if the
Merger Agreement and the Merger have been duly approved by December 31, 1995
by (i) the requisite holders of LIN Common Shares in accordance with
applicable law and the Certificate of Incorporation and By-Laws of LIN and
(ii) the affirmative vote of the holders of at least a majority of the LIN
Public Shares present and entitled to vote at the Annual Meeting at which a
majority of the LIN Public Shares is present, and the Merger is being pursued
in good faith by McCaw but has not been completed due to regulatory delays or
litigation, August 31, 1996, or (c) by action of the Board of Directors of
either McCaw or LIN if (i) any court of competent jurisdiction in the United
States or governmental body in the United States has issued an order, decree
or ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action has become final and nonappealable, or (ii) at the Annual Meeting, the
Merger Agreement and the Merger do not receive the
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affirmative vote of the holders of at least a majority of the LIN Public
Shares present and entitled to vote at the Annual Meeting at which a majority
of the LIN Public Shares is present.
Subject to the applicable provisions of the DGCL, at any time prior to the
Effective Time, the parties to the Merger Agreement may modify, amend or
supplement the Merger Agreement, by written agreement executed and delivered
by duly authorized officers of the respective parties with respect to any of
the terms contained in the Merger Agreement; provided, however, that after
approval of the Merger by the stockholders of LIN, no such amendment or
modification will be made which reduces the form or amount of consideration
payable in the Merger or adversely affects the rights of LIN's stockholders
under the Merger Agreement without the approval of such stockholders. The
Merger Agreement may not be amended except by an instrument in writing signed
on behalf of each of the parties.
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
parties, (b) waive any inaccuracies in the representations and warranties
contained in the Merger Agreement or in any document delivered pursuant to the
Merger Agreement or (c) to the extent permitted, waive compliance with certain
of the agreements or conditions contained in the Merger Agreement. Any
agreement on the part of a party to any such extension or waiver will be valid
only if set forth in an instrument in writing signed on behalf of such party.
The failure of any party to the Merger Agreement to assert any of its rights
under the Merger Agreement or otherwise will not constitute a waiver of such
rights.
A termination of the Merger Agreement, an amendment of the Merger Agreement
or an extension or waiver pursuant to the provisions of the Merger Agreement
by any of the parties will, in order to be effective, require, in the case of
McCaw, Holdings or Merger Sub, approval by its Board of Directors or the duly
authorized designee of its Board of Directors and, in the case of LIN,
approval by its Board of Directors or the duly authorized designee of its
Board of Directors and approval by a majority of the LIN Independent
Directors.
In the event of termination of the Merger Agreement and abandonment of the
Merger pursuant to the Merger Agreement, no party to the Merger Agreement (or
any of its directors or officers) will have any liability or further
obligation to any other party under the Merger Agreement, except that nothing
therein will relieve any party from liability for any breach of the Merger
Agreement and except that the provisions of the Merger Agreement governing the
use by LIN or its Subsidiaries of the AT&T service mark in marketing its
services will survive any termination of the Merger Agreement and/or
abandonment of the Merger. Except as and to the extent provided in the PMVG,
the termination of the Merger Agreement and abandonment of the Merger pursuant
to the Merger Agreement will not affect in any way the PMVG, which will
continue to be in full force and effect to the extent of and in accordance
with its terms.
REGULATORY APPROVALS
No regulatory approvals are anticipated to be required for consummation of
the Merger. In September, 1994, AT&T received the last of the regulatory
approvals required in connection with its acquisition of control of McCaw.
Accordingly, no further regulatory approvals are expected to be required in
connection with the acquisition of the remaining 48% interest in LIN not
already beneficially owned by AT&T and McCaw, as contemplated by the Merger
Agreement and the Merger.
EXPENSES AND FEES
Except in connection with certain liabilities which may arise in respect of
New York State and/or New York City Real Property Gains and Transfer Taxes,
which will be borne by LIN, each party will pay its own expenses in connection
with the Merger. Expenses incurred in connection with printing and mailing
this Proxy Statement will be shared equally by McCaw, Holdings and Merger Sub,
on the one hand, and LIN on the other. LIN will bear the cost of soliciting
proxies from its stockholders.
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FINANCING OF THE MERGER
The total amount of funds necessary for payment of the Merger Consideration
and expenses related to the Merger is approximately $3.3 billion. Those funds
are expected to be obtained by McCaw and Holdings from the proceeds of capital
contributions and/or loans from AT&T. However, AT&T has not guaranteed the
payment of the Merger Consideration and has no legal obligation to provide
such funds. McCaw's obligation to consummate the Merger is not conditioned on
financing. Accordingly, if all conditions to McCaw's obligation to consummate
the Merger were satisfied but such funds were not available, McCaw would be in
breach of the Merger Agreement.
AT&T meets its cash needs through cash from operations and a combination of
equity and long- and short-term debt financing. AT&T expects to obtain its
current cash requirements (including capital contributions to fund payment of
the Merger Consideration and related expenses) from cash on hand and
commercial paper funding of accounts receivable and with permanent financing
as advantageous opportunities arise.
Estimated costs and fees in connection with the Merger, assuming completion
of the Merger, are as follows:
<TABLE>
<S> <C>
Legal Fees.................................................... $10,000,000
Investment Banking Fees....................................... 18,125,000
SEC Filing Fees............................................... 665,000
Printing Costs................................................ 75,000
Solicitation Fees............................................. 25,000
Miscellaneous................................................. 110,000
-----------
Total....................................................... $29,000,000
===========
</TABLE>
Subject to certain exceptions, each party will pay its own expenses in
connection with the Merger. See "THE MERGER--Expenses and Fees." It is
expected that, of the costs and fees set forth above, approximately $15.5
million will be payable by LIN.
RIGHTS OF DISSENTING STOCKHOLDERS
Under Section 262 of the DGCL, any holder of LIN Common Shares who neither
votes in favor of the Merger nor consents thereto in writing, who delivers a
demand for appraisal prior to the vote of the LIN stockholders on the Merger,
and who has otherwise complied with the applicable requirements of Section 262
of the DGCL, has the right to an appraisal of, and to receive cash payment
for, the "fair value" of such shares at the Effective Time (excluding any
element of value arising from the accomplishment or expectation of the
Merger). In order to exercise such right, a stockholder must comply with each
of the procedural requirements of Section 262 of the DGCL, a summary of and
the text of which is set forth in Appendix C hereto. Holders of LIN Common
Shares should read Section 262 of the DGCL in its entirety. The "fair value"
of each LIN Common Share would be determined in judicial proceedings, the
results of which cannot be predicted. The failure to take any of the steps
required under Section 262 of the DGCL in a timely manner will result in a
loss of appraisal rights.
The Merger Agreement provides that, notwithstanding anything in the Merger
Agreement to the contrary, LIN Common Shares outstanding immediately prior to
the Effective Time and held by a holder (if any) who has not voted in favor of
the Merger or consented thereto in writing, and who has demanded appraisal for
such LIN Common Shares in accordance with Section 262 of the DGCL, will not be
converted into the right to receive the Merger Consideration, as provided in
the applicable provisions of the Merger Agreement, unless and until the holder
thereof fails to perfect or withdraws or otherwise loses his right to
appraisal and payment under the DGCL. If, after the Effective Time, any such
holder fails to perfect or withdraws or loses his right to appraisal, such
Dissenting Shares will thereupon be treated as if they had been converted as
of the Effective Time into the
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right to receive the Merger Consideration to which such holder is entitled,
without interest thereon. LIN will give McCaw prompt notice of any demands
received by LIN for appraisal of LIN Common Shares and McCaw will have the
right to participate in all negotiations and proceedings with respect to such
demands. LIN will not, except with the prior written consent of McCaw, make
any payment with respect to, or settle or offer to settle, any such demands.
See Appendix C hereto.
ELECTION OF DIRECTORS
NOMINEES FOR DIRECTOR
The LIN Board proposes the election of the ten nominees listed below to
serve until the next Annual Meeting or until their successors are elected and
qualified, or until the earlier consummation of the Merger. Unless contrary
instructions are received, it is intended that the LIN Common Shares
represented by proxies solicited on behalf of the LIN Board will be voted in
favor of the election as directors of all such nominees. If, for any reason,
any such nominee is not available for election (which is not currently known
or expected), the persons named in the proxy card have advised that they will
vote for such substitute nominees as the LIN Board may propose. The names and
certain information relating to the ten nominees are set forth below. Messrs.
Herbster and Kislik and Ms. Jordan are nominated as LIN Independent Directors
and the remaining seven nominees have been designated by McCaw.
<TABLE>
<CAPTION>
NOMINEE AGE POSITION WITH LIN
------- --- -----------------
<S> <C> <C>
Tom A. Alberg............... 55 President, Chief Operating Officer and Director
Dennis J. Carey............. 48 Director
Lewis M. Chakrin............ 47 Chairman of the Board
W. Preston Granbery......... 51 Director
William G. Herbster......... 62 Director
Rolla G. Huff............... 38 Director
Wilma H. Jordan............. 46 Director
Richard W. Kislik........... 67 Director
Wayne M. Perry.............. 45 Vice Chairman of the Board
Florence L. Walsh........... 34 Director
</TABLE>
Tom A. Alberg became a director of LIN in 1991. Mr. Alberg has been the
President and Chief Operating Officer of LIN since April 1991 and has been
Executive Vice President of McCaw since July 1990. Prior to July 1990, Mr.
Alberg was the Chairman of the Executive Committee and a partner in the
Perkins Coie law firm, 1201 Third Ave., 40th Floor, Seattle, WA 98101-3099. He
has been a director of Digital Systems International, Inc., 6464 185th Avenue
NE, Redmond, WA 98052, a manufacturer of call management software systems,
since January 1994. He has been a director of Active Voice Corporation, 2901
Third Ave., Seattle, WA 98121, a manufacturer of PC-based voice processing
systems, since April 1993. He has been a director of LIN Television since
March 1993.
Dennis J. Carey became a director of LIN in 1994. Mr. Carey has been the
Vice President, Finance and Audit of AT&T since February 1994. Prior to that
he served as Vice President, Business Development and International of General
Electric Corporation, Appliance Park, Louisville, KY 40223, a manufacturer of
appliances, from February 1992 to February 1994 and as Senior Vice President
and General Manager Corporate Finance Group of General Electric Capital
Corporation, a financing company located in Stamford, Connecticut, from August
1987 to February 1992. He has been a director of LIN Television since November
1994.
Lewis M. Chakrin became a director of LIN in 1994. Mr. Chakrin has been Vice
President and General Manager--Global Wireless Services Group of AT&T since
April 1995. Prior to that he served with AT&T as Vice President, Business
Development--Communications Services Group from March 1994 to April 1995, Vice
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President, Personal Communications Services from July 1991 to March 1994,
Director, Strategic Planning--International Communication Services from May
1990 to July 1991, and Sales Vice President, Business Sales Division from
September 1987 to May 1990. He has been a director of LIN Television since
November 1994.
W. Preston Granbery became a director of LIN in 1994. Mr. Granbery has been
a General Attorney with the Corporate and Securities Group of AT&T since 1988.
William G. Herbster became a director of LIN in 1976. Mr. Herbster is a
financial consultant. His business address is 2700 Calvert Street, N.W., #716,
Washington, DC 20008. He has been a director of LIN Television since November,
1994. He is Senior Advisor to the Investment Fund for Foundations.
Rolla G. Huff became a director of LIN in 1994. Mr. Huff has been the Chief
Financial Officer of McCaw since April 1995. Prior to that he served as
Financial Vice President and Chief Financial Officer, Mergers and Acquisitions
of AT&T from October 1993, to April 1995 and with NCR Corp., 1700 South
Patterson Blvd., Dayton, OH 45479-0001, as Controller, US from January 1992 to
September 1993, Director, Service Marketing Europe from April 1991 to December
1991 and Director, Operations from August 1989 to March 1991.
Wilma H. Jordan became a director of LIN in 1987. Ms. Jordan is Co-Chairman
of The Jordan, Edmiston Group, Inc., 885 Third Ave., 25th Floor, New York, NY
10022, an investment banking and management consulting firm for publishing
companies. She has been a director of Ringier America Printing Co., One Pierce
Place, Itasca, IL 60143, since 1989. She has been a director of Guideposts
Associates, Inc., 39 Seminary Hill Road, Carmel, New York 10512, a publishing
company, since 1990. She has been a director of Clayton Homes, Inc., P.O. Box
15169, Alcoa Highway, Knoxville, TN 37901, a retailer of manufactured homes,
since August, 1994. She has been a director of LIN Television since November
1994.
Richard W. Kislik became a director of LIN in 1969. Mr. Kislik has been a
publishing consultant since 1985. His business address is M. Evans and
Company, Inc., 216 East 49th St., New York, NY 10017. He has been a director
of LIN Television since November 1994.
Wayne M. Perry became a director of LIN in 1990. Mr. Perry has been Vice
Chairman of the Board of LIN since March 1990 and Vice Chairman of the Board
of McCaw since June 1989 and Secretary of McCaw since October 1994. From
December 1985 to June 1989, Mr. Perry served as President of McCaw.
Florence L. Walsh became a director of LIN in 1995. Ms. Walsh has been the
Assistant Treasurer--Corporate Finance of AT&T since November 1994. Prior to
that she served as the Director, Domestic Finance of General Motors
Corporation from January 1989 to October 1994.
Harold S. Eastman decided not to stand for reelection and will no longer
serve on the Board of Directors effective as of the date of the Annual
Meeting, at which time the size of the LIN Board will be reduced to ten. Mr.
Eastman became a director of LIN in 1990. He was Vice Chairman of the Board of
LIN from March 1990 to April 1992. Mr. Eastman has been the President of
Peregrine Capital Co., 101 South Capitol Blvd., Boise, ID 83702, a private
investment company, since December, 1991. He served as President of McCaw from
June 1989 to December 1991 and thereafter as Vice Chairman of the Board of
McCaw until April 1992.
ARRANGEMENTS FOR THE ELECTION OF DIRECTORS
In accordance with the PMVG, Ms. Jordan and Messrs. Herbster and Kislik have
been elected and serve as the LIN Independent Directors. See "SPECIAL
FACTORS--Terms of the PMVG" and "--Background of the Merger." Each of the
remaining nominees is an officer or employee of AT&T or McCaw.
LIN BOARD COMMITTEES AND MEETINGS
During 1994, the LIN Board held eight meetings. No director attended fewer
than 75% of the aggregate of the number of meetings of the LIN Board held
during the period for which he or she was a director and the number of
meetings of committees of the LIN Board on which the director served during
the period that he or she served.
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The LIN Board has an audit committee (the "Audit Committee"), presently
consisting of Ms. Jordan and Mr. Kislik, which held two meetings in 1994. The
functions of the Audit Committee include evaluating the services of LIN's
independent auditors and reviewing with management and the independent
auditors LIN's system of internal controls. The LIN Board also has a
compensation committee (the "Compensation Committee"), presently consisting of
Ms. Jordan and Messrs. Herbster and Kislik, which held one meeting and acted
by written consent three times in 1994. The functions of the Compensation
Committee are to determine compensation polices and act on remuneration
arrangements with respect to all employees, including executive officers. The
LIN Board does not have a nominating committee.
DIRECTOR COMPENSATION
Directors who are not also officers of LIN or its affiliates are compensated
at the rate of $30,000 per annum. In addition, directors who are not also
officers of LIN or its affiliates receive $1,500 for each LIN Board meeting
attended and $1,500 for each committee meeting attended, as long as that
meeting is not held in conjunction with a board meeting. Directors are also
reimbursed for any travel expenses incurred in connection with such meetings.
In addition, each LIN Independent Director receives $1,500 for each meeting
attended by him or her exclusive of full board or committee meetings. Ms.
Jordan and Messrs. Herbster and Kislik each receive $250 per hour, or $2,000
per eight-hour day, for additional services performed in their capacities as
LIN Independent Directors, including time spent attending and preparing for
meetings of the LIN Independent Directors and otherwise devoting attention to
those matters requiring consideration by the LIN Independent Directors. Ms.
Jordan and Messrs. Herbster and Kislik received $38,688, $37,790 and $57,625,
respectively, for such services rendered in 1994, which consisted primarily of
time spent reviewing materials and attending meetings of the LIN Independent
Directors and meetings with their financial and legal advisors concerning the
Television Spin-off and the PMVG process.
All directors of LIN have the option of deferring their compensation under
LIN's Deferred Compensation Plan.
EXECUTIVE OFFICERS
The executive officers of LIN are:
<TABLE>
<CAPTION>
NAME AGE OFFICE
---- --- ------
<S> <C> <C>
Steven W. Hooper............ 42 Chief Executive Officer
Tom A. Alberg............... 55 President, Chief Operating Officer and Director
Wayne M. Perry.............. 45 Vice Chairman of the Board
Donald Guthrie.............. 40 Senior Vice President--Finance
</TABLE>
The following information describes the executive officers of LIN who are
not also directors.
Steven W. Hooper has been Chief Executive Officer of LIN since March 1995
and Chief Executive Officer of McCaw since January 1995. From 1993 to January
1995, he was Executive Vice President and Chief Financial Officer of McCaw.
From 1988 until 1993, he was Senior Vice President--Cellular Operations of
McCaw. Prior to 1988, Mr. Hooper served with McCaw as Executive Vice President
and Chief Operating Officer of its Cable Division and in various financial
positions.
Donald Guthrie became Vice President--Finance of LIN in March 1990 and was
promoted to Senior Vice President--Finance in June 1992. Since February 1986,
Mr. Guthrie has been a Senior Vice President and the Treasurer of McCaw.
The business address of the directors and executive officers of LIN is LIN
Broadcasting Corporation, 5295 Carillon Point, Kirkland, Washington 98033,
except for Messrs. Hooper and Perry, whose business address is McCaw Cellular
Communications, Inc., 5400 Carillon Point, Kirkland, Washington 98033.
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EXECUTIVE COMPENSATION
The three tables set forth below provide information with respect to the
annual and long-term compensation for services in all capacities to LIN for
fiscal years 1994, 1993 and 1992 and the option grants, exercises and values
in and at the end of fiscal year 1994 of those persons who (i) served, at any
time during 1994, as LIN's Chief Executive Officer or (ii) were, during 1994,
the four other most highly compensated executive officers of LIN
(collectively, the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------- ------------
OTHER SECURITIES ALL OTHER
NAME AND ANNUAL UNDERLYING COMPENSATION
PRINCIPAL POSITION(1) YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS (#) ($)(2)
--------------------- ---- --------- -------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Craig O. McCaw(3)....... 1994 $100,122 0 0 0 $ 2,469
Chairman of the Board
and 1993 100,000 0 0 0 2,308
Chief Executive Officer 1992 100,200 0 0 0 2,225
Tom A. Alberg(4)........ 1994 250,487 $250,000 0 50,000 15,977
President and Chief 1993 235,000 200,000 0 50,000 12,517
Operating Officer 1992 225,000 150,200 0 50,000 10,912
James L. Barksdale(5)... 1994 525,487 467,000 0 0 14,967
Chairman of the Board
and 1993 525,000 400,000 0 0 14,506
Chief Executive Officer 1992 500,200 300,000 $70,293(6) 0 4,167
Gary R. Chapman(7)...... 1994 475,000 150,000 0 0 15,481(8)
President--LIN
Television Group 1993 404,600 150,000 0 20,000 163,014(8)
1992 385,000 125,000 0 20,000 160,839(8)
Donald Guthrie(9)....... 1994 200,487 100,000 0 35,000 3,813
Senior Vice President--
Finance 1993 190,000 75,200 0 35,000 2,919
1992 180,000 60,200 0 30,000 2,650
Wayne M. Perry(10)...... 1994 100,487 250,000 0 0 5,139
Vice Chairman of the
Board 1993 100,000 0 0 0 4,975
1992 100,000 0 0 0 4,885
</TABLE>
- --------
(1) All amounts shown for Messrs. Alberg, Chapman and Guthrie were paid by
LIN, and all amounts shown for Messrs. McCaw, Barksdale and Perry were
paid by McCaw. Upon approval by the LIN Independent Directors of the
proposed intercompany reimbursement program for 1994, each of LIN and
McCaw will reimburse the other for a portion of such executives'
compensation (other than Mr. Chapman, who rendered services solely to LIN
prior to the completion of the Television Spin-off). See "CERTAIN
INFORMATION REGARDING AT&T, McCAW, HOLDINGS, MERGER SUB AND LIN--Certain
Transactions Among LIN, AT&T and McCaw."
(2) Represents amounts paid for life and disability insurance premiums unless
otherwise indicated.
(3) Mr. McCaw resigned from his positions as Chairman of the Board and an
executive officer of LIN effective October 25, 1994. Mr. McCaw also
received options to purchase 210,000 shares of McCaw's Class A Common
Stock in 1993. All such options that were outstanding at the time of the
acquisition of McCaw by AT&T (the "McCaw/AT&T Merger") were converted
into options to purchase AT&T Common Shares. Mr. McCaw also received from
McCaw additional compensation related solely to his employment with and
services rendered to McCaw.
(4) Mr. Alberg also received from McCaw additional compensation related
solely to his employment with and services rendered to McCaw.
(5) Mr. Barksdale was elected Chairman of the Board and Chief Executive
Officer of LIN on November 2, 1994. Mr. Barksdale resigned from all
positions with LIN effective January 13, 1995. Mr. Barksdale also
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<PAGE>
received options to purchase 200,000 and 340,000 shares of McCaw's Class A
Common Stock in 1993 and 1992, respectively. All such options that were
outstanding at the time of the McCaw/AT&T Merger were converted into
options to purchase AT&T Common Shares. Mr. Barksdale also received from
McCaw and AT&T additional compensation related solely to his employment
with and services rendered to McCaw.
(6) Represents a tax-equalization payment.
(7) Mr. Chapman resigned as an executive officer of LIN effective December
28, 1994 following the Television Spin-off. Amounts reported are those
paid to Mr. Chapman for services rendered in 1994 for the entire year,
although a portion of such amounts was paid by LIN Television following
completion of the Television Spin-off. See "CERTAIN INFORMATION REGARDING
AT&T, McCAW, HOLDINGS, MERGER SUB AND LIN --Relationship With LIN
Television."
(8)Amount for 1994 represents life and disability insurance premiums. Amounts
for 1993 and 1992 represent $13,014 and $10,839, respectively, paid for
life and disability insurance premiums and a $150,000 payment in each year
in consideration of Mr. Chapman's agreeing in 1990 to forego certain
benefits under a severance agreement.
(9) Mr. Guthrie also received from McCaw additional compensation related
solely to his employment with and services rendered to McCaw.
(10) Mr. Perry also received from McCaw additional compensation related solely
to his employment with and services rendered to McCaw.
OPTION GRANTS IN FISCAL YEAR 1994
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------
POTENTIAL REALIZABLE
NUMBER OF PERCENT VALUE AT ASSUMED
SECURITIES OF TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE FOR OPTION TERM(2)
GRANTED EMPLOYEES IN PRICE EXPIRATION ------------------------------
NAME (#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------ -------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Craig O. McCaw.......... 0 0 N/A N/A 0 0
Tom A. Alberg........... 50,000 16.581% $133.50 12/31/04 $ 4,197,872 $ 10,638,231
James L. Barksdale...... 0 0 N/A N/A 0 0
Gary R. Chapman......... 0 0 N/A N/A 0 0
Donald Guthrie.......... 35,000 11.607% 133.50 12/31/04 $ 2,938,510 $ 7,446,762
Wayne M. Perry.......... 0 0 N/A N/A 0 0
All stockholders(3)..... N/A N/A N/A N/A $4,330,439,664 $10,974,184,339
Named executive
officers' gain as % of
all stockholders' gain. N/A N/A N/A N/A 0.16 0.16
</TABLE>
- -------
(1) All options granted to the named executive officers become exercisable in
three annual installments of 33%, 33% and 34% beginning one year after the
grant date. The per share option exercise prices represent the fair market
value of the LIN Common Shares on the date of grant. The option term is 10
years. In the event of a change in control of LIN, other than certain
transactions with McCaw and certain transactions pursuant to the PMVG,
officers of LIN who are subject to Section 16 of the Exchange Act may
surrender vested options in exchange for a cash payment by LIN. As a
result of the closing of the McCaw/AT&T Merger, the options to purchase
LIN Common Shares held by the named executive officers will vest (if not
otherwise vested prior thereto pursuant to their terms) if the optionee's
employment with LIN is terminated under certain circumstances. See
"EXECUTIVE COMPENSATION--Employment Contracts and Termination of
Employment and Change-in-Control Arrangements."
(2) The dollar amounts under these columns are the result of calculations at
the 5% and 10% assumed appreciation rates set by the Commission and
therefore are not intended to forecast possible future appreciation, if
any, of the price of the LIN Common Shares. At the 5% and 10% assumed
appreciation rates, the price per LIN Common Share would be $217.46 and
$346.26, respectively.
(3) Based on number of LIN Common Shares outstanding on December 31, 1994.
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<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1994
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL IN-THE-MONEY OPTION
ACQUIRED ON VALUE YEAR-END (#) AT FISCAL YEAR-END($)(2)
EXERCISE REALIZED ------------------------- -------------------------
NAME (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Craig O. McCaw.......... N/A N/A 67,500 22,500 $4,662,137 $1,540,712
Tom A. Alberg........... 30,000 $1,967,500 20,000 130,000 1,123,978 3,768,369
James L. Barksdale...... N/A N/A 0 0 N/A N/A
Gary R. Chapman......... N/A N/A 59,220 33,000 4,599,207 1,575,824
Donald Guthrie.......... N/A N/A 26,000 85,250 1,588,036 2,255,488
Wayne M. Perry.......... 900 55,800 44,100 15,000 3,019,796 1,027,142
</TABLE>
- --------
(1) This amount represents the aggregate of the number of LIN Common Shares
acquired on exercise multiplied by the difference between the closing
price of the LIN Common Shares on the Nasdaq National Market on the
respective option exercise date (or, if not exercised on a trading day,
the nearest trading day) minus the exercise price for the relevant option.
(2) This amount represents the aggregate of the number of in-the-money options
multiplied by the difference between the closing price of the LIN Common
Shares on the Nasdaq National Market on December 30, 1994 (the final
trading day in 1994) and the exercise prices for the relevant options.
PENSION PLAN
Until December 28, 1994, LIN maintained a defined benefit retirement plan
(the "Pension Plan") that covered certain employees of LIN and its
subsidiaries. On December 28, 1994, pursuant to the Employee Benefits
Allocation Agreement between LIN and LIN Television, LIN Television assumed
sponsorship of the Pension Plan. See "CERTAIN INFORMATION REGARDING AT&T,
McCAW, HOLDINGS, MERGER SUB AND LIN--Relationship with LIN Television." LIN
Television now is solely responsible for all liabilities and obligations under
the Pension Plan. Mr. Chapman continues to participate in the Pension Plan as
an employee of LIN Television.
Effective January 1, 1993, the Pension Plan was amended to provide that any
employees treated by LIN as employed by a component of LIN that maintains a
Code Section 401(k) plan providing for employer-matching contributions are not
eligible to participate in, or accrue benefits under, the Pension Plan. After
retirement from or other termination with LIN, however, any employee who was
participating in the Pension Plan as of December 31, 1992, is entitled to
receive monthly payments under the Pension Plan based on his or her average
compensation and years of credited service as of December 31, 1992, provided
that he or she completes five years of vesting service with LIN after
attaining age 17. Such payments begin at age 65, subject to the employee's
election to terminate from employment and receive reduced monthly payments
beginning at any time between ages 55 and 65. Due to this amendment, Messrs.
Alberg and Guthrie no longer accrue additional benefits under the Pension
Plan, but are entitled to receive monthly payments of $459 and $329,
respectively, under the Pension Plan at age 65, provided they each become
vested. Messrs. McCaw, Barksdale and Perry did not participate in the Pension
Plan.
The following table shows the estimated annual retirement benefits payable
under the Pension Plan and LIN's Supplemental Benefit Retirement Plan as an
annuity for life upon normal retirement for specified compensation and years
of credited service classifications, assuming retirement at age 65 on December
31, 1993. Benefits are computed by multiplying (i) 1.25% of the employee's
average annual compensation for the three consecutive years producing the
highest average (excluding benefits or payments received under any other
benefit plan) times (ii) the employee's number of years of credited service,
up to a maximum of 32 years. Sections 401(a)(17) and 415 of the Code limit the
annual benefits that may be paid from a tax-qualified retirement plan such as
the Pension Plan. As permitted by the Employee Retirement Income Security Act
of 1974, as amended
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("ERISA"), LIN's Supplemental Benefit Retirement Plan authorizes the payment
out of LIN's general funds of any benefits calculated under the provisions of
the Pension Plan that may be above the limits of Sections 401(a)(17) and 415
of the Code.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
THREE-YEAR
AVERAGE YEARS OF CREDITED SERVICE
ANNUAL ---------------------------------------------------------
COMPENSATION 10 15 20 25 30 32
------------ ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000 12,500 18,750 25,000 31,250 37,500 40,000
$200,000 25,000 37,500 50,000 62,500 75,000 80,000
$300,000 37,500 56,250 75,000 93,750 112,500 120,000
$400,000 50,000 75,000 100,000 125,000 150,000 160,000
$500,000 62,500 93,750 125,000 156,250 187,500 200,000
$750,000 93,750 140,625 187,500 234,375 281,500 300,000
</TABLE>
As of December 31, 1994, Mr. Chapman had six years of credited service under
the Pension Plan and his three-year average annual compensation was $613,200.
Benefit amounts under the Pension Plan are not subject to any deduction for
Social Security benefits or other offset amounts.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Employment Agreements. In 1990, Mr. Chapman entered into an employment
agreement with LIN, which replaced an already existing severance compensation
agreement. Mr. Chapman's employment agreement provides for: (i) a term that
currently ends on December 31, 1995, subject to subsequent renewals; (ii) a
minimum base salary of $375,000, commencing on January 1, 1991; (iii) a target
annual bonus award at least equal to $125,000 per year beginning after
December 31, 1991, the actual amount payable being determined by LIN based on
performance guidelines; and (iv) a retention bonus of $600,000, payable in
four equal annual installments beginning December 31, 1990. The agreement also
provides for options, participation in certain of LIN's incentive compensation
programs, and additional severance benefits upon termination without cause,
including the right to require LIN to purchase certain of the LIN Common
Shares and vested options owned by Mr. Chapman as of the date of the
employment agreement based on the value of the greater of $112 per LIN Common
Share and the Private Market Price of the LIN Common Shares as determined in
accordance with the PMVG. The agreement also requires LIN to purchase on
January 1, 1995, certain of the LIN Common Shares and vested options owned by
Mr. Chapman as of the date of the employment agreement based on a value of the
greater of $112 per share and the Private Market Price. This agreement was
assigned to and assumed by LIN Television in connection with the Television
Spin-off. Performance of certain provisions of this agreement has been
deferred pending the completion of discussions currently underway concerning a
new employment agreement between LIN Television and Mr. Chapman.
In 1991, Mr. Guthrie entered into an employment agreement with LIN. Mr.
Guthrie's employment agreement provides for (i) a term that currently ends on
April 30, 1996, subject, unless terminated, to subsequent automatic annual
renewals; (ii) a base salary that currently is $210,000; (iii) options and
bonuses as determined by the LIN Board; and (iv) such other benefits and
perquisites as are provided to LIN employees or senior executives generally.
In the event that Mr. Guthrie is terminated without "cause," as defined in the
agreement, or his employment with LIN terminates as a result of the expiration
of the term of the agreement, he will receive an amount equal to twelve
months' salary and bonus and all long-term compensation that would have vested
during the remaining term of the agreement will be immediately vested.
Amended and Restated 1969 Stock Option Plan. Pursuant to LIN's Amended and
Restated 1969 Stock Option Plan (the "1969 Plan"), in the event of a change in
control of LIN (as defined in the 1969 Plan), other than certain transactions
with McCaw and certain transactions pursuant to the PMVG, officers of LIN who
are
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subject to Section 16 of the Exchange Act may surrender vested options in
exchange for a cash payment by LIN. The amount of the cash payment per LIN
Common Share is determined by taking the difference between the exercise price
of the LIN Common Shares covered by the options so surrendered and the greater
of (i) the highest market price of the LIN Common Shares during the 90-day
period prior to the day of surrender and (ii) the highest price paid to any
stockholder of LIN in the transaction or group of transactions resulting in
the change in control. Such options may be surrendered during the 60-day
period following the change in control.
As a result of the closing of the McCaw/AT&T Merger, options to purchase LIN
Common Shares outstanding on August 14, 1993 held by the named executive
officers will vest (if not otherwise vested prior thereto pursuant to their
terms) at the time McCaw or any affiliate consummates any acquisition of all
or substantially all the remaining LIN Common Shares or LIN is otherwise sold,
whether pursuant to the PMVG or otherwise. In addition, as a result of the
closing of the McCaw/AT&T Merger, all outstanding options to purchase LIN
Common Shares held by the named executive officers will vest (if not otherwise
vested prior thereto pursuant to their terms) if the optionee's employment
with LIN is terminated under certain circumstances.
Bonus and Severance Arrangements in Connection With the McCaw/AT&T
Merger. In connection with the McCaw/AT&T Merger, LIN established an aggregate
$7.75 million bonus pool for certain persons employed by LIN and its
subsidiaries as of August 15, 1993, conditioned upon both consummation of the
McCaw/AT&T Merger (the "McCaw/AT&T Closing"), which occurred on September 19,
1994, and the closing of any acquisition of all or substantially all the
remaining LIN Common Shares by McCaw or of a sale of LIN (pursuant to the PMVG
or otherwise) (the "LIN Closing"). Except as provided under the Executive
Plan, as hereinafter defined, all bonuses payable to executive officers are
payable in three installments (50% at the LIN Closing, 25% on the first
anniversary of the McCaw/AT&T Closing and 25% of the second anniversary of the
McCaw/AT&T Closing), in each case to persons who remain employed by LIN, its
ultimate parent or any of their subsidiaries at such times, provided, that if
the LIN Closing has not occurred by such anniversary dates of the McCaw/AT&T
Closing, such payments will not be made until the date of the LIN Closing. The
amounts of the bonuses allocated to Messrs. Alberg and Guthrie are $700,000
and $509,000, respectively. Messrs. McCaw, Alberg, Barksdale, Guthrie and
Perry received bonuses under a similar bonus program implemented by McCaw.
Also in connection with the McCaw/AT&T Merger, LIN established an Executive
Separation Plan (the "Executive Plan"). The Executive Plan provides benefits
to certain executives, including Messrs. Alberg and Guthrie, in the event that
they are terminated (other than for cause, as defined in the Executive Plan)
on or after the McCaw/AT&T Closing or in the event that they terminate their
employment within six months following an adverse change in working conditions
(including a reduction in salary or bonus opportunities in the absence of
overall poor performance, a material reduction in scope of responsibility,
authority or other conditions of employment, a notice that an executive's
employment location will be moved more than 40 miles or certain decreases in
executive perquisites or other employee benefits) on or after the McCaw/AT&T
Closing. Under the Executive Plan, executives are entitled to a benefit
payment equal to any unpaid installments under the bonus pool, unless
terminated for consistently poor performance documented by substantially
contemporaneous notices. Mr. Perry is entitled to receive severance benefits,
and Messrs. Alberg and Guthrie are entitled to additional severance benefits,
in certain circumstances under a severance program established by McCaw in
connection with the McCaw/AT&T Merger.
Bonus and Severance Arrangements in Connection with the Merger. In addition,
LIN has established an arrangement for the payment of other benefits to
certain of LIN's officers, including Messrs. Alberg and Guthrie. In order to
receive this benefit, the individual must be an officer or employee of LIN at
the time of the LIN Closing. Such payments will be made if the officer's
employment with LIN is terminated within 120 days of a LIN Closing under the
same circumstances as are described above with respect to the Executive Plan.
The amount of such benefits payable to Messrs. Alberg and Guthrie would be
$380,000 and $213,333, respectively.
The Compensation Committee has approved the payment to certain officers and
employees of LIN, including Messrs. Alberg and Guthrie, at the time of the LIN
Closing, of a bonus of at least 50% of the bonus paid to such individual in
1994. The amount of the bonus may be increased, in the discretion of the
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Compensation Committee, based on performance, timing and such other factors as
are approved by the Compensation Committee. The minimum amount of such bonuses
payable to Messrs. Alberg and Guthrie are $125,000 and $50,000, respectively.
In the event that all or any portion of any severance payment, bonus, stock
option or other compensation or benefit payable to certain executives,
including Messrs. Alberg and Guthrie, as a result of the LIN Closing would
subject any executive to an excise tax under Section 4999 of the Code, such
executive would be entitled to receive a tax gross-up payment to cover such
excise tax and related penalties and interest (including any taxes payable in
connection with the gross-up payment).
BOARD COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee consists of the three directors who are not
employed by any of LIN, McCaw and AT&T (Ms. Jordan and Messrs. Herbster and
Kislik). The Compensation Committee determines compensation policies and
remuneration arrangements with respect to all LIN employees.
Compensation Policies. The foundation of LIN's compensation policies is the
view that LIN's success is attributable to the efforts of its employees,
including its executive officers. Development of LIN's business has required
its employees to excel in the face of complicated and rapidly evolving
technologies and strong and increasingly diverse competition. Accordingly, LIN
believes that the compensation levels of its executive officers, who provide
leadership and strategic direction to LIN, must be sufficiently high to
attract to LIN the best qualified people in the cellular industry. It also
believes that its compensation packages must include sufficient long-term
incentives to motivate its executive officers to remain with LIN and to align
the interests of its executive officers with those of the stockholders.
During 1994, LIN compensated its executive officers through a combination of
base salaries, year-end cash bonuses, and year-end stock option grants. In
setting base salaries at the beginning of the fiscal year, the Compensation
Committee made subjective determinations that were not subject to specific
criteria. The Compensation Committee considered such variables as the
officer's relative responsibilities, expertise, past year's compensation, and
past year's performance as reflected in periodic performance reviews conducted
by LIN. These individual criteria were then considered in the context of LIN's
overall salary structure as applicable to its cellular and television
businesses. In addition, LIN's commitments under its employment agreements
with Messrs. Chapman and Guthrie were reflected in the base salaries of each
such officer.
In setting year-end bonuses for 1994, the Compensation Committee focused on
LIN's performance during the year in a number of specific areas. The
Compensation Committee focused on such factors as cash flow, subscriber and
revenue growth and subscriber churn, without assigning a specific weight to
any one of these factors, and then evaluated each officer's relative
contribution to LIN's results. In each case, the Compensation Committee did
not measure the individual's performance against any previously set bonus
target; rather it made a subjective determination on the basis of the
Compensation Committee's views of LIN's 1994 performance and the respective
contributions of the officers to that performance.
LIN traditionally makes annual grants of stock options to its executive
officers. Although the Compensation Committee's decision with respect to stock
options is subjective, the factors described above were considered in awarding
the year-end stock option grants. LIN believes that stock option grants
provide a key incentive for executive officers not only to remain with LIN
over time but to manage LIN for long-term growth, thereby aligning their
interests with those of its stockholders. Although LIN does not have a target
equity-ownership level for its officers, it encourages such ownership for its
employees in general (for example, through the LIN Employee Stock Purchase
Plan), and therefore continues to view the year-end stock option grants as a
very important component of its compensation package for executive officers.
Compensation payments in excess of $1 million to the Chief Executive Officer
or four other most highly compensated executive officers are subject to a
limitation on deductibility for LIN under Section 162(m) of the
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Code. Certain performance-based compensation is not subject to the limitation
on deductibility. LIN has not made a determination regarding whether it will
qualify cash compensation awards for the performance-based exception to the $1
million limitation on deductibility of compensation payments. LIN has amended
the 1969 Plan to qualify stock option awards for the performance-based
exception to the $1 million limitation on deductibility of payments.
Chief Executive Officer Compensation. Messrs. McCaw and Barksdale, each of
whom served as LIN's Chief Executive Officer during a portion of 1994, also
were executives of McCaw. LIN reimbursed McCaw for a portion of their
compensation and certain benefits. See "CERTAIN INFORMATION REGARDING AT&T,
McCAW, HOLDINGS, MERGER SUB AND LIN--Certain Transactions Among LIN, AT&T and
McCaw."
The Committee believes that Mr. McCaw's compensation was considerably less
than would have been warranted by LIN's performance during 1994, and by Mr.
McCaw's very significant contribution to that performance as LIN's Chief
Executive Officer. The Committee believes that Mr. Barksdale's compensation
during 1994 was reasonable in light of the factors listed above based on Mr.
Barksdale's strong performance during the year and his contributions as LIN's
Chief Executive Officer during the last two months of the year.
Compensation Committee
William G. Herbster
Wilma H. Jordan
Richard W. Kislik
83
<PAGE>
STOCK PRICE PERFORMANCE
The following graph compares the cumulative total stockholder return on the
LIN Common Shares with the cumulative total return of the Nasdaq Stock Market
(US) Index and the Center for Research in Securities Prices ("CRSP") Index of
Nasdaq Telecommunications Stocks for the five-year period beginning January 1,
1990.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG THE
LIN COMMON SHARES, NASDAQ STOCK MARKET (US) INDEX AND CRSP INDEX
OF NASDAQ TELECOMMUNICATIONS STOCKS (FISCAL YEAR ENDING DECEMBER 31)
<TABLE>
<CAPTION>
Measurement period Nasdaq Telecom
(Fiscal year Covered) LIN Index Index
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
Measurement PT -
1989 $ 100 $ 100 $ 100
FYE 1990 $ 88.02 $ 84.92 $ 67.41
FYE 1991 $102.33 $136.28 $ 92.97
FYE 1992 $109.49 $158.57 $114.19
FYE 1993 $158.15 $182.03 $175.98
FYE 1994 $207.08 $177.99 $145.7
</TABLE>
Assumes $100 invested January 1, 1990 in the LIN Common Shares, Nasdaq Stock
Market (US) Index, and CRSP Index of Nasdaq Telecommunications Stocks, with
all dividends reinvested. Assumes all LIN Common Shares were tendered
immediately before the closing of the McCaw Offer, with the proceeds for LIN
Common Shares accepted in the McCaw Offer immediately reinvested. If LIN
Common Shares had not been tendered in the McCaw Offer, the cumulative total
return on the LIN Common Shares as of December 31, 1990, 1991, 1992, 1993 and
1994 would have been $51, $59, $64, $92 and $120, respectively. On December
28, 1994, in the Television Spin-off LIN paid a special dividend of one share
of common stock of LIN Television for every two shares of LIN Common Shares to
holders of record of LIN Common Shares on December 9, 1994. Assumes that all
shares of LIN Television paid as a special dividend in the Television Spin-off
were sold at the closing price for a share of common stock of LIN Television
on December 29, 1994 and immediately reinvested. As of May 31, 1995, the CRSP
Index of Nasdaq Telecommunications Stocks included a total of 220 issuers. LIN
will provide a list of the issuers that are included in the CRSP Index of
Nasdaq Telecommunications Stocks to a LIN stockholder upon such stockholder's
written request.
Note: Stock price performance shown above for the LIN Common Shares is
historical and not necessarily indicative of future price performance.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires LIN's directors, certain of its
officers and the beneficial owners of more than ten percent of LIN Common
Shares to file reports related to their ownership of the LIN Common Shares and
of changes in such ownership with the Commission and the National Association
of Securities Dealers. Commission regulations also require LIN to identify in
this Proxy Statement any person subject to this requirement who failed to file
any such report on a timely basis. AT&T and Messrs. Carey and Chakrin
inadvertently filed late the initial report required at the time each of them
became a ten percent stockholder or director of LIN.
84
<PAGE>
CERTAIN INFORMATION REGARDING AT&T,
MCCAW, HOLDINGS, MERGER SUB AND LIN
AT&T
AT&T is principally engaged in global information movement and management,
financial services and leasing. The mailing address of AT&T's principal
executive offices is 32 Avenue of the Americas, New York, New York 10013-2412,
and its telephone number is (212) 387-5400.
MCCAW
McCaw, a wholly owned subsidiary of AT&T, is principally engaged in the
business of providing cellular communication services. The mailing address of
McCaw's principal executive offices is 5400 Carillon Point, Kirkland,
Washington 98033, and its telephone number is (206) 827-4500.
HOLDINGS
Holdings, a wholly owned subsidiary of McCaw, was formed for the purpose of
holding investment securities and conducts no other business. The mailing
address of Holdings' principal executive offices is c/o McCaw Cellular
Communications, Inc., 5400 Carillon Point, Kirkland, Washington 98033, and its
telephone number is (206) 827-4500.
MERGER SUB
Merger Sub, a wholly owned subsidiary of McCaw, was formed for the purpose
of effecting the Merger and has not conducted any other business. The mailing
address of Merger Sub's principal executive offices is c/o McCaw Cellular
Communications, Inc., 5400 Carillon Point, Kirkland, Washington 98033, and its
telephone number is (206) 827-4500.
LIN
LIN is engaged primarily in the business of providing cellular voice
telephone and data services. McCaw owns an approximate 52% interest in LIN
through McCaw's wholly owned subsidiary, Holdings. The mailing address of
LIN's principal executive offices is 5295 Carillon Point, Kirkland, Washington
98033, and its telephone number is (206) 828-1902.
CERTAIN TRANSACTIONS AMONG LIN, AT&T AND MCCAW
After McCaw acquired its interest in LIN in March 1990, McCaw made available
the services of its employees, some of whom are elected to management
positions with LIN, with the understanding that LIN would reimburse McCaw for
these services. Under the PMVG, the approval of a majority of the LIN
Independent Directors is required before LIN enters into any material
transaction with McCaw or its affiliates. Pursuant to a proposal that has been
approved by the management of each of LIN and McCaw, and subject only to the
approval of the LIN Independent Directors, McCaw will receive reimbursement
from LIN in the amount of $8.5 million for services rendered in 1994 in
connection with various engineering, research and development, marketing and
other general management activities and for payments to third parties, and LIN
will receive reimbursement from McCaw in the amount of $2.2 million for
services rendered in 1994 in connection with various operations, marketing and
legal activities and for payments to third parties. The respective
reimbursement amounts include actual amounts paid to third parties. Also
included within this reimbursement program is an allocation of the time
devoted to the affairs of each company by those employees who were involved in
the operation of both McCaw and LIN. The costs associated with such employees,
including salary, bonus, stock options awarded during the year and other
benefits, are then allocated between the companies in the same proportion. As
determined for purposes of this allocation for 1994, Messrs. McCaw, Alberg,
Barksdale, Guthrie and Perry devoted 40% (through the closing of the
AT&T/McCaw merger), 80%, 40%, 80% and 30%, respectively, of
85
<PAGE>
their time to the affairs of LIN; the balance of each executive's time was
allocated to McCaw. All of the time of Mr. Chapman, the President of LIN
Television, through the date of the Television Spin-off was devoted to the
affairs of LIN.
For so long as LIN remains a majority-owned subsidiary of McCaw, LIN and
McCaw expect to annually negotiate payments for the reimbursement of expenses
incurred on behalf of LIN by McCaw and on behalf of McCaw by LIN for
management assistance and other intercompany services. LIN does not anticipate
that the net amount of its payments to McCaw will be material to LIN's
business operations or financial performance. The payments will continue to be
negotiated on an arm's-length basis, and will be subject to the approval of
the LIN Independent Directors.
In addition to the transactions described above, LIN (including its
subsidiaries and other entities it controls or manages) routinely enters into
transactions with McCaw and AT&T (including their respective subsidiaries and
other entities they control or manage, other than LIN) in the ordinary course
of business. LIN pays McCaw for providing cellular service to LIN's
subscribers under roaming agreements, and McCaw pays LIN for similar services
provided by LIN to McCaw's subscribers. For roaming services provided during
1994, LIN paid McCaw approximately $18.3 million and McCaw paid LIN
approximately $13.0 million. In addition, LIN's Dallas cellular operation
provided switching, billing, and certain other services to an affiliate of
McCaw. Under this agreement, LIN's Dallas cellular operation collects the
revenues generated by the subscribers of McCaw's affiliate and receives a
contractually determined fee. Such revenues amounted to approximately $1.2
million during 1994, and the payments to McCaw's affiliate amounted to
approximately $1.0 million. LIN also reimburses McCaw for the cost of
programs, such as the North American Cellular Network, national advertising
campaigns and the National Account Services Program (a sales force and support
group that coordinates the sale of cellular services to large companies),
which McCaw manages for all of its markets, as well as certain of LIN's
markets, and for the cost of goods and services purchased by LIN from third
parties through McCaw. LIN paid McCaw approximately $1.3 million for expenses
in connection with such programs during 1994. The costs of such programs are
shared by all markets benefited (including, in certain cases, markets owned by
third parties), with the allocation based on actual per market costs incurred
or such factors as relative market population or numbers of subscribers. LIN
also maintains a regional office that oversees and provides certain
centralized services for LIN's Dallas cellular operation as well as a cluster
of McCaw cellular markets located in Texas and adjacent states. The costs of
this office are allocated to all such markets, based on their relative shares
of the factors considered most relevant to each particular cost. For example,
the allocation of general and administrative costs is based on population,
while engineering and operations costs are allocated based largely on the
relative number of cell sites in each market. McCaw's share of such costs
during 1994 was approximately $3.9 million.
During 1994, LIN purchased equipment, consisting primarily of telephones and
accessories, from AT&T for an aggregate purchase price of approximately $13.4
million. LIN also paid AT&T approximately $3.3 million to provide customer
support services in situations in which the volume of such requests exceeded
LIN's handling capacity. Finally, LIN paid AT&T approximately $176,000 for
various services provided by AT&T, including engineering and design services
and cell site rentals.
All such agreements and arrangements between LIN and McCaw or AT&T are on
terms that LIN believes are as or more favorable to it as or than would have
been obtained with an unrelated third party.
On June 19, 1992, LIN, McCaw and certain other parties received court
approval of a Stipulation of Settlement setting forth terms by which
shareholder litigation in the United States District Court for the Southern
District of New York would be settled and shareholder litigation in the
Delaware Court of Chancery for New Castle County would be dismissed. Such
litigation arose out of the transactions related to the acquisition by McCaw
in 1990 of a majority of the LIN Common Shares. Under the terms of the
settlement, LIN received from McCaw a payment of $1.35 million in July 1992,
and received from McCaw further payments of $2 million on each of June 30,
1993, June 30, 1994 and June 30, 1995. McCaw was also required to transfer to
LIN approximately a 2% interest in the Galveston, Texas cellular market.
86
<PAGE>
RELATIONSHIP WITH LIN TELEVISION
On December 28, 1994 (the "Spin-off Date"), LIN distributed to the holders
of LIN Common Shares of record on December 9, 1994 (the "Spin-off Record
Date"), all of the outstanding common stock, $.01 par value (the "LIN
Television Common Stock"), of LIN's subsidiary, LIN Television. The Television
Spin-off was made in the form of a stock dividend of one share of LIN
Television Common Stock for every two LIN Common Shares held on the Spin-off
Record Date. LIN did not receive any shares of LIN Television Common Stock in
respect of LIN Common Shares held by LIN as treasury shares. The "ex-
distribution" date for the Television Spin-off, as established by the Nasdaq
National Market, was December 29, 1994. Fractional shares of LIN Television
Common Stock to which holders of LIN Common Shares would have been entitled as
a result of the Television Spin-off have been aggregated and sold, and the
cash proceeds distributed to the record holders entitled thereto. The Internal
Revenue Service has ruled that receipt of shares of LIN Television Common
Stock in the Television Spin-off will not result in the recognition of income,
gain or loss for federal income tax purposes (except with respect to any cash
received in lieu of a fractional share interest in LIN Television Common
Stock).
Also on December 28, 1994, pursuant to the Asset Purchase Agreement, dated
June 7, 1994, as amended, among LIN, LIN Television, Cook Inlet
Communications, Inc., an Alaska corporation, and Cook Inlet Communications
Corp., a Delaware corporation ("CICC"), LIN Television acquired substantially
all the assets and assumed certain liabilities of WTNH-TV, New Haven-Hartford,
Connecticut, from CICC in exchange for $120,170,000 in cash and approximately
11.5% of the LIN Television Common Stock outstanding after giving effect to
such issuance. The cash portion of the purchase price is subject to post-
closing adjustment.
Following the Transaction, approximately 42.3% of the LIN Television Common
Stock was publicly owned; approximately 11.5% was held by CICC; and
approximately 46.3% was held indirectly by McCaw. LIN Television Common Stock
is quoted on the Nasdaq National Market. Six of the ten initial directors of
LIN Television were designated by McCaw, and three of them currently are
officers of one or more of AT&T, McCaw and LIN. In addition, all of the LIN
Independent Directors also serve as directors of LIN Television.
In connection with the Television Spin-off, LIN and LIN Television entered
into a number of agreements, including: a Distribution Agreement, which
provides for, among other things, the principal corporate transactions
required to effect the Television Spin-off and certain other agreements
governing the relationship between LIN and LIN Television; a Tax Allocation
Agreement, which provides for the allocation between LIN and LIN Television of
responsibilities, liabilities and benefits relating to or affecting taxes paid
or payable by either of them or their respective subsidiaries for all taxable
periods before and after the Television Spin-off; a Management Services
Agreement, pursuant to which LIN and LIN Television will each provide to the
other, upon request and for up to one year after the Television Spin-off,
certain corporate administrative services, such as tax, treasury and legal
services; and an Employee Benefits Allocation Agreement, which provides for
the treatment of outstanding options to purchase LIN Common Shares granted
under the 1969 Plan and certain other matters, including the allocation of
retirement, medical, disability and other employee welfare and benefit plans
between LIN and LIN Television.
LIN Television and certain subsidiaries of LIN also entered into a
Consulting Agreement, pursuant to which LIN Television will provide management
and operational consulting for the television broadcasting operations retained
by LIN after the Television Spin-off, and a Right of First Refusal Agreement,
pursuant to which, in the event that LIN receives and wishes to accept an
offer to purchase assets associated with LIN's television broadcasting
operations, LIN Television has the right to purchase such assets at the
offered price.
Prior to the Television Spin-off, LIN and McCaw allocated to LIN Television
each year a portion of the expenses relating to certain corporate-level
services, such as tax, treasury and legal services, provided to LIN Television
by LIN and McCaw. LIN Television's portion of such expenses was determined
based on its revenues, wages and properties relative to those of LIN and
McCaw. The amount allocated to LIN Television
87
<PAGE>
for the portion of 1994 preceding the Television Spin-off was approximately
$1.8 million. Due to limitations imposed under LIN Television's credit
facility on payments by LIN Television to its affiliates, LIN Television paid
approximately $578,000 of such amount in cash, with the forgiveness of the
balance of this expense being treated for accounting purposes as a
contribution to capital by LIN. As a result of the separation of LIN and LIN
Television pursuant to the Television Spin-off, these allocations ceased on
December 28, 1994.
Similarly, LIN Television provided certain corporate-level services,
consisting primarily of general and administrative and accounting services, to
LIN with respect to the television broadcasting operations conducted by LIN
other than through LIN Television. The amount charged to LIN and its
subsidiaries for these services in 1994 was approximately $494,000. Any such
services provided in the future will be provided only through the Consulting
Agreement described above or through such other agreements or arrangements as
may be established by the parties.
During the portion of 1994 ending on the Spin-off Date, LIN was a party to a
tax-sharing agreement with LIN Television and its subsidiaries pursuant to
which LIN Television was included in the consolidated federal income tax
return filed by LIN. Pursuant to this agreement, LIN Television's allocated
share of LIN's current consolidated federal income tax expense in 1994 is
estimated to be approximately $22.7 million. This agreement further provided
that LIN Television was treated as if it had certain net operating loss
carryforwards, as a result of which LIN Television's share of the federal tax
expense has been forgiven. The forgiveness of this expense has been treated
for accounting purposes as a contribution to capital by LIN.
During 1994, LIN Television provided to AT&T and its subsidiaries, including
McCaw, advertising time worth approximately $1.5 million. LIN believes that
the terms of all such transactions were at least as favorable as those that
would result from arm's-length negotiations.
88
<PAGE>
CERTAIN PRO FORMA FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Statement of Income gives
effect, as of January 1, 1994, to each of the following transactions that
occurred during 1994: (1) the Television Spin-off, (2) the redemption of the
LCH Preferred Stock, in exchange for LIN's interest in the Philadelphia
cellular market, GuestInformant and cash, and (3) the acquisition of
additional interests in the New York cellular market. This Unaudited Pro Forma
Consolidated Statement of Income has been prepared from the historical
financial statements of LIN that are incorporated in this Proxy Statement and
should be read in conjunction therewith. This pro forma information is not
necessarily indicative of future operating results.
LIN BROADCASTING CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
LIN PRO FORMA PRO FORMA PRO FORMA
BROADCASTING ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
CORPORATION TELEVISION LCH NEW YORK PRO FORMA
HISTORICAL SPIN-OFF REDEMPTION ACQUISITION RESULTS
------------ ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenue:
Service................ $875,880 $(150,390)(1a) $ (11,306)(2a) $ 714,184
Equipment sales........ 95,846 95,846
-------- --------- --------- ---------
Total revenue.......... 971,726 (150,390) (11,306) 810,030
Cost of equipment
sales................. 95,257 95,257
-------- --------- --------- ---------
876,469 (150,390) (11,306) 714,773
-------- --------- --------- ---------
Operating costs and
expenses:
Direct operating....... 138,579 (41,263)(1a) (3,962)(2a) 93,354
Selling, general and
administrative........ 378,797 (37,278)(1a) (6,162)(2a) 335,357
Corporate.............. 11,831 (1,067)(1b) 10,764
Depreciation........... 58,066 (6,015)(1a) (108)(2a) 51,943
Amortization of intan-
gible assets.......... 83,086 (2,746)(1a) (120)(2a) $ 2,955 (3) 83,175
-------- --------- --------- ------- ---------
670,359 (88,369) (10,352) 2,955 574,593
-------- --------- --------- ------- ---------
Operating income........ 206,110 (62,021) (954) (2,955) 140,180
-------- --------- --------- ------- ---------
Other income/(expense):
Equity in income of un-
consolidated affili-
ates.................. 115,010 (5,064)(2b) 109,946
Investment income and
other................. 5,717 (820)(1a) (19)(2a) 4,878
Interest expense....... (111,638) 13,148 (1a) (4,230)(3) (102,720)
Gain on redemption of
preferred stock....... 468,689 (468,689)(2c) 0
-------- --------- --------- ------- ---------
477,778 12,328 (473,772) (4,230) 12,104
-------- --------- --------- ------- ---------
Income before income tax
and minority interests. 683,888 (49,693) (474,726) (7,185) 152,284
Income tax expense...... 59,289 (19,830)(1a) (411)(2a) (2,313)(3) 36,735
-------- --------- --------- ------- ---------
Income before minority
interests.............. 624,599 (29,863) (474,315) (4,872) 115,549
Minority interests:
In net income of con-
solidated subsidiar-
ies................... 26,874 (1,708)(3) 25,166
Provision for preferred
stock dividends of a
subsidiary............ 33,575 (33,575)(2c) 0
-------- --------- --------- ------- ---------
Net income.............. $564,150 $ (29,863) $(440,740) $(3,164) $ 90,383
======== ========= ========= ======= =========
Net income per share.... $ 10.84 $ (0.57) $ (8.47) $ (0.06) $ 1.74
======== ========= ========= ======= =========
</TABLE>
89
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
NOTE 1--LIN TELEVISION CORPORATION SPIN-OFF
On December 28, 1994, LIN distributed the common stock of its wholly owned
subsidiary LIN Television to LIN's stockholders on a tax-free basis. LIN
Television owns seven network affiliated television stations, including
station WTNH-TV acquired simultaneously with the Television Spin-off. LIN
continues to own one network affiliated television station (WOOD-TV) in
addition to its cellular businesses. The pro forma consolidated statement of
income reflects the removal of LIN Television's results of operations for the
year ended December 31, 1994.
(a) To reflect the removal of the operating results of LIN Television for
the period presented. Certain costs which were allocated by LIN to LIN
Television were not deducted in arriving at the pro forma results as those
costs would continue to be incurred by LIN after the Television Spin-off.
Such costs, net of the related tax benefits, amounted to $520,000 for the
year ended December 31, 1994.
(b) To reflect the removal of direct incremental costs incurred by LIN
associated with the completion of the Television Spin-off, including
attorneys' fees, accounting fees, printing costs, investment banking fees
and other miscellaneous expenses.
NOTE 2--LCH TRANSACTION
On June 24, 1994, LIN's subsidiary, LCH, redeemed all of the LCH Preferred
Stock held by Comcast Cellular Communications Inc., a subsidiary of Comcast
Corp., in exchange for all of the capital stock of a subsidiary of LCH, whose
assets consist primarily of a 49.99 percent interest in the Philadelphia "A
Block" cellular system and GuestInformant.
a) To reflect the removal of GuestInformant's operating results.
b) To reflect the removal of equity in income of unconsolidated
affiliates related to the Philadelphia cellular system.
c) To remove the gain on the redemption of the LCH Preferred Stock and
the provision for dividends on the LCH Preferred Stock incurred during the
first quarter of 1994.
NOTE 3--NEW YORK ACQUISITION
On May 31, 1994, LIN completed the acquisition of an additional 5.2%
indirect interest in the New York City cellular licensee for approximately
$145 million in cash, bringing LIN's total interests in the New York City
licensee to 98.3%. The pro forma consolidated income statement reflects the
additional amortization of intangible assets recorded as a result of the
purchase, additional interest expense as a result of the additional borrowings
incurred by LIN to finance the purchase, a decrease in the minority interests
in the equity of the income of consolidated subsidiaries and the net effect on
book tax expense as a result of the above adjustments.
90
<PAGE>
MARKET PRICES OF
LIN COMMON SHARES; DIVIDEND HISTORY
The LIN Common Shares are traded principally on the Nasdaq National Market.
The following table sets forth, for the fiscal periods indicated, the high and
low sales prices per LIN Common Share on the Nasdaq National Market:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1993:
First Quarter............................................. $ 90.00 $ 75.50
Second Quarter............................................ 101.00 80.25
Third Quarter............................................. 121.75 98.50
Fourth Quarter............................................ 116.50 108.25
1994:
First Quarter............................................. 117.25 106.50
Second Quarter............................................ 122.25 102.75
Third Quarter............................................. 140.75 119.25
Fourth Quarter............................................ 146.25 133.00
1995:
First Quarter............................................. 141.50 120.25
Second Quarter............................................ 126.75 121.38
Third Quarter (through August 31)......................... 128.50 126.50
</TABLE>
On February 15, 1995, the last trading day prior to public announcement of
the views of Morgan Stanley and of Bear Stearns and Lehman Brothers as to the
private market value per LIN Common Share, the high and low sales prices per
LIN Common Share on the Nasdaq National Market were $141.50 and $138.50,
respectively. On March 7, 1995, the last trading day prior to public
announcement of the determination of Wasserstein Perella as to the private
market value per LIN Common Share, the high and low sales prices per LIN
Common Share on the Nasdaq National Market were $130.25 and $128.25,
respectively. On April 6, 1995, the last trading day prior to the public
announcement that AT&T and McCaw determined that McCaw would proceed with an
acquisition of the LIN Public Shares at the Private Market Price of $127.50
per LIN Common Share, the high and low sales prices per LIN Common Share on
the Nasdaq National Market were $122.25 and $121.50, respectively. On June 22,
1995, the last trading day prior to the public announcement by McCaw that it
had agreed in principle with the plaintiffs to settle the Stockholders
Litigation, the high and low sales prices per LIN Common Share on the Nasdaq
National Market were $125.25 and $124, respectively. On August 31, 1995, the
latest practicable date prior to printing this Proxy Statement, the high and
low sales prices per LIN Common Share on the Nasdaq National Market were
$128.50 and $128.25, respectively.
LIN has paid no cash dividends with respect to the LIN Common Shares for the
periods set forth above. LIN's two bank credit facilities, a senior secured
facility and a senior unsecured facility, restrict LIN's ability to pay
dividends to its stockholders. There are also restrictions on the ability of
LIN's operating subsidiaries to pay dividends to LIN. It is not anticipated
that any cash dividends will be paid on LIN Common Shares in the foreseeable
future. On December 28, 1994, LIN paid a special dividend of one share of LIN
Television Common Stock for every two LIN Common Shares to holders of record
of LIN Common Shares on December 9, 1994. None of the prices above has been
adjusted for that event, but prices for the period including and following
December 28, 1994 reflect its effect. See "SUMMARY--LIN Broadcasting
Corporation Summary Consolidated Financial Data."
From January 1993 through October 1994, 23,500 LIN Common Shares were
purchased by LIN through open market transactions, for prices ranging from
approximately $77.13 to $140.00 per share, primarily for distribution to
employees in connection with LIN's Employee Stock Purchase Plan (the "ESPP").
The average purchase price per LIN Common Share paid by LIN during the
quarterly periods ending on the following dates is as follows: March 31, 1993,
$80.73; June 30, 1993, $88.82; September 30, 1993, $107.25; December 31, 1993,
$113.45; March 31, 1994, $113.55; June 30, 1994, $107.30; September 30, 1994,
$134.75; and December 31, 1994, $140.00.
91
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of LIN Common
Shares, as of June 15, 1995, by persons known by LIN to be beneficial owners
of 5% or more of the LIN Common Shares.
<TABLE>
<CAPTION>
NAME AND ADDRESS LIN COMMON SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT
------------------- ------------------ -------
<S> <C> <C>
AT&T Corp. ......................................... 26,989,500(1) 52.2%
32 Avenue of the Americas
New York, New York 10013
The Capital Group Companies, Inc. .................. 3,362,500(2) 6.5%
333 South Hope Street
Los Angeles, California 90071
</TABLE>
- --------
(1) AT&T holds its LIN Common Shares through its wholly owned subsidiary
McCaw, which in turn holds its LIN Common Shares through its wholly owned
subsidiary Holdings. McCaw has determined to proceed with an acquisition,
pursuant to and subject to the terms of the PMVG, of all of the LIN Common
Shares that it does not beneficially own at this time. See "SPECIAL
FACTORS--Background of the Merger" and "--Terms of the PMVG" and "THE
MERGER."
(2) Based on publicly available information reported as of December 31, 1994.
Capital Guardian Trust Company and Capital Research and Management
Company, operating subsidiaries of The Capital Group Companies, Inc.,
exercised, as publicly reported as of December 31, 1994, investment
discretion with respect to 141,400 and 3,221,100 LIN Common Shares,
respectively, which were owned by various institutional investors.
92
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of LIN Common Shares as of
June 15, 1995 by LIN's (i) directors, (ii) the named executive officers, and
(iii) directors and executive officers as a group.
<TABLE>
<CAPTION>
LIN COMMON SHARES
NAME BENEFICIALLY OWNED (1) PERCENT
---- ---------------------- -------
<S> <C> <C>
Tom A. Alberg................................ 21,450(2) *
Dennis J. Carey.............................. 0 *
Lewis M. Chakrin............................. 0 *
Harold S. Eastman............................ 0 *
W. Preston Granbery.......................... 0 *
William G. Herbster.......................... 3,480(3) *
Rolla G. Huff................................ 0 *
Wilma H. Jordan.............................. 578 *
Richard W. Kislik............................ 8,410 *
Wayne M. Perry............................... 45,000(4) *
Florence L. Walsh............................ 0 *
Craig O. McCaw............................... 0 *
James L. Barksdale........................... 0 *
Gary R. Chapman.............................. 60,536(5) *
Donald Guthrie............................... 26,594(6) *
All directors, named executive officers and
other executive officers as a group (16
persons).................................... 166,048(7) *
</TABLE>
- --------
* Less than 1%
(1) Certain directors of LIN are directors and/or officers of one or more of
AT&T and McCaw, each of which beneficially owns 26,989,500 LIN Common
Shares. Such individuals disclaim beneficial ownership of such LIN Common
Shares.
(2) Includes options exercisable within 60 days to purchase 20,000 LIN Common
Shares.
(3) Represents LIN Common Shares held of record by Mr. Herbster's wife.
(4) Includes options exercisable within 60 days to purchase 44,100 LIN Common
Shares.
(5) Includes options exercisable within 60 days to purchase 59,220 LIN Common
Shares.
(6) Includes options exercisable within 60 days to purchase 26,000 LIN Common
Shares.
(7) Includes options exercisable within 60 days to purchase 149,320 LIN Common
Shares.
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<PAGE>
BENEFICIAL OWNERSHIP OF AT&T COMMON SHARES
The following table shows the beneficial ownership of all equity securities
of AT&T as of June 15, 1995 by LIN's (i) directors, (ii) the named executive
officers, and (iii) directors and executive officers as a group.
<TABLE>
<CAPTION>
AT&T COMMON SHARES PERCENT
NAME BENEFICIALLY OWNED OF CLASS
---- ------------------ --------
<S> <C> <C>
Tom A. Alberg................................... 105,453(1) *
Dennis J. Carey................................. 29,527(2) *
Lewis M. Chakrin................................ 22,624(3) *
Harold S. Eastman............................... 100 *
W. Preston Granbery............................. 10,370(4) *
William G. Herbster............................. 0 *
Rolla G. Huff................................... 5,756(5) *
Wilma H. Jordan................................. 275(6) *
Richard W. Kislik............................... 200 *
Wayne M. Perry.................................. 2,251,244(7) *
Florence L. Walsh............................... 0 *
Craig O. McCaw.................................. 15,913,730(8) 1.0
James L. Barksdale.............................. 50,000 *
Gary R. Chapman................................. 28 *
Donald Guthrie.................................. 45,600(9) *
All directors, named executive officers and
other executive officers as a group (16
persons)....................................... 19,022,541(10) 1.2
</TABLE>
- --------
* Less than 1%
(1) Includes options exercisable within 60 days to purchase 105,000 AT&T
Common Shares.
(2) Includes options exercisable within 60 days to purchase 12,587 AT&T
Common Shares.
(3) Includes options exercisable within 60 days to purchase 18,972 AT&T
Common Shares, and five AT&T Common Shares owned by Mr. Chakrin's son as
to which Mr. Chakrin disclaims beneficial ownership.
(4) Includes options exercisable within 60 days to purchase 10,365 AT&T
Common Shares, and five AT&T Common Shares owned by Mr. Granbery's wife
as to which Mr. Granbery disclaims beneficial ownership.
(5) Includes options exercisable within 60 days to purchase 5,580 AT&T Common
Shares.
(6) Includes 175 AT&T Common Shares owned by Ms. Jordan's husband and as to
which she disclaims beneficial ownership.
(7) Includes 47,500 AT&T Common Shares held by a trust of which Steven W.
Hooper is trustee and as to which Mr. Perry disclaims beneficial
ownership. Also includes options exercisable within 60 days to purchase
1,006,109 AT&T Common Shares.
(8) Includes options exercisable within 60 days to purchase 1,540,289 AT&T
Common Shares.
(9) Includes options exercisable within 60 days to purchase 45,500 AT&T
Common Shares.
(10) Includes options exercisable within 60 days to purchase 3,125,035 AT&T
Common Shares.
94
<PAGE>
CURRENT INFORMATION: DELISTING AND DEREGISTRATION
LIN is subject to the informational requirements of the Exchange Act, and in
accordance therewith, files reports, proxy statements and other documents and
information with the Commission. LIN officers, directors and principal
shareholders are also presently subject to certain filing requirements, as
well as certain trading restrictions, imposed under the Exchange Act. Such
reports, proxy statements and other documents and information, as well as the
aforementioned Schedule 13E-3, are available for inspection and copying at the
public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Regional Offices of the Commission located at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and Seven World Trade Center, New York, New
York 10048. Copies of such material may be obtained at prescribed rates by
mail addressed to the Commission's Public Reference Section, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549.
After the Effective Time, the LIN Common Shares will be delisted from the
Nasdaq National Market, and registration of LIN Common Shares under the
Exchange Act will terminate and LIN will cease filing reports with the
Commission. Moreover, LIN will be relieved of the obligation to comply with
the proxy rules of Regulation 14A under Section 14 of the Exchange Act, and
its officers, directors and 10% shareholders will be relieved of the reporting
requirements and "short-swing" trading liability under Section 16 of the
Exchange Act.
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP, 999 Third Avenue, Seattle, Washington 98104,
which has been the independent auditor of LIN since 1969, has been selected to
continue as LINs independent auditor for the current year. Representatives of
Ernst & Young LLP will be present at the Annual Meeting to respond to
questions and to make a statement if they so desire.
PROPOSALS BY LIN STOCKHOLDERS
Proposals that stockholders wish to include in LIN's proxy statement and
form of proxy for presentation at the 1996 Annual Meeting of Stockholders
(assuming the Merger is not consummated prior to the 1996 Annual Meeting,
which will not be held if the Merger is consummated prior thereto) must be
received by LIN no later than May 8, 1996.
95
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MCCAW CELLULAR COMMUNICATIONS, INC.,
MMM HOLDINGS, INC.,
MMM ACQUISITION CORP.
AND
LIN BROADCASTING CORPORATION
DATED APRIL 28, 1995,
AS AMENDED AND RESTATED JUNE 30, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
<TABLE>
<S> <C>
1. Definitions.......................................................... 1
ARTICLE II
2. The Merger; Terms of the Merger...................................... 4
2.1. The Merger..................................................... 4
2.2. Effective Time................................................. 4
2.3. Closing........................................................ 4
2.4. Certificate of Incorporation................................... 4
2.5. The By-Laws.................................................... 4
2.6. Directors...................................................... 4
2.7. Officers....................................................... 4
ARTICLE III
3. Conversion of Shares; Option Plan; Stockholders Meeting.............. 5
3.1. Merger Consideration; Conversion or Cancellation of Shares in
the Merger.................................................... 5
3.2. Option Plan; Stock Purchase Plan............................... 5
3.3. Stockholders' Meeting.......................................... 6
ARTICLE IV
4. Dissenting Shares; Payment for Shares................................ 6
4.1. Dissenting Shares.............................................. 6
4.2. Payment for Shares............................................. 7
4.3. Payment for Shares If Additional Amount Is Not Determined As of
the Effective Time............................................ 8
ARTICLE V
5. Representations and Warranties of LIN................................ 8
5.1. Organization, Etc. of LIN...................................... 8
5.2. Operations of Subsidiaries..................................... 9
5.3. Agreement...................................................... 9
5.4. Capital Stock.................................................. 9
5.5. Brokers and Finders............................................ 9
5.6. Proxy Statement................................................ 9
5.7. Delaware Section 203........................................... 10
5.8. Rights Agreement............................................... 10
ARTICLE VI
6. Representations and Warranties of McCaw, Holdings and Merger Sub..... 10
6.1. Organization, Etc. of McCaw, Holdings and Merger Sub........... 10
6.2. Agreement...................................................... 10
6.3. Brokers and Finders............................................ 10
6.4. Proxy Statement................................................ 11
6.5. No Prior Activities............................................ 11
6.6. Solvency....................................................... 11
</TABLE>
A-i
<PAGE>
ARTICLE VII
<TABLE>
<S> <C>
7. Additional Covenants and Agreements................................... 11
7.1. Conduct of Business of LIN..................................... 11
7.2. Reasonable Efforts............................................. 12
7.3. Indemnification; Insurance..................................... 12
7.4. New York Real Property Gains and Transfer Tax.................. 13
ARTICLE VIII
8. Conditions............................................................ 13
8.1. Conditions to Each Party's Obligations......................... 13
8.2. Conditions to Obligations of McCaw, Holdings and Merger Sub.... 13
8.3. Conditions to Obligations of LIN............................... 14
ARTICLE IX
9. Termination, Amendment and Waiver..................................... 14
9.1. Termination by Mutual Consent.................................. 14
9.2. Termination by Either McCaw or LIN............................. 14
9.3. Amendment...................................................... 15
9.4. Extension; Waiver.............................................. 15
9.5. Procedure for Termination, Amendment, Extension or Waiver...... 15
9.6. Effect of Termination and Abandonment.......................... 15
ARTICLE X
10. Miscellaneous and General............................................. 15
10.1. Expenses....................................................... 15
10.2. Notices, Etc. ................................................. 15
10.3. Nonsurvival of Representations and Warranties.................. 16
10.4. No Assignment.................................................. 16
10.5. Entire Agreement............................................... 17
10.6. Specific Performance........................................... 17
10.7. Remedies Cumulative............................................ 17
10.8. No Waiver...................................................... 17
10.9. No Third Party Beneficiaries................................... 17
10.10. Public Announcements........................................... 17
10.11. Certain Actions by LIN......................................... 17
10.12. Governing Law.................................................. 17
10.13. Name, Captions, Etc. .......................................... 17
10.14. Counterparts................................................... 17
10.15. McCaw Guarantee................................................ 17
</TABLE>
Exhibit A--Private Market Value Guarantee, as amended
A-ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated
April 28, 1995, as amended and restated June 30, 1995, by and among McCaw
Cellular Communications, Inc., a Delaware corporation ("McCaw"), MMM Holdings,
Inc., a Delaware corporation and a direct Wholly Owned Subsidiary of McCaw
("Holdings"), MMM Acquisition Corp., a Delaware corporation and a direct
Wholly Owned Subsidiary of Holdings ("Merger Sub"), and LIN Broadcasting
Corporation, a Delaware corporation ("LIN").
Recitals
Whereas, McCaw and Holdings are the beneficial owners of approximately 52%
of the outstanding LIN Common Shares;
Whereas, pursuant to and in accordance with the terms of the PMVG, the
Private Market Price was set at $127.50 per LIN Common Share;
Whereas, on April 28, 1995, McCaw, Holdings, Merger Sub and LIN entered into
the Original Merger Agreement, providing for the merger of Merger Sub with and
into LIN in which the public stockholders of LIN would receive $127.50 per LIN
Common Share;
Whereas, in connection with (i) the settlement of the Stockholders
Litigation and (ii) discussions with the LIN Independent Directors, McCaw
subsequently determined that it was willing to increase the Merger
Consideration above the Private Market Price, as set forth herein, and to
agree to other revisions to the Original Merger Agreement;
Whereas, the Boards of Directors of McCaw, Holdings, Merger Sub and LIN (in
the case of LIN, with the approval of the LIN Independent Directors) each have
determined that it is in the best interests of their respective stockholders
for Merger Sub to merge with and into LIN, upon the terms and subject to the
conditions set forth in this Agreement; and
Whereas, McCaw, Holdings, Merger Sub and LIN desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
Now, Therefore, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, McCaw, Holdings, Merger Sub and LIN
hereby agree as follows:
ARTICLE I
Definitions
As used in this Agreement, the following terms shall have the respective
meanings set forth below:
"Accretion Amount": As defined in Section 3.1(a).
"Additional Amount": As defined in Section 3.1(a).
"Affiliate": As defined in Rule 12b-2 under the Exchange Act.
"Agreement": As defined in the preamble hereto.
"Assumption Ratio": As defined in Section 3.2(a).
"AT&T": AT&T Corp., a New York corporation.
"AT&T Common Shares": Shares of common stock, $1.00 par value per share, of
AT&T.
"Authorization": Any consent, approval or authorization of, or any
expiration or termination of any waiting period requirement (including
pursuant to the HSR Act) of, or any filing, registration, qualification,
declaration or designation with or by, any Governmental Body.
A-1
<PAGE>
"Certificate of Merger": The certificate of merger with respect to the
Merger, containing the provisions required by, and executed in accordance
with, Section 251 of the DGCL.
"Certificates": As defined in Section 4.2.
"Closing": The closing of the Merger.
"Closing Date": The date on which the Closing occurs.
"Code": The Internal Revenue Code of 1986, as amended, and all regulations
promulgated thereunder, as in effect from time to time.
"DGCL": The Delaware General Corporation Law.
"Dissenting Shares": As defined in Section 4.1.
"Effective Time": As defined in Section 2.2.
"Escrow Account": As defined in Section 4.3(b).
"Exchange Act": The Securities Exchange Act of 1934, as amended.
"FCC": The Federal Communications Commission.
"Governmental Body": Any Federal, state, municipal, political subdivision or
other governmental department, authority, commission, board, bureau, agency or
instrumentality, domestic or foreign.
"HSR Act": The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"Holdings": As defined in the preamble to this Agreement.
"Indemnified Parties": As defined in Section 7.3(a).
"LIN": As defined in the preamble to this Agreement.
"LIN Board": The board of directors of LIN.
"LIN Common Shares": Shares of common stock, par value $0.01 per share, of
LIN;
"LIN Independent Directors": The three members of the LIN Board designated
as Independent Directors pursuant to and in accordance with Section 1 of the
PMVG.
"LIN Merger Shares": LIN Common Shares issued and outstanding immediately
prior to the Effective Time, other than LIN Common Shares owned by McCaw or
any of its Wholly Owned Subsidiaries and LIN Common Shares held in the
treasury of LIN or by any Wholly Owned Subsidiary of LIN.
"LIN Public Shares": LIN Common Shares not owned by McCaw or any of its
affiliates or any member of a "group", as such term is used for purposes of
Schedule 13D under the Exchange Act, of which McCaw or its affiliates are
members with respect to securities of LIN.
"McCaw": As defined in the preamble to this Agreement.
"Memorandum of Understanding": The Memorandum of Understanding dated June
22, 1995, setting forth the proposed terms for the settlement of the
Stockholders Litigation.
"Merger": The merger of Merger Sub with and into LIN as contemplated by
Section 2.1.
A-2
<PAGE>
"Merger Consideration": As defined in Section 3.1(a).
"Merger Sub": As defined in the preamble to this Agreement.
"NASDAQ": The National Association of Securities Dealers Automated
Quotations System.
"NYSE": The New York Stock Exchange, Inc.
"Options": As defined in Section 3.2.
"Option Plan": As defined in Section 3.2.
"Original Merger Agreement": The Merger Agreement, dated April 28, 1995, by
and among McCaw, Holdings, Merger Sub and LIN, prior to the amendment and
restatement thereof reflected in this Agreement.
"PMVG": The Private Market Value Guarantee, dated December 11, 1989, as
amended, between McCaw and LIN, attached hereto as Exhibit A.
"Paying Agent": As defined in Section 4.2.
"Person": Any individual or corporation, company, partnership, trust,
incorporated or unincorporated association, joint venture or other entity of
any kind.
"Private Market Price": The private market price per LIN Common Share
determined pursuant to Section 2(C) of the PMVG.
"Proxy Statement": As defined in Section 3.3.
"Rights": The Preferred Share Purchase Rights issued pursuant to the Rights
Agreement.
"Rights Agreement": The Rights Agreement, dated as of May 2, 1988, as
amended and restated as of January 13, 1989 and June 19, 1989 and as
subsequently further amended, between LIN and Manufacturers Hanover Trust
Company, as Rights Agent.
"Schedule 13E-3": The Transaction Statement on Schedule 13E-3 to be filed
under the Exchange Act by AT&T, McCaw, Holdings, Merger Sub and LIN with
respect to the Merger.
"SEC": The Securities and Exchange Commission.
"Significant Subsidiary": As defined under Rule 12b-1 of the Exchange Act.
"Solvent": As defined in Section 6.6.
"Stock Purchase Plan": As defined in Section 3.2(c).
"Stockholders Litigation": The litigations brought by stockholder plaintiffs
in connection with the Merger and the PMVG and certain related matters, as set
forth in the Memorandum of Understanding.
"Stockholders Meeting": As defined in Section 3.3.
"Subsidiary": As to any Person, any other Person of which at least 50% of
the equity or voting interest is owned, directly or indirectly, by such first
Person.
"Surviving Corporation": The surviving corporation in the Merger.
"Wholly Owned Subsidiary": A Subsidiary of which 100% of the equity interest
is owned, directly or indirectly, by the parent company.
A-3
<PAGE>
ARTICLE II
The Merger; Terms of The Merger
2.1. The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time, Merger Sub shall be merged with and into LIN in accordance
with the provisions of Section 251 of the DGCL and with the effect provided in
Sections 259 and 261 of the DGCL. The separate corporate existence of Merger
Sub shall thereupon cease and LIN shall be the Surviving Corporation and shall
continue to be governed by the laws of the State of Delaware. At the election
of McCaw, any Wholly Owned Subsidiary of McCaw may be substituted for Merger
Sub as a constituent corporation in the Merger, provided that the parties
shall have executed an appropriate amendment to this Agreement in accordance
with Section 9.3 in form and substance reasonably satisfactory to LIN and
McCaw in order to reflect such substitution.
2.2. Effective Time. The Merger shall become effective on the date and at
the time (the "Effective Time") that the Certificate of Merger shall have been
accepted for filing by the Secretary of State of the State of Delaware (or
such later date and time as may be specified, with the approval of LIN and
McCaw, in the Certificate of Merger).
2.3. Closing. Unless this Agreement shall have been terminated and the
transactions contemplated shall have been abandoned pursuant to Section 9.1 or
9.2 and subject to the fulfillment or waiver of the conditions set forth in
Article VIII, the Closing shall take place (i) at the offices of Wachtell,
Lipton, Rosen & Katz, New York, New York, as promptly as practicable (but in
any event within three business days) following satisfaction of the condition
set forth in Section 8.1(a) or (ii) at such other place and/or time and/or on
such other date as McCaw and LIN may agree or as may be necessary to permit
the fulfillment or waiver of the other conditions set forth in Article VIII.
The parties hereto shall use all reasonable efforts to cause the Certificate
of Merger to be filed with the Secretary of State of the State of Delaware on
the Closing Date or as soon as practicable thereafter.
2.4. Certificate of Incorporation. The Certificate of Incorporation of
Merger Sub as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly amended
in accordance with the terms thereof and of the DGCL, except that Article
SECOND thereof shall be amended to read as follows:
"The name of the Corporation (which is hereinafter called the
"Corporation") is LIN Broadcasting Corporation."
2.5. The By-Laws. The By-Laws of Merger Sub in effect at the Effective Time
shall be the By-Laws of the Surviving Corporation, until duly amended in
accordance with the terms thereof, of the Certificate of Incorporation of the
Surviving Corporation and of the DGCL.
2.6. Directors. The directors of Merger Sub at the Effective Time shall,
from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-Laws.
2.7. Officers. The officers of LIN at the Effective Time shall, from and
after the Effective Time, be the officers of the Surviving Corporation until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and By-Laws.
A-4
<PAGE>
ARTICLE III
Conversion of Shares; Option Plan; Stockholders Meeting
3.1. Merger Consideration; Conversion or Cancellation of Shares in the
Merger. Subject to the provisions of this Article III, at the Effective Time,
by virtue of the Merger and without any action on the part of the holders
thereof, the shares of the constituent corporations shall be converted as
follows:
(a) Each LIN Common Share issued and outstanding immediately prior to the
Effective Time (other than LIN Common Shares owned by McCaw or any of its
Wholly Owned Subsidiaries and LIN Common Shares held in the treasury of LIN
or by any Wholly Owned Subsidiary of LIN, which LIN Common Shares, by
virtue of the Merger and without any action on the part of the holders
thereof, shall be automatically cancelled and retired and shall cease to
exist with no payment being made with respect thereto, and other than any
Dissenting Shares) shall be converted into the right to receive (i) $129.50
in cash, plus (ii) the Additional Amount, if any, plus (iii) the Accretion
Amount, if any (collectively, the "Merger Consideration"), as set forth in
Section 4.2. The term "Additional Amount" shall mean $0.25 less an amount
equal to (x) the excess over $4 million of the total fee awarded by a final
and nonappealable order of the Delware Chancery Court to the plaintiffs'
attorneys in connection with the settlement of the Stockholders Litigation
divided by (y) the number of LIN Merger Shares. The term "Accretion Amount"
shall mean an amount, if any, equal to the amount of simple interest that
would accrue on $129.50 plus the Additional Amount (if any) at a rate of
five and one-half percent (5 1/2%) per annum from, but not including,
September 15, 1995 through, and including, the Closing Date.
(b) Each share of capital stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and become
one validly issued, fully paid and nonassessable share of Common Stock, par
value $0.01 per share, of the Surviving Corporation.
3.2. Option Plan; Stock Purchase Plan. (a) Pursuant to the terms of the
Amended and Restated 1969 Stock Option Plan of LIN (the "Option Plan"), each
option to purchase LIN Common Shares outstanding at the Effective Time (each,
an "Option") issued pursuant to the Option Plan shall be assumed by AT&T and
shall constitute an option to acquire, on the same terms and conditions as
were applicable under such assumed Option, a number of AT&T Common Shares
equal to the product of the Assumption Ratio and the number of LIN Common
Shares remaining subject to such Option as of the Effective Time, at a price
per AT&T Common Share equal to the aggregate exercise price for the LIN Common
Shares remaining subject to such Option divided by the number of full AT&T
Common Shares deemed to be purchasable pursuant to such Option; provided,
however, that (i) subject to the provisions of clause (ii) below, the number
of AT&T Common Shares that may be purchased upon exercise of such Option shall
not include any fractional shares and, upon the last such exercise of such
Option, a cash payment shall be made for any fractional share based upon the
per share closing price of AT&T Common Shares as reported in the NYSE
Composite Transactions on the date of such exercise, and (ii) in the case of
any Option to which Section 421 of the Code applies by reason of its
qualification under Section 422 or Section 423 of the Code ("qualified stock
options"), the option price, the number of shares purchasable pursuant to such
Option and the terms and conditions of exercise of such Option shall be
determined in order to comply with Section 424 of the Code. For purposes of
the foregoing, the "Assumption Ratio" shall mean the per share closing price
of the LIN Common Shares on the date of approval of the Merger by the LIN
stockholders, as reported on NASDAQ, divided by the per share closing price of
AT&T Common Shares on the date of approval of the Merger by the LIN
stockholders, as reported in the NYSE Composite Transactions (or if such date
is not a trading day, on the immediately preceding trading day). The
Assumption Ratio will be adjusted appropriately, if necessary, to reflect any
stock split, reverse stock split or similar change in the AT&T Common Shares
or the LIN Common Shares that is not reflected in their respective per share
closing prices on the date of approval of the Merger; provided that in no
event will any such adjustment be made in respect of quarterly cash dividends
payable on the AT&T Common Shares or the LIN Common Shares.
(b) McCaw shall cause AT&T to take all corporate action necessary to reserve
for issuance a sufficient number of AT&T Common Shares for delivery upon
exercise of the Options assumed in accordance with
A-5
<PAGE>
Section 3.2(a). AT&T shall file a registration statement on Form S-8 (or any
successor form) or another appropriate form, effective as of the Effective
Time, with respect to AT&T Common Shares subject to such Options and shall use
all reasonable efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such Options
remain outstanding.
(c) LIN shall take such action as may be necessary so that, from and after
the Effective Time, no employee of LIN shall be eligible to purchase LIN
Common Shares pursuant to the LIN Broadcasting Corporation Employee Stock
Purchase Plan (the "Stock Purchase Plan"). In lieu thereof, LIN employees who
meet the eligibility requirements thereof will be eligible to purchase AT&T
Common Shares pursuant to the McCaw Cellular Communications, Inc. Employee
Stock Purchase Plan.
(d) LIN shall take such action as may be necessary to ensure that, following
the Effective Time, no holder of Options or any participant in the Option
Plan, the Stock Purchase Plan or any other plans, programs or arrangements of
LIN or any of its Subsidiaries shall have any right thereunder to acquire any
equity securities of LIN, the Surviving Corporation or any Subsidiary thereof.
3.3. Stockholders' Meeting. (a) As promptly as practicable following the
date hereof, LIN shall, in accordance with applicable law and its Certificate
of Incorporation and By-Laws:
(i) duly call, give notice of, convene and hold a special meeting of its
stockholders (the "Stockholders Meeting") for the purpose of considering
and taking action upon the Merger and this Agreement and such other matters
as may be necessary to consummate the transactions contemplated herein;
(ii) prepare and file with the SEC a preliminary proxy statement relating
to the matters to be considered at the Stockholders Meeting pursuant to
this Agreement and use its reasonable best efforts to obtain and furnish
the information required to be included by the SEC in the Proxy Statement
and, after consultation with McCaw, to respond promptly to any comments
made by the SEC with respect to the preliminary proxy statement and to
cause a definitive proxy statement (the "Proxy Statement") to be mailed to
its stockholders; and
(iii) subject to the fiduciary obligations of the LIN Board under
applicable law as advised in writing by outside counsel selected by the LIN
Board, include in the Proxy Statement the recommendation of the LIN Board
that stockholders of LIN vote in favor of the approval of the Merger, the
adoption of this Agreement and such other matters as may be necessary to
consummate the transactions contemplated hereby.
(b) McCaw agrees that, if the Merger is approved by the affirmative vote of
at least a majority of the LIN Public Shares present and entitled to vote at
the Stockholders Meeting pursuant to clause (ii) of Section 8.1(a), McCaw will
vote, or cause to be voted, all of the LIN Common Shares beneficially owned by
it, its affiliates or any of its Subsidiaries in favor of the approval of the
Merger, the adoption of this Agreement and such other matters as may be
necessary to consummate the transactions contemplated hereby. In addition,
each of LIN, McCaw, Holdings and Merger Sub agrees that it will fully
cooperate in the preparation of the Proxy Statement and the Schedule 13E-3.
ARTICLE IV
Dissenting Shares; Payment for Shares
4.1. Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, LIN Common Shares outstanding immediately prior to the Effective
Time and held by a holder (if any) who has not voted in favor of the Merger or
consented thereto in writing and who has demanded appraisal for such LIN
Common Shares in accordance with Section 262 of the DGCL ("Dissenting Shares")
shall not be converted into the right to receive the Merger Consideration, as
provided in Section 3.1, unless and until such holder fails to perfect or
withdraws or otherwise loses his right to appraisal and payment under the
DGCL. If, after the Effective Time, any such
A-6
<PAGE>
holder fails to perfect or withdraws or loses his right to appraisal, such
Dissenting Shares shall thereupon be treated as if they had been converted as
of the Effective Time into the right to receive the Merger Consideration to
which such holder is entitled, without interest thereon. LIN shall give McCaw
prompt notice of any demands received by LIN for appraisal of LIN Common
Shares and McCaw shall have the right to participate in all negotiations and
proceedings with respect to such demands. LIN shall not, except with the prior
written consent of McCaw, make any payment with respect to, or settle or offer
to settle, any such demands.
4.2. Payment for Shares. (a) From and after the Effective Time, a bank or
trust company to be designated by McCaw shall act as paying agent (the "Paying
Agent") in effecting the payment of the Merger Consideration for certificates
(the "Certificates") formerly representing LIN Common Shares and entitled to
payment of the Merger Consideration pursuant to Section 3.1. At the Effective
Time, and from time to time thereafter, McCaw or Merger Sub shall deposit, or
cause to be deposited, in trust with the Paying Agent for the benefit of the
holders of LIN Common Shares such amounts as may be necessary to permit the
Paying Agent to make the payments contemplated by paragraph (b) of this
Section 4.2 and, if applicable, paragraph (d) of Section 4.3.
(b) Promptly after the Effective Time, but in no event later than two
business days after the date of the Effective Time, the Paying Agent shall
mail to each record holder of Certificates that immediately prior to the
Effective Time represented LIN Common Shares (other than Certificates
representing LIN Common Shares owned by McCaw or any of its Wholly Owned
Subsidiaries and LIN Common Shares held in the treasury of LIN or by any
Wholly Owned Subsidiary of LIN) a form of letter of transmittal which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Paying Agent and instructions for use in surrendering such Certificates and
receiving the Merger Consideration therefor. Upon the surrender of each such
Certificate, together with such letter of transmittal duly executed and any
other required documents, the Paying Agent shall pay the holder of such
Certificate, in consideration therefor, the Merger Consideration multiplied by
the number of LIN Common Shares formerly represented by such Certificate and,
if applicable, the payment contemplated by Section 4.3(d), and such
Certificate shall forthwith be cancelled. Until so surrendered, each such
Certificate (other than Certificates representing Dissenting Shares and
Certificates representing LIN Common Shares owned by McCaw or any of its
Wholly Owned Subsidiaries and LIN Common Shares held in the treasury of LIN or
by any Wholly Owned Subsidiary of LIN) shall represent solely the right to
receive the aggregate Merger Consideration relating thereto and, if
applicable, the payment contemplated by Section 4.3(d). No interest shall be
paid or accrued on the Merger Consideration.
(c) Promptly following the date which is one year after the Effective Time,
the Paying Agent shall deliver to McCaw all cash, Certificates and other
documents in its possession relating to the transactions described in this
Agreement, and the Paying Agent's duties shall terminate. Thereafter, each
holder of a Certificate formerly representing a LIN Common Share (other than
Certificates representing Dissenting Shares and Certificates representing LIN
Common Shares owned by McCaw or any of its Wholly Owned Subsidiaries and LIN
Common Shares held in the treasury of LIN or by any Wholly Owned Subsidiary of
LIN) may surrender such Certificate to McCaw and (subject to applicable
abandoned property, escheat and similar laws) receive, in consideration
therefor, the aggregate Merger Consideration relating thereto and, if
applicable, the payment contemplated by Section 4.3(d), without any interest
or dividends thereon.
(d) The Merger Consideration and, if applicable, any additional payment as
contemplated by Section 4.3(c) or 4.3(d) shall be net to each holder of
Certificates in cash, subject to reduction only for any applicable federal
back-up withholding or stock transfer taxes payable by such holder.
(e) If payment of cash in respect of any Certificate is to be made to a
Person other than the Person in whose name such Certificate is registered, it
shall be a condition to such payment that the Certificate so surrendered shall
be properly endorsed or shall be otherwise in proper form for transfer and
that the Person requesting such payment shall have paid any transfer and other
taxes required by reason of such payment in a name other than that of the
registered holder of the Certificate surrendered or shall have established to
the satisfaction of McCaw or the Paying Agent that such tax either has been
paid or is not payable.
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(f) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any LIN Common Shares which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates formerly representing LIN Common Shares (other
than Certificates representing LIN Common Shares owned by McCaw or any of its
Wholly Owned Subsidiaries and LIN Common Shares held in the treasury of LIN or
by any Wholly Owned Subsidiary of LIN) are presented to the Surviving
Corporation or the Paying Agent, they shall be surrendered and cancelled in
return for the payment of the aggregate Merger Consideration relating thereto
and, if applicable, the payment contemplated by Section 4.3(d), as provided in
this Article IV, subject to applicable law and the other provisions of this
Agreement in the case of Dissenting Shares.
4.3. Payment for Shares If Additional Amount Is Not Determined As of the
Effective Time. Notwithstanding anything to the contrary in this Agreement, in
the event the Effective Time occurs prior to the determination of the
Additional Amount, if any, the following provisions shall apply:
(a) The Merger Consideration will be determined and paid in accordance with
the terms hereof, and all references herein to the Merger Consideration shall
be construed, as if the Additional Amount were equal to zero.
(b) McCaw or Merger Sub shall deposit or cause to be deposited with the
Paying Agent, in an interest bearing account (the "Escrow Account"), an amount
equal to (i) $0.25 plus the Accretion Amount, if any, applicable to $0.25,
multiplied by (ii) the number of LIN Merger Shares. Such amount and any
interest thereon will be retained in the Escrow Account pending the payments
contemplated by paragraph (c) of this Section 4.3.
(c) If the total fee awarded by a final and nonappealable order of the
Delaware Chancery Court to the plaintiffs' attorneys in connection with the
settlement of the Stockholders Litigation is greater than $4 million, the
excess of such fee over $4 million will be paid to the plaintiffs' attorneys
from the Escrow Account (together with any interest accrued on such excess
amount in the Escrow Account). If any amount remains in the Escrow Account
following such payment, an additional payment will be made to former holders
of Certificates who have previously received payment of the Merger
Consideration, in an amount per LIN Common Share formerly represented by such
Certificates equal to (i) the aggregate amount remaining in the Escrow Account
immediately following such payment to the plaintiffs' attorneys divided by
(ii) the total number of LIN Merger Shares (the "Escrow Amount"). If any
amount remains in the Escrow Account following all the foregoing payments,
such remaining amount shall be governed by the provisions of Section 4.2(c)
with respect to the deposit and retention of funds held by the Paying Agent.
(d) Holders of Certificates who have not received payment of the Merger
Consideration as of the time of determination of the Escrow Amount, if any,
pursuant to paragraph (c) of this Section 4.3 will be entitled to receive, at
such time as they receive payment of the Merger Consideration in accordance
with Section 4.2, an additional payment, if any, equal to the Escrow Amount,
without interest thereon, with respect to each LIN Common Share in respect of
which such holder receives payment of the Merger Consideration.
ARTICLE V
Representations and Warranties of LIN
LIN hereby represents and warrants to McCaw, Holdings and Merger Sub as
follows:
5.1. Organization, Etc. of LIN. LIN is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own and operate its properties,
to carry on its business as now conducted and proposed by LIN to be conducted,
to enter into this Agreement and (subject to the approval of the LIN
stockholders) to carry out the provisions of this Agreement and consummate the
transactions contemplated hereby. LIN has obtained from the appropriate
Governmental Bodies (including, without limitation, the FCC) all approvals and
licenses necessary for the conduct of its
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business and operations as currently conducted, which approvals and licenses
are valid and remain in full force and effect, except where the failure to
have obtained such approvals or licenses or the failure of such licenses and
approvals to be valid and in full force and effect does not have and would not
be reasonably expected (so far as can be foreseen at the time) to have a
material adverse effect on the business, properties, operations, condition
(financial or other) or prospects of LIN and its Subsidiaries taken as a
whole.
5.2. Operations of Subsidiaries. Each Significant Subsidiary of LIN (a) is a
corporation or other legal entity duly organized, validly existing and (if
applicable) in good standing under the laws of the jurisdiction of its
organization and has the full power and authority to own its properties and
conduct its business and operations as currently conducted, except where the
failure to be duly organized, validly existing and in good standing does not
have, and would not be reasonably expected (so far as can be foreseen at the
time) to have, a material adverse effect on the business, properties,
operations, condition (financial or other) or prospects of LIN and its
Subsidiaries taken as a whole and (b) has obtained from the appropriate
Governmental Bodies (including, without limitation, the FCC) all approvals and
licenses necessary for the conduct of its business and operations as currently
conducted, which licenses and approvals are valid and remain in full force and
effect, except where the failure to have obtained such approvals and licenses
or the failure of such licenses and approvals to be valid and in full force
and effect does not have and would not be reasonably expected (so far as can
be foreseen at the time) to have a material adverse effect on the business,
properties, operations, condition (financial or other) or prospects of LIN and
its Subsidiaries taken as a whole.
5.3. Agreement. This Agreement and the consummation of the transactions
contemplated hereby have been duly approved by the LIN Board and have been
duly authorized by all other necessary corporate action on the part of LIN
(except for the approval of LIN's stockholders contemplated by Section
8.1(a)). This Agreement has been duly executed and delivered by a duly
authorized officer of LIN and constitutes a valid and binding agreement of
LIN, enforceable against LIN in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
5.4. Capital Stock. The authorized capital stock of LIN consists of (a)
150,000,000 LIN Common Shares, of which 51,714,366 shares were outstanding as
of April 28, 1995, and (b) 2,000,000 shares of preferred stock, no par value,
none of which were outstanding as of April 28, 1995. All outstanding LIN
Common Shares are duly authorized, validly issued, fully paid and
nonassessable, and no class of capital stock of LIN is entitled to preemptive
rights. There were outstanding on April 28, 1995 no options, warrants or other
rights to acquire capital stock from LIN, except (i) Options representing in
the aggregate the right to purchase up to 1,610,931 LIN Common Shares pursuant
to the Option Plan and (ii) the Rights. Since April 28, 1995, LIN has not
issued any capital stock or any options, warrants or other rights to acquire
capital stock from LIN, except for LIN Common Shares issued upon due exercise
of Options outstanding on April 28, 1995 and except for LIN Common Shares
issued pursuant to the Stock Purchase Plan in accordance with its terms.
Except as disclosed in LIN's public filings under the Exchange Act filed since
January 1, 1995, all outstanding shares of capital stock of the Significant
Subsidiaries of LIN are owned by LIN or a direct or indirect Wholly Owned
Subsidiary of LIN, free and clear of all liens, charges, encumbrances, claims
and options of any nature.
5.5. Brokers and Finders. Except for the fees and expenses payable to Lehman
Brothers Inc. and Bear Stearns & Co., Inc., which fees and expenses are
reflected in their agreements with LIN, copies of which have been furnished to
McCaw, and except for Wasserstein Perella & Co., Inc., whose fees and expenses
are reflected in their agreement with LIN and their agreement with LIN and
McCaw, neither LIN nor the LIN Independent Directors has employed any
investment banker, broker, finder, consultant or intermediary in connection
with the transactions contemplated by this Agreement which would be entitled
to any investment banking, brokerage, finder's or similar fee or commission in
connection with this Agreement or the transactions contemplated hereby.
5.6. Proxy Statement. The Proxy Statement will comply in all material
respects with the requirements of the Exchange Act. The Proxy Statement will
not, at the time filed with the SEC, at the date it or any amendment
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or supplement is mailed to stockholders and 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 made therein, in light of the circumstances under which they were
made, not misleading; provided that the foregoing shall not apply to
information supplied by McCaw, Holdings or Merger Sub with respect to any
thereof or to AT&T specifically for inclusion or incorporation by reference in
the Proxy Statement. If at any time prior to the Effective Time any event with
respect to LIN, its officers and directors or any of its Subsidiaries should
occur which is required to be described in an amendment of, or a supplement
to, the Proxy Statement, LIN shall notify McCaw thereof by reference to this
Section 5.6 and such event shall be so described, and such amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of LIN and such amendment or supplement shall
comply with all provisions of applicable law. The Proxy Statement will also
form a part of the Schedule 13E-3, which Schedule 13E-3 will comply in all
material respects with the requirements of the Exchange Act.
5.7. Delaware Section 203. The Board of Directors of LIN has taken all
appropriate and necessary action such that the provisions of Section 203 of
the DGCL will not apply to any of the transactions contemplated by this
Agreement.
5.8. Rights Agreement. The Rights Agreement has been amended to provide that
(i) none of AT&T, McCaw, Holdings or Merger Sub will become an "Acquiring
Person," (ii) no "Triggering Event," "Share Acquisition Date" or "Distribution
Date" (as such terms are defined in the Rights Agreement) will occur and (iii)
Section 13 of the Rights Agreement will not be triggered, in each case as a
result of the execution or delivery of this Agreement or any amendment hereto
or the consummation of the transactions contemplated hereby (including,
without limitation, the Merger), with the effect that (x) none of such events
will trigger the exercisability of the Rights, the separation of the Rights
from the stock certificates to which they are attached or any other provision
of the Rights Agreement and (y) the Rights will no longer be outstanding upon
the consummation of the Merger.
ARTICLE VI
Representations and Warranties of McCaw, Holdings and Merger Sub
McCaw, Holdings and Merger Sub each represents and warrants to LIN as
follows:
6.1. Organization, Etc. of McCaw, Holdings and Merger Sub. Each of McCaw,
Holdings and Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of its respective jurisdiction of
incorporation, and each has all requisite corporate power and authority to own
and operate its properties, to carry on its business as now conducted and
proposed by it to be conducted, to enter into this Agreement and to carry out
the provisions of this Agreement and consummate the transactions contemplated
hereby.
6.2. Agreement. This Agreement and the consummation of the transactions
contemplated hereby have been duly approved by the respective Boards of
Directors of McCaw, Holdings and Merger Sub, by the unanimous vote of those
directors present, and by Holdings as the sole stockholder of Merger Sub (no
other corporate action on the part of McCaw, Holdings or Merger Sub being
necessary). This Agreement has been duly executed and delivered by a duly
authorized officer of each of McCaw, Holdings and Merger Sub and constitutes a
valid and binding agreement of each of McCaw, Holdings and Merger Sub,
enforceable against each in accordance with its terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights generally,
general equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.
6.3. Brokers and Finders. Except for the fees and expenses payable to Morgan
Stanley & Co., Incorporated, which fees and expenses will be paid by AT&T and
McCaw, and except for Wasserstein Perella &
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Co., Inc., whose fees and expenses are reflected in their agreement with LIN
and McCaw, none of AT&T, McCaw, Holdings or Merger Sub has employed any
investment banker, broker, finder, consultant or intermediary in connection
with the transactions contemplated by this Agreement which would be entitled
to any investment banking, brokerage, finder's or similar fee or commission in
connection with this Agreement or the transactions contemplated hereby.
6.4. Proxy Statement. None of the information to be supplied by McCaw,
Holdings or Merger Sub with respect to any thereof or to AT&T for inclusion or
incorporation by reference in the Proxy Statement will, at the time of the
mailing of the Proxy Statement or at the time of the Stockholder 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 not misleading. If at any time prior to the Effective Time
any event with respect to McCaw, Holdings or Merger Sub, or their officers and
directors or any of their Subsidiaries shall occur which is required to be
described in the Proxy Statement, McCaw shall notify LIN thereof by reference
to this Section 6.4 and such event shall be so described, and an amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of LIN. The Proxy Statement will also form a
part of the Schedule 13E-3, which Schedule 13E-3 will comply in all material
respects with the requirements of the Exchange Act.
6.5. No Prior Activities. Merger Sub has not incurred, and will not incur,
directly or through any Subsidiary, any liabilities or obligations for
borrowed money or otherwise, except incidental liabilities or obligations not
for borrowed money incurred in connection with its organization. Except as
contemplated by this Agreement, Merger Sub (i) has not engaged, directly or
through any Subsidiary, in any business activities of any type or kind
whatsoever, (ii) has not entered into any agreements or arrangements with any
person or entity and (iii) is not subject to or bound by any obligation or
undertaking.
6.6. Solvency. Assuming that LIN is Solvent immediately prior to the
Effective Time, the Surviving Corporation will be Solvent at and immediately
after the Effective Time, after giving effect to the transactions contemplated
hereby. For purposes of this Agreement, "Solvent" shall mean, with respect to
LIN or the Surviving Corporation, (i) that the fair valuation of such
corporation's property (on a consolidated basis) is, on the date of
determination, greater than the total amount of consolidated liabilities of
such corporation as of such date and (ii) that the present fair saleable value
of such corporation's assets is, on the date of determination, greater than
the amount that will be required to pay such corporation's probable liability
on its existing debts as they become absolute and matured.
ARTICLE VII
Additional Covenants and Agreements
7.1. Conduct of Business of LIN. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Effective Time, LIN
will, and will cause each of its Subsidiaries to, conduct its operations
according to, and not enter into any transaction other than in accordance
with, its ordinary course of business consistent with past practice.
Notwithstanding the foregoing, pending the Effective Time, LIN and its
Subsidiaries may convert their cellular systems (to the extent they are not
already so converted) to provide equal access for long-distance carriers in
connection with long-distance communications using LIN's or its Subsidiaries'
services and, following such conversion, may market their services under the
AT&T service mark, in each case on such schedule as may be determined by
McCaw. AT&T hereby covenants and agrees to make the use of the AT&T service
mark available to LIN and its Subsidiaries, for purposes of marketing their
services pursuant to the immediately preceding sentence, on a non-exclusive,
royalty free basis. Following the commencement of the marketing of any service
of LIN or any of its Subsidiaries pursuant to the immediately preceding two
sentences, AT&T shall continue to make the use of the AT&T service mark
available on such basis with respect to such service, and such service shall
continue to be so marketed under the AT&T service mark, for so long as AT&T
directly or indirectly owns at least a majority of the voting power of LIN's
capital
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stock entitled to vote generally in the election of directors, unless a
majority of the LIN Independent Directors otherwise consents.
7.2. Reasonable Efforts. LIN, McCaw, Holdings and Merger Sub shall, and
shall use all reasonable efforts to cause their respective Subsidiaries to:
(i) use all reasonable efforts to promptly take, or cause to be taken, all
other actions and do, or cause to be done, all things necessary, proper or
appropriate to satisfy the conditions set forth in Article VIII and to
consummate and make effective the transactions contemplated by this Agreement
on the terms and conditions set forth herein as soon as practicable (including
seeking to remove promptly any injunction or other legal barrier that may
prevent such consummation); and (ii) not take any action (including, without
limitation, effecting or agreeing to effect or announcing an intention or
proposal to effect, any acquisition, business combination or other
transaction) which might reasonably be expected to impair the ability of the
parties to consummate the Merger at the earliest possible time (regardless of
whether such action would otherwise be permitted or not prohibited hereunder).
7.3. Indemnification; Insurance. (a) McCaw and Holdings agree that all
rights to indemnification now existing in favor of any of the present or
former directors, officers or employees of LIN or any of its Subsidiaries (the
"Indemnified Parties") as provided in its Certificate of Incorporation or
Bylaws, or otherwise in effect on the date of this Agreement (including,
without limitation, as provided in the PMVG), will survive the Merger and
continue in full force and effect and McCaw and Holdings will cause the
Surviving Corporation to honor all such rights to indemnification.
(b) In the event of any claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time) subject to the rights to
indemnification provided by paragraph (a) of this Section 7.3, (i) the
Surviving Corporation shall have the right, from and after the Effective Time,
to assume the defense thereof with counsel reasonably satisfactory to such
Indemnified Parties and McCaw and Holdings shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof (provided that such Indemnified Parties shall have the
right to be represented by up to one separate counsel for the LIN Independent
Directors and one separate counsel for the other Indemnified Parties as a
group in connection with the defense thereof, in each case selected by such
Indemnified Parties and reasonably satisfactory to the Surviving Corporation,
if such Indemnified Parties shall have been advised by such counsel that there
may be one or more substantial legal defenses available to them which are
different from or additional to those available to the Surviving Corporation
and in the reasonable judgment of such counsel it is advisable for such
Indemnified Parties to be represented by such separate counsel, in which case,
if such Indemnified Parties notify McCaw and Holdings in writing that they
elect to be represented by such separate counsel at the expense of the
Surviving Corporation in accordance with the terms of this proviso, the
Surviving Corporation shall not have the right to assume the defense of such
action on behalf of such Indemnified Parties), (ii) the Indemnified Parties
will cooperate in the defense of any such matter and (iii) McCaw and Holdings
will not be liable for any settlement effected without their prior written
consent; provided that McCaw and Holdings will not have any obligation
hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law; and provided, further,
that nothing herein shall prevent the Surviving Corporation from settling any
such claim, action, suit, proceeding or investigation as to any Indemnified
Party subject to the rights to indemnification provided by paragraph (a) of
this Section 7.3, so long as such settlement is based on the payment of money
and the Surviving Corporation agrees to make all such payments due in
connection with such settlement on behalf of such Indemnified Party.
(c) McCaw and Holdings shall cause to be maintained in effect for not less
than six years after the Effective Time the current policies of directors' and
officers' liability insurance maintained by LIN with respect to matters
occurring prior to and including the Effective Time for all present and past
directors and officers of LIN or any of its Subsidiaries; provided, however,
that (i) McCaw and Holdings may substitute therefor policies of at least the
same coverage containing terms and conditions which are no less advantageous
to the directors and officers
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covered thereby and (ii) McCaw and Holdings shall not be required to pay in
the aggregate an annual premium for such insurance in excess of two times the
last annual premium paid prior to the date hereof, but in such case shall
purchase as much coverage as possible for such amount.
(d) In the event that any action, suit, proceeding or investigation relating
hereto or to the transactions contemplated by this Agreement is commenced,
whether before or after the Closing, the parties hereto agree to cooperate and
use their respective reasonable efforts to vigorously defend against and
respond thereto.
(e) This Section 7.3 is intended to benefit the persons covered by the
indemnification rights and/or insurance policies referred to in this Section
7.3 and shall be binding on all successors and assigns of McCaw, Holdings,
Merger Sub, LIN and the Surviving Corporation.
7.4. New York Real Property Gains and Transfer Tax. Any liability arising
out of New York State and/or New York City Real Property Gains and Transfer
Taxes, with respect to interests in real property owned directly or indirectly
by LIN immediately prior to the Merger, if applicable and due with respect to
the Merger, shall be borne by LIN and expressly shall not be a liability of
the stockholders of LIN.
ARTICLE VIII
Conditions
8.1. Conditions to Each Party's Obligations. The respective obligations of
each party to consummate the transactions contemplated by this Agreement are
subject to the fulfillment at or prior to the Effective Time of each of the
following conditions, any or all of which may be waived (other than the
condition set forth in clause (ii) of Section 8.1(a)) in whole or in part by
the party being benefitted thereby, to the extent permitted by applicable law
and the PMVG:
(a) Stockholder Approval. This Agreement and the transactions contemplated
hereby shall have been duly approved at the Stockholders Meeting by (i) the
requisite holders of LIN Common Shares in accordance with applicable law and
the Certificate of Incorporation and By-Laws of LIN and (ii) the affirmative
vote of the holders of at least a majority of the LIN Public Shares present
and entitled to vote at the Stockholders Meeting at which a majority of the
LIN Public Shares shall have been present.
(b) No Injunction. There shall not be in effect any judgment, writ, order,
injunction or decree of any court or Governmental Body of competent
jurisdiction, restraining, enjoining or otherwise preventing consummation of
the transactions contemplated by this Agreement or permitting such
consummation only subject to any condition or restriction unacceptable to
McCaw in its reasonable judgment; provided, however, that any party invoking
this condition shall use reasonable efforts to have any such order or
injunction vacated or any such other restriction eliminated.
8.2. Conditions to Obligations of McCaw, Holdings and Merger Sub. The
respective obligations of McCaw, Holdings and Merger Sub to consummate the
transactions contemplated by this Agreement are subject to the fulfillment at
or prior to the Effective Time of each of the following conditions, any or all
of which may be waived in whole or part by McCaw, Holdings and Merger Sub, as
the case may be, to the extent permitted by applicable law:
(a) Representations and Warranties True. The representations and warranties
of LIN contained in Section Article V shall have been true in all material
respects when made and at the time of the Closing with the same effect as
though such representations and warranties had been made at such time, except
for changes resulting from the consummation of the transactions contemplated
by this Agreement.
(b) Performance. LIN shall have performed or complied in all material
respects with all agreements and conditions contained herein required to be
performed or complied with by it prior to or at the time of the Closing.
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(c) Government Consents, Etc. All Authorizations, if any, required in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been made or
obtained, in each case without limitation or restriction unacceptable to McCaw
in its reasonable judgment, except where the failure to have obtained such
Authorizations would not be reasonably expected (so far as can be foreseen at
the time) to have a material adverse effect on the business, properties,
operations, condition (financial or other) or prospects of (i) LIN and its
Subsidiaries taken as a whole or (ii) McCaw and its Subsidiaries taken as a
whole.
(d) Approval of Settlement of Stockholders Litigation. A stipulation of
settlement, as contemplated by the Memorandum of Understanding, shall have
been entered into providing for the settlement of the Stockholders Litigation
on the terms set forth in the Memorandum of Understanding and such stipulation
shall have been approved by a final and nonappealable order of the Delaware
Chancery Court; provided that such condition shall be deemed satisfied if the
only aspect of the settlement not approved by such a final and nonappealable
order is the award of the plaintiffs' attorneys' fee.
(e) Third Party Consents. All required authorizations, consents or approvals
in connection with the Merger of any third party (other than a Governmental
Body), if any, the failure to obtain which would have a material adverse
effect on (i) LIN and its Subsidiaries taken as a whole or (ii) McCaw and its
Subsidiaries taken as a whole, shall have been obtained.
8.3. Conditions to Obligations of LIN. The obligations of LIN to consummate
the transactions contemplated by this Agreement are subject to the fulfillment
at or prior to the Effective Time of each of the following conditions, any or
all of which may be waived in whole or in part by LIN to the extent permitted
by applicable law:
(a) Representations and Warranties True. The representations and warranties
of McCaw, Holdings and Merger Sub contained in Article VI shall have been true
in all material respects when made and at the time of the Closing with the
same effect as though such representations and warranties had been made at
such time, except for changes resulting from the consummation of the
transactions contemplated by this Agreement.
(b) Performance. Each of McCaw, Holdings and Merger Sub shall have performed
or complied in all material respects with all agreements and conditions
contained herein required to be performed or complied with by it prior to or
at the time of the Closing.
ARTICLE IX
Termination, Amendment and Waiver
9.1. Termination by Mutual Consent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by holders of LIN Common Shares, either by the mutual
written consent of McCaw and LIN, or by mutual action of their respective
Boards of Directors.
9.2. Termination by Either McCaw or LIN. This Agreement may be terminated
(upon notice from the terminating party to the other parties) and the Merger
may be abandoned (a) by action of the Board of Directors of McCaw if the
Merger shall not have been consummated by November 30, 1995, (b) by action of
the Board of Directors of LIN if the Merger shall not have been consummated by
December 31, 1995 or, if the condition set forth in Section 8.1(a) shall have
been satisfied and the Merger is being pursued in good faith by McCaw but has
not been completed due to regulatory delays or litigation, August 31, 1996, or
(c) by action of the Board of Directors of either McCaw or LIN if (i) any
court of competent jurisdiction in the United States or Governmental Body in
the United States shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become final
and nonappealable or (ii) at the Stockholders Meeting, this Agreement and the
Merger shall
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not receive the affirmative vote of the holders of at least a majority of the
LIN Public Shares present and entitled to vote at the Stockholders Meeting at
which a majority of the LIN Public Shares shall be present.
9.3. Amendment. Subject to the applicable provisions of the DGCL, at any
time prior to the Effective Time, the parties hereto may modify, amend or
supplement this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties with respect to any of the terms
contained herein; provided, however, that after approval of the Merger by the
stockholders of LIN, no such amendment or modification shall be made which
reduces the form or amount of consideration payable in the Merger or adversely
affects the rights of LIN's stockholders hereunder without the approval of
such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties.
9.4. Extension; 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 parties, (b) waive any inaccuracies in the representations
and warranties contained in this Agreement or in any document delivered
pursuant to this Agreement or (c) subject to Section 9.3, waive compliance
with any of the agreements or conditions (other than the condition set forth
in clause (ii) of Section 8.1(a)) contained in this Agreement. Any agreement
on the part of a party to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party. The
failure of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such rights.
9.5. Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 9.1 or 9.2, an amendment of
this Agreement pursuant to Section 9.3 or an extension or waiver pursuant to
Section 9.4 by any of the parties shall, in order to be effective, require, in
the case of McCaw, Holdings or Merger Sub, approval by its Board of Directors
or the duly authorized designee of its Board of Directors and, in the case of
LIN, approval by its Board of Directors or the duly authorized designee of its
Board of Directors and approval by a majority of the LIN Independent
Directors.
9.6. Effect of Termination and Abandonment. In the event of termination of
this Agreement and abandonment of the Merger pursuant to this Article IX, no
party hereto (or any of its directors or officers) shall have any liability or
further obligation to any other party under this Agreement, except that
nothing herein will relieve any party from liability for any breach of this
Agreement and except that the last two sentences of Section 7.1 will survive
any termination of this Agreement and/or abandonment of the Merger. Except as
and to the extent provided in the PMVG, the termination of this Agreement and
abandonment of the Merger pursuant to this Article IX shall not affect in any
way the PMVG, which shall continue to be in full force and effect to the
extent of and in accordance with its terms.
ARTICLE X
Miscellaneous and General
10.1. Expenses. Each party shall bear its own expenses, including the fees
and expenses of any attorneys, accountants, investment bankers, brokers,
finders or other intermediaries or other Persons engaged by it, incurred in
connection with this Agreement and the transactions contemplated hereby,
except as set forth in Section 7.4 and except that expenses incurred in
connection with printing and mailing the Proxy Statement will be shared
equally by McCaw, Holdings and Merger Sub, on the one hand, and LIN, on the
other.
10.2. Notices, Etc. All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing
and shall be deemed to have been duly given to any party when delivered
personally (by courier service or otherwise), when delivered by telecopy and
confirmed by return telecopy, or seven days after being mailed by first-class
mail, postage prepaid and return receipt requested in each case to the
applicable addresses set forth below:
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If to LIN:
LIN Broadcasting Corporation
5400 Carillon Point
Kirkland, Washington 98033
Attn: Mr. Tom A. Alberg
Telecopy: (206) 828-1835
with copies to:
David B. Chapnick, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Telecopy: (212) 455-2502
and
Jeffrey Weinberg, Esq.
Weil, Gotshal & Manges
767 Fifth Avenue
New York, NY 10153
Telecopy: (212) 310-8007
If to McCaw, Holdings or Merger Sub:
McCaw Cellular Communications, Inc.
1150 Connecticut Avenue, N.W.
Suite 400
Washington, DC 20036
Attn: Andrew A. Quartner, Esq.
Telecopy: (202) 223-9095
with copies to:
AT&T Corp.
131 Morristown Rd., C64-A2029
Basking Ridge, New Jersey 07920
Attn: Marilyn J. Wasser, Esq.
Telecopy: (908) 953-4657
and
Steven A. Rosenblum, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy: (212) 403-2000
or to such other address as such party shall have designated by notice so
given to each other party.
10.3. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement (other than the
representations and warranties set forth in Sections 6.5 and 6.6) or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 10.3 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time.
10.4. No Assignment. This Agreement shall be binding upon and shall inure to
the benefit of and be enforceable by the parties and their respective
successors and assigns; provided that, except as otherwise expressly set forth
in this Agreement, neither the rights nor the obligations of any party may be
assigned or delegated without the prior written consent of the other party.
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10.5. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter; provided, however, that the parties hereto acknowledge and agree that
this Agreement shall not supersede or in any way modify the PMVG which shall
continue to be in full force and effect in accordance with its terms. The
parties further acknowledge and agree that the Merger contemplated by this
Agreement shall be considered an Acquisition as defined in the PMVG.
10.6. Specific Performance. The parties acknowledge that money damages are
not an adequate remedy for violations of this Agreement and that any party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
10.7. Remedies Cumulative. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or beginning of the
exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
10.8. No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
10.9. No Third Party Beneficiaries. This Agreement is not intended to be for
the benefit of and shall not be enforceable by any Person or entity who or
which is not a party hereto, except for the indemnification provisions
contained in Section 7.3, which provisions may be enforced by the parties
referred to therein.
10.10. Public Announcements. McCaw and LIN will agree upon the timing and
content of the initial press release to be issued describing the transactions
contemplated by this Agreement, and will not make any public announcement
thereof prior to reaching such agreement unless required to do so by
applicable law or regulation. To the extent reasonably requested by either
party, each party will thereafter consult with and provide reasonable
cooperation to the other in connection with the issuance of further press
releases or other public documents describing the transactions contemplated by
this Agreement.
10.11. Certain Actions by LIN. Subject to Section 9.5, LIN shall not be
deemed to have breached this Agreement by virtue of any action taken by LIN
that is expressly approved by a majority of the members of the LIN Board who
are employees of McCaw or its affiliates other than LIN and its Subsidiaries.
10.12. Governing Law. This Agreement and all disputes hereunder shall be
governed by and construed and enforced in accordance with the internal laws of
the State of Delaware, without regard to principles of conflict of laws.
10.13. Name, Captions, Etc. The name assigned this Agreement and the section
captions used herein are for convenience of reference only and shall not
affect the interpretation or construction hereof. Unless otherwise specified,
(a) the terms "hereof", "herein" and similar terms refer to this Agreement as
a whole and (b) references herein to Articles or Sections refer to articles or
sections of this Agreement.
10.14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one instrument. Each counterpart may consist
of a number of copies each signed by less than all, but together signed by
all, the parties hereto.
10.15. McCaw Guarantee. McCaw absolutely, irrevocably and unconditionally
guarantees the performance and satisfaction of the obligations of each of
Holdings, Merger Sub and the Surviving Corporation under this Agreement.
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In Witness Whereof, this Agreement has been executed and delivered by the
parties set forth below.
Date: June 30, 1995 McCaw Cellular Communications, Inc.
/s/
By: _________________________________
Steven W. Hooper
President
Date: June 30, 1995 MMM Holdings, Inc.
/s/
By: _________________________________
Steven W. Hooper
President
Date: June 30, 1995 MMM Acquisition Corp.
/s/
By: _________________________________
H. John Hokenson
Vice President
Date: June 30, 1995 LIN Broadcasting Corporation
/s/
By: _________________________________
Lewis M. Chakrin
Chairman
Agreed to for purposes of the last
two sentences of Section 7.1:
AT&T Corp.
/s/
By: _________________________________
Dennis J. Carey
Vice President
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APPENDIX B
[LOGO] WASSERSTEIN Wasserstein Perella & Co., Inc.
PERELLA & CO 31 West 52nd St
- ------------------- New York, New York 10019
Telephone 212-969-2700
Fax 212-969-7836
June 30, 1995
Board of Directors
LIN Broadcasting Corporation
5295 Carillon Point
Kirkland, Washington 98033
Members of the Board:
You have asked us to advise you with respect to the fairness from a financial
point of view to the stockholders of LIN Broadcasting Corporation (the
"Company") (other than McCaw Cellular Communications, Inc. ("McCaw"), a wholly
owned subsidiary of AT&T Corp. ("AT&T")) of the consideration to be received by
such stockholders pursuant to the terms of the Agreement and Plan of Merger
among the Company, McCaw, MMM Holdings, Inc., a wholly owned subsidiary of
McCaw ("Holdings") and MMM Acquisition Corp., a wholly owned subsidiary of
Holdings ("Merger Sub"), dated April 28, 1995, as amended and restated as of
June 30, 1995 (the "Merger Agreement"). The Merger Agreement provides for the
merger of Merger Sub with and into the Company (the "Merger"), resulting in the
Company becoming a wholly owned subsidiary of Holdings, and each share of
Common Stock, par value $0.01 per share (the "LIN Common Shares") of the
Company issued and outstanding immediately prior to the Merger (other than LIN
Common Shares held by McCaw or any of its wholly owned subsidiaries) being
converted into the right to receive $129.50 in cash, plus the Additional Amount
(as defined below), if any, and the Accretion Amount (as defined below), if
any. The "Additional Amount" means $0.25 per LIN Common Share less an amount
(which could be some portion of the $0.25 per LIN Common Share or the entire
amount thereof) determined with respect to the settlement of certain
stockholder litigation involving the Company, among others, as described in the
draft LIN Broadcasting Corporation Proxy Statement, dated 6/26/95 (the "Draft
Proxy Statement"), previously provided to us. The "Accretion Amount" means an
amount equal to the amount of interest, if any, that would accrue on the
$129.50 per LIN Common Share, plus the Additional Amount, if any, at a rate of
5.5% per annum from, but not including, September 15, 1995 to, and including,
the date upon which the closing of the Merger occurs. The terms and conditions
of the Merger are set forth in more detail the Draft Proxy Statement and in the
Merger Agreement. Since it is not known on the date hereof whether all, any
portion or none of either the Additional Amount or the Accretion Amount will
become payable to shareholders of the Company as a result of the Merger, the
Additional Amount and the Accretion Amount are disregarded for purposes of this
opinion. The $129.50 per LIN Common Share is referred to as the "Merger
Consideration".
Pursuant to an engagement letter dated February 17, 1995 (the "February
Engagement"), we served as the "Mutually Designated Appraiser" under (and as
defined in) the Private Market Value Guarantee (the "PMVG") dated December 11,
1989 between McCaw and the Company. On March 7, 1995 we delivered our opinion
determining the private market value of the LIN Common Shares pursuant to the
PMVG. Our determination of such private market value pursuant thereto was
$127.50 per LIN Common Share. As contemplated by the PMVG, on April 28, 1995,
McCaw and the Company entered into an Agreement and Plan of Merger (the
"Original Merger Agreement"), providing for the merger of Merger Sub with and
into the Company and the payment to shareholders of the Company other than
McCaw of $127.50 per LIN Common Share. Subsequent to the date of the Original
Merger Agreement, settlement discussions were held with plaintiffs in certain
stockholder
New York Chicago Frankfurt Houston London Los Angeles Osaka Paris Tokyo
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litigations and certain other parties as described in the Draft Proxy
Statement. The result of those discussions is a proposed settlement which
calls for the amendment and restatement of the Original Merger Agreement in
the form of the Merger Agreement and the payment of the Merger Consideration
pursuant thereto.
The February Engagement required us to determine the price an unrelated
third party would pay for the Company in an arm's-length transaction assuming
the Company were being sold in a manner designed to maximize value, all in
accordance with, and based on the contractual requirements of, the PMVG. Our
opinion below on the fairness of the Merger Consideration from a financial
point of view is based on criteria and judgments customarily applied in
rendering fairness opinions in circumstances similar to the circumstances of
the Merger.
In connection with the February Engagement and in arriving at our opinion
set forth below, we familiarized ourselves with the business of the Company,
reviewing, among other things, the following:
(i) the PMVG;
(ii) the reports and materials (the "Other Appraisers' Reports") prepared
and delivered to us by Morgan Stanley & Co. Incorporated on behalf of McCaw
and by Lehman Brothers and Bear Stearns & Co. on behalf of the Company's
Independent Directors relating to their determinations of the private
market value of the LIN common shares pursuant to section 2(C) of the PMVG;
(iii) certain publicly available information with respect to the Company,
including the publicly available consolidated financial statements of the
Company for recent years and interim periods available to the date hereof;
(iv) certain financial and operating information, including certain
projections of financial performance, relating to the Company, its
principal operating subsidiaries and certain entities in which the Company
or its subsidiaries hold partnership interests prepared by each of the
management of the Company and the management of McCaw;
(v) the Draft Proxy Statement;
(vi) certain publicly available information concerning the public trading
prices of the LIN Common Shares, certain market indices and the stock of
certain other companies in businesses similar to that of the Company; and
(vii) certain publicly available information concerning merger and
acquisition transactions involving McCaw, the Company and certain other
companies in businesses similar to the Company.
In addition, we have had discussions with the management of the Company and
its representatives concerning the businesses, operations, assets, financial
condition and future prospects of the Company and its subsidiaries. We have
also performed such studies and analyses as we considered appropriate for
purposes of this opinion.
We have not been provided with any internal nonpublic information prepared
by McCaw or AT&T relating to the operations or assets of McCaw or AT&T or the
Company, other than the information referred to in clause (iv) above, or any
valuations of the Company prepared by the Company, McCaw or AT&T or their
financial advisers, other than those contained in the other Appraisers'
Reports. We have not been asked to and have not solicited any third parties
regarding their possible interest in acquiring the Company or any of its
business or assets or investigated alternative transactions which may be
available to the Company apart from those considered at the time of the
February Engagement.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all the factual, historical,
financial and other information provided to us and on publicly available
information. We have assumed, with your consent, that the financial forecasts
and projections provided to us by the Company and the other Appraisers'
Reports were prepared in good faith and on bases reflecting the best currently
available judgments and estimates of the party preparing such forecasts and
projections. We also have assumed that the Company does not have contingent
liabilities exceeding the reserves therefor established in the Company's
financial statements. We have not independently verified the accuracy or
completeness of, and we do not assume responsibility for, any of such
information. In addition, we have not assumed any responsibility for
conducting a physical inspection of the properties or facilities of the
Company or for making
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or obtaining an independent valuation or appraisal of the assets or
liabilities of the Company. Our opinion is necessarily based on economic and
market conditions and other circumstances as they exist and can be evaluated
by us as of the date hereof and on the Draft Proxy Statement and the Merger
Agreement in the forms provided to us.
We have relied on the advice of counsel for LIN and our own counsel on this
matter with respect to legal and tax matters.
In addition to acting for the Company and McCaw as the Mutually Designated
Appraiser under the February Engagement, we acted as financial adviser to the
Company in connection with the agreement dated as of December 11, 1989 among
McCaw, the Company and Holdings, pursuant to which the parties thereto agreed,
among other things, that McCaw would acquire a majority of the outstanding
shares of the Company and certain other proposed transactions and activities
prior to the Company's entering into such agreement.
It is understood that this letter is for the benefit and use of the Board of
Directors of the Company in its consideration of the Merger Agreement and may
not be reproduced, disseminated, quoted or referred to, in whole or in part,
orally or in any registration statement, proxy statement or in any other
document or any press release or public statement without our prior written
consent, except that it may be disclosed in its entirety in any proxy
statement to be filed by the Company with the Securities and Exchange
Commission and circulated to stockholders in connection with the Merger. This
letter does not constitute a recommendation to any shareholder with respect to
whether to vote in favor of the Merger, and should not be relied upon by any
shareholder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date hereof
the Merger Consideration per LIN Common Share, payable in cash, to be received
by the stockholders of the Company, other than McCaw, pursuant to the Merger
is fair from a financial point of view to such stockholders.
Very truly yours,
Wasserstein Perella & Co., Inc.
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APPENDIX C
SUMMARY OF APPRAISAL RIGHTS
Holders of LIN Common Shares are entitled to appraisal rights under Section
262 of the DGCL ("Section 262"). Section 262 is reprinted in its entirety
herewith. All references in Section 262 and in this summary to a "stockholder"
are to the record holder of LIN Common Shares as to which appraisal rights are
asserted. A person having a beneficial interest in LIN Common Shares that are
held of record in the name of another person, such as a broker or nominee,
must act promptly to cause the record holder to follow the steps summarized
below properly and in a timely manner to perfect whatever appraisal rights the
beneficial owner may have.
The following discussion is not a complete statement of the law relating to
appraisal rights and is qualified in its entirety by reference to Section 262.
This discussion and Section 262 should be reviewed carefully by any holder who
wishes to exercise statutory appraisal rights or who wishes to preserve the
right to do so, since failure to comply with the procedures set forth herein
or therein will result in the loss of appraisal rights.
Stockholders of record who desire to exercise their appraisal rights must
satisfy all of the following conditions. A written demand for appraisal of LIN
Common Shares must be delivered to LIN at the address set forth below prior to
the vote of the LIN stockholders on the Merger. Voting against, abstaining
from voting or failing to vote on the Merger Agreement and the Merger will not
constitute a demand for appraisal within the meaning of Section 262.
Stockholders electing to exercise their appraisal rights under Section 262
must not vote for approval and adoption of the Merger Agreement and of the
Merger. If a stockholder returns a signed proxy but does not specify a vote
against approval of the Merger or a direction to abstain, the proxy will be
voted for approval and adoption of the Merger Agreement and of the Merger,
which will have the effect of waiving that stockholder's appraisal rights.
The demand for appraisal must be executed by or for the stockholder of
record, fully and correctly, as such stockholder's name appears on the
Certificate or Certificates representing his or her LIN Common Shares. If the
LIN Common Shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian, or custodian, such demand must be executed by the
fiduciary. If the LIN Common Shares are owned of record by more than one
person, as in a joint tenancy or tenancy in common, such demand must be
executed by or for all record owners. An authorized agent, including an agent
for two or more record owners, may execute the demand for appraisal for a
stockholder of record; however, the agent must identify the record owner and
expressly disclose the fact that, in exercising the demand, such person is
acting as agent for the record owner.
A record owner, such as a broker, who holds LIN Common Shares as a nominee
for others, may exercise appraisal rights with respect to the LIN Common
Shares held for all or less than all beneficial owners of LIN Common Shares as
to which such person is the record owner. In such cases the written demand for
appraisal must set forth the number of LIN Common Shares covered by such
demand. Where the number of LIN Common Shares is not expressly stated, the
demand will be presumed to cover all LIN Common Shares outstanding in the name
of such record owner. Beneficial owners who are not record owners and who
intend to exercise appraisal rights should instruct their record owners to
comply strictly with the statutory requirements with respect to the exercise
of appraisal rights.
A stockholder who elects to exercise appraisal rights must mail or deliver
his or her written demand to:
LIN Broadcasting Corporation
5295 Carillon Point
Kirkland, Washington 98033
Attn: Secretary
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The written demand for appraisal must specify the stockholder's name and
mailing address, the number of LIN Common Shares owned, and that the
stockholder is thereby demanding appraisal of his or her LIN Common Shares.
Within 120 days after the date on which the Merger becomes effective (the
"Merger Date") any stockholder who has complied with the required conditions
of Section 262 may file a petition in the Delaware Court of Chancery (the
"Delaware Chancery Court") demanding a determination of the fair value of the
LIN Common Shares of all holders of LIN Common Shares who have so complied
with such conditions. If a petition for an appraisal is timely filed, after a
hearing on such petition, the Delaware Chancery Court will determine which
stockholders are entitled to appraisal rights and will appraise the LIN Common
Shares owned by such stockholders, determining the fair value of such LIN
Common Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
In determining fair value, the Delaware Chancery Court is to take into account
all relevant factors. In Weinberger v. UOP, Inc., et al., decided February 1,
1983, the Delaware Supreme Court, in discussing the considerations that could
be taken into account in determining fair value in an appraisal proceeding,
stated that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered and that "fair price obviously requires
consideration of all relevant factors involving the value of a company." The
Delaware Supreme Court stated that in making this determination of fair value
the court must consider market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts which could be
ascertained as of the date of the merger which throw any light on future
prospects of the merged corporation. Section 262 provides that fair value is
to be "exclusive of any element of value arising from the accomplishment or
expectation of the merger." In Weinberger, the Delaware Supreme Court
construed Section 262 to mean that "elements of future value, including the
nature of the enterprise, which are known or susceptible of proof as of the
date of the merger and not the product of speculation may be considered."
Within 120 days after the Merger Date, any holder of LIN Common Shares who
has complied with the requirements for exercise of appraisal rights as
discussed above and stated in Section 262 is entitled, upon written request,
to receive from LIN a statement setting forth the aggregate number of LIN
Common Shares not voted in favor of the Merger and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such LIN Common Shares. Such statement must be mailed within 10 days after
the written request therefor has been received by LIN or, if later, within 10
days after the expiration of the period for delivery to LIN of appraisal
demands.
Stockholders considering seeking appraisal should have in mind that the fair
value of their LIN Common Shares determined under Section 262 could be more
than, the same as or less than the consideration they are to receive pursuant
to the Merger if they do not seek appraisal of their LIN Common Shares. The
cost of the appraisal proceeding may be determined by the Delaware Chancery
Court and assessed against such parties as the Delaware Chancery Court deems
equitable in the circumstances. Upon application of a dissenting stockholder,
the Delaware Chancery Court may order that all or a portion of the expenses
incurred by any dissenting stockholder in connection with the appraisal
proceeding, including without limitation reasonable attorneys' fees and the
fees and expenses of experts, be charged pro rata against the value of all LIN
Common Shares entitled to appraisal.
Any stockholder who has duly demanded appraisal in compliance with Section
262 will not, after the Merger Date, be entitled to vote for any purpose the
LIN Common Shares subject to such demand or to receive any dividends or other
distributions on such LIN Common Shares, except for any dividends or
distributions payable to stockholders of record at a date prior to the Merger
Date.
At any time within 60 days after the Merger Date, any stockholder will have
the right to withdraw his or her demand for appraisal and to accept the terms
offered pursuant to the Merger; after this period, the stockholder may
withdraw his or her demand for appraisal only with the consent of LIN as the
Surviving Corporation. If no petition for appraisal is filed with the Delaware
Chancery Court within 120 days after the Merger Date by any
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stockholder who has demanded appraisal, such stockholder's rights to appraisal
will cease, and such stockholder will be entitled to receive the Merger
Consideration. Inasmuch as LIN has no obligation to file such a petition, and
has no present intention to do so, any stockholder who desires such a petition
to be filed is advised to file it on a timely basis. No petition timely filed
in the Delaware Chancery Court demanding appraisal shall be dismissed as to
any stockholder without the approval of the Delaware Chancery Court, and such
approval may be conditioned upon such terms as the Delaware Chancery Court
deems just.
SECTION 262 OF THE GENERAL CORPORATION
LAW OF THE STATE OF DELAWARE
(S) 262. Appraisal Rights.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing pursuant
to (S) 228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of his shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock
corporation and also a member of record of a nonstock corporation; the words
"stock" and "share" mean and include what is ordinarily meant by those words
and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S) 251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of (S) 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to (S)(S)
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on
a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
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d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S) 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S) 228 or
253 of this title, the surviving or resulting corporation, either before
the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation, a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number
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of holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
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(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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APPENDIX D
PRIVATE MARKET VALUE GUARANTEE
PRIVATE MARKET VALUE GUARANTEE, dated December 11, 1989 (this "Guarantee"),
between McCaw Cellular Communications, Inc., a Delaware corporation (the
"Offeror"), and LIN Broadcasting Corporation, a Delaware corporation (the
"Company").
WHEREAS, the Offeror is conducting a tender offer for shares of common
stock, par value $0.01 per share ("Shares"), of the Company (as amended or
supplemented from time to time in accordance with the Agreement dated the date
hereof between the Offeror and the Company, the "Offer");
WHEREAS, in connection with the Offer the Offeror undertook to enter into
this Guarantee for the benefit of the Company's stockholders (other than the
Offeror and its affiliates).
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein, the parties agree as follows:
1. Independent Directors.
Three members of the Company's board of directors (the "Independent
Directors") will be designated by the present board of directors of the
Company, from such board as comprised on this date; provided, however, in the
event that fewer than three such persons are willing to be so designated, the
present board of directors of the Company shall designate as the remaining
Independent Directors persons who would be independent directors as determined
under the New York Stock Exchange Rules (i.e., independent of management of
the Offeror and its affiliates and free of any relationship that, in the
opinion of the Company's board of directors, would interfere with the exercise
of independent judgment). Independent Directors will be subject to removal
only (x) for cause, (y) if a majority of the Independent Directors approve
such removal or (z) if such removal is approved by a Majority Vote of the
Public Stockholders without any solicitation of votes by the Offeror, its
affiliates or Group Members (as defined below).
Vacancies among the Independent Directors occurring prior to the expiration
of their respective terms of office will be filled in accordance with the vote
of a majority of the remaining Independent Directors (or, if there are none, a
majority of the directors then in office) or a Majority Vote of the Public
Stockholders. Independent Directors to be selected at each annual meeting will
be nominated by the then current Independent Directors and elected in
accordance with a Majority Vote of the Public Stockholders. The Offeror will
not, directly or indirectly, solicit votes or otherwise take any action to
oppose the election of any nominee for Independent Director or support any
attempt to remove any Independent Director and in each election of directors
will vote its Shares and the Shares of its subsidiaries for the Independent
Director nominees receiving the Majority Vote of the Public Stockholders.
As used herein, "Majority Vote of the Public Stockholders" means (a) the
affirmative vote of the holders of at least a majority of the Public Shares
present and entitled to vote at any meeting at which the holders of a majority
of such Shares are present or (b) the action by written consent (in accordance
with applicable provisions of Delaware law and the Company's certificate of
incorporation and by-laws) of the holders of a majority of the Public Shares.
"Public Shares," as used herein, means Shares not owned by the Offeror or any
of its affiliates or any member of a "group", as such term is used for
purposes of Schedule 13D under the Securities Exchange Act of 1934, of which
Offeror or its affiliates are members with respect to securities of the
Company (collectively, "Group Members").
The Company will treat the Independent Directors in a manner comparable to
the treatment of outside directors of comparable public companies, including
by providing indemnification, compensation and expense reimbursement
arrangements at least as favorable as the indemnification, compensation and
expense
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reimbursement arrangements provided to outside directors of the Company as of
November 30, 1989, and provide notice of board meetings and agendas there for
and generally maintain the frequency thereof consistent with past practice of
the Company.
2. Sale of the Company.
(A) Appraisers. On or about January 1, 1995 (the "Initiation Date"), the
Independent Directors will designate an investment banking firm of recognized
national standing (the "Independent Directors' Appraiser") and the Offeror
will designate an investment banking firm of recognized national standing (the
"Offeror's Appraiser"), in each case to determine the private market value per
Share.
(B) Definition of Private Market Value. The Offeror acknowledges that the
consideration that would constitute private market value per Share is the
private market price per Share (including control premium) that an unrelated
third party would pay if it were to acquire all outstanding Shares (including
the Shares held by the Offeror and its affiliates) in an arm's-length
transaction, assuming that the Company was being sold in a manner designed to
attract all possible participants (including the Regional Bell Operating
Companies) and to maximize stockholder value, including if necessary through
the sale or other disposition (including tax-free spin-offs, if possible) of
businesses prohibited by legal restrictions to be owned by any particular
buyer or class of buyers (e.g., the Regional Bell Operating Companies). Each
of the investment banking firms referred to in this Section 2 will be
instructed to determine private market value per Share in this manner.
(C) Determination of Private Market Price. Within 30 days after the
Initiation Date, the Independent Directors' Appraiser and the Offeror's
Appraiser will each determine its initial view as to the private market value
per Share and consult with one another with respect thereto. By the 45th day
after the Initiation Date, the Independent Directors' Appraiser and the
Offeror's Appraiser will each have determined its final view as to the private
market value per Share. At that point, if the Higher Appraised Amount (as
defined below) is not more than 110% of the Lower Appraised Amount (as defined
below), the private market price per Share (the "Private Market Price") will
be the average of those two views. Otherwise, the Independent Directors'
Appraiser and the Offeror's Appraiser will agree upon and jointly designate a
third investment banking firm of recognized national standing (the "Mutually
Designated Appraiser") to determine such private market value. The Mutually
Designated Appraiser will, no later than the 65th day after the Initiation
Date, determine such private market value (the "Mutually Appraised Amount"),
and the Private Market Price will be (x) the Mutually Appraised Amount, if
such amount falls within the range of values that is greater than one-third
and less than two-thirds of the way between the Lower Appraised Amount and the
Higher Appraised Amount, and (y) the average of the Mutually Appraised Amount
and the other Appraised Amount (Lower or Higher) that is closest to the
Mutually Appraised Amount, if the Mutually Appraised Amount does not fall
within that range; provided, however, that the Private Market Price may not be
less than the Lower Appraised Amount nor more than the Higher Appraised
Amount.
As used herein, "Lower Appraised Amount" means the lower of the respective
final views of the Independent Directors' Appraiser and the Offeror's
Appraiser as to private market value per Share and "Higher Appraised Amount"
means the higher of such respective final views.
(D) Acquisition Proposal. Once the Private Market Price is determined as
provided above, the Offeror will have 45 days to decide whether it desires to
proceed with an acquisition of all of the Public Shares (an "Acquisition") at
that price. If the Offeror decides to proceed with an Acquisition, it may pay
the Private Market Price in cash or any combination of cash, common equity
securities and/or non-convertible senior or subordinated "current cash pay"
debt securities that the Independent Directors, after consultation with their
investment banking firm, believe in good faith will have an aggregate market
value, on a fully distributed basis, of not less than the Private Market
Price.
(E) Meeting of Stockholders. If the Offeror determines to proceed with an
Acquisition as set forth above, it will enter into an agreement with the
Company therefor (containing customary terms and conditions applicable
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in a situation in which the acquiror has an ownership position comparable to
Offeror's ownership interest in the Company) and will cause a meeting of
stockholders of the Company to be held as soon as practicable to consider and
vote thereon. The Acquisition may only be completed if it is approved by a
Majority Vote of the Public Stockholders.
(F) Sale of the Company. Subject to subparagraph (G) below, if the Offeror
determines not to proceed with an Acquisition, or if despite Offeror's good
faith efforts an Acquisition has not been completed within 12 months following
the Initiation Date (or, if an Acquisition has been approved by a Majority
Vote of the Public Stockholders and is being pursued in good faith by the
Offeror but has not been completed due to regulatory delays or litigation, 20
months following the Initiation Date), the Offeror will put the entire Company
up for sale under direction of the Independent Directors in a manner intended
by the Independent Directors to maximize value for all Shares. The sale will
be conducted by the Independent Directors, with the advice of independent
financial advisors and counsel selected by the Independent Directors, whose
fees shall be reimbursed by the Company, and the Offeror will not bid unless
requested to do so by the Independent Directors. The sale procedures will be
set by the Independent Directors and may include, if necessary in order to
maximize stockholder value, provision for the sale or other disposition
(including tax-free spin-offs, if possible) of businesses prohibited by legal
restrictions to be owned by any particular buyer or class of buyers (e.g., the
Regional Bell Operating Companies). The Independent Directors will select from
among the proposed transactions the one or more transactions determined by
them as being most likely to maximize value for all Shares and will cause a
meeting of the Company's stockholders to be held as soon as practicable to
consider and vote thereon. The Offeror will fully cooperate in this process
and, if the one or more transactions so selected by the Independent Directors
are approved by a Majority Vote of the Public Stockholders, will cause all
Shares owned by it or its affiliates to be voted in favor thereof. Any sale of
the Company pursuant to this subsection would be subject to receipt of FCC and
other necessary regulatory approvals. Offeror will not take any action,
including any action involving any judicial, regulatory or legislative body,
that is intended to, or will have the effect of, delaying or preventing
consummation of any transaction so selected and approved.
(G) Survival of Guarantee. If a transaction is presented for approval at a
meeting of stockholders as contemplated by either subsection (E) or (F) above
and fails to receive the requisite Majority Vote of the Public Stockholders,
there will be no further rights or obligations under this Section 2, but the
remainder of this Guarantee shall continue to apply to the extent described
herein.
3. Continuing Stockholder Protections.
(A) Approvals Required for Transactions with Affiliates. Except as permitted
by Section 2 above, neither the Offeror nor any of its non-Company affiliates
may engage in any material transaction (including, without limitation,
agreements, such as roaming agreements, which are standard in the industry)
with the Company or any of its subsidiaries (other than pro rata as a
stockholder of the Company) unless such transaction has been approved by a
majority of the Independent Directors.
(B) Approvals Required for Mergers. Except as permitted by Section 2 above,
neither the Offeror nor any of its non-Company affiliates may engage in a
merger or consolidation with the Company, or purchase all or substantially all
of the Company's assets, unless the transaction is approved not only by a
majority of the Independent Directors but also by a Majority Vote of the
Public Stockholders. In deciding whether to approve such a transaction, the
Independent Directors will be instructed to consider as a fair price per Share
the private market price per share (including control premium) that an
unrelated third party would pay if it were to acquire all outstanding Shares
(including the Shares held by the Offeror and its affiliates) in an arm's-
length transaction, assuming that the Company was being sold in a manner
designed to attract all possible participants (including the Regional Bell
Operating Companies) and to maximize stockholder value, including if necessary
through the sale or other disposition (including tax-free spin-offs, if
possible) of businesses prohibited by legal restrictions to be owned by any
particular buyer or class of buyers (e.g., the Regional Bell Operating
Companies). The Independent Directors will retain independent financial
advisors and counsel to advise them with respect to any
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such transaction, whose reasonable costs, expenses and indemnities will be
paid for and provided by the Company.
(C) Independent Director Veto. No transaction will be undertaken, and the
Company will not take any action, whether or not approved by a majority of the
board of directors of the Company, if the Independent Directors determine in
their good faith judgment by unanimous vote that such transaction or action
would likely depress the value of the Company on the Initiation Date. In
addition, the Company will not acquire or dispose of any business (other than
acquisitions of additional cellular interests in markets in which the Company
has an interest), whether or not approved by a majority of the board of
directors of the Company, if the Independent Directors determine in their good
faith judgment by unanimous vote that such acquisition or disposition is not
in the best interests of the Company.
4. Additional Share Purchases. Except as permitted by Sections 2 and 3
above, neither the Offeror nor any of its non-Company affiliates may purchase
additional Shares if, after giving effect thereto, they would beneficially own
in the aggregate more than 75% of the outstanding Shares on a fully diluted
basis.
5. Corporate Opportunities. The Offeror will direct to the Company, and the
Company will have a priority right to pursue, all corporate opportunities to
acquire interests in U.S. cellular mobile telephone systems other than those
in markets in which the Offeror has such an interest or contiguous to markets
in which the Offeror has such an interest (in the latter instance, however,
only if such market is not a market in which the Company has such an interest
or contiguous to such a market). For purposes of the foregoing, a party will
not be deemed to have an interest in a cellular mobile telephone system solely
by reason of such party's ownership of less than a majority equity interest in
a public Company having such an interest. The Independent Directors shall be
afforded an amount of time reasonably necessary to consider any such
transaction, consistent with any time constraints imposed by the other party
to such transaction, and if and for so long as a majority of the Independent
Directors desire to pursue such transaction, the Offeror will not Separately
pursue that transaction.
6. Certain Transferees Bound. Except pursuant to Section 2(F) above, neither
the Offerer nor any of its non-Company affiliates may sell more than 25% of
the outstanding Shares on a fully diluted basis to a third party or group
unless that third party or group agrees in writing to be bound by the
provisions set forth in this Guarantee as they would apply if the term
"Offeror" as used herein were defined to mean such third party or group.
7. Amendments. The provisions of this Guarantee may be amended in any
respect not materially adverse to the holders of Public Shares, but only if
the amendment is approved by a majority of the Independent Directors. Any such
amendment will promptly be disclosed in a filing with the Securities and
Exchange Commission. The determination of the Independent Directors as to
whether an amendment is materially adverse to the holders of Public Shares
shall be final and shall bind all holders of Public Shares.
The provisions of this Guarantee may also be amended in any other respect if
the amendment is approved by a Majority Vote of the Public Stockholders.
8. Effectiveness and Termination. The obligations of the Offeror under this
Guarantee shall become effective upon the acceptance by the Offerer of Shares
for purchase pursuant to the Offer. This Guarantee shall cease to be in effect
if at any time (i) the Offeror, its affiliates and Group Members beneficially
own in the aggregate less than 25% of the outstanding Shares on a fully
diluted basis and the Offeror's designees no longer constitute a majority of
the Board of Directors of the Company (provided that in such event this
Guarantee shall come back into effect if, at any time within two years
thereafter, (A) the Offeror, its affiliates and Group Members shall
beneficially own in the aggregate 25% or more (but less than 100%) of the
Outstanding Shares on a fully diluted basis or (B) the Offeror's designees
shall again constitute a majority of the Board of Directors of the Company) or
(ii) the Offeror, its affiliates and Group Members beneficially own in the
aggregate 100% of the outstanding Shares.
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9. Further Assurances. Each party shall execute and deliver such additional
instruments and other documents and shall take such further actions as may be
necessary or appropriate to effectuate, carry out and comply with all of the
terms of this Guarantee and the transactions contemplated hereby.
10. Remedies. The parties acknowledge that money damages may not be an
adequate remedy for violations of this Agreement and that any party may, in
its sole discretion, apply to any court of competent jurisdiction for specific
performance or injunctive or such other relief as such court may deem just and
proper in order to enforce this Agreement or prevent any violation hereof and,
to the extent permitted by applicable law, each party waives any objection to
the imposition of such relief.
11. Notices, etc. All notices, requests, demands or other communications
required by or otherwise with respect to this Guarantee shall be in writing
and shall be deemed to have been duly given to any party when delivered
personally (by courier service or otherwise), when delivered by fax and
confirmed, or to any party five days after being mailed by certified mail,
return receipt requested, in each case to the applicable addresses set forth
below:
If to Offeror:
McCaw Cellular Communications, Inc.
5400 Carillon Point
Kirkland, Washington 98033
Attn: Wayne Perry, Vice Chairman
Fax no.: 206-828-8450
with a copy to:
McCaw Cellular Communications, Inc.
1250 Connecticut Avenue, NW, Suite 401
Washington, D.C. 20036
Attn: Andrew A. Quartner, Esq.
Fax no.: 202-223-9095
If to the Company:
LIN Broadcasting Corporation
1370 Avenue of the Americas
New York, New York 10019
Attn: President
Fax no.: 212-582-0479
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
828 8th Avenue
New York, New York 10019
Attn: Robert Rosenman, Esq.
Fax no.: 212-474-3700
and a copy to:
The designated representative of the
Independent Directors and their
counsel, if any
or to such other address as such party shall have designated by notice so
given to each other party.
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12. Entire Agreement. This Guarantee embodies the entire agreement and
understanding between the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter.
13. Successors and Assigns. This Guarantee shall be binding upon and shall
inure to the benefit of and be enforceable by the Offeror and the Independent
Directors of the Company and their respective successors and assigns, provided
that neither the rights nor the obligations of any party may be assigned or
delegated without the prior written consent of the other parties.
14. Governing Law. This Guarantee and all disputes hereunder shall be
governed by and construed and enforced in accordance with the laws of the
State of New York applicable to contracts made and performed in that State.
15. Name. Captions. The section captions used herein are for convenience of
reference only and shall not affect the interpretation or construction hereof.
16. Counterparts. This Guarantee may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one instrument. Each counterpart may consist
of a number of copies each signed by less than all, but together signed by all
the parties hereto.
IN WITNESS WHEREOF, the parties have duly executed this Guarantee as of the
date first above written.
McCaw Cellular Communications, Inc.
/s/ Wayne M. Perry
by __________________________________
Title:
LIN Broadcasting Corporation
/s/ Donald Pels
by __________________________________
Title:
D-6
<PAGE>
FIRST AMENDMENT TO PRIVATE MARKET VALUE GUARANTEE
This FIRST AMENDMENT TO PRIVATE MARKET VALUE GUARANTEE (this "Amendment"),
dated June 7, 1994, is between McCaw Cellular Communications, Inc., a Delaware
corporation ("McCaw"), and LIN Broadcasting Corporation, a Delaware
corporation (the "Company"). Capitalized terms used but not defined in this
Amendment shall have the meanings ascribed thereto in the Guarantee.
WHEREAS, McCaw and the Company have previously entered into a Private Market
Value Guarantee, dated December 11, 1989 (the "Guarantee"), for the benefit of
the Company's stockholders (other than McCaw and its affiliates) in connection
with McCaw's tender offer for the shares of common stock of the Company;
WHEREAS, the Company is proposing the Transaction (as hereinafter defined);
WHEREAS, McCaw and the Company have agreed to amend the Guarantee in
connection with the Transaction; and
WHEREAS, the Independent Directors have approved this Amendment in
accordance with the requirements of the Guarantee;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein, the parties agree as follows:
1. CONTINUING STOCKHOLDER PROTECTIONS
Section 3(C) of the Guarantee is hereby amended to add the following
sentence at the end thereof:
"Notwithstanding the foregoing, the Transaction will not be undertaken, and
the Company will not take any action whether or not approved by a majority
of the board of directors of the Company, if the Independent Directors
determine in their good faith judgment, by unanimous vote, that such
Transaction or action would likely depress the value of the Public Shares
on January 1, 1995, after giving effect to the Transaction; provided the
Transaction may be undertaken if the Independent Directors determine in
their good faith judgment that (i) the Transaction is fair, from a
financial point of view, to the holders of the Public Shares and (ii) the
consideration to be paid in the proposed acquisition of WTNH--Hartford--New
Haven is fair, from a financial point of view, to the holders of the Public
Shares. The "Transaction" involves the (y) acquisition by LIN Television
Corporation ("LIN TV") of WTNH--Hartford--New Haven from Cook Inlet
Communications Corp. and (z) the tax-free distribution pursuant to Section
355 of the Internal Revenue Code of the remaining shares of LIN TV to
stockholders of the Company."
2. COUNTERPARTS
This Amendment may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one instrument.
D-7
<PAGE>
3. EFFECTIVENESS
Except as expressly modified herein, the rights and obligations of the
parties hereto under the Guarantee are hereby ratified and confirmed.
IN WITNESS WHEREOF, the parties have duly executed this Amendment as of the
date first above written.
McCaw Cellular Communications, Inc.
/s/ Wayne M. Perry
by __________________________________
Title: Vice Chairman
LIN Broadcasting Corporation
/s/ Donald Guthrie
by __________________________________
Title:
D-8
<PAGE>
APPENDIX E
CERTAIN INFORMATION REGARDING DIRECTORS
AND EXECUTIVE OFFICERS OF AT&T,
MCCAW, HOLDINGS AND MERGER SUB
DIRECTORS AND EXECUTIVE OFFICERS OF AT&T
Each of the persons named below is a citizen of the United States of
America. For each person whose principal employment is with AT&T, the
principal business of such person's employer is described in "CERTAIN
INFORMATION REGARDING AT&T, McCAW, HOLDINGS, MERGER SUB AND LIN--AT&T." Except
as noted, each of the persons named below whose principal employment is with
AT&T has held high level managerial positions with AT&T or its affiliates for
more than the past five years. None of the persons named below is the
beneficial owner of any LIN Common Shares. Members of the Board of Directors
of AT&T are indicated with an asterisk.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS; PRINCIPAL
NAME BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
---- -----------------------------------------------------
<S> <C>
*Robert E. Allen........ Chairman and Chief Executive Officer,
AT&T Corp.
32 Avenue of the Americas
New York, NY 10013-2412
Richard S. Bodman....... Senior Vice President, Corporate Strategy & Development,
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
Mr. Bodman joined AT&T on August 23, 1990. Prior thereto,
Mr. Bodman was President of Washington National
Investment Corporation, an investment company, for more
than five years.
Harold W. Burlingame.... Senior Vice President--Human Resources,
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
*M. Kathryn Eickhoff.... President of Eickhoff Economics, Incorporated
(Economic Consultants)
510 LaGuardia Place, Suite 400
New York, NY 10012
Ms. Eickhoff has been President of Eickhoff Economics
Incorporated since 1987.
*Walter Y. Elisha....... Chairman & Chief Executive Officer of Springs Industries, Inc.
(Textiles Manufacturing)
205 North White Street P.O. Box 70
Fort Mill, SC 29715
Mr. Elisha has been the Chairman and Chief Executive
Officer of Springs Industries, Inc. for more than the
past five years.
*Philip M. Hawley....... Retired Chairman & Chief Executive Officer of Broadway
Stores, Inc. (formerly Carter Hawley Hale Stores, Inc.)
(Department Stores)
444 South Flower Street, Suite 2280
Los Angeles, CA 90071-2900
Mr. Hawley retired as Chairman and Chief Executive
Officer of Broadway Stores, Inc. in 1993, which position
he held since 1983.
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS; PRINCIPAL
NAME BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
---- -----------------------------------------------------
<S> <C>
*Carla A. Hills......... Chairman & Chief Executive Officer of Hills & Company
(International Consultants)
1200 19th Street, NW
5th Floor
Washington, D.C. 20036
Ms. Hills has been the Chairman and Chief Executive
Officer of Hills & Company since 1993. Prior thereto, Ms.
Hills was the United States Trade Representative,
Executive Office of the President (1989-1993).
*Belton K. Johnson...... Former Owner of Chaparrosa Ranch
100 West Houston Street
Suite 1100
San Antonio, TX 78205
Mr. Johnson has been the Chairman of Belton K. Johnson
Interests, a private investment company, for more than
the past five years.
Marilyn Laurie.......... Senior Vice President--Public Relations,
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
*Drew Lewis............. Chairman & Chief Executive Officer of Union Pacific Corporation
(Rail Transportation Natural Resources, and Trucking)
Martin Tower
Eighth and Eaton Avenues
Bethlehem, PA 18018
Mr. Lewis has been the Chairman and Chief Executive
Officer of Union Pacific Corporation for more than the
past five years.
Alex J. Mandl........... Executive Vice President, AT&T Corp. &
Chief Executive Officer of Communications Services Group
295 North Maple Avenue
Basking Ridge, NJ 07920
Mr. Mandl joined AT&T on August 1, 1991. Prior thereto,
Mr. Mandl was Chairman and Chief Executive Officer of
Sea-Land Service, Inc., 150 Allen Road, Liberty Corner,
NJ 07938, an ocean transportation and distribution
services company, for four years and prior thereto held
executive positions at CSX Corporation, 901 East Carey
Street, Box C-2222, Richmond, VA 23219, a transportation
holding company.
William B. Marx, Jr. ... Executive Vice President, AT&T Corp. &
Chief Executive Officer of Multimedia Products Group
295 North Maple Avenue
Basking Ridge, NJ 07920
Richard A. McGinn....... Executive Vice President, AT&T Corp. &
Chief Executive Officer of Network Systems Group
475 South Street
Morristown, NJ 07962
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS; PRINCIPAL
NAME BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
---- -----------------------------------------------------
<S> <C>
*Donald F. McHenry...... President of IRC Group, Inc. (Consultants)
Georgetown University
School of Foreign Service
ICC301
Washington, D.C. 20057
Mr. McHenry has been the President of IRC Group and the
University Research Professor of Diplomacy and
International Relations, Georgetown University for more
than the past five years.
Richard W. Miller....... Executive Vice President & Chief Financial Officer,
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
Mr. Miller joined AT&T on August 3, 1993. Prior thereto,
Mr. Miller was with Wang Laboratories, Inc., 1 Industrial
Avenue, Lowell, MA 01851, an international computer
company, from 1989 through 1993, serving as President and
Chief Operating Officer and later Chairman, President and
Chief Executive Officer.
*Victor A. Pelson....... Executive Vice President, AT&T Corp. &
Chairman of Global Operations Team
295 North Maple Avenue
Basking Ridge, NJ 07920
*Donald S. Perkins...... Chairman of Kmart Corp. (Mass Merchandise Retailer);
Retired Chairman of the Board of Jewel Companies, Inc.
(Diversified Retailer)
One First National Plaza
Suite 2530
21 South Clark Street
Chicago, IL 60603-2006
Mr. Perkins has been the Chairman of Kmart Corp. since
January 1995. Prior thereto, Mr. Perkins was Chairman and
Chief Executive Officer of Jewel Companies, Inc. for more
than five years.
S. Lawrence Prendergrast Vice President & Treasurer,
AT&T Corp.
One Oak Way
Berkeley Heights, NJ 07922-2724
*Henry B. Schacht....... Chairman of the Executive Committee and Former Chairman
and Chief Executive Officer of Cummins Engine Company, Inc.
(Diesel Engine Manufacturer)
500 Jackson St.
Box Number 3005
Columbus, IN 47202-3005
Mr. Schacht has been Chairman of the Executive Committee
of Cummins Engine Company, Inc. since 1994, and prior
thereto was Chairman and Chief Executive Officer for more
than five years.
</TABLE>
E-3
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS; PRINCIPAL
NAME BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
---- -----------------------------------------------------
<S> <C>
*Michael I. Sovern... President Emeritus & Chancellor
Kent Professor of Law at
Columbia University
435 W. 116th Street, Box B20
New York, NY 10027
Mr. Sovern has been President Emeritus & Chancellor Kent
Professor of Law at Columbia University since 1993. Prior
thereto Mr. Sovern was the President of Columbia
University for more than five years.
Daniel C. Stanzione.. President, Bell Laboratories Division,
AT&T Corp.
600 Mountain Avenue
Murray Hill, NJ 07974
Maureen H. Tart...... Vice President and Controller,
AT&T Corp.
340 Mt. Kemble Avenue
Morristown, NJ 07962
*Franklin A. Thomas.. President of the Ford Foundation (Charitable Organization)
320 East 43rd Street
New York, NY 10017
Mr. Thomas has been the President of The Ford Foundation
for more than the past five years.
Marilyn J. Wasser.... Vice President--Law and Secretary,
AT&T Corp.
131 Morristown Road
Basking Ridge, NJ 07920
*Joseph D. Williams.. Chairman of the Executive Committee and Retired Chairman
and Chief Executive Officer
Warner-Lambert Co. (Pharmaceuticals, Health Care and
Consumer Products)
182 Tabor Road
Morris Plains, NJ 07950
Mr. Williams has been Chairman of the Executive Committee
of Warner-Lambert Co. since 1991. Prior thereto Mr.
Williams was Chairman and Chief Executive Officer from
1985 to 1991.
*Thomas H. Wyman..... Chairman, S.G. Warburg & Co., Inc. (Investment Banking)
277 Park Avenue
New York, NY 10172
Mr. Wyman has been the Chairman of S.G. Warburg & Co.
Inc. since 1992 and Vice Chairman of S.G. Warburg Group
PLC (U.K.) since 1993. Prior thereto Mr. Wyman was the
Chairman of United Biscuits (Holdings) U.S. Ltd., 677
Larch Avenue, Elmhurst, IL 60126, a bakery products
manufacturer.
John D. Zeglis....... Senior Vice President--General Counsel and Government
Affairs,
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
</TABLE>
E-4
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF MCCAW
Each of the persons named below is a citizen of the United States of
America, except for Mr. Kauser, who is a citizen of Canada. For each person
whose principal employment is with McCaw, the principal business of such
person's employer is described in "CERTAIN INFORMATION REGARDING AT&T, McCAW,
HOLDINGS, MERGER SUB AND LIN--McCaw." The business address of each person
whose principal employment is with McCaw is McCaw Cellular Communications,
Inc., 5400 Carillon Point, Kirkland, WA 98033. None of the persons named below
is the beneficial owner of any LIN Common Shares, except Messrs. Perry, Alberg
and Guthrie, whose beneficial ownership of LIN Common Shares is described in
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT--Security
Ownership of Management." Members of the Board of Directors of McCaw are
indicated with an asterisk.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS; PRINCIPAL
NAME BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
---- -----------------------------------------------------
<S> <C>
*Harold W. Burlingame... See "Directors and Executive Officers of AT&T" in this
Appendix D.
*Alex J. Mandl.......... See "Directors and Executive Officer of AT&T" in this
Appendix D.
*Richard W. Miller...... See "Directors and Executive Officer of AT&T" in this
Appendix D.
*Wayne M. Perry......... Vice Chairman of the Board and Secretary
McCaw Cellular Communications, Inc.
See "ELECTION OF DIRECTORS--Nominees for Director" for a
description of Mr. Perry's five-year employment history.
Tom A. Alberg........... Executive Vice President
McCaw Cellular Communications, Inc.
See "ELECTION OF DIRECTORS--Nominees for Director" for a
description of Mr. Alberg's five-year employment history.
Donald Guthrie.......... Senior Vice President and Treasurer
McCaw Cellular Communications, Inc.
See "EXECUTIVE OFFICERS" for a description of Mr.
Guthrie's five-year employment history.
Steven W. Hooper........ President, Chief Operating Officer and Director
McCaw Cellular Communications, Inc.
See "EXECUTIVE OFFICERS" for a description of Mr.
Hooper's five-year employment history.
Rolla G. Huff........... Senior Vice President and Chief Financial Officer
McCaw Cellular Communications, Inc.
See "ELECTION OF DIRECTORS--Nominees for Director" for a
description of Mr. Huff's five-year employment history.
Nicolas Kauser.......... Executive Vice President--Chief Technology Officer
McCaw Cellular Communications, Inc.
Mr. Kauser has been an Executive Vice President of McCaw
and Holdings since May 1992 and Senior Vice President--
Technology of McCaw and Holdings since July 1990. Prior
to July 1990 Mr. Kauser was Senior Vice President-
Operations of Cantel, Inc., based in Toronto, Canada. Mr.
Kauser was responsible for the planning, design,
implementation and operation of Cantel National Cellular
Network.
</TABLE>
E-5
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF HOLDINGS
Each of the persons named below is a citizen of the United States. The
principal business of McCaw, the employer of each of the persons named below,
is described in "CERTAIN INFORMATION REGARDING AT&T, McCAW, HOLDINGS, MERGER
SUB AND LIN--McCAW." None of the persons named below is the beneficial owner
of any LIN Common Shares, except Mr. Quartner, who owns 500 LIN Common Shares,
and Messrs. Perry, Alberg and Guthrie, whose beneficial ownership of LIN
Common Shares is described in "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT--Security Ownership of Management." Except as otherwise set
forth below, the principal occupation, business address and five-year
employment history for each of the persons named below is set forth in this
Appendix D under "Directors and Executive Officers of McCaw."
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS; PRINCIPAL
NAME BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
---- -----------------------------------------------------
<S> <C>
Tom A. Alberg..........
Donald Guthrie.........
Steven W. Hooper.......
Rolla P. Huff..........
Wayne M. Perry.........
Andrew A. Quartner..... Senior Vice President, Law and Assistant Secretary
McCaw Cellular Communications, Inc.
1150 Connecticut Avenue, NW
Suite 400
Washington, DC 20036
Mr. Quartner has been a Director of Holdings since
January 1995 and has been a Senior Vice President and
Assistant Secretary of both McCaw and Holdings since
February 1988 and December 1988 respectively.
</TABLE>
E-6
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF MERGER SUB
Each of the persons named below is a citizen of the United States of
America. Each person has held managerial positions with AT&T or its affiliates
for more than the past five years. The principal business of AT&T is described
in "CERTAIN INFORMATION REGARDING AT&T, McCAW, HOLDINGS, MERGER SUB AND LIN--
AT&T." The business address of each such person is AT&T, 131 Morristown Road,
Basking Ridge, NJ 07920. None of the persons named below is the beneficial
owner of any LIN Common Shares.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION; BUSINESS ADDRESS; PRINCIPAL
NAME BUSINESS OF EMPLOYER AND FIVE-YEAR EMPLOYMENT HISTORY
---- -----------------------------------------------------
<S> <C>
W. Preston Granbery.... General Attorney, Corporate and Securities Group, AT&T
Corp.
H. John Hokenson....... General Attorney, AT&T Corp.
Marilyn J. Wasser...... Vice President--Law and Secretary, AT&T Corp.
</TABLE>
E-7
<PAGE>
PROXY CARD
LIN BROADCASTING CORPORATION
5295 CARILLON POINT
KIRKLAND, WASHINGTON 98033
1995 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF LIN BROADCASTING CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 3, 1995
The undersigned hereby appoints Lewis M. Chakrin and Mark D. Bradner, and
each of them, as Proxies, with full power of substitution, and hereby
authorizes them to represent and to vote, as designated on the reverse side,
all the shares of Common Stock of LIN Broadcasting Corporation held of record
by the undersigned on August 11, 1995, at the Annual Meeting of Stockholders to
be held on October 3, 1995, or any adjournment or postponement thereof.
The Board of Directors recommends a vote "FOR" all nominees in Item 1. The
Board of Directors recommends a vote "FOR" Item 2.
SEE REVERSE SIDE
<PAGE>
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting. This Proxy, when properly
executed and delivered, will be voted in the manner directed herein by the
undersigned. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR ALL
NOMINEES" IN ITEM 1 AND "FOR" ITEM 2.
I plan to attend the meeting [_]
<TABLE>
<CAPTION>
1.ELECTION OF DIRECTORS
<S> <C> <C> <C> <C> <C> <C>
Election of the TOM A. ALBERG DENNIS J. CAREY LEWIS M. CHAKRIN W. PRESTON GRANBERY
following ten nominees to WILLIAM G. HERBSTER ROLLA G. HUFF WILMA H. JORDAN RICHARD W. KISLIK
serve as directors for the WAYNE M. PERRY FLORENCE L. WALSH
ensuing year:
FOR WITHHOLD WITHHELD FOR
ALL FOR ALL the following
nominee(s)
only (write
name(s) here):
[_] [_] ------------------------------------------------------------------------------------------
</TABLE>
2. Approval and adoption of an Agreement and Plan of Merger, dated April 28,
1995, as amended and restated June 30, 1995, among LIN Broadcasting
Corporation ("LIN"), McCaw Cellular Communications, Inc. ("McCaw") and two
subsidiaries of McCaw, and the merger of one of such subsidiaries of McCaw
with and into LIN, all as more fully described in the accompanying Proxy
Statement:
For Against Abstain
[_] [_] [_]
PLEASE SIGN BELOW EXACTLY AS YOUR NAME APPEARS ON YOUR STOCK CERTIFICATE. WHEN
SHARES ARE HELD JOINTLY, EACH PERSON SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EX-
ECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. AN
AUTHORIZED PERSON SHOULD SIGN ON BEHALF OF CORPORATIONS, PARTNERSHIPS AND ASSO-
CIATIONS AND GIVE HIS OR HER TITLE.
Dated: __________________________________________________________________ , 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s)
YOUR VOTE IS IMPORTANT. PROMPT RETURN OF THIS PROXY WILL HELP SAVE THE EXPENSE
OF ADDITIONAL SOLICITATION EFFORTS.
+ FOLD AND DETACH HERE +
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
LIN Broadcasting Corporation
We have audited the accompanying consolidated balance sheets of LIN
Broadcasting Corporation and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits 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 consolidated financial position
of LIN Broadcasting Corporation and subsidiaries at December 31, 1994 and
1993, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Seattle, Washington
January 20, 1995
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ----------------------------
Board of Directors and Stockholders
AWACS, Inc.
Wayne, Pennsylvania
We have audited the consolidated balance sheet of AWACS, Inc. and
subsidiaries as of December 31, 1993 and 1992, and the related consolidated
statements of operations and retained earnings and of cash flows for the years
then ended (not presented separately herein). These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did
not audit the financial statements of Garden State Cablevision L.P. ("Garden
State"), the Company's investment in which is accounted for by use of the
equity method. The Company's equity of $32,302,000 and $22,369,000 in Garden
State's deficit at December 31, 1993 and 1992, respectively, and of $9,933,000
and $2,985,000 in that entity's net losses for the years then ended are
included in the accompanying consolidated financial statements. The financial
statements of Garden State were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the amounts
included for Garden State, is based solely on the report of such other
auditors.
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, based on our audits and the report of other auditors, such
consolidated financial statements present fairly, in all material respects,
the financial position of AWACS, Inc. and subsidiaries as of December 31, 1993
and 1992 and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
As discussed in the notes to the consolidated financial statements, the
Company changed its method of accounting for income taxes effective January 1,
1993 to conform with Statement of Financial Accounting Standards No. 109
"Accounting For Income Taxes".
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 18, 1994
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Garden State Cablevision L.P.:
We have audited the accompanying balance sheets of Garden State Cablevision
L.P. (a Delaware Limited Partnership) as of December 31, 1993 and 1992, and
the related statements of operations, partners' (deficit) capital and cash
flows for the years then ended (not presented herein). These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these 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 financial statements referred to above present fairly,
in all material respects, the financial position of Garden State Cablevision
L.P. as of December 31, 1993 and 1992, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, PA
February 23, 1994
