<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the 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
PEOPLE'S CHOICE TV CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $0.01 per share
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(2) Aggregate number of securities to which transaction applies:
13,111,848
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(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):
$10.00 per share of Common Stock
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$131,118,480
-----------------------------------------------------------------------
(5) Total fee paid:
N/A
-----------------------------------------------------------------------
/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: $25,913
(2) Form, Schedule or Registration Statement No.: Schedule 14A
(3) Filing Party: People's Choice TV Corp.
(4) Date Filed: May 7, 1999
<PAGE>
PEOPLE'S CHOICE TV CORP.
TWO CORPORATE DRIVE, SUITE 249
SHELTON, CONNECTICUT 06484
June 3, 1999
To the Stockholders of PEOPLE'S CHOICE TV CORP.:
You are cordially invited to attend a special meeting of stockholders of
People's Choice TV Corp. to be held at 10:00 a.m., local time, on July 7, 1999,
at One Corporate Drive, Shelton, Connecticut 06484.
As described in the accompanying proxy statement, at the Special Meeting you
will be asked to approve a merger agreement and a merger pursuant to which:
- each outstanding share of People's Choice common stock will be converted
into the right to receive $10.00 in cash; and
- People's Choice will become a wholly owned subsidiary of Sprint
Corporation.
The Board of Directors has received opinions of its financial advisors,
Chase Securities Inc. and Houlihan Lokey Howard & Zukin Capital, to the effect
that, on the date of such opinions, and based upon and subject to the matters
set forth in the opinions, the then-proposed consideration of $8.00 per share to
be received by the holders of People's Choice common stock in the merger was
fair, from a financial point of view, to those holders.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, HAS
DETERMINED THAT THE MERGER IS FAIR TO, ADVISABLE AND IN THE BEST INTERESTS OF
PEOPLE'S CHOICE AND ITS HOLDERS OF COMMON STOCK AND RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
YOUR VOTE IS IMPORTANT. To assure your representation at the special
meeting, please complete, sign and date the enclosed proxy card and return it in
the enclosed white prepaid envelope marked "Proxy". This will allow your shares
to be voted whether or not you attend the meeting.
Detailed information concerning the proposed merger is set forth in the
accompanying proxy statement. I urge you to read the enclosed material carefully
and request that you promptly complete and return the enclosed proxy in the
enclosed return envelope, which requires no postage if mailed in the United
States. If you attend the special meeting, you may vote in person even if you
have previously returned your proxy. Your vote is important regardless of the
number of shares you own.
Sincerely,
/s/ Matthew Oristano
Matthew Oristano
Chairman of the Board and Chief
Executive Officer
<PAGE>
PEOPLE'S CHOICE TV CORP.
TWO CORPORATE DRIVE, SUITE 249
SHELTON, CONNECTICUT 06484
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 7, 1999
NOTICE IS HEREBY GIVEN that a special meeting of holders of common stock and
preferred stock of People's Choice TV Corp. will be held at 10:00 a.m., local
time, on July 7, 1999, at One Corporate Drive, Shelton, Connecticut 06484, for
the following purposes:
(1) To approve and adopt an Agreement and Plan of Merger, dated as of
April 12, 1999, among Sprint Corporation, MM Acquisition Corp., a
wholly-owned subsidiary of Sprint, and People's Choice, and the merger
contemplated thereby; and
(2) To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The accompanying proxy statement describes the proposed merger in detail.
Only holders of common stock and preferred stock of record at the close of
business on May 28, 1999 entitled to notice of and to vote at the meeting or any
adjournments or postponements thereof.
Stockholders who do not vote in favor of adopting the merger agreement and
who otherwise comply with the requirements of Delaware law will be entitled to
appraisal rights. A summary of the applicable Delaware law provision, including
the requirements a stockholder must follow in order to exercise his or her
appraisal rights, is contained in the accompanying proxy statement.
By order of the Board of Directors
/s/ Donald E. Olander
Donald E. Olander
Vice President, General Counsel and
Corporate Secretary
June 3, 1999
Shelton, Connecticut
THE FORM OF PROXY IS ENCLOSED. TO ASSURE THAT YOUR SHARES WILL BE VOTED AT
THE SPECIAL MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES. SENDING A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF
YOU ATTEND THE SPECIAL MEETING.
PLEASE DO NOT SEND YOUR COMMON STOCK CERTIFICATES AT THIS TIME. IF THE
MERGER IS CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF
YOUR CERTIFICATES.
<PAGE>
PEOPLE'S CHOICE TV CORP.
TWO CORPORATE DRIVE, SUITE 249
SHELTON, CONNECTICUT 06484
------------------------
PROXY STATEMENT
------------------------
This proxy statement is being furnished to the holders of outstanding shares
of common stock and preferred stock of People's Choice TV Corp.
This proxy statement is being mailed in connection with the solicitation of
proxies by the People's Choice Board of Directors to approve and adopt an
agreement and plan of merger involving People's Choice and Sprint Corporation
and the merger contemplated by that agreement.
If the merger is completed, Sprint will pay you $10.00 for each share of
People's Choice common stock you own, and People's Choice will become a
wholly-owned subsidiary of Sprint. The preferred stock will continue to remain
outstanding following the merger.
Because our Board of Directors has determined that the terms of the merger
agreement and the merger are fair to, advisable and in the best interests of our
holders of common stock, the Board unanimously approved and adopted the merger
agreement. The Board considered the opinions of Chase Securities Inc. and
Houlihan Lokey Howard & Zukin Capital that, as of the date of the opinions, the
then-proposed consideration of $8.00 per share to be received by our common
stockholders in the merger was fair from a financial point of view to those
stockholders. Subsequently, the consideration to be received by holders of
common stock pursuant to the merger was increased to $10.00 in cash per share.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THAT AGREEMENT.
We have scheduled a special meeting for our stockholders to vote on the
merger. YOUR VOTE IS VERY IMPORTANT. The special meeting will be held at 10:00
a.m., local time, on July 7, 1999 at One Corporate Drive, Shelton, Connecticut
06484.
Whether or not you plan to attend the meeting, please take the time to vote
by completing and mailing the enclosed proxy card to us. If you sign, date and
mail your proxy without indicating how you want to vote, your proxy will be
counted as a vote in favor of the merger. If you abstain or do not vote, it will
have the effect of a vote against the merger.
This proxy statement provides you with detailed information about the
proposed merger. In addition, you may obtain information about People's Choice
from documents that we have filed with the Securities and Exchange Commission.
We encourage you to read this entire document carefully.
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION HAS NOT PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
------------------------
This proxy statement, the accompanying notice of special meeting and the
accompanying form of proxy are first being mailed to stockholders of People's
Choice on or about June 3, 1999.
THE DATE OF THIS PROXY STATEMENT IS JUNE 3, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER..................................................................... 1
Who Can Help Answer Your Questions......................................................................... 3
SUMMARY.................................................................................................... 4
MARKET PRICE AND DIVIDEND INFORMATION...................................................................... 9
Recent Closing Prices.................................................................................... 9
Number of Stockholders................................................................................... 9
Dividends................................................................................................ 9
SELECTED CONSOLIDATED FINANCIAL DATA....................................................................... 10
THE SPECIAL MEETING........................................................................................ 11
General; Date; Place and Time............................................................................ 11
Purpose of the Special Meeting........................................................................... 11
Record Date; Voting Power................................................................................ 11
Vote Required............................................................................................ 11
Revocation of Proxy...................................................................................... 12
Expenses of Solicitation................................................................................. 13
Miscellaneous............................................................................................ 13
THE PARTIES................................................................................................ 14
People's Choice.......................................................................................... 14
Sprint................................................................................................... 14
THE MERGER................................................................................................. 14
Background of the Merger................................................................................. 14
Reasons for the Merger; Recommendation of the People's Choice Board...................................... 18
Opinions of People's Choice's Financial Advisors......................................................... 20
Certain Federal Income Tax Consequences of the Merger.................................................... 28
Accounting Treatment of the Merger....................................................................... 28
Regulatory Filings and Approvals......................................................................... 28
Management, Operations and Ownership Structure Following the Merger...................................... 29
Appraisal Rights......................................................................................... 30
Public Trading Markets................................................................................... 31
THE MERGER AGREEMENT....................................................................................... 32
General; Merger Consideration............................................................................ 32
Dissenting Shares........................................................................................ 32
Treatment of Stock Options............................................................................... 32
Closing; Effective Time.................................................................................. 33
Cancellation of Shares................................................................................... 33
Exchange of Certificates................................................................................. 33
Transfers................................................................................................ 33
Lost, Stolen or Destroyed Certificates................................................................... 33
Representations and Warranties........................................................................... 33
Conduct of People's Choice's Business Prior to the Merger................................................ 34
Agreement Not to Solicit Other Offers.................................................................... 35
Certain Other Covenants and Agreements................................................................... 36
Conditions of the Proposed Merger........................................................................ 39
Termination.............................................................................................. 40
Termination Fee.......................................................................................... 41
Amendment and Waiver..................................................................................... 41
INTERESTS OF CERTAIN PERSONS IN THE MERGER................................................................. 42
Merger/Recapitalization Bonus Program.................................................................... 42
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Change of Control Severance Agreements................................................................... 42
Stock Options............................................................................................ 42
Consulting Agreement..................................................................................... 43
RELATED AGREEMENTS AND TRANSACTIONS........................................................................ 44
Preferred Purchase Agreement............................................................................. 44
Stockholder and Option Agreements........................................................................ 44
Rights Plan.............................................................................................. 45
OWNERSHIP OF PREFERRED AND COMMON STOCK.................................................................... 48
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.................................................. 50
AVAILABLE INFORMATION...................................................................................... 51
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................ 51
</TABLE>
<TABLE>
<S> <C> <C>
APPENDIX A -- THE AGREEMENT AND PLAN OF MERGER
APPENDIX B -- STOCKHOLDER AND OPTION AGREEMENT WITH ORISTANO HOLDERS
APPENDIX C -- FAIRNESS OPINION OF CHASE SECURITIES INC.
APPENDIX D -- FAIRNESS OPINION OF HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL
APPENDIX E -- SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
APPENDIX F -- SUMMARY OF RIGHTS TO PURCHASE SHARES OF SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
This summary highlights certain information from this proxy statement, is
qualified by reference to the proxy statement and may not contain all of the
information that is important to you. To understand the merger more fully and
for a more complete description of the legal terms of the merger, you should
read carefully this entire document, the documents referred to in the
"Incorporation of Certain Documents by Reference" section on page 51 and the
appendices included with the proxy statement. The summary does not contain a
complete statement of material information relating to the merger agreement, the
merger, or other matters discussed in this document.
Q. WHY IS PEOPLE'S CHOICE PROPOSING TO MERGE WITH SPRINT?
A. The Board of Directors determined to recommend approval of the merger
agreement and the merger based on a wide variety of factors, including:
- the premium offered by Sprint over the historical and recent market prices
of People's Choice common stock;
- People's Choice's current financial situation and the capital requirements
which would be needed to continue its business;
- the termination of People's Choice's proposed recapitalization plan and
the need to address certain liquidity concerns;
- the terms and provisions of the merger agreement and related agreements;
and
- the opinions of People's Choice's financial advisors, Chase Securities
Inc. and Houlihan Lokey Howard & Zukin Capital, based upon and subject to
certain matters stated in the opinions, as to the fairness, from a
financial point of view, of the consideration to be received by holders of
common stock in the merger.
Q. WHAT WILL I RECEIVE IN THE MERGER?
A. You will receive $10.00, without interest, in cash in exchange for each share
of People's Choice common stock that you own. This amount may be increased
if Sprint purchases additional shares of common stock at a higher price
prior to the merger. Following the merger, the preferred stock will continue
to remain outstanding.
Q. WHAT DO I NEED TO DO NOW?
A. After you have carefully read this proxy statement, just indicate on your
proxy card how you want to vote, and sign and mail it in the enclosed
prepaid return envelope as soon as possible, so that your shares of
preferred stock or common stock may be represented at the special meeting
for stockholders. The special meeting will take place at 10:00 a.m., local
time, on July 7, 1999, at One Corporate Drive, Shelton, Connecticut 06484.
The Board of Directors unanimously recommends voting "FOR" the proposed
merger agreement and merger.
Q. WHAT VOTE IS REQUIRED TO APPROVE THE MERGER?
A. In order to complete the merger, the merger agreement must be approved by (i)
a majority of the votes eligible to be cast by holders of the outstanding
shares of People's Choice preferred stock and common stock, voting as a
single class, and (ii) two-thirds of the outstanding shares of People's
Choice preferred stock, voting as a separate class. As of the record date,
Sprint owned approximately 46.0% of the total votes of common stock and
preferred stock and approximately 83.2% of the outstanding preferred stock.
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Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A. Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares. Without instructions, your
shares will not be voted, which for purposes of voting on the merger, will
have the same effect as voting against the merger.
Q. CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A. Yes. You can change your vote at any time before your proxy is voted at the
special meeting for stockholders. You can do this in one of three ways:
- First, you can send a written notice stating that you would like to revoke
your proxy.
- Second, you can complete and submit a new proxy card.
If you choose either of these two methods, you must submit your notice of
revocation or your new proxy card to People's Choice at the address on
page 12.
- Third, you can attend the special meeting for stockholders and vote in
person. Simply attending the meeting, however, will not revoke your proxy.
If you have instructed a broker to vote your shares, you must follow
directions received from your broker to change your vote.
Q. WILL I HAVE APPRAISAL RIGHTS AS A RESULT OF THE MERGER?
A. Yes. Stockholders have appraisal rights. If you wish to exercise your
appraisal rights you must follow the requirements of Delaware law. A summary
describing the requirements you must follow in order to exercise your
appraisal rights is described in greater detail beginning on page 30.
Q. SHOULD I SEND IN MY STOCK CERTIFICATES WHEN I RETURN MY PROXY FORM?
A. No. Holders of common stock should not send in their stock certificates now.
Following the merger, a separate letter of transmittal will be mailed to the
holders of common stock which will enable holders to receive the merger
consideration due to them.
Q. WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A. We are working towards completing the merger as quickly as possible. In
addition to the approval of our stockholders described above, we must also
obtain certain regulatory approvals. We presently expect to complete the
merger in August or September 1999 although we cannot assure you that we
will have obtained the necessary approvals by that time. To review the
necessary regulatory approvals in greater detail, see page 28.
Q. WHAT ARE THE TAX CONSEQUENCES OF THE MERGER?
A. The receipt of cash by a stockholder of People's Choice pursuant to the
merger will be a taxable transaction for federal income tax purposes and may
also be taxable under applicable state, local and foreign income and other
tax laws. A stockholder will recognize gain or loss in an amount equal to
the difference between the adjusted tax basis of the common stock and the
amount of cash received in exchange for that stock in the merger. The gain
or loss will be capital gain or loss if the common stock is a capital asset
in the hands of the stockholder and will be long-term capital gain or loss
if the holding period exceeds one year. To review the tax consequences to
stockholders in greater detail, see page 28.
Q. WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETING?
A. We do not expect to ask you to vote on any matter other than the merger
agreement and merger at the special meeting.
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WHO CAN HELP ANSWER YOUR QUESTIONS
If you have more questions about the merger, you should contact:
People's Choice TV Corp.
Two Corporate Drive, Suite 249
Shelton, Connecticut 06484
Attention: Michael F. Whalen
Phone Number: (203) 925-7932
If you would like additional copies of the proxy statement, you should contact:
WF Doring & Co.
150 Bay Street
Jersey City, New Jersey 07302
Phone Number: (888) 330-5111
3
<PAGE>
SUMMARY
THE COMPANIES
People's Choice TV Corp.
Two Corporate Drive, Suite 249
Shelton, Connecticut 06484
(203) 925-7900
People's Choice is a developer, owner and operator of wireless
communications systems. These systems provide (i) high speed internet access
services and private data communication services, which are marketed under the
name SpeedChoice-TM-, (ii) digital video transmission services which are
marketed under the name DigitalChoice TV-TM-, and (iii) analog video
transmission services. People's Choice's markets are concentrated in the
midwestern and the southwestern regions of the United States.
Sprint Corporation
2330 Shawnee Mission Parkway
Westwood, Kansas 66205
(913) 624-3703
Sprint is a diversified telecommunications service provider, providing long
distance, local and wireless communications services. Sprint also engages in
product distribution and directory publishing activities, and other
telecommunications activities, investments and alliances. For the year ended
December 31, 1998, Sprint had approximately $17.1 billion in revenue and
approximately $450.5 million in income from continuing operations.
REASONS FOR THE MERGER
The People's Choice Board of Directors determined to recommend approval and
adoption of the merger agreement and the merger based on a wide variety of
factors, including:
- the premium offered by Sprint over the historical and recent market prices
of the common stock;
- People's Choice's current financial situation and the capital requirements
which would be needed to continue its business;
- the termination of People's Choice's proposed recapitalization plan and
the need to address certain liquidity concerns;
- the terms and provisions of the merger agreement and related agreements;
and
- the opinions of People's Choice's financial advisors, Chase Securities
Inc. and Houlihan Lokey Howard & Zukin Capital, based upon and subject to
certain matters stated in the opinions, as to the fairness on the date of
such opinions, from a financial point of view, of the then-proposed
consideration of $8.00 in cash per share to be received by holders of
common stock pursuant to the merger. Subsequently, the consideration to be
received by holders of the common stock pursuant to the merger was
increased to $10.00 in cash per share.
THE SPECIAL MEETING
WHEN AND WHERE. The special meeting will be held at 10:00 a.m., local time,
on July 7, 1999, at One Corporate Drive, Shelton, Connecticut 06484.
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PURPOSES OF SPECIAL MEETING. At the special meeting, you will be asked to
approve and adopt the merger agreement and the merger.
RECORD DATE; VOTING POWER. Holders of preferred stock and common stock as
of the close of business on May 28, 1999, the record date, are entitled to vote
at the meeting or any adjournment thereof. As of the record date, there were
outstanding 13,111,848 shares of common stock and 746,104 shares of preferred
stock. Each share of common stock is entitled to one vote and each share of
preferred stock is entitled to 4.444 votes for the vote of common stock and
preferred stock as a single class. At the special meeting, there will be
16,427,866 votes entitled to be cast by holders of common stock and preferred
stock, voting as a single class, and 746,104 shares of preferred stock entitled
to vote as a separate class.
VOTE REQUIRED. The affirmative vote of (i) a majority of the votes eligible
to be cast by holders of the outstanding shares of preferred stock and common
stock as of the record date, voting as a single class, and (ii) two-thirds of
the outstanding shares of preferred stock as of the record date, voting as a
separate class, are required to approve and adopt the merger agreement and the
consummation of the merger.
Sprint disclosed that, on April 6, 1999, Sprint purchased from Wireless
Holding LLC 497,405 shares of preferred stock and obtained options to purchase
an additional 248,699 shares of preferred stock, representing in the aggregate
100% of the outstanding preferred stock. In connection with the execution of the
merger agreement, Matthew Oristano, the Company's Chairman and Chief Executive
Officer, members of his family (including his father, Victor Oristano, a
director of People's Choice) and family trusts and foundations entered into an
option agreement with Sprint whereby the Oristano holders granted to Sprint,
among other things, an irrevocable option to purchase 1,694,823 shares of common
stock representing in the aggregate approximately 12.9% of the outstanding
shares of common stock and an irrevocable proxy to vote these shares at the
special meeting. On April 13, 1999, Sprint disclosed it had entered into an
option agreement with Bay Harbour Management, LC, whereby Bay Harbour granted to
Sprint, among other things, irrevocable options to purchase 881,600 shares of
common stock representing approximately 6.7% of the outstanding shares of common
stock. On April 29, 1999, Sprint disclosed it had entered into option agreements
with certain other People's Choice stockholders who granted to Sprint, among
other things, irrevocable options to purchase in the aggregate 2,227,000 shares
of common stock representing approximately 17.0% of the outstanding shares of
common stock at a purchase price of $10.00 in cash per share. As a result of the
transactions announced by Sprint on April 29, the consideration to be paid by
Sprint to the holders of common stock in the merger increased, under the terms
of the merger agreement, from $8.00 to $10.00 per share. On June 2, 1999, Sprint
disclosed it had exercised all of its options with respect to common stock and
purchased an aggregate of 4,804,231 shares of common stock and exercised one of
its options with Wireless Holding and purchased an additional 123,699 shares of
preferred stock.
Based on the approximately 16,427,866 votes of common stock and preferred
stock, as a single class, and 746,104 shares of preferred stock, as a separate
class, entitled to vote at the meeting, a total of 8,213,934 votes of the common
stock and preferred stock and 497,403 shares of preferred stock, respectively,
are required to be voted in favor of the merger agreement and the merger in
order for the merger agreement and the merger to be approved and adopted. As a
result of the transactions described above, as of the record date, Sprint owned
approximately 46.0% of the total votes of common stock and preferred stock and
approximately 83.2% of the outstanding preferred stock. Sprint has agreed to
vote all shares of common stock and preferred stock beneficially owned by it in
favor of the merger agreement and the transaction contemplated thereby.
Accordingly, the required class vote by the preferred stock to approve the
merger agreement will be satisfied even if no other holder of preferred stock
votes in favor of the merger.
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REVOCATION OF PROXY. A stockholder may revoke a proxy at any time prior to
its exercise by (i) delivering to Donald E. Olander, Corporate Secretary,
People's Choice TV Corp., Two Corporate Drive, Suite 249, Shelton, Connecticut
06484, a written notice of revocation of proxy prior to the special meeting,
(ii) delivering prior to the special meeting a duly executed proxy bearing a
later date or (iii) attending the special meeting and voting in person. The
presence of a stockholder at the special meeting will not in and of itself
automatically revoke such stockholder's proxy. If not revoked, the proxy will be
voted in accordance with the instructions indicated on the proxy or, if no
instructions are indicated on a properly executed proxy, such proxy will be
voted "FOR" the approval and adoption of the merger agreement and the merger.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES. The required quorum for the
special meeting is a majority of votes eligible to be cast by holders of
preferred stock and common stock issued and outstanding as of the record date.
Both abstentions and broker non-votes will be included in determining the number
of votes present and voting at the special meeting for the purpose of
determining the presence of a quorum. Abstentions and broker non-votes will have
the same effect as votes against the merger agreement and the consummation of
the merger. THE ACTIONS PROPOSED IN THIS PROXY STATEMENT ARE NOT MATTERS THAT
CAN BE VOTED ON BY BROKERS HOLDING SHARES FOR BENEFICIAL OWNERS WITHOUT THE
OWNERS' SPECIFIC INSTRUCTIONS. ACCORDINGLY, ALL BENEFICIAL OWNERS OF PREFERRED
STOCK AND COMMON STOCK ARE URGED TO RETURN THE ENCLOSED PROXY CARD MARKED TO
INDICATE THEIR VOTES.
RECOMMENDATION TO STOCKHOLDERS
On April 11, 1999, the People's Choice Board of Directors (i) determined
that the merger and the transactions contemplated by the merger agreement are
fair, equitable and in the best interests of People's Choice and its common
stockholders, (ii) approved and adopted the merger agreement and (iii) resolved
to recommend that the stockholders vote in favor of the merger agreement and the
merger contemplated thereby. The Board of Directors unanimously recommends a
vote "FOR" approval and adoption of the merger agreement and the merger.
OPINIONS OF FINANCIAL ADVISORS
On April 11, 1999, Chase and Houlihan Lokey delivered their oral opinions to
the Board of Directors that as of such date, and based upon the assumptions and
subject to the limitations set forth therein, the then-proposed consideration of
$8.00 per share in cash to be received by holders of common stock in the merger
was fair from a financial point of view to such holders. The full text of the
written opinions delivered on April 12, 1999 of Chase and Houlihan Lokey, which
set forth assumptions made, matters considered and limitations on the review
undertaken in connection with the opinions are attached hereto as Appendix C and
Appendix D and are incorporated herein by reference. Stockholders are urged to,
and should, read such opinions in their entirety.
THE MERGER
THE MERGER AGREEMENT IS ATTACHED AS APPENDIX A TO THIS PROXY STATEMENT. THE
PEOPLE'S CHOICE BOARD OF DIRECTORS ENCOURAGES YOU TO READ THE MERGER AGREEMENT
IN ITS ENTIRETY. IT IS THE LEGAL DOCUMENT GOVERNING THE MERGER.
WHAT PEOPLE'S CHOICE STOCKHOLDERS WILL RECEIVE IN THE MERGER. Holders of
common stock will receive $10.00 in cash in exchange for each share of common
stock that they own. The shares of preferred stock will continue to remain
outstanding following the merger.
WHAT HOLDERS OF STOCK OPTIONS WILL RECEIVE IN THE MERGER. People's Choice
will offer holders of outstanding options to purchase shares of common stock the
right to cancel each stock option in
6
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exchange for an amount in cash equal to the product of (A) $10.00 less the per
share exercise price of the stock option and (B) the number of shares subject to
the stock option.
CONDITIONS TO THE MERGER. Consummation of the merger is subject to various
conditions, including, among others:
- the approval of the merger by stockholders at the special meeting;
- that no law has been enacted or injunction entered which effectively
prohibits the merger;
- that all necessary approvals of governmental authorities and all material
required consents of third parties have been obtained, including the
approval of the FCC; and
- that Sprint and People's Choice's respective representations and
warranties in the merger agreement are true and correct in all material
respects and the parties have performed in all material respects their
respective obligations under the merger agreement.
TERMINATION. Sprint and People's Choice can agree to terminate the merger
agreement without completing the merger, and either of the companies can
terminate the merger agreement if any of the following occurs:
- the merger is not completed by December 31, 1999;
- a court or other governmental authority permanently prohibits the merger;
- the required approval of the stockholders is not received at the special
meeting; or
- the other company materially breaches or fails to comply with any of its
representations or warranties or obligations under the merger agreement.
In addition, Sprint can terminate the merger agreement if (A) People's
Choice enters into a binding agreement for, or recommends to its stockholders, a
business combination with a third party or (B) the Board of Directors withdraws
or adversely modifies its approval or recommendation of the merger agreement.
TERMINATION FEE. The merger agreement requires People's Choice to pay to
Sprint a termination fee of $14 million if the merger agreement is terminated
under certain circumstances.
REGULATORY APPROVALS. The Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, prohibits the companies from completing the merger until after
the companies have furnished certain information and materials to the Antitrust
Division of the Department of Justice and the Federal Trade Commission and a
required waiting period has ended. On April 15, 1999 and April 26, 1999, Sprint
and People's Choice, respectively, furnished that information. Early termination
was granted on May 14, 1999. However, the Department of Justice and the Federal
Trade Commission will continue to have the authority to challenge the merger on
antitrust grounds before or after the merger is completed.
The merger is also subject to the receipt of certain approvals from the
Federal Communications Commission. On May 14 and 17, 1999, People's Choice and
Sprint made all applicable filings with the FCC and as of the date of this proxy
statement, approval from the FCC is still pending. We presently expect to
receive FCC approval in August or September 1999 although we cannot assure you
that we will receive such approval by that time.
FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash by a stockholder of
People's Choice pursuant to the merger will be a taxable transaction for federal
income tax purposes and may also be taxable under applicable state, local and
foreign income and other tax laws. A stockholder will recognize gain or loss in
an amount equal to the difference between the adjusted tax basis of the common
stock and the amount of cash received in exchange for that stock in the merger.
The gain or loss will be capital gain or loss if the common stock is a capital
asset in the hands of the stockholder
7
<PAGE>
and will be long-term capital gain or loss if the holding period exceeds one
year. To review the tax consequences to stockholders in greater detail, see page
28.
APPRAISAL RIGHTS. Pursuant to Section 262 of the Delaware General
Corporation Law, stockholders have a right to an appraisal of the value of their
shares in connection with the merger. For a description of this right, see page
30.
OTHER INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER
In considering the recommendation of the People's Choice Board of Directors
with regard to the merger, stockholders should be aware that a number of
People's Choice officers and directors and other affiliates of People's Choice
have severance agreements, benefit plans or other agreements that provide them
with interests in the merger that are different from, and in addition to, the
interests of stockholders generally. For a description of these arrangements,
see page 42.
OTHER AGREEMENTS
Certain stockholders of People's Choice holding approximately 36.6% of the
outstanding common stock entered into option agreements with Sprint, pursuant to
which such stockholders granted Sprint options to purchase their shares. On June
2, 1999, Sprint disclosed it had exercised these options and purchased an
aggregate of 4,804,231 shares of common stock and also exercised its option to
purchase an additional 123,699 shares of preferred stock.
FORWARD LOOKING STATEMENTS MAY PROVE INACCURATE
PEOPLE'S CHOICE HAS MADE FORWARD LOOKING STATEMENTS IN THIS DOCUMENT AND IN
DOCUMENTS THAT ARE INCORPORATED BY REFERENCE THAT ARE SUBJECT TO RISKS AND
UNCERTAINTIES. FORWARD LOOKING STATEMENTS INCLUDE INFORMATION CONCERNING
POSSIBLE OR ASSUMED FUTURE RESULTS OF OPERATIONS OF PEOPLE'S CHOICE. WHEN WORDS
SUCH AS "BELIEVES," "EXPECTS," "ANTICIPATES" OR SIMILAR EXPRESSIONS ARE USED,
THEY ARE INTENDED TO IDENTIFY FORWARD LOOKING STATEMENTS. STOCKHOLDERS SHOULD
NOTE THAT MANY FACTORS, SOME OF WHICH ARE DISCUSSED ELSEWHERE IN THIS DOCUMENT
AND IN THE DOCUMENTS WHICH ARE INCORPORATED IN THIS PROXY STATEMENT BY
REFERENCE, COULD AFFECT THE FUTURE FINANCIAL AND BUSINESS RESULTS OF PEOPLE'S
CHOICE AND COULD CAUSE THOSE RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED
IN THE FORWARD LOOKING STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE INTO
THIS DOCUMENT.
INFORMATION CONCERNING SPRINT
All information contained in this proxy statement concerning Sprint and its
subsidiaries, including MM Acquisition Corp., has been supplied by Sprint and
has not been independently verified by People's Choice.
8
<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
The common stock is currently traded on the OTC Bulletin Board operated by
Nasdaq under the symbol "PCTV". The following table sets forth for the calendar
quarters indicated, the high and low closing sales prices per share of the
common stock as reported by Nasdaq.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1997:
First Quarter................................................................ $ 6.50 $ 2.63
Second Quarter............................................................... 3.25 0.44
Third Quarter................................................................ 4.00 1.38
Fourth Quarter............................................................... 3.25 1.13
1998:
First Quarter................................................................ $ 2.06 $ 0.75
Second Quarter............................................................... 1.81 0.41
Third Quarter................................................................ 1.50 0.44
Fourth Quarter............................................................... 0.81 0.18
1999:
First Quarter................................................................ $ 3.06 $ 0.38
Second Quarter (through June 1).............................................. 9.50 3.75
</TABLE>
RECENT CLOSING PRICES
On April 9, 1999, the last trading day before the public announcement of the
proposed merger, the reported high and low sales price per share of common stock
were $8.03 and $4.31, respectively. On June 1, 1999, the latest practicable
trading day before the date of this proxy statement, the reported closing sales
price per share of common stock was $9.25.
NUMBER OF STOCKHOLDERS
On May 28, 1999, there were approximately 155 holders of record of common
stock and two holders of record of preferred stock.
DIVIDENDS
People's Choice has not declared or paid any cash dividends on the common
stock since its formation in April 1993.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial data of People's Choice for the years 1998, 1997,
1996, 1995 and 1994 presented below has been derived from the audited
consolidated financial statements of People's Choice. The selected financial
data of People's Choice for the three months ended March 31, 1999 and 1998 have
been derived from the consolidated financial statements of People's Choice. The
information shown below is qualified in its entirety by, and should be read in
conjunction with, the related consolidated financial statements of People's
Choice, including the related notes thereto and "Management's Discussion and
Analysis of Results of Operations and Financial Condition" for People's Choice
incorporated by reference in this proxy statement.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------------------- -----------------------
1998 1997 1996 1995 1994 1999 1998
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Statement of Operations
Data:
Revenues.............. $ 25,185 $ 32,690 $ 33,425 $ 26,004 $ 12,557 $ 5,599 $ 6,999
Depreciation and
Amortization........ 35,027 34,508 39,258 24,627 6,606 5,207 7,373
Operating Loss........ (64,338) (43,761) (50,819) (42,277) (20,573) (10,924) (11,005)
Interest Expense...... 35,109 31,576 27,891 15,566 2,514 9,523 8,465
Net Loss.............. (94,021) (69,580)(1) (75,887) (53,235)(3) (19,531)(4) (20,409) (18,296)
Basic and Diluted Loss
Per Common Share...... $ (7.59)(2) $ (5.80)(1) $ (6.26) $ (5.23)(3) $ (2.20)(4) $ (1.72) $ (1.53)
Weighted Average Number
of Common Shares
Outstanding........... 12,924 13,149 13,100 11,072 8,949 12,924 13,145
Balance Sheet Data:
Total Assets.......... $ 208,002 $ 279,124 $ 326,148 $ 373,093 $ 117,532 $ 196,098 $ 268,211
Notes and Other
Payables............ 286,879 256,465 234,431 202,317 12,116 295,950 264,716
Convertible Preferred
Stock............... 73,132 66,342 60,170 54,577 10,129 74,897 67,957
Stockholders' Equity/
(Deficit)........... (160,338) (62,209) 14,089 96,519 82,997 (182,518) (82,364)
</TABLE>
- ------------------------
(1) Includes an extraordinary gain of $0.8 million or $0.06 per share.
(2) Includes a gain on extinguishment of preferred stock of $3.1 million or
$0.24 per share of common stock.
(3) Includes an extraordinary gain of $1.2 million or $0.11 per share.
(4) Includes an income tax benefit of $3.2 million or $.36 per share.
10
<PAGE>
THE SPECIAL MEETING
GENERAL; DATE; PLACE AND TIME
This proxy statement (the "Proxy Statement") is being provided by, and the
enclosed proxy is solicited by and on behalf of, the board of directors (the
"People's Choice Board") of People's Choice TV Corp. ("People's Choice" or the
"Company") for use at the special meeting (the "Special Meeting") of the holders
of the Company's Convertible Cumulative Pay-in-Kind Preferred Stock, $.01 par
value per share (the "Preferred Stock"), and Common Stock, $.01 par value per
share (the "Common Stock").
The Special Meeting is scheduled to be held at 10:00 a.m., local time, on
July 7, 1999, at One Corporate Drive, Shelton, Connecticut 06484.
PURPOSE OF THE SPECIAL MEETING
The purpose of the Special Meeting is to consider and vote upon the approval
and adoption of an Agreement and Plan of Merger, dated as of April 12, 1999 (the
"Merger Agreement") among People's Choice, Sprint Corporation ("Sprint") and MM
Acquisition Corp. ("Sub") and the merger contemplated thereby (the "Merger"),
and to transact any other business that is properly brought before the Special
Meeting.
RECORD DATE; VOTING POWER
Only holders of Preferred Stock and Common Stock at the close of business on
May 28, 1999 (the "Record Date") will be entitled to receive notice of and to
vote at the Special Meeting. As of the Record Date, there were 13,111,848 shares
of Common Stock and 746,104 shares of Preferred Stock outstanding and entitled
to vote at the Special Meeting. Each share of Common Stock is entitled to one
vote and each share of Preferred Stock is entitled to 4.444 votes for the vote
of the Common Stock and Preferred Stock, voting as a single class. At the
Special Meeting, there will be 16,427,866 votes entitled to be cast by the
holders of Common Stock and Preferred Stock, voting as a single class, and
746,104 shares of Preferred Stock entitled to vote as a separate class.
VOTE REQUIRED
The affirmative vote of (i) a majority of votes eligible to be cast by
holders of the outstanding shares of Preferred Stock and Common Stock, voting as
a single class, and (ii) two-thirds of the shares of Preferred Stock
outstanding, voting as a separate class, is required to approve and adopt the
Merger Agreement.
Sprint disclosed that, on April 6, 1999, Sprint purchased from Wireless
Holding LLC 497,405 shares of Preferred Stock with options to purchase an
additional 248,699 shares of Preferred Stock, constituting in the aggregate 100%
of the outstanding Preferred Stock. In connection with the execution of the
Merger Agreement, Matthew Oristano, the Company's Chairman and Chief Executive
Officer, members of his family (including his father, Victor Oristano, a
director of People's Choice) and family trusts and foundations (collectively,
the "Oristano Holders") entered into an option agreement with Sprint whereby the
Oristano Holders granted to Sprint an irrevocable option to purchase 1,694,823
shares of Common Stock, representing in the aggregate approximately 12.9% of the
outstanding shares of Common Stock. Sprint disclosed that on April 12, 1999 it
entered into an agreement with Bay Harbour Management, LC ("Bay Harbour")
containing substantially the same terms and conditions as the agreement with the
Oristano Holders whereby Bay Harbour granted Sprint an irrevocable option to
purchase 881,600 shares of Common Stock representing in the aggregate
approximately 6.7% of the outstanding shares of Common Stock. On April 29, 1999,
Sprint disclosed it had recently entered into option agreements with certain
other People's Choice stockholders who granted to Sprint irrevocable
11
<PAGE>
options to purchase in the aggregate an additional 2,227,000 shares of Common
Stock at a purchase price of $10.00 in cash per share and an irrevocable proxy
to vote such shares at the Special Meeting. As a result of the transactions
announced by Sprint on April 29, 1999, the consideration to be paid by Sprint to
the holders of Common Stock in the Merger increased, under the terms of the
Merger Agreement, from $8.00 to $10.00 per share (the "Merger Consideration").
On June 2, 1999, Sprint disclosed it had exercised all of its options with
respect to common stock and purchased an aggregate of 4,804,231 shares of Common
Stock and exercised one of its options with Wireless Holding and purchased an
additional 123,699 shares of Preferred Stock.
As of the Record Date, there were approximately 155 holders of record of
Common Stock and two holders of record of Preferred Stock, as shown on the
records of the Company's transfer agent. Based on the approximately 16,427,866
votes of Common Stock and Preferred Stock, as a single class, and 746,104 shares
of Preferred Stock, as a separate class, entitled to vote at the meeting, a
total of 8,213,934 votes of Common Stock and Preferred Stock and 497,403 shares
of Preferred Stock, respectively, are required to be voted in favor of the
Merger Agreement and the Merger in order for the Merger Agreement and the Merger
to be approved and adopted. As a result of the transactions described above,
Sprint owned approximately 46.0% of the total votes of Common Stock and
Preferred Stock and approximately 83.2% of the outstanding Preferred Stock.
Sprint has agreed to vote all shares of common stock and preferred stock
beneficially owned by Sprint in favor of the Merger Agreement and the
transaction contemplated thereby. Accordingly, the required class vote of the
Preferred Stock to approve the Merger will be satisfied even if no other holder
of Preferred Stock votes in favor of the Merger.
Because the required vote of the stockholders on the Merger Agreement is
based upon the total number of outstanding shares of Preferred Stock and Common
Stock, the failure to submit a proxy card (or to vote in person at the Special
Meeting) or the abstention from voting by a stockholder will have the same
effect as a vote against approval and adoption of the Merger Agreement. Brokers
holding shares of Common Stock as nominees will not have discretionary authority
to vote such shares in the absence of instructions from the beneficial owners
thereof.
The Delaware General Corporation Law ("DGCL"), the People's Choice
Certificate of Incorporation, as amended (the "People's Choice Certificate"),
the People's Choice Bylaws (the "People's Choice Bylaws") and the Securities
Exchange Act of 1934 (the "Exchange Act"), contain requirements governing the
actions of People's Choice stockholders at the Special Meeting. According to the
People's Choice Bylaws, a majority of the votes eligible to be cast by holders
of Preferred Stock and Common Stock outstanding on the Record Date must be
present, either in person or by proxy, at the Special Meeting to constitute a
quorum. In general, abstentions and broker non-votes are counted as present or
represented at the Special Meeting for the purpose of determining a quorum for
the Special Meeting.
The obligations of People's Choice and Sprint to consummate the Merger are
subject, among other things, to the condition that the stockholders approve and
adopt the Merger Agreement, and the failure to obtain such approval on or before
December 31, 1999 would give either People's Choice or Sprint the right to
terminate the Merger Agreement.
REVOCATION OF PROXY
A stockholder may revoke a proxy at any time prior to its exercise by (i)
delivering to Donald E. Olander, Corporate Secretary, People's Choice TV Corp.,
Two Corporate Drive, Suite 249, Shelton, Connecticut 06484, a written notice of
revocation of proxy prior to the Special Meeting, (ii) by delivering to People's
Choice a duly executed proxy bearing a later date prior to the Special Meeting
or (iii) by attending the Special Meeting and voting in person. The presence of
a stockholder at the Special Meeting will not in and of itself automatically
revoke such stockholder's proxy.
12
<PAGE>
EXPENSES OF SOLICITATION
The Company will bear the costs of soliciting proxies from stockholders. In
addition to soliciting proxies by mail, directors, officers and employees of the
Company, without receiving additional compensation therefor, may solicit proxies
by telephone, by facsimile or in person. Arrangements may also be made with
brokerage firms and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares held of record by such
persons, and the Company will reimburse such brokerage firms, custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them
in connection therewith. In addition, WF Doring & Co. (the "Proxy Solicitor")
has been retained by People's Choice to assist in the solicitation of proxies.
The Proxy Solicitor may contact holders of shares of Common Stock by mail,
telephone, facsimile, telegraph and personal interviews and may request brokers,
dealers and other nominee stockholders to forward materials to beneficial owners
of shares of Common Stock. The proxy solicitor will receive reasonable and
customary compensation for its services (estimated at $5,000) and will be
reimbursed for certain reasonable out-of-pocket expenses.
MISCELLANEOUS
It is not expected that any matter other than those referred to herein will
be presented for action at the Special Meeting. If any other matters are
properly brought before the Special Meeting, the persons named in the proxies
will have discretion to vote on such matters in accordance with their best
judgment. The grant of a proxy will also confer discretionary authority on the
persons named in the proxy as proxy appointees to vote in accordance with their
best judgment on matters incident to the conduct of the Special Meeting,
including (except as stated in the following sentence) postponement or
adjournment for the purpose of soliciting additional votes. However, shares
represented by proxies that have been voted "AGAINST" the Merger Agreement and
the Merger will not be used to vote "FOR" postponement or adjournment of the
Special Meeting for the purposes of allowing additional time for soliciting
additional votes "FOR" the approval and adoption of the Merger Agreement and the
Merger.
Holders of Common Stock should not send their stock certificates with their
proxy cards. If the Merger is consummated, a separate letter of transmittal will
be mailed to the holders of Common Stock which will enable a holder to receive
the appropriate consideration.
13
<PAGE>
THE PARTIES
PEOPLE'S CHOICE
People's Choice is a developer, owner and operator of wireless
communications systems. These systems provide (i) high speed internet access
services and private data communication services, which are marketed under the
name SpeedChoice-TM-, (ii) digital video transmission services which are
marketed under the name DigitalChoice TV-TM-, and (iii) analog video
transmission services. People's Choice's markets are concentrated in the
midwestern and the southwestern regions of the United States. For the year ended
December 31, 1998, People's Choice had revenues of approximately $25.2 million
and experienced a net loss of approximately $94.0 million.
The principal executive offices of People's Choice are located at Two
Corporate Drive, Suite 249, Shelton, Connecticut 06484, and its telephone number
is (203) 925-7900.
SPRINT
Sprint is a diversified telecommunications service provider, providing long
distance, local and wireless communications services. Sprint also engages in
product distribution and directory publishing activities, and other
telecommunications activities, investments and alliances. For the year ended
December 31, 1998, Sprint had approximately $17.1 billion in revenue and
approximately $450.5 million in income from continuing operations.
The principal executive offices of Sprint are located at 2330 Shawnee
Mission Parkway, Westwood, Kansas 66205, and its telephone number is (913)
624-3703.
THE MERGER
BACKGROUND OF THE MERGER
During late 1997 and early 1998, People's Choice considered proposing an
exchange offer with the holders of its 13 1/8% senior discount notes (the
"Senior Discount Notes") and Preferred Stock as a means of addressing liquidity
issues confronting People's Choice. Under the terms of the Senior Discount
Notes, People's Choice is required to begin making cash interest payments on the
Senior Discount Notes in December 2000. The first interest payment on the Senior
Discount Notes will be $21.8 million and, unless it obtained additional
financing or restructured existing obligations, People's Choice did not expect
that it would have the cash available to make that interest payment. In April
1998, People's Choice filed a Registration Statement on Form S-4 with the
Securities and Exchange Commission relating to proposed exchange offers (the
"Recapitalization Plan") to be made by it to holders of its Senior Discount
Notes and Preferred Stock. People's Choice had also previously retained Houlihan
Lokey Howard & Zukin Capital ("Houlihan Lokey") to represent People's Choice as
restructuring advisor. Pursuant to the Recapitalization Plan, People's Choice
proposed to offer to exchange:
(i) $85,000,000 principal amount at maturity of its new 13 1/8% Senior
Subordinated Discount Notes due 2003 ("New Discount Notes"), 4,887,267
shares of Common Stock and $42,500,000 cash for all of its outstanding
$332,000,000 principal amount at maturity of Senior Discount Notes; and
(ii) $15,000,000 principal amount at maturity of its New Discount Notes and
2,597,054 shares of Common Stock for all of its outstanding Preferred
Stock.
After the filing of the Registration Statement relating to the
Recapitalization Plan, a group of holders of the Senior Discount Notes,
including the largest holder of such notes, formed an informal committee (the
"Informal Committee") to negotiate with People's Choice with respect to the
Recapitalization Plan. The Informal Committee advised People's Choice that its
members held
14
<PAGE>
collectively approximately 63% of the principal amount at maturity of the Senior
Discount Notes. From April 1998 to March 1999, People's Choice and its advisors
had numerous discussions with the Informal Committee and the holders of the
Preferred Stock with respect to the proposed Recapitalization Plan and other
potential recapitalization transactions. In March 1999, People's Choice
terminated its efforts to implement the Recapitalization Plan after the largest
holder of Senior Discount Notes informed People's Choice that the holder would
not support the Recapitalization Plan or an alternative recapitalization plan.
In March 1998, Tim Sutton, Vice President, Corporate Strategy and
Development of Sprint, contacted Matthew Oristano, Chairman and Chief Executive
Officer of People's Choice, and informed Mr. Oristano that Sprint was interested
in meeting with People's Choice to learn about the current status of People's
Choice's projects with its wireless spectrum. On March 20, 1998, People's Choice
and Sprint executed a confidentiality agreement for the purpose of exploring a
possible relationship between the two companies. During March 1998, Mr. Oristano
and Peter Lynch, People's Choice's Senior Vice President-Operations, met with
Mr. Sutton and Brett Krause, Director Corporate Development of Sprint, at
People's Choice's business offices in Phoenix, Arizona to discuss People's
Choice's current business projects. In early April 1998, Mr. Krause advised
People's Choice that Sprint was not prepared to propose or pursue any
relationship or other transaction with People's Choice at such time.
In October 1998, Mr. Oristano, Michael F. Whalen, Jr., Vice
President--Finance and Acquisitions of People's Choice, and Michael Kramer of
Houlihan Lokey met with Mr. Sutton and Mr. Krause at Sprint's offices in Kansas
City to discuss whether Sprint would be interested in acquiring the outstanding
Preferred Stock of People's Choice and providing People's Choice with senior
secured financing. Approximately one week after this meeting, Mr. Sutton called
Mr. Oristano and advised him that Sprint was not interested in pursuing further
discussions regarding People's Choice's proposal.
In mid November 1998, Mr. Sutton contacted Mr. Oristano and requested a
meeting for the purpose of discussing Sprint's interest in opportunities for
investment in companies within People's Choice's industry group. At a November
20, 1998 meeting in New York City attended by Mr. Oristano, Mr. Sutton, and F.
Davis Terry, Jr. of Warburg Dillon Read LLC, financial advisor to Sprint, Mr.
Sutton and Mr. Terry requested Mr. Oristano's advice regarding potential
strategies by which Sprint might assemble a national portfolio of Multichannel
Multipoint Distribution Service ("MMDS") wireless spectrum. The discussion
covered People's Choice and the other major companies that held MMDS wireless
spectrum. The discussions were general in scope and the Sprint representatives
made no proposal by which Sprint would acquire People's Choice or engage in a
transaction with People's Choice. After this meeting, representatives of
People's Choice did not have any material conversations with Sprint
representatives until March 1999.
During late 1998 and into March 1999, People's Choice continued with its
efforts to implement the Recapitalization Plan. On March 10, 1999, People's
Choice issued a press release announcing that it was terminating its efforts to
implement the Recapitalization Plan.
On March 15, 1999, Theodore H. Schell, Sprint's Senior Vice President,
Strategic Planning and Corporate Development, contacted Mr. Whalen and advised
him that Sprint was interested in acquiring People's Choice. On March 16, 1999,
a meeting was held at People's Choice's offices in Shelton, Connecticut among
representatives of People's Choice and Sprint to discuss Sprint's proposal to
acquire People's Choice. Attending the meeting on behalf of People's Choice were
Mr. Oristano, Charles F. Schwartz, People's Choice's Chief Financial Officer,
Donald E. Olander, People's Choice's General Counsel, and Mr. Whalen. Attending
the meeting from Sprint were Mr. Schell, Mr. Sutton, and Mr. Terry. At this
meeting, Mr. Schell advised People's Choice's executives that Sprint was
interested in acquiring People's Choice. No purchase price was discussed at this
meeting. The Sprint representatives stated that they had performed initial
background due diligence on People's Choice using publicly
15
<PAGE>
available information and believed that Sprint was prepared to move promptly to
negotiate, document and consummate an acquisition of People's Choice.
Sprint stated to People's Choice's representatives that Sprint expected that
a reorganization of People's Choice under Chapter 11 of the U.S. Bankruptcy Code
would be necessary to complete the acquisition. Sprint contemplated that
People's Choice and Sprint would execute an acquisition agreement which would be
consummated pursuant to the terms of a plan of reorganization jointly proposed
by Sprint and People's Choice in a Chapter 11 bankruptcy proceeding. The primary
purpose of the Chapter 11 reorganization would be to permit Sprint to acquire
People's Choice and retire the Senior Discount Notes at a reduced amount from
their then accreted value.
The parties then discussed other elements of a proposed acquisition. Mr.
Schell stated that the acquisition agreement would contain customary
representations, warranties, covenants and conditions, including no-shop,
break-up fee and expense reimbursement provisions. Conditions to closing would
include receipt of governmental consents (including any required FCC consents),
satisfactory due diligence review of People's Choice's assets and operations
(especially focusing on People's Choice's wireless frequencies), and the
execution of certain security holder agreements with respect to shares of Common
Stock held by Mr. Oristano and Victor Oristano. Mr. Schell requested that Mr.
Oristano advise the People's Choice Board of Sprint's proposal and contact Mr.
Schell with a proposed purchase price for People's Choice.
On March 17, 1999, Sprint delivered to People's Choice a memorandum
outlining the general terms and conditions of a proposed acquisition of People's
Choice by Sprint. The memorandum did not contain a proposed purchase price. The
general terms and conditions outlined in the memorandum were consistent with
those presented by Sprint to People's Choice at the meeting held on March 16,
1999.
On March 18, 1999, the People's Choice Board held a meeting to discuss
Sprint's proposal to acquire People's Choice. The People's Choice Board
discussed the various terms contained in the March 17, 1999 memorandum from
Sprint. Mr. Oristano also informed the People's Choice Board that he had been
advised by Mr. Schell that Sprint could support a transaction in a range of
$1.50 to $1.75 for each share of Common Stock. Mr. Oristano had informed Mr.
Schell that he did not expect that the People's Choice Board would be interested
in considering such a purchase price. Mr. Schell had told Mr. Oristano that even
if the People's Choice Board could not support such a purchase price that Sprint
was still interested in continuing discussions with People's Choice. The
People's Choice Board then discussed the purchase price that Company management
would be authorized to present to Sprint. The People's Choice Board agreed to
convene the following day to consider the purchase price issue further. The
People's Choice Board also authorized Mr. Oristano and other appropriate
executives of People's Choice to continue discussions with Sprint.
On March 19, 1999, the People's Choice Board had further discussions with
respect to the Sprint acquisition proposal and a proposed purchase price for the
Common Stock. The People's Choice Board authorized Company management to respond
to Sprint's proposal in writing with a proposed purchase price of $5.00 per
share for the Common Stock. On March 19, 1999, People's Choice delivered a
letter to Sprint responding to the Sprint memorandum of March 17th and proposing
a purchase price of $5.00 per share for the Common Stock. On March 19, 1999, the
closing sale price of the Common Stock on the OTC Bulletin Board was $0.875.
On March 25, 1999, the People's Choice Board met to discuss further the
Sprint proposal and to discuss general operational matters. The Board was
advised by Mr. Oristano that People's Choice's executives had not heard from
Sprint but expected to hear from Sprint in a few days.
On March 30, 1999, Mr. Schell called Mr. Oristano and informed him that
People's Choice's proposed $5.00 purchase price for the Common Stock was
generally acceptable to Sprint and that
16
<PAGE>
People's Choice would shortly receive a letter from Mr. Schell outlining
additional terms and conditions for an acquisition. Later on March 30, 1999, a
letter from Mr. Schell addressed to the People's Choice Board was delivered to
People's Choice's offices in Shelton, Connecticut. The letter confirmed that a
$5.00 per share purchase price for the Common Stock was generally acceptable and
outlined other terms and conditions for an acquisition. Among other terms, the
letter indicated that the proposal was subject to the execution and delivery of
an acceptable definitive acquisition agreement and requested a $50 million
break-up fee; a 30-day limit on the period during which the Board could consider
competing offers after the signing of the definitive acquisition agreement; the
adoption of a stockholder rights plan by People's Choice; completion by Sprint
of satisfactory due diligence; and the execution of an agreement in which
People's Choice would commit to negotiate exclusively with Sprint regarding a
business combination involving People's Choice.
On March 30, 1999, Mr. Oristano, Mr. Olander, Mr. Whalen, and Mr. Schwartz
participated in a conference call with Mr. Schell and Sheldon Fisher and Fred
Sgroi, attorneys with Sprint, for the purpose of discussing the March 30 letter
from Sprint. Mr. Schell advised People's Choice that Sprint no longer expected
that an acquisition would need to be completed through a Chapter 11 proceeding.
Mr. Schell also advised People's Choice that he believed that an acquisition
agreement could be signed within 10 business days and due diligence completed
within 30 days. Mr. Schell requested that People's Choice execute the 30-day
exclusive negotiating agreement that was attached to the Sprint letter. Mr.
Oristano advised Mr. Schell that he would present the terms of Sprint's proposal
to the People's Choice Board.
On March 31, 1999, the People's Choice Board met to discuss the proposal
from Sprint. The Board determined that, subject to receipt of a fairness opinion
from a nationally recognized investment banking firm and the satisfactory
resolution of the other issues raised in Sprint's proposal, People's Choice
management should attempt to negotiate an acquisition transaction with Sprint.
The People's Choice Board discussed the size of the break-up fee, the request
that People's Choice adopt a stockholder rights plan, and the length of time
associated with an exclusive negotiating agreement. The People's Choice Board
requested that Company management seek a reduction in the break-up fee and the
shortest time possible for an exclusive negotiating agreement.
On April 1, 1999, Mr. Oristano, other representatives of People's Choice,
its outside counsel, Willkie Farr & Gallagher, and Mr. Schell, other Sprint
representatives and outside counsel had a telephone conference in which various
issues were discussed. These included the amount of a break-up fee, the length
of time for an exclusive negotiating agreement, the length of time necessary to
execute a merger agreement and complete due diligence, and the stockholder
rights plan. The Sprint representatives advised People's Choice that they would
consider a reduced break-up fee and a shorter exclusive negotiating period, but
insisted that People's Choice institute a stockholder rights plan.
On April 2, 1999, Sprint entered into a purchase agreement with Wireless
Holding LLC ("Wireless Holding"), the holder of the Preferred Stock, pursuant to
which Sprint agreed to acquire all of the outstanding Preferred Stock. The
People's Choice Board and executives did not facilitate or otherwise participate
in the negotiation of this transaction between Sprint and Wireless Holding.
Wireless Holding disclosed the transaction in a public filing made on April 9,
1999. For more details with respect to the agreement, see "Related Agreements
and Transactions--Preferred Purchase Agreement."
On April 3, 1999, People's Choice and Sprint executed an exclusive
negotiating agreement pursuant to which People's Choice agreed to negotiate
exclusively with Sprint with respect to an acquisition transaction for a period
of one week beginning on April 5, 1999.
On April 5, 1999 Sprint commenced due diligence at People's Choice's offices
and representatives of Sprint and People's Choice commenced negotiations with
respect to the terms of the Merger Agreement. On April 5, 1999, People's Choice
retained Chase to act as People's Choice's financial advisor and render a
fairness opinion with respect to the consideration proposed to be paid by
Sprint.
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Based on the work that Houlihan Lokey had performed with respect to the
Recapitalization Plan, People's Choice also decided to retain Houlihan Lokey to
provide an additional fairness opinion.
On April 11, 1999, the People's Choice Board, its senior executives, and
outside financial and legal advisors met to discuss the proposed transaction
with Sprint and the proposed terms of the Merger Agreement. After discussing the
terms of the Merger Agreement and the status of the pending due diligence
review, the Board received presentations from Chase and Houlihan Lokey with
respect to the fairness of the $5.00 per share purchase price. After these
presentations, the Board remained convened as People's Choice's executives and
advisors proceeded to resolve the remaining issues on the Merger Agreement and
outstanding due diligence items with Sprint.
During the afternoon and evening of April 11, 1999, Mr. Oristano and Mr.
Schell discussed a proposal by which Sprint would increase its purchase price
for the Common Stock to $8.00 per share if Mr. Oristano, Victor Oristano, and
their family and affiliates would be willing to execute option agreements in
favor of Sprint with respect to their shares of Common Stock, and forego the
opportunity to the benefit of a higher purchase price if a third party other
than Sprint ultimately acquired People's Choice. Mr. Oristano and Victor
Oristano agreed that they would be willing to execute such agreements in order
to obtain an increase in the purchase price to all holders to $8.00 per share.
For more details on the agreement, see "Related Agreements and
Transactions--Stockholder and Option Agreements."
In the evening of April 11, 1999, the People's Choice Board reconvened to
consider the merger transaction with Sprint, the proposed form of Merger
Agreement, and the proposed increase in the purchase price to $8.00 per share.
Following discussion and deliberation by the People's Choice Board, the Board
unanimously determined that the Merger was fair to, and in the best interest of,
the holders of Common Stock. The Board unanimously approved the Merger Agreement
and the Merger and resolved unanimously to recommend that the holders of Common
Stock vote for the approval and adoption of the Merger Agreement and the Merger.
At the same time, the People's Choice Board also adopted a Stockholder
Rights Plan in which preferred stock purchase rights were distributed as a
dividend at the rate of one right for each share of Common Stock held as of the
close of business on April 22, 1999. For a detailed summary of the Stockholder
Rights Plan, see "Related Agreements and Transactions--Rights Plan."
On April 12, 1999, the Merger Agreement was executed by People's Choice,
Sprint and Sub. For a detailed summary of the Merger Agreement, see "The Merger
Agreement".
On April 29, 1999, Sprint disclosed in a public filing that it had entered
into option agreements with certain stockholders to acquire an aggregate of
2,227,000 additional shares of Common Stock at a price of $10.00 per share. As a
result, the consideration to be received by each common stockholder in the
merger increased, under the terms of the Merger Agreement, from $8.00 to $10.00
per share in cash.
On June 2, 1999, Sprint disclosed it had exercised all of its options with
respect to Common Stock and purchased an aggregate of 4,804,231 shares of Common
Stock and exercised one of its options with Wireless Holding and purchased an
additional 123,699 shares of Preferred Stock.
REASONS FOR THE MERGER; RECOMMENDATION OF THE PEOPLE'S CHOICE BOARD
In reaching its determination to recommend approval and adoption of the
Merger Agreement and the Merger, the People's Choice Board consulted with
management, as well as Willkie Farr & Gallagher, its legal advisor, Chase and
Houlihan Lokey, and considered a number of factors, including the factors listed
below. In view of the wide variety of factors considered in connection with the
Merger, the People's Choice Board did not consider it practicable to, nor did it
attempt to, quantify or otherwise assign relative weights to the specific
factors it considered in reaching its decision.
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(1) HISTORICAL AND RECENT MARKET PRICES COMPARED TO CONSIDERATION TO BE
RECEIVED BY HOLDERS OF COMMON STOCK. The People's Choice Board reviewed the
historical market prices and trading information with respect to the Common
Stock, and considered that the original price of $8.00 per share of Common
Stock represented (A) a premium of approximately 31% over the $6.13 closing
price of the Common Stock on April 9, 1999, the last full trading day prior
to the April 11 People's Choice Board meeting and (B) a 332% premium over
the average closing price of the Common Stock for the 30 previous trading
days prior to the April 11 People's Choice Board meeting.
(2) PEOPLE'S CHOICE'S BUSINESS, CONDITION AND PROSPECTS. The People's
Choice Board considered information with respect to the financial condition,
results of operations and business of People's Choice, on both an historical
and prospective basis, and current industry, economic and market conditions,
including People's Choice's market position in the wireless communications
market and the recent emphasis on developing its SpeedChoice-TM- internet
access services. The members of the People's Choice Board were familiar with
and knowledgeable about People's Choice's business and affairs and further
reviewed these matters in the course of their deliberations. The People's
Choice Board considered the capital requirements necessary to continue its
business given its current financial condition. The People's Choice Board
noted that there could be no assurance as to People's Choice's access to
such capital on acceptable terms.
(3) TERMINATION OF PEOPLE'S CHOICE'S PROPOSED RECAPITALIZATION PLAN AND
THE NEED TO ADDRESS CERTAIN LIQUIDITY CONCERNS. Prior to the Sprint
acquisition proposal, People's Choice had invested almost twelve months in
attempting to resolve its liquidity and leverage issues through the
Recapitalization Plan. The Recapitalization Plan was terminated when the
largest holder of Senior Discount Notes advised People's Choice that it was
not willing to proceed with the Recapitalization Plan or an alternative
recapitalization transaction. The People's Choice Board considered the fact
that it was not likely that a recapitalization plan could be accomplished in
the near future, and therefore People's Choice would need to consider other
means of addressing its liquidity and leverage issues. The People's Choice
Board believed that unless People's Choice obtained additional financing or
restructure its existing obligations, People's Choice would not have the
cash available to make the $21.8 million interest payment due on the Senior
Discount Notes in December 2000.
(4) TERMS OF THE MERGER. The People's Choice Board considered the
terms and provisions of the Merger Agreement and the related agreements. The
People's Choice Board considered the terms of the Merger Agreement that
permit the People's Choice Board to receive unsolicited inquiries and
proposals from, and negotiate and give information to, third parties. The
People's Choice Board further considered that the total amount which could
be payable to Sprint pursuant to the termination fee was limited to $14
million. The People's Choice Board found reasonable the views of Chase and
Houlihan Lokey that a $14 million termination fee was within the range of
fees payable in comparable transactions and that the fee would not in and of
itself preclude alternative proposals. The People's Choice Board further
considered that Sprint had stated that it would not enter into a transaction
which did not include provisions similar to the termination fee.
(5) OPINIONS OF CHASE AND HOULIHAN LOKEY. The People's Choice Board
considered the oral opinions delivered on April 11, 1999 by Chase and
Houlihan Lokey that as of the date of such opinions, and based upon and
subject to certain matters stated therein, the then-proposed consideration
of $8.00 in cash per share to be received by holders of Common Stock in the
Merger was fair, from a financial point of view to those holders. The
People's Choice Board also considered the oral and written presentations
made to it by Chase and Houlihan Lokey. See "The Merger--Opinions of
People's Choice's Financial Advisors." Copies of Chase and Houlihan Lokey's
written opinions to the People's Choice Board, dated April 12, 1999, which
set forth the
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assumptions made, matters considered and limitations on the review
undertaken, are attached as Appendix C and Appendix D to this Proxy
Statement and are incorporated herein by reference.
(6) SPRINT'S REPUTATION AND RESOURCES AND TIME NEEDED TO COMPLETE THE
TRANSACTION. The People's Choice Board also considered Sprint's size and
standing in the communications industry and the likelihood that Sprint would
be able to gain prompt regulatory approval as a result of these factors. In
addition, the People's Choice Board considered that Sprint's obligation to
close the Merger is not subject to a financing condition and that, in light
of Sprint's size and resources, Sprint has sufficient available funds to
consummate the Merger.
THE BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, HAS DETERMINED THAT
THE MERGER IS FAIR TO, ADVISABLE AND IN THE BEST INTERESTS OF, PEOPLE'S CHOICE
AND ITS HOLDERS OF COMMON STOCK, AND RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
OPINIONS OF PEOPLE'S CHOICE'S FINANCIAL ADVISORS
Chase and Houlihan Lokey were retained by People's Choice to act as its
financial advisors in connection with the proposed Merger. In connection with
such engagement, People's Choice requested that Chase and Houlihan Lokey
evaluate the fairness, from a financial point of view, to holders of Common
Stock of the consideration to be received by such holders pursuant to the terms
of the proposed Merger. On April 11, 1999, at a meeting of the People's Choice
Board held to evaluate the Merger contemplated by the Merger Agreement, Chase
and Houlihan Lokey delivered oral opinions (subsequently confirmed by delivery
of written opinions dated April 12, 1999) to the People's Choice Board to the
effect that, as of the date of such opinion and based upon and subject to
certain matters stated therein, the then-proposed consideration of $8.00 in cash
per share proposed at such time to be paid by Sprint to holders of Common Stock
in the Merger was fair, from a financial point of view, to those holders.
THE FULL TEXT OF THE OPINIONS, WHICH SET FORTH THE PROCEDURES FOLLOWED, THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY
THE ADVISORS IN RENDERING THEIR OPINIONS, ARE ATTACHED AS APPENDIX C AND
APPENDIX D TO THIS PROXY STATEMENT AND ARE INCORPORATED HEREIN BY REFERENCE.
STOCKHOLDERS ARE URGED TO READ THE OPINIONS IN THEIR ENTIRETY. THE OPINIONS ARE
DIRECTED TO THE PEOPLE'S CHOICE BOARD AND RELATE ONLY TO THE FAIRNESS FROM A
FINANCIAL POINT OF VIEW TO HOLDERS OF COMMON STOCK OF THE CONSIDERATION TO BE
RECEIVED IN THE MERGER AND DO NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF THE COMPANY AS TO HOW SUCH
STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE MERGER AGREEMENT. REFERENCES TO THE
OPINIONS AND THE SUMMARY OF THE OPINIONS CONTAINED HEREIN ARE QUALIFIED IN THEIR
ENTIRETY BY REFERENCE TO THE FULL TEXT THEREOF.
OPINION OF CHASE
People's Choice retained Chase to act as a financial advisor in connection
with the Merger and to render its opinion as to the fairness, from a financial
point of view, of the consideration of $8.00 in cash per share proposed at such
time to be paid to the holders of Common Stock in the Merger. On April 11, 1999,
Chase rendered its oral opinion (confirmed in writing as of April 12, 1999) to
the People's Choice Board to the effect that, as of such date, the consideration
of $8.00 in cash per share proposed at such time to be paid by Sprint in the
Merger was fair, from a financial point of view, to the holders of Common Stock.
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In conducting its investigation and analysis and in arriving at its opinion,
Chase reviewed information and took into account financial and economic factors
it deemed relevant under the circumstances. In that connection, Chase, among
other things:
- reviewed certain internal information, primarily financial in nature,
including projections, concerning the business and operations of People's
Choice furnished to Chase for purposes of its analysis;
- reviewed publicly available information including but not limited to
People's Choice's recent filings with the Securities and Exchange
Commission;
- reviewed the Merger Agreement in the form presented to the People's Choice
Board;
- compared the financial position and operating results of People's Choice
with those of other publicly traded companies Chase deemed relevant;
- compared the historical market prices and trading activity of the Common
Stock with those of certain other publicly traded companies Chase deemed
relevant; and
- compared the proposed financial terms of the Merger with the financial
terms of certain other business combinations Chase deemed relevant.
Chase held discussions with members of the senior management of People's
Choice concerning the historical and current financial condition, operating
results and future prospects of People's Choice. Chase was not asked to, and did
not, solicit third party indications of interest in acquiring all or any part of
People's Choice. Chase also considered such other information, financial
studies, analysis and investigations and financial, economic and market criteria
that it deemed relevant for the preparation of its opinion. People's Choice and
Sprint determined the consideration to be paid to holders of Common Stock in the
Merger in arm's-length negotiations. People's Choice did not place any
limitation upon Chase with respect to the procedures followed or factors
considered by Chase in rendering its opinion.
In arriving at its opinion, Chase assumed and relied upon the accuracy and
completeness of all of the financial and other information that was publicly
available or provided to Chase by or on behalf of People's Choice. Chase did not
attempt to independently verify any such information. Chase assumed, with
People's Choice's consent, that:
- all material assets and liabilities (contingent or otherwise, known or
unknown) of People's Choice are as set forth in its financial statements;
- the Merger will be accounted for under the purchase method of accounting;
- the Merger will be consummated in accordance with the terms of the Merger
Agreement without waiver or amendment of any of the respective obligations
of the parties thereunder; and
- the financial forecasts of People's Choice examined by Chase were
reasonably prepared on bases reflecting the best available estimates and
good faith judgments of People's Choice's management as to the future
performance of People's Choice.
In conducting its review, Chase did not undertake or obtain an independent
evaluation or appraisal of any of the assets or liabilities (contingent or
otherwise) of People's Choice, nor did it make a physical inspection of the
properties or facilities of People's Choice. Chase's opinion necessarily was
based upon economic, regulatory, monetary and market conditions as they existed
and could be evaluated on the date of its opinion, and did not predict or take
into account any changes which may occur, or information which may become
available, after the date of its opinion. Chase did not update its opinion or
analysis with respect to any such changes (including without limitation the
increase in the Merger Consideration) and assumes no obligation to do so.
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The following is a summary of certain analyses performed by Chase in
connection with rendering its opinion.
PREMIUMS PAID ANALYSIS. Chase reviewed the implied premium of the
then-proposed consideration of $8.00 per share to be paid to holders of Common
Stock in the Merger in relation to People's Choice's closing stock price on and
before April 9, 1999. In connection with such analysis, Chase reviewed the
actual and average stock price per share of People's Choice Common Stock on the
following dates and over the following periods: April 9, 1999 ($6.13), 30-days
prior to April 9, 1999 ("30-Day Prior") ($1.13), one-month mean prior to April
9, 1999 ($2.08), six-month mean prior to April 9, 1999 ($0.99) and one-year mean
prior to April 9, 1999 ($1.03). Based on the consideration of $8.00 per share of
Common Stock, the implied premium paid for People's Choice in relation to the
April 9, 1999, 30-Day Prior, one-month mean, six-month mean and one-year mean
stock price were 30.6%, 611.1%, 284.3%, 711.8% and 675.6%, respectively.
COMPARATIVE COMPANY ANALYSIS. Chase reviewed certain publicly available
financial information as of the most recently reported period and certain stock
market information as of April 9, 1999 for People's Choice and four selected
publicly traded companies that Chase deemed comparative to People's Choice. Such
comparative companies consisted of American Telecasting, Inc., CAI Wireless
Systems, Inc., Nucentrix Broadband Networks, Inc. and Wireless One, Inc.
(collectively, the "Comparative Companies").
In connection with its analysis, Chase compared the operating performance
and financial condition of the Comparative Companies with that of the operating
performance and financial condition of People's Choice. Such analysis included,
among other things: (i) a review of three-year compounded annual growth rate in
revenues, earnings before interest, taxes, depreciation and amortization
("EBITDA") and subscribers, (ii) gross margins, EBITDA margins, subscriber
penetration, and (iii) debt to market capitalization and book capitalization,
debt to EBITDA and EBITDA to interest expense ratios. In terms of other analyses
performed, Chase calculated the multiples of Enterprise Value (defined herein as
the total market value of fully diluted equity, plus outstanding debt, preferred
and minority interests, less cash and cash equivalents) to latest twelve months
("LTM") revenues, LTM total households, LTM line-of-sight households, and LTM
subscribers for the Comparative Companies. Chase then compared such multiples to
the relevant company calculations based on the People's Choice 30-Day Prior
stock price of $1.13 per share. Such analysis yielded the following: (i) the
multiple of Enterprise Value to LTM revenue was 12.74x for People's Choice
compared to a range of 2.49x to 18.79x for the Comparative Companies (with a
median of 5.07x); (ii) the multiple of Enterprise Value to LTM total households
of $31.6 for People's Choice, compared to a range of $20.7 to $29.0 for the
Comparative Companies (with a median of $21.6); (iii) the multiple of Enterprise
Value to LTM line-of-sight households was $41.1 for People's Choice, compared to
a range of $25.8 to $26.5 for the Comparative Companies (with a median of
$26.2); (iv) the multiple of Enterprise Value per LTM subscribers of People's
Choice of $7,023, compared to a range of $1,148 to $12,019 for the Comparative
Companies (with a median of $2,120). Based upon such analysis, Chase then
applied the median multiples for the Comparative Companies to the relevant
financial and operating data for People's Choice and derived a range of implied
equity values per share for People's Choice. Chase then added to this range of
implied equity values the present value of People's Choice's current $170
million net operating loss carryforward (the "NOL"), based upon applicable use
restrictions under existing tax law and assuming an expiration year of 2011 (and
the applicable corporate tax rate). The resulting range consisted of an implied
equity value per share of Common Stock of $-13.32 to $-4.92.
COMPARATIVE TRANSACTION ANALYSIS. Chase reviewed 29 transactions involving
acquisitions of businesses and/or assets in the wireless cable business that had
been completed since January 1994 (the "Comparative Transactions"). The
Comparative Transactions were chosen based on a review of acquired companies
and/or assets that had general business, operating and financial characteristics
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representative of companies in the industry in which People's Choice operates.
Chase noted that none of the Comparative Transactions reviewed was identical to
the Merger and that, accordingly, the analysis of the Comparative Transactions
necessarily involved complex considerations and judgments concerning differences
in financial and operating characteristics of the target companies and/or assets
and other factors (including the general market conditions prevailing in the
equity capital markets at the time of the transaction) that would affect the
acquisition values of the Comparative Transactions.
In connection with its analysis, where available, Chase reviewed EBITDA
margins and subscriber penetration of each of the companies and/or assets
acquired immediately prior to being acquired in the Comparative Transactions in
relation to the latest reported EBITDA margin and subscriber penetration of
People's Choice. Additionally, for the Comparative Transactions, Chase
calculated the median multiples of Enterprise Value to LTM revenue, LTM
households and LTM subscribers and compared such multiples to the corresponding
statistics of People's Choice implied by the consideration to be received by
holders in the Merger. Such calculations yielded median multiples of 6.64x for
Enterprise Value to LTM revenue, $35 for Enterprise Value to LTM households, and
$3,584 for Enterprise Value to LTM subscribers versus 16.77x, $41 and $9,242,
respectively, for People's Choice. Based upon such analysis, Chase then applied
the median multiples of the Comparative Transactions to the relevant financial
or operating data of People's Choice to derive a range (after adding the
discounted value of the NOL, as discussed above) of implied equity values per
share of Common Stock of $-8.74 to $4.42.
DISCOUNTED CASH FLOW ANALYSIS. Chase performed a discounted cash flow
analysis of People's Choice on a stand-alone basis using People's Choice
management's projections for the fiscal years 1999 through 2006. In connection
with such analysis, Chase assumed a range of terminal multiples of 10.0x to
12.0x projected EBITDA in fiscal year 2006 and discount rates ranging from 20.0%
to 25.0%. The discounted cash flow analysis produced a range of implied equity
values (including the discounted value of the NOL as discussed above) per share
of Common Stock ranging from $-15.45 to $-8.71.
OTHER ANALYSES AND CONSIDERATIONS. Among other analysis performed and
factors considered by Chase in connection with its opinion, Chase reviewed
several significant industry and Company-specific historical trends and events
over the past four years. Specifically, Chase reviewed certain significant
events within the wireless cable industry since 1995, during which time several
major telecommunications companies entered, considered entering or exited the
wireless cable business. Chase also reviewed People's Choice's previous efforts
to explore strategic alternatives, including the restructuring or possible sale
of People's Choice or the formation of strategic alliances with other companies
as well as People's Choice's recently terminated Recapitalization Plan.
The foregoing summary does not purport to be a complete description of the
analyses performed by Chase. The preparation of a fairness opinion is a complex
process and is not susceptible to partial analyses or summary description. Chase
believes that its analyses must be considered as a whole, and that selecting
portions of such analyses without considering all analyses and factors would
create an incomplete view of the processes underlying its opinion. Chase did not
attempt to assign specific weights to particular analyses. Analyses based upon
forecasts of future results are not necessarily indicative of actual values,
which may be significantly more or less favorable than suggested by such
analyses. Estimates of values of companies do not purport to be appraisals or
necessarily to reflect the prices at which companies may actually be sold, and
such estimates are inherently subject to uncertainty. None of the Comparative
Companies is identical to People's Choice, and none of the Comparative
Transactions is identical to the proposed Merger. Accordingly, an analysis of
the Comparative Companies and Comparative Transactions is not mathematical;
rather, it involves complex considerations and judgments concerning differences
in financial and operating characteristics and other factors.
Pursuant to an engagement letter dated April 5, 1999 between People's Choice
and Chase, People's Choice agreed to pay Chase a fee of $250,000, payable upon
delivery of its opinion, regardless
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of the conclusions reached by Chase in such opinion (such fee to be credited
against the transaction fee described below) and a transaction fee, payable upon
consummation of the Merger, equal to 0.7% of the transaction value of People's
Choice implied by the Merger. People's Choice has also agreed to reimburse Chase
for its reasonable out-of-pocket expenses. People's Choice has also agreed to
indemnify Chase, its affiliates and their respective directors, officers,
employees and agents and controlling persons against certain liabilities
relating to or arising out of its engagement, including liabilities under the
federal securities laws. In the past, The Chase Manhattan Corporation and its
affiliates, including Chase, have provided commercial and investment banking
services to People's Choice and Sprint, for which they have received customary
compensation.
Chase, as part of its investment banking business, is engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements, and
valuations for estate, corporate and other purposes. People's Choice retained
Chase because of Chase's experience and expertise in the valuation of businesses
and their securities in connection with mergers and acquisitions. In the
ordinary course of business, Chase and its affiliates may from time to time
trade securities of People's Choice and Sprint for its own account and for
accounts of its customers and, accordingly, may at any time hold a long or short
position in such securities.
OPINION OF HOULIHAN LOKEY
As noted above, the preparation of a fairness opinion is a complex process
and is not necessarily susceptible to partial analysis or summary description.
The following is a brief summary and general description of the valuation
methodologies followed by Houlihan Lokey. The summary does not purport to be a
complete statement of the analyses and procedures applied, the judgments made or
the conclusion reached by Houlihan Lokey or a complete description of its
presentation. Houlihan Lokey believes, and so advised the People's Choice Board,
that its analyses must be considered as a whole and that selecting portions of
its analyses and of the factors considered by it, without considering all
factors and analyses, could create an incomplete view of the process underlying
its analyses and opinions.
People's Choice retained Houlihan Lokey to act as its financial advisor in
connection with the Merger and to render an opinion as to the fairness, from a
financial point of view, of the consideration to be received by the holders of
Common Stock in connection with the Merger. On April 12, 1999, Houlihan Lokey
delivered its written opinion to the People's Choice Board that as of such date
and based on the matters described therein, the consideration to be received by
the holders of Common Stock at such time in connection with the Merger is fair
to them from a financial point of view.
In connection with its opinion, Houlihan Lokey made such reviews, analyses
and inquiries as Houlihan Lokey deemed necessary and appropriate under the
circumstances. Among other things, Houlihan Lokey: (i) reviewed People's
Choice's annual report to stockholders on Form 10-K for the fiscal year ended
December 31, 1998, which People's Choice's management identified as being the
most current audited financial statements available; (ii) reviewed the Merger
Agreement; (iii) reviewed the People's Choice Certificate and People's Choice
Bylaws; (iv) reviewed the Prospectus/Offer to Exchange and Consent Solicitation
Statement on Form S-4 dated April 24, 1998, relating to the Recapitalization
Plan; (v) reviewed the Indenture governing the Senior Discount Notes draft dated
April 4, 1995; (vi) met with certain members of the senior management of
People's Choice to discuss the operations, financial condition, future prospects
and projected operations and performance of People's Choice; (vii) visited
certain facilities and business offices of People's Choice; (viii) reviewed
forecasts and projections prepared by People's Choice's management with respect
to People's Choice for the years ended December 31, 1999 through 2003; (ix)
reviewed the historical market prices and trading volume for People's Choice's
publicly traded securities; (x) reviewed certain other publicly available
financial data for certain companies that Houlihan Lokey deemed comparable to
People's Choice, and publicly available prices and premiums paid in other
transactions that Houlihan Lokey
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considered similar to the Merger; and (xi) conducted such other studies,
analyses and inquiries as Houlihan Lokey deemed appropriate.
In assessing the financial fairness of the consideration offered in the
Merger to People's Choice's common stockholders, Houlihan Lokey, among other
things: (i) analyzed the historical trading value of People's Choice's publicly
traded common equity securities (the "Historical Trading Analysis"); (ii)
analyzed the value of the consideration being offered in the Merger relative to
the historical trading value of People's Choice's publicly traded common equity
securities (the "Acquisition Premium Analysis"); (iii) compared the acquisition
premiums implied by the Merger to acquisition premiums paid in completed
transactions in the cable/telecommunications industry over the last several
years (the "Comparative Acquisition Premium Analysis"); (iv) compared the
multiples of Total Enterprise Value to the number of Line-of-Sight Households
("TEV/LOS HH") and Total Enterprise Value to the number of Television Households
("TEV/TV HH") implied by the Merger to comparable multiples of certain publicly
traded wireless cable operators (the "Market Multiple Analysis"); (v) compared
the value of the consideration being offered in the Merger to Houlihan Lokey's
independent valuation analysis of People's Choice determined using a discounted
cash flow approach (the "Independent Valuation Analysis"); (vi) compared the
TEV/LOS HH multiple implied by the Merger to TEV/LOS HH multiples paid in
historical wireless cable acquisitions (the "Acquisition Multiple Analysis");
and (vii) reviewed the valuation implications to holders of Common Stock of
various strategic alternatives theoretically available to People's Choice in
addition to the Merger.
HISTORICAL TRADING ANALYSIS. Houlihan Lokey analyzed the historical price
and trading volume of Common Stock for the period April 9, 1998 to April 9,
1999. Prior to a press release on March 29, 1999 announcing that MCI had
acquired $200 million in debt from various wireless cable operators including
People's Choice (the "MCI Announcement"), the Common Stock had traded in the
range of $0.22 per share to $1.75 per share with an average stock price of $0.93
per share over the twelve-month period prior to the MCI Announcement. On Friday,
April 9, 1999, Wireless Holding, the sole holder of Preferred Stock, announced
Sprint's purchase of $15 million of Preferred Stock (the "Sprint Announcement")
and People's Choice's Common Stock price closed at $6.13 per share. Including
the trading history for Common Stock following the MCI Announcement and the
Sprint Announcement, the Common Stock traded in the range of $0.22 per share to
$6.13 per share, with an average stock price of $1.03 per share over the
twelve-month period from April 9, 1998 to April 9, 1999.
ACQUISITION PREMIUM ANALYSIS. For purposes of analyzing the implied
acquisition premiums in the Merger, Houlihan Lokey compared the value of the
then-proposed consideration of $8.00 per share being offered to the common
stockholders of People's Choice to People's Choice's average stock prices for
the one-week, one-month, six-month and one-year periods both immediately prior
to the MCI Announcement and through April 9, 1999. People's Choice's average
prices for the one-week, one-month, six-month and one-year periods prior to the
MCI Announcement were $1.04, $1.03, $0.74 and $0.93, respectively. Houlihan
Lokey noted that based on the then-proposed consideration of $8.00 per share
being offered in the Merger, the implied acquisition premiums for People's
Choice based on the average trading prices for the one-week, one-month,
six-month and one-year periods prior to the MCI Announcement were 666.5%,
677.4%, 978.3% and 758.7%, respectively. People's Choice's average prices for
the one-week, one-month, six-month and one-year periods prior to April 9, 1999,
were $4.38, $2.26, $0.99 and $1.03, respectively. Houlihan Lokey noted that
based on the then-proposed consideration of $8.00 per share being offered in the
Merger, the implied acquisition premiums for People's Choice based on the
average trading prices for the one-week, one-month, six-month and one-year
periods ending on April 9, 1999, were 82.6%, 253.6%, 711.8% and 676.2%,
respectively.
Based on this analysis, Houlihan Lokey concluded that the then-proposed
consideration of $8.00 per share being offered in the Merger represents a
significant acquisition premium to People's Choice's historical stock trading
history.
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COMPARATIVE ACQUISITION PREMIUM ANALYSIS. For purposes of this analysis,
Houlihan Lokey compared the acquisition premiums implied for People's Choice by
the Merger to acquisition premiums paid in 24 completed, publicly announced
transactions in the cable/telecommunications industry that occurred between
January 1, 1995, and April 9, 1999. Of the 24 completed, publicly announced
transactions analyzed, there were no transactions deemed directly comparable to
the Merger. The median one day, one week and one month acquisition premiums for
the 24 cable/telecommunication transactions analyzed were approximately 31.3%,
34.0% and 50.7%, respectively. The one day, one week and one month acquisition
premiums for Common Stock implied by the Merger are approximately 456.5%, 966.7%
and 540.0%, respectively, for the periods prior to the MCI Announcement.
Including the trading history for Common Stock following the MCI Announcement
and the Sprint Announcement, the one day, one week and one month acquisition
premiums for Common Stock implied by the Merger are approximately 30.6%, 93.9%
and 495.3%, respectively, for the periods through April 9, 1999.
Based on this analysis, Houlihan Lokey concluded that the acquisition
premiums implied by the then-proposed consideration of $8.00 per share being
offered in the Merger are significantly above the median of acquisition premiums
paid in other completed cable/telecommunications industry transactions.
MARKET MULTIPLE ANALYSIS. For purposes of this analysis, Houlihan Lokey
compared the multiples of TEV/LOS HH and TEV/TV HH implied by the Merger to
comparable multiples of certain publicly traded wireless cable operators. The
following publicly traded companies were considered by Houlihan Lokey to be
reasonably comparable to People's Choice: American Telecasting, Inc., CAI
Wireless Systems, Inc., Nucentrix Broadband Networks, Inc. and Wireless One,
Inc. (collectively, the "Comparable Companies"). In addition, CS Wireless
Systems, Inc. was considered from an operational comparability standpoint, but
because the company does not have publicly traded equity its multiples were not
available.
The median TEV/LOS HH and TEV/TV HH multiples for the Comparable Companies
in Houlihan Lokey's analysis were 26.7 and 21.8, respectively. The TEV/LOS HH
and TEV/TV HH multiples for People's Choice implied by the Merger were 56.0 and
43.0, respectively. Based on this analysis, Houlihan Lokey concluded that the
multiples of TEV/LOS HH and TEV/TV HH implied by the Merger were higher than the
multiples of TEV/LOS HH and TEV/TV HH of the Comparable Companies.
INDEPENDENT VALUATION ANALYSIS. For purposes of this analysis, Houlihan
Lokey compared the value of the consideration being offered in the Merger to an
independent valuation analysis of People's Choice determined using a discounted
cash flow approach. The discounted cash flow analysis was based on detailed,
five-year projections provided by the management of People's Choice. In
determining the independent value of People's Choice from the discounted cash
flow approach, Houlihan Lokey utilized a terminal EBITDA multiple of 11.0x and a
range of discount rates of 19% to 22%.
The range of valuation conclusions for People's Choice implied by the
independent valuation analysis suggested a range of TEV/TV HH multiples of 10.0
to 13.8 and a range of TEV/LOS HH multiples of 13.1 to 17.9. Houlihan Lokey then
compared the multiples of TEV/TV HH and TEV/LOS HH for People's Choice implied
by the Merger of 43.0 and 56.0, respectively, to the range of multiples of
TEV/TV HH and TEV/LOS HH implied by the independent valuation analysis. Based on
this analysis, Houlihan Lokey concluded that the value of the consideration
being offered in the Merger is higher than the range of independent valuation
indications for People's Choice determined using a discounted cash flow
approach.
ACQUISITION MULTIPLE ANALYSIS. For purposes of this analysis, Houlihan
Lokey compared People's Choice's TEV/LOS HH multiple implied by the Merger to
TEV/LOS HH multiples paid in 62 publicly
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disclosed wireless cable acquisitions from December 1993 to April 1999 (the
"Historical Wireless Cable Acquisitions"). Houlihan Lokey noted that none of the
publicly disclosed wireless cable acquisitions were directly comparable to the
Merger, and that a majority of the wireless cable acquisitions were principally
completed during the 1995 to 1996 time period. The median TEV/LOS HH multiple
for the 62 wireless cable acquisitions analyzed was 39.2 compared to a TEV/LOS
HH multiple of 56.0 for People's Choice implied by the Merger.
Based on this analysis, Houlihan Lokey concluded that the TEV/LOS HH
multiple implied by the Merger is higher than the median of the TEV/LOS HH
multiples paid in the Historical Wireless Cable Acquisitions.
REVIEW OF STRATEGIC ALTERNATIVES TO THE MERGER. In evaluating the fairness,
from a financial point of view, of the consideration to be received by the
holders of Common Stock in the Merger, Houlihan Lokey considered the expected
value to People's Choice's stockholders of completing the Merger and certain
alternatives to the Merger. With regard to each alternative, Houlihan Lokey's
analysis qualitatively considered the valuation implications to holders of
Common Stock, the probability of successfully completing the alternative, and
the cost and time to implement. For purposes of this analysis, Houlihan Lokey
considered the following strategic alternatives: (i) status quo; (ii) debt
restructuring; (iii) sale to a strategic buyer; (iv) sale to a financial buyer;
and (v) liquidation. Houlihan Lokey noted that of the strategic alternatives
considered, the Merger appears to provide the greatest value to holders of
Common Stock on a risk-adjusted basis.
Houlihan Lokey has relied upon and assumed, without independent
verification, that the financial forecasts and projections provided to them have
been reasonably prepared and reflect the best currently available estimates of
the future financial results and condition of People's Choice, and that there
has been no material change in the assets, financial condition, business or
prospects of People's Choice since the date of the most recent financial
statements made available to them.
Houlihan Lokey has not independently verified the accuracy and completeness
of the information supplied to them with respect to People's Choice and does not
assume any responsibility with respect to it. Houlihan Lokey has not made any
physical inspection or independent appraisal of any of the properties or assets
of People's Choice. Houlihan Lokey's opinion is necessarily based on business,
economic, market and other conditions as they existed and could be evaluated by
it as of the date of the opinion.
Houlihan Lokey is a nationally recognized investment banking firm with
special expertise in, among other things, valuing businesses and securities and
rendering fairness opinions. Houlihan Lokey is continually engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, private placements of debt and equity,
corporate reorganizations, employee stock ownership plans, corporate and other
purposes. People's Choice selected Houlihan Lokey because of its experience and
expertise in performing valuation and fairness analysis. Houlihan Lokey does not
beneficially own nor has it ever beneficially owned any interest in People's
Choice.
Pursuant to an agreement entered into on April 9, 1999, Houlihan Lokey was
retained by People's Choice to analyze the fairness, from a financial point of
view, of the consideration to be received by the holders of Common Stock in the
Merger. People's Choice has agreed to pay Houlihan Lokey a fee of $250,000 plus
its reasonable out-of-pocket expenses incurred in connection with the rendering
of a fairness opinion. People's Choice has further agreed to indemnify Houlihan
Lokey against certain liabilities and expenses in connection with the rendering
of its services, including liabilities under the federal securities laws.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion describes certain United States federal income tax
consequences of the Merger. The discussion is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), existing and proposed Treasury
regulations promulgated thereunder, rulings, administrative pronouncements and
judicial decisions, changes to which could materially affect the tax
consequences described herein and could be made on a retroactive basis. This
discussion does not address all aspects of federal income taxation that may be
important to a stockholder based on such holder's particular circumstances and
does not address any aspect of state, local or foreign tax laws. This summary
generally considers only shares of Common Stock that are held as capital assets
(generally, assets held for investment) and may not apply to holders who
acquired Common Stock pursuant to the exercise of employee stock options or
other compensation arrangements with the Company, holders that are subject to
special tax treatment (such as broker-dealers, insurance companies, tax-exempt
organizations, financial institutions, and regulated investment companies),
holders that hold Common Stock as part of a "straddle", "hedge", or "conversion
transaction", or holders the functional currency of which is not the U.S.
dollar.
CONSEQUENCES TO HOLDERS OF COMMON STOCK. A holder of Common Stock will
recognize gain or loss equal to the difference between the amount of cash
received in the Merger and the holder's adjusted tax basis in the shares of
Common Stock exchanged. Such gain or loss will generally be capital gain or loss
and will be long-term capital gain or loss if at the Effective Time (as
hereinafter defined) the holder has a holding period for the Common Stock of
more than one year.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Payments of cash to a holder
surrendering shares of Common Stock will be subject to information reporting and
"backup" withholding at a rate of 31% of the cash payable to the holder, unless
the holder furnishes its taxpayer identification number in the manner prescribed
in applicable Treasury Regulations, certifies that such number is correct,
certifies as to no loss of exemption from backup withholding and meets certain
other conditions. Any amounts withheld from payments to a holder under the
backup withholding rules generally will be allowed as a credit against the
holder's United States federal income tax liability, which may entitle such
holder to a refund provided the required information is furnished to the
Internal Revenue Service.
THE PRECEDING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT TO THE MERGER. THUS, PEOPLE'S
CHOICE STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER APPLICABLE TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX
LAWS.
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for by Sprint as a purchase.
REGULATORY FILINGS AND APPROVALS
ANTITRUST. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and the rules promulgated thereunder by the Federal
Trade Commission (the "FTC"), the Merger cannot be consummated until
notifications have been given and certain information has been furnished to the
FTC and the Antitrust Division of the Department of Justice (the "Antitrust
Division") and specified waiting period requirements have been satisfied. Sprint
and People's Choice filed notification and report forms under the HSR Act with
the FTC and the Antitrust Division on April 15, 1999 and April 26, 1999,
respectively. Early termination was granted on May 14, 1999.
At any time before or after consummation of the Merger, the Antitrust
Division or the FTC or any state could take such action under the antitrust laws
as it deems necessary or desirable in the
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public interest, including seeking to enjoin the consummation of the Merger or
seeking divestiture of substantial assets of Sprint or People's Choice. Private
parties may also seek to take legal action under the antitrust laws under
certain circumstances.
FCC APPROVAL. As a result of the Merger, People's Choice and its licensee
subsidiaries, including PCTV Gold, Inc., will undergo a change of control.
Pursuant to the Communications Act of 1934, as amended, and the FCC's
implementing rules, applications must be submitted to, and granted by, the FCC
prior to the closing of the Merger. In addition to the transmission capacity of
the FCC licenses that People's Choice leases from unaffiliated third parties,
People's Choice leases the transmission capacity of certain FCC licenses from
Alda Multichannels, Ltd., Alda Wireless Holdings, Inc., Alda Tucson, Inc. and
Alda Gold, Inc. (the "Alda Companies"), which companies are controlled by
Matthew Oristano. As a condition to the closing of the Merger, the FCC licenses
held by the Alda Companies must be transferred to People's Choice prior to the
closing of the Merger. People's Choice intends to accomplish this license
transfer by transferring all of the capital stock of the Alda Companies (except
for Alda Multichannels, Ltd.) to People's Choice (or a designee of Sprint) at
the time of the closing of the Merger and assigning the FCC licenses held by
Alda Multichannels, Ltd. to a designee of Sprint at the time of the closing of
the Merger. This stock transfer and assignment of FCC licenses will also require
the submission of applications to the FCC and the completion of a review, notice
and approval process.
In considering the above applications, the FCC will evaluate whether grants
will serve the public interest, convenience and necessity, primarily considering
the status of each of the underlying licenses, whether the current licensee is
legally, technically and financially qualified to currently hold each license,
and whether Sprint is legally, technically and financially qualified to assume
control over the holder of each license. Under the FCC's rules, once the FCC
issues a public notice announcing its acceptance for filing of an application
proposing an assignment of a license or a transfer of control over a licensee,
interested parties are afforded thirty days to petition the FCC to deny the
application. In general, upon FCC issuance of a public notice announcing the
grant of an application, interested parties have thirty days to petition the FCC
to reconsider its action, and the FCC has an additional ten days to reconsider
its action on its own motion where the action is taken by its staff under
delegated authority. Although the FCC's rules permit the consummation of the
Merger immediately upon public notice of the grant of the applications unless a
stay is issued, the Merger may be delayed pending favorable resolution of any
petition for reconsideration or other administrative or judicial review.
People's Choice anticipates that any FCC consent to a transfer of control of
PCTV Gold, Inc. will be conditioned upon repayment of certain bidding credits
taken by People's Choice in connection with its acquisition through auction of
certain wireless frequency authorizations and upon immediate payment of the
remaining principal amount of installment debt incurred by People's Choice to
the United States Treasury for certain wireless frequency authorizations
acquired by People's Choice at auction, as well as any unpaid interest accrued
as of the date of transfer.
There can be no assurance that the required regulatory approvals described
above will be received or, if received, the timing and the terms and conditions
thereof.
MANAGEMENT, OPERATIONS AND OWNERSHIP STRUCTURE FOLLOWING THE MERGER
Following the Merger, People's Choice will continue its operations as a
wholly-owned subsidiary of Sprint. The directors of Sub will become the
directors of People's Choice. At the Effective Time, the officers of People's
Choice will remain unchanged. Shortly after the Effective Time, People's Choice
expects that certain current officers will be replaced by Sprint designees.
Sprint has not advised People's Choice of its designees at this time.
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APPRAISAL RIGHTS
Under the DGCL, stockholders are entitled to appraisal rights in connection
with the Merger. Any holder of record of Common Stock or Preferred Stock that
objects to the Merger may elect to have his or her shares of Common Stock or
Preferred Stock appraised under the procedures of the DGCL and to be paid the
appraised value of his or her shares (a "Dissenting Stockholder"). The appraised
value of the shares will not include any value arising from the Merger but may
include a fair rate of interest. It is possible that the fair value determined
may be more or less than the consideration to be received by holders of Common
Stock in the Merger.
Any stockholder who is considering exercising his or her appraisal rights is
urged to review carefully the provisions of Section 262 of the DGCL ("Section
262"), a copy of which is attached as Appendix E to this Proxy Statement,
particularly with respect to the procedural steps required to perfect the right
of appraisal. The right of appraisal may be lost if the procedural requirements
of Section 262 are not followed exactly. The following is a summary of the
procedures relating to exercise of the right of appraisal, which should be read
in conjunction with the full text of Section 262.
Under Section 262, People's Choice is required to notify each stockholder
entitled to appraisal rights at least 20 days prior to the special meeting that
such appraisal rights are available. The notice should include a copy of Section
262, a copy of which is attached as Appendix E. THIS PROXY STATEMENT CONSTITUTES
SUCH NOTICE TO THE STOCKHOLDERS OF PEOPLE'S CHOICE.
A stockholder electing to exercise his or her appraisal rights under Section
262 must deliver to People's Choice a written demand for appraisal before the
vote is taken at the Special Meeting. The written demand must identify the
stockholder and state that the stockholder intends to demand appraisal of his or
her shares of Common Stock or Preferred Stock. A vote against the adoption of
the Merger Agreement or an abstention will not constitute a demand for
appraisal. A stockholder electing to make a demand for appraisal must do so by a
separate written demand to People's Choice. Demands should be mailed or
delivered to People's Choice TV Corp., Two Corporate Drive, Suite 249, Shelton,
Connecticut, 06484, Attention: Corporate Secretary. Within 10 calendar days
after the Effective Time, People's Choice will notify each stockholder who has
made a proper written demand for appraisal and who has not voted for the
adoption of the Merger Agreement that the Merger has been completed. A vote
"For" the adoption of the Merger Agreement will have the effect of waiving all
appraisal rights.
Within 120 calendar days after the Effective Time, People's Choice or any
stockholder who has complied with the foregoing notice requirement and the other
requirements of Section 262 may file a petition in the Delaware Court of
Chancery (the "Court") demanding a determination of the fair value of his or her
shares of Common Stock or Preferred Stock. People's Choice has no obligation to
file a petition and does not currently intend to do so. As a result, any
Dissenting Stockholder who wishes to file a petition is advised to do so on a
timely basis. If a petition for appraisal is not filed during the 120-day
period, all appraisal rights relating to the Common Stock will terminate. Any
stockholder may withdraw a demand for appraisal at any time within 60 calendar
days after the Effective Time (or thereafter with the written consent of
People's Choice).
If a stockholder either withdraws his or her demand for appraisal or has his
or her appraisal rights terminated as described above, the stockholder will only
be entitled to receive the Merger Consideration for his or her shares of Common
Stock or Preferred Stock as provided under the terms of the Merger Agreement.
Within 120 calendar days after the Effective Time, any stockholder who has
complied with the above-described notice requirements and the other requirements
of Section 262 may request in writing a list of the aggregate number of shares
of Common Stock or Preferred Stock for which demands for appraisal have been
made and the aggregate number of holders demanding appraisal rights.
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If a petition is filed by a Dissenting Stockholder, People's Choice will
receive notice from the Court of such filing. Within 20 calendar days after
People's Choice receives notice from the Court, People's Choice must file with
the office of the Register in Chancery in which the petition was filed, a list
containing the names and addresses of all stockholders who have demanded
appraisal rights and the names of all stockholders who have disagreements with
People's Choice regarding the value of their shares of Common Stock or Preferred
Stock. If a petition is filed by People's Choice, the petition will be
accompanied by a similar list. If ordered by the Court, the Register in Chancery
will give notice of the time and place of the hearing by registered or certified
mail to People's Choice and to each stockholder shown on the list. The notice
will also be given by publishing the notice in a newspaper of general
circulation published in Wilmington, Delaware (or any other location the Court
may determine), at least one week before the hearing. The forms of the notices
to be used will be approved by the Court, and all costs related to the
distribution of the notices will be paid by People's Choice.
After the Court determines which of the stockholders are entitled to an
appraisal under Section 262, the Court will appraise the fair value of the
shares of the Common Stock or Preferred Stock. Following determination by the
Court of the fair value of the shares, People's Choice will pay all Dissenting
Stockholders the appraised value of their shares, together with interest, if
any, upon surrender to People's Choice of their certificates representing Common
Stock or Preferred Stock. The costs of the appraisal proceeding may be
determined by the Court and charged to the parties as the Court deems equitable
in the circumstances. Upon application of a Dissenting Stockholder, the Court
may order all or a portion of the expenses incurred by any Dissenting
Stockholder in connection with the appraisal proceeding, including reasonable
attorneys' fees and the fees and expenses of experts, to be charged pro rata
against the value of all of the shares entitled to an appraisal.
After the Effective Time, no stockholder who has demanded his or her
appraisal rights as set forth above will be entitled to vote his or her shares
for any purpose or to receive payment of dividends or other distributions on his
shares (except dividends or other distributions payable to stockholders of
record at a date prior to the Effective Time).
PUBLIC TRADING MARKETS
The Common Stock is currently traded on the OTC Bulletin Board under the
symbol "PCTV". Upon consummation of the Merger, the Common Stock will no longer
be traded on the OTC Bulletin Board and will be deregistered under the Exchange
Act.
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THE MERGER AGREEMENT
The following describes certain aspects of the proposed Merger, including
material provisions of the Merger Agreement. The following description of the
Merger does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement, which is attached as Appendix A to this Proxy
Statement and is incorporated herein by reference. Holders of Common Stock are
urged to read the Merger Agreement carefully. Capitalized terms used in this
section or elsewhere in this Proxy Statement but not defined in this Proxy
Statement shall have the meanings attributed to them in the Merger Agreement.
GENERAL; MERGER CONSIDERATION
The terms of the Merger are set forth in the Merger Agreement. The Merger
Agreement was approved by the People's Choice Board and signed by Sprint, Sub
and People's Choice on April 12, 1999. Pursuant to the Merger Agreement, and on
the terms and conditions set forth therein, at the Effective Time, Sub will be
merged with and into People's Choice. People's Choice will be the surviving
corporation in the Merger (the "Surviving Corporation"). The Merger Agreement
provides that, as a result of the Merger, each share of Common Stock issued and
outstanding immediately prior to the Effective Time (other than Common Stock
already owned by Sprint or Sub, Common Stock owned as treasury stock by People's
Choice and shares of Common Stock held by holders who have sought appraisal
rights under the DGCL (the "Excluded Shares")) shall be converted into the right
to receive $8.00 in cash. The Merger Agreement also provides that if, prior to
the consummation of the Merger, Sprint or its affiliates purchase or obtain
options to purchase shares of Common Stock at a price per share greater than
$8.00, each share of Common Stock issued and outstanding immediately prior to
the Effective Time (other than Excluded Shares) will be converted into the right
to receive the highest such price per share. As a result of option agreements
entered into by Sprint and certain stockholders, the consideration to be paid to
holders of Common Stock in the Merger increased, under the terms of the Merger
Agreement, from $8.00 to $10.00 in cash per share. The Preferred Stock will
remain issued and outstanding following the Merger.
DISSENTING SHARES
In the Merger, stockholders have appraisal rights under Section 262 of the
DGCL. If a stockholder exercises his or her appraisal rights and complies with
the requirements of Section 262, the shares of Common Stock or Preferred Stock
owned by the Dissenting Stockholder will not be converted into the right to
receive the Merger Consideration at the Effective Time. Instead, such Dissenting
Stockholder will receive the appraisal value of his or her shares of Common
Stock or Preferred Stock (the "Dissenting Shares"), which may be more or less
than $10.00 per share. If after the Effective Time, the Dissenting Stockholder
fails to comply with the requirements of Section 262, the Dissenting Shares of
such Dissenting Stockholder will be converted into the right to receive the
Merger Consideration or, in the case of Preferred Stock, remain outstanding
following the Merger. At the Effective Time, a Dissenting Stockholder will not
have any rights (including voting rights and rights to dividends or
distributions) with respect to his or her Dissenting Shares other than rights
provided by Section 262. For a summary of the requirements that a stockholder
must follow in order to exercise his or her appraisal rights, see "The
Merger--Appraisal Rights."
TREATMENT OF STOCK OPTIONS
People's Choice agreed to take all commercially reasonable efforts necessary
to ensure that all outstanding stock options will be exercisable in full
immediately prior to the consummation of the Merger and all options that are not
exercised prior to the consummation of the Merger will terminate and expire as
of the consummation date of the Merger. People's Choice agreed to offer holders
of People's Choice stock options the right to cancel his or her stock option in
exchange for an amount in cash equal to the product of (A) $10.00 (which may be
increased if the Merger Consideration is
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increased) less the exercise price of the stock option and (B) the number of
shares subject to the stock option.
CLOSING; EFFECTIVE TIME
The Closing of the Merger will take place within five business days
following the satisfaction or waiver of the conditions to the Merger set forth
in the Merger Agreement. Concurrently with the Closing, People's Choice and
Sprint will cause a Certificate of Merger to be executed, acknowledged and filed
with the Secretary of State of the State of Delaware. The Merger will become
effective at the time the Certificate of Merger is duly filed with the Secretary
or at such later time agreed by the parties and established under the
Certificate of Merger (the "Effective Time"). See "--Conditions of the Proposed
Merger" and "The Merger--Required Regulatory Filings and Approvals."
CANCELLATION OF SHARES
At the Effective Time, the Common Stock will no longer be outstanding and
will be canceled and retired and will cease to exist, and each certificate (a
"Certificate") formerly representing any of such shares (other than Excluded
Shares) will thereafter represent only the right to receive the Merger
Consideration.
EXCHANGE OF CERTIFICATES
Prior to the Effective Time, Sprint agreed to designate a bank or trust
company to act as agent (the "Paying Agent") for the benefit of the holders of
shares of Common Stock to receive the funds necessary to make payments to
holders upon surrender of the Certificates. Upon surrender of a Certificate to
the Paying Agent together with a signed letter of transmittal, duly executed,
the holder of such Certificate is entitled to receive in exchange therefor the
Merger Consideration that such holder has the right to receive pursuant to the
provisions of the Merger Agreement, and the Certificate will then be canceled.
No interest will be paid or accrued on any amount payable upon due surrender of
the Certificates.
TRANSFERS
After the Effective Time, the stock transfer books of People's Choice will
be closed and thereafter there shall be no further registration of transfers of
shares of Common Stock on the records of People's Choice.
LOST, STOLEN OR DESTROYED CERTIFICATES
In the event any Certificate is lost, stolen or destroyed, upon the making
of an affidavit of that fact by the stockholder claiming such Certificate to be
lost, stolen or destroyed and, if required by the Surviving Corporation or
Sprint, the posting by such stockholder of a bond in such reasonable amount as
Sprint may direct as an indemnity against any claim that may be made against it
with respect to such Certificate, the Paying Agent will issue in exchange for
such lost, stolen or destroyed Certificate the applicable Merger Consideration
such stockholder is entitled to receive pursuant to the Merger Agreement.
REPRESENTATIONS AND WARRANTIES
MUTUAL REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains
various representations and warranties of the parties relating to and including,
among other things: (a) capitalization and organization and similar corporate
matters; (b) authorization, execution, delivery, performance and enforceability
of the Merger Agreement and related matters; (c) conflicts under governing
documents, required consents or approvals, and violations of any agreements or
law; and (d) information supplied in this Proxy Statement.
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ADDITIONAL REPRESENTATIONS AND WARRANTIES OF PEOPLE'S CHOICE. People's
Choice has made additional representations relating to: (a) the filing and
validity of FCC licenses and other licenses and permits; (b) filings with the
SEC; (c) certain changes or events; (d) the filing of tax returns and other tax
matters; (e) valid title to assets; (f) change of control agreements; (g)
litigation; (h) contracts and commitments; (i) retirement and other employee
plans and matters relating to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"); (j) contracts with labor unions or organizations;
(k) compliance with environmental regulations; (l) ownership of intellectual
property; (m) Year 2000 compliance; (n) insurance policies; (o) notes and
accounts receivable; (p) transactions with affiliates; (q) other merger
discussions; (r) disclosure in the company disclosure letter delivered by
People's Choice concurrently with the Merger Agreement; and (s) the exercise of
outstanding warrants.
CONDUCT OF PEOPLE'S CHOICE'S BUSINESS PRIOR TO THE MERGER
People's Choice has agreed as to itself and, where indicated, each of its
subsidiaries that after the date of the Merger Agreement and prior to the
Effective Time (unless Sprint shall otherwise approve in writing):
(a) it and its Subsidiaries will conduct their businesses in the ordinary
course of business and in a manner consistent with prior practice;
(b) it and its Subsidiaries will use all commercially reasonable efforts to
maintain and protect the FCC licenses and channel leases, to preserve
their business organizations substantially intact, to keep available the
services of their current officers and employees and maintain their
existing relations and goodwill with customers, suppliers and other
persons with which People's Choice or its Subsidiaries has significant
business relations;
(c) it will comply in all material respects with all applicable laws and
regulations wherever its business is conducted, including the timely
filing of all reports with the FCC and SEC;
(d) it will not authorize, declare, set aside or pay any dividend payable in
cash, stock or property in respect of any capital stock other than (i)
dividends from Subsidiaries, (ii) dividends with respect to the
Preferred Stock and (iii) dividends with respect to the preferred stock
of SpeedChoice of Detroit, Inc.;
(e) it will not split, combine or reclassify its outstanding shares of
capital stock;
(f) it will not repurchase or otherwise acquire or permit any of its
Subsidiaries to purchase or otherwise acquire any shares of its capital
stock;
(g) neither it nor its Subsidiaries will issue, deliver or sell, or
authorize or propose the issuance, delivery or sale of, any shares of
its capital stock or any securities convertible into any such shares of
its capital stock, or any rights, warrants or options to acquire any
such shares or convertible securities or any stock appreciation rights,
phantom stock plans or stock equivalents, other than the issuance of
shares of Common Stock upon (i) the exercise of Options outstanding as
of the date of the Merger Agreement, (ii) exercise of warrants and (iii)
conversion of Preferred Stock;
(h) it will not amend or modify the People's Choice Certificate or People's
Choice Bylaws;
(i) neither it nor its Subsidiaries will incur any indebtedness for borrowed
money or guaranty any such indebtedness of another person, other than
(A) borrowings under existing lines of credit (or under any refinancing
of such existing lines) or (B) indebtedness owing to, or guaranties of
indebtedness owing to, People's Choice;
(j) neither it nor its Subsidiaries will make any loans or advances to any
other person other than loans or advances between any Subsidiaries or
between People's Choice and its Subsidiaries (other than loans or
advances less than $50,000 made in the ordinary course of business
consistent with past practice);
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(k) neither it nor its Subsidiaries will merge or consolidate with any other
entity in any transaction, or sell any business or assets in a single
transaction or series of transactions in which the aggregate
consideration is $100,000 or greater;
(l) neither it nor its Subsidiaries will change its accounting policies
except as required by GAAP;
(m) neither it nor its Subsidiaries will make any change in employment terms
for any of its directors or officers;
(n) neither it nor its Subsidiaries will alter, amend or create any
obligations with respect to compensation, severance, benefits, change of
control payments or any other payments to employees, directors or
affiliates of People's Choice or its Subsidiaries, other than with
respect to alterations or amendments made with respect to non-officers
and non-directors in the ordinary course of business consistent with
past practice or as expressly contemplated by the Merger Agreement or
consented to in writing by Sprint;
(o) neither it nor any of its Subsidiaries will make any changes to its
Benefit Plans;
(p) neither it nor any of its Subsidiaries will enter into any leasing or
licensing agreements, take-or-pay arrangements or other affiliations,
alignments or agreements with respect to the FCC Licenses, provided,
People's Choice may renegotiate any Channel Leases in the ordinary
course of business;
(q) neither it nor any of its Subsidiaries will willfully take any action
that would cause any of its representations and warranties in the Merger
Agreement to become untrue in any material respect;
(r) it will not incur material operating expenses or capital expenditures,
in the aggregate, in excess of those identified in the projections
contained in the Merger Agreement; and
(s) neither it nor any of its Subsidiaries will authorize or enter into any
agreement to take any of the foregoing actions.
In addition, People's Choice and each of its Subsidiaries agreed not to take
any action that would, or could reasonably be expected to, result in the
conditions to the obligations of People's Choice, Sprint or Sub to consummate
the Merger not being satisfied.
AGREEMENT NOT TO SOLICIT OTHER OFFERS
Under the Merger Agreement, People's Choice agreed not to, nor authorize or
permit any of its Subsidiaries or any of its officers, directors, employees,
auditors, attorneys, financial advisors, lenders and other agents (collectively,
the "Representatives") to, directly or indirectly, (a) solicit, initiate or
encourage the submission of any Acquisition Proposal (as defined in the
following paragraph) or (b) participate in or encourage any discussion or
negotiations regarding, or furnish to any person any non-public information with
respect to, or take any other action to facilitate any inquiries or the making
of, any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal. However, the People's Choice Board is entitled to furnish
information to, or enter into discussions or negotiations with, any person or
entity that makes an unsolicited Acquisition Proposal prior to the approval of
the Merger Agreement by the holders of Common Stock if, and to the extent that
(A) the People's Choice Board, based upon the written advice of independent
outside legal counsel, determines in good faith that such action is required for
the People's Choice Board to comply with its fiduciary obligations to the
holders of Common Stock under applicable Delaware law, (B) prior to taking such
action, People's Choice receives from such person or entity an executed
agreement in reasonably customary form relating to the confidentiality of
information to be provided to such person or entity and (C) the People's Choice
Board concludes in good faith, based upon written advice from its independent
financial advisor, that the Acquisition Proposal is a Superior Proposal.
People's Choice is to provide immediate oral and written notice to Sprint of (a)
the receipt of any such Acquisition Proposal or any inquiry which could
reasonably be expected to lead to any Acquisition Proposal,
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(b) the material terms and conditions of such Acquisition Proposal or inquiry,
(c) the identity of such person or entity making any such Acquisition Proposal
or inquiry and (d) People's Choice's intention to furnish information to, or
enter into discussions or negotiations with, such person or entity. People's
Choice agreed to continue to keep Sprint informed of the status and details of
any such Acquisition Proposal or inquiry. Sprint has an opportunity to propose
adjustments to the terms and conditions of the Merger Agreement in order to
enable the People's Choice Board of Directors to continue with its
recommendation of the Merger Agreement as described under "--Board
Recommendations."
For purposes of the Merger Agreement, "Acquisition Proposal" means any bona
fide proposal with respect to a merger, consolidation, share exchange, tender
offer or similar transaction involving People's Choice, or any purchase or other
acquisition of all or any significant portion of the assets of People's Choice
or any equity interest in People's Choice, and "Superior Proposal" means any
proposal (on its most recently amended or modified terms, if amended or
modified) made by a third party to enter into an Alternative Transaction (see
"--Certain Other Covenants and Agreement--Board Recommendations") which the
People's Choice Board determines in its good faith judgment (based on, among
other things, the written advice of an independent financial advisor) to be more
favorable to the stockholders than the Merger, taking into account all relevant
factors (including whether, in the good faith judgment of the People's Choice
Board, after obtaining the advice of such independent financial advisor, the
third party is reasonably able to finance the transaction, and any proposed
changes to the Merger Agreement that may be proposed by Sprint in response to
such Alternative Transaction).
CERTAIN OTHER COVENANTS AND AGREEMENTS
ACCESS TO INFORMATION; CONFIDENTIALITY. The Merger Agreement provides that
from the signing of the Merger Agreement to the closing of the Merger, People's
Choice will, and will cause the Representatives of People's Choice, to afford
the Representatives of Sprint and Sub reasonable access at all reasonable times
to the officers, employees, agents, properties, offices and other facilities,
books and records of People's Choice and its Subsidiaries, and shall furnish
Sprint and Sub with all financial, operating and other data and information as
Sprint and Sub, through their Representatives, may reasonably request. Sprint
will remain subject to the terms of a confidentiality agreement with People's
Choice dated March 20, 1998. No investigation pursuant to this provision shall
affect any representation or warranty in the Merger Agreement of any party or
any condition to the obligations of the parties.
NOTIFICATION OF CERTAIN MATTERS. The Merger Agreement provides that
People's Choice give prompt notice to Sprint, and Sprint give prompt notice to
People's Choice, of (i) the occurrence, or nonoccurrence, of any event which
would be likely to cause any representation or warranty contained in the Merger
Agreement to be untrue or inaccurate and (ii) any failure by such party (or Sub,
in the case of Sprint) to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it.
FURTHER ASSURANCES. Upon the terms and subject to the conditions of the
Merger Agreement, each of the parties to the Merger Agreement agreed to use all
commercially reasonable efforts to take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things necessary, proper or
advisable under law to consummate and make effective the Merger and the other
transactions contemplated by the Merger Agreement, including, without
limitation, using all commercially reasonable efforts to obtain all licenses,
permits, consents, approvals, authorizations, qualifications and orders of each
governmental entity and parties to contracts with People's Choice and its
Subsidiaries as are necessary for the consummation of the Merger and the other
transactions contemplated by the Merger Agreement and to fulfill the conditions
set forth in the Merger Agreement. If at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of the Merger
Agreement, the proper officers of each party to the Merger Agreement and the
Surviving Corporation agreed to use all commercially reasonable efforts to take
all such action.
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In connection with, and without limiting the foregoing, People's Choice
agreed to:
(a) take all actions necessary to ensure that no state antitakeover
statute or similar statute or regulation is or becomes operative with
respect to the Merger Agreement, the Merger or any other transactions
contemplated by the Merger Agreement and
(b) if any state antitakeover statute or similar statute or regulation
is or becomes operative with respect to the Merger Agreement, the Merger or
any other transaction contemplated by the Merger Agreement, take all actions
necessary to ensure that the Merger Agreement, the Merger and any other
transactions contemplated by the Merger Agreement and otherwise to minimize
the effect of such statute or regulation on the Merger and the other
transactions contemplated by the Merger Agreement.
The parties to the Merger Agreement have agreed to use their best efforts to
secure promptly all necessary approvals from the FCC that are required to
consummate the Merger Agreement. Notwithstanding the foregoing, on May 14 and
17, 1999, the parties filed with the FCC applications seeking authorization for
the transfer of control of People's Choice to Sub at the Closing and the
assignment of any FCC Licenses held by the Alda Companies to an entity
designated by Sub at the Closing. The parties agreed to use their best efforts
to prosecute such applications with diligence and to diligently oppose any
objections to such applications to the end that each application, as soon as
practicable, is granted by the FCC and such grants shall no longer be subject to
any further administrative or judicial review.
BOARD RECOMMENDATIONS. In connection with the Merger and Special Meeting,
the People's Choice Board agreed to recommend to the holders of the Common Stock
to vote in favor of the Merger and use all commercially reasonable efforts to
obtain the necessary approvals by the holders of the Common Stock of the Merger
Agreement, subject to fiduciary obligations under applicable law. The People's
Choice Board shall not (i) withdraw, qualify or modify, or propose publicly to
withdraw, qualify or modify, in a manner adverse to Sprint, the approval or
recommendation of such Board of Directors of the Merger or the Merger Agreement,
(ii) approve or recommend, or propose publicly to approve or recommend, any
transaction involving an acquisition proposal from a third party (an
"Alternative Transaction"), or (iii) cause People's Choice to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement (each, an "Acquisition Agreement") related to any Alternative
Transaction.
Nevertheless, if prior to the approval of the Merger Agreement by the
holders of the Common Stock, the People's Choice Board determines in good faith,
after it has received a Superior Proposal as described above under "--Agreement
Not to Solicit Other Offers" and after receipt of written advice from outside
counsel that it is required to do so by its fiduciary duties to holders of the
Common Stock under applicable law, the People's Choice Board may (subject to
this and the following sentences) inform holders of Common Stock that it no
longer believes that the Merger is advisable and no longer recommends approval
(a "Subsequent Determination") and enter into an Acquisition Agreement with
respect to a Superior Proposal, but only at a time that is after the third
business day following Sprint's receipt of written notice from the People's
Choice Board that it has received a Superior Proposal. Such written notice shall
specify the material terms and conditions of such Superior Proposal (and include
a copy thereof with all accompanying documentation, if in writing), identify the
person making such Superior Proposal and state that the People's Choice Board
intends to make a Subsequent Determination. During such three business day
period, People's Choice agreed to provide Sprint an opportunity to propose such
adjustments to the terms and conditions of the Merger Agreement as would enable
People's Choice to proceed with its recommendation to its stockholders without a
Subsequent Determination. However, any such proposed adjustment will be at the
discretion of the parties at such time.
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In the event that the People's Choice Board withdraws or modifies its
recommendation, People's Choice has agreed that the Special Meeting shall
nevertheless be convened and votes with respect to the Merger taken.
STOCKHOLDER LITIGATION. People's Choice agreed to give Sprint the
opportunity to participate in the defense or settlement of any stockholder
litigation against People's Choice and its directors relating to the
transactions contemplated by the Merger Agreement or the Merger. However, no
such settlement will be agreed to without Sprint's consent, which consent may
not be unreasonably withheld.
SPECIAL MEETING. People's Choice agreed to cause the Special Meeting to be
duly called and held as soon as practicable for the purpose of voting on the
approval and adoption of the Merger Agreement and the Merger. People's Choice
will take all action necessary in accordance with the DGCL and the People's
Choice Certificate and Bylaws to duly call, give notice of, and convene the
Special Meeting. People's Choice will, at the direction of Sprint, solicit from
holders of shares of Common Stock entitled to vote at the Special Meeting
proxies in favor of such approval and shall take all other action necessary or,
in the reasonable judgment of Sprint, helpful to secure the vote or consent of
such holders required to effect the Merger.
INDEMNIFICATION OF DIRECTORS AND OFFICERS; DIRECTORS AND OFFICERS'
INSURANCE. All rights to indemnification by People's Choice now existing in
favor of each present and former director, officer, employee and agent of
People's Choice or its Subsidiaries (the "Indemnified Parties") as provided in
People's Choice's Certificate or Bylaws, in each case as in effect on the date
of the Merger Agreement, or pursuant to any other agreements in effect on the
date thereof, copies of which have been provided to Sprint, will survive the
Merger. Sprint agreed to (i) cause the Surviving Corporation to continue in full
force and effect for a period of at least six years from the Effective Time and
(ii) perform, or cause the Surviving Corporation to perform, in a timely manner,
the Surviving Corporation's obligation with respect to those indemnification
rights.
Sprint and Sub agreed that any claims for indemnification hereunder as to
which they have received written notice prior to the sixth anniversary of the
Effective Time will survive, whether or not such claims shall have been finally
adjudicated or settled. In addition, Sprint will cause the Surviving Corporation
to, and the Surviving Corporation will, maintain in effect for six years from
the Effective Time, if available, the current directors' and officers' liability
insurance policies ("D&O Insurance") covered by such policies (provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are not materially less
favorable) with respect to matters occurring prior to the Effective Time.
However, in no event will the Surviving Corporation be required to expend more
than an amount per year equal to 150% of current annual premiums paid by
People's Choice for such insurance.
If the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other persons and is not the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any persons,
then, and in each such case, proper provision will be made so that the
successors and assigns of the Surviving Corporation will assume the obligations
described above.
FCC APPLICATIONS. People's Choice and Sprint have agreed to coordinate
efforts and cooperate with each other, to the extent permitted by the FCC rules,
in the preparation and filing of Colocation Applications and Other Applications
with the FCC. Upon the request of Sprint, People's Choice will use all
commercially reasonable efforts to prepare and file and/or to cause the lessor
of a Channel Lease to prepare and file, at People's Choice's expense, a
Colocation Application or Other Application to be filed with the FCC, as soon as
practicable, and to the extent applicable, in no event after: (i) the end of the
initial one week filing window in which the FCC will accept Other Applications
for the provision of Two-Way Services; or (ii) the end of a filing window for
ITFS major modification applications established pursuant to Section 74.911(c)
of the FCC rules.
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TRANSFER OF FCC LICENSES. People's Choice agreed to cause, prior to the
consummation of the Merger, the FCC Licenses and Channel Leases owned by the
Alda Companies to be transferred to People's Choice in a manner reasonably
satisfactory to Sprint. In connection with such transfer, People's Choice will
cause each of the Alda Companies to release People's Choice from any liabilities
to the Alda Companies associated with such FCC Licenses and Channel Leases and
acknowledge that People's Choice has no further obligations to the Alda
Companies with respect to such FCC Licenses and Channel Leases.
DIRECTOR RESIGNATIONS. People's Choice agreed to cause to be delivered to
Sprint resignations of all the directors of People's Choice's Subsidiaries to be
effective upon the consummation of the Merger. People's Choice will cause such
directors prior to resignation, to appoint new directors nominated by Sprint to
fill such vacancies.
RIGHTS PLAN. The People's Choice Board agreed to adopt a Rights Agreement
between People's Choice and Harris Trust Company of New York (the "Rights Plan")
and approve the appropriate resolutions so that (i) neither Sprint nor Sub will
become an "Acquiring Person" as a result of the transactions contemplated by the
Merger Agreement or the Merger, (ii) no "Stock Acquisition Date" or
"Distribution Date" will occur as a result of the Merger Agreement or the Merger
or the consummation of the transactions contemplated by the Merger Agreement or
the Merger, and (iii) all outstanding rights to purchase Series A Junior
Participating Preferred Stock issued and outstanding under the Rights Plan will
expire at the Effective Time. See "Rights Plan" for further details.
YEAR 2000 PLAN. People's Choice agreed to (i) use all commercially
reasonable efforts to ensure that People's Choice's Year 2000 Plan shall be
completed in a timely manner, (ii) allow Sprint to monitor People's Choice's
Year 2000 Compliance issues and Year 2000 Plan, (iii) provide prompt notice to
Sprint if People's Choice does not achieve, or reasonably expects it shall not
achieve milestones and objectives identified in the Year 2000 Plan and (iv)
cooperate in good faith with Sprint's efforts to ensure that People's Choice is
Year 2000 Compliant.
PURCHASE OF COMMON STOCK. People's Choice agreed not to prohibit Sprint or
any of its affiliates from purchasing shares of Common Stock or entering into
option, lock-up, voting, or proxy agreements or any other similar agreements
with respect to Common Stock (including, but not limited to, amending the Rights
Plan to cause such acquisition or agreement to trigger a Stock Acquisition Date
or Distribution Date or cause Sprint or any or its affiliates to become an
Acquiring Person) at any time prior to the consummation of the Merger.
APPOINTMENT OF DIRECTORS. Unless or until permitted by FCC rules and
regulations, Sprint agreed not to appoint any directors to the People's Choice
Board pursuant to rights relating to shares of Common Stock owned directly or
indirectly by Sprint.
CONDITIONS OF THE PROPOSED MERGER
MUTUAL CONDITIONS. The obligation of each of Sprint, Sub and People's
Choice to effect the Merger is conditioned on the following:
(a) the approval of the Merger by the requisite vote of the holders of
Common Stock;
(b) No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition (including, any statute, rule, regulation,
injunction, order or decree proposed, enacted, enforced, promulgated,
issued or deemed applicable to, or any consent or approval withheld with
respect to, the Merger, by any Governmental Entity) preventing the
consummation of the Merger shall be in effect; PROVIDED, HOWEVER, that
the parties invoking this condition shall use all commercially
reasonable efforts to have any such order or injunction vacated;
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(c) the expiration or termination of the waiting period applicable to the
consummation of the Merger under the HSR Act, any necessary approval by
the FCC, and all other actions by or in respect of or filings with any
Governmental Entity required to permit the consummation of the Merger
shall have been made or obtained (as the case may be);
(d) the other party's representations and warranties, subject to certain
materiality exceptions, being true and correct as of the date of the
Merger Agreement and as of the Closing Date and the receipt of
certificates to such effect; and
(e) the performance in all material respects by the other party of its
obligations under the Merger Agreement and the receipt of certificates
to such effect.
ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF SPRINT AND SUB. In addition,
the obligations of Sprint and Sub under the Merger Agreement are subject to (i)
the transfer of the FCC Licenses by the Alda Companies to People's Choice, (ii)
the resignation of the directors of People's Choice's Subsidiaries and People's
Choice's appointment of Sprint nominees to fill the vacancies, (iii) obtaining
necessary third party consents, (iv) there not having been instituted, pending
or threatened any action, investigation or proceeding challenging the Merger or
seeking to restrict People's Choice's ownership of its properties or Sprint's
ownership of the Common Stock, and (v) there not having occurred any material
change or development that has, or can be expected to, result in a material
adverse effect on People's Choice. See "--Certain Other Covenants and
Agreements--FCC Licenses" and "--Certain Other Covenants and
Agreements--Resignation of Subsidiaries' Directors".
TERMINATION
The Merger Agreement may be terminated:
(a) at any time prior to the Effective Time, whether before or after
approval of the Merger Agreement by holders of Common Stock by mutual
written consent of People's Choice and Sprint;
(b) by Sprint, Sub or People's Choice, if any court of competent
jurisdiction or other Governmental Entity has issued an order, decree,
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; PROVIDED HOWEVER, that the
party terminating the Merger Agreement will use all commercially reasonably
efforts to have such order, decree, ruling or action vacated;
(c) by Sprint, Sub or People's Choice, if the Merger is not consummated
on or before December 31, 1999; PROVIDED, that the terminating party has not
failed to fulfill any obligation under the Merger Agreement or has been the
primary cause of, or resulted in, the failure to consummate the Merger on or
before such date;
(d) by Sprint or Sub, if the People's Choice Board (i) withdraws or
modifies in a manner adverse to Sprint or Sub its approval or recommendation
of the Merger or the Merger Agreement, (ii) causes People's Choice to enter
into an agreement with respect to an Acquisition Proposal, (iii) endorses,
approves or recommends any Acquisition Proposal, or (iv) resolves to do any
of the foregoing;
(e) by People's Choice, Sprint or Sub, if the Merger Agreement and the
Merger fails to be approved and adopted by People's Choice's stockholders at
the Special Meeting;
(f) by Sprint or Sub, if (i) People's Choice fails to satisfy the
conditions to obligations of Sprint and Sub to effect the Merger and such
failure has not been waived by Sprint and Sub or (ii) People's Choice
breaches in any material respect any of its representations, warranties,
covenants or other obligations under the Merger Agreement and, within ten
days after written notice of such breach to People's Choice from Sprint,
such breach is not cured in all material
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respects or waived by Sprint or Sub and People's Choice has not provided
reasonable assurance to Sprint and Sub that such breach will be cured in all
material respects on or before the Effective Time;
(g) by People's Choice, if (i) Sprint or Sub fails to satisfy the
conditions to obligations of People's Choice to effect the Merger and such
failure has not been waived by People's Choice or (ii) Sprint or Sub
breaches in any material respect any of their respective representations,
warranties or obligations under the Merger Agreement and, within ten days
after written notice of such breach to Sprint from People's Choice, such
breach is not cured in all material respects or waived by People's Choice,
Sprint or Sub, as the case may be, has not provided reasonable assurance to
People's Choice that such breach will be cured in all material respects on
or before the Effective Time; or
(h) by People's Choice, if, in compliance with the provisions set forth
in the Merger Agreement (i) the People's Choice Board withdraws or modifies
in a manner adverse to Sprint or Sub its approval or recommendation of the
Merger or the Merger Agreement and (ii) People's Choice enters into an
agreement with respect to a Superior Proposal.
TERMINATION FEE
In the event of the termination of the Merger Agreement, the Merger
Agreement has no further effect except as specifically provided in the Merger
Agreement. There shall be no liability on the part of any party on such
termination except for liability for any willful breach and except as otherwise
provided in the Merger Agreement.
If Sprint or Sub exercises its right to terminate the Merger Agreement
pursuant to clause (d) under "--Termination", People's Choice will pay to Sprint
$14 million (the "Termination Fee"), as liquidated damages and not as a penalty
to reimburse Sprint for its time, expense and lost opportunity costs of pursuing
the Merger, upon consummation of the transaction relating to such Acquisition
Proposal. If within one year after termination of the Merger Agreement, People's
Choice shall enter into any agreement relating to, or consummate, an Acquisition
Proposal with a person other than Sprint or Sub, then immediately prior to, and
as a condition of, consummation of such transaction, People's Choice shall pay
to Sprint upon demand $14 million, as liquidated damages and not as a penalty,
to reimburse Sprint for its time, expense and lost opportunity costs of pursuing
the Merger; PROVIDED that no such amount shall be payable (a) if the Termination
Fee shall have become payable or paid in accordance with the prior sentence or
if the Merger Agreement is terminated by People's Choice pursuant to clause
(g)(ii) under "--Termination", or (b) if the fair market value of the per share
consideration to be received by the holders of Common Stock pursuant to such
Acquisition Proposal is less than 90% of the Merger Consideration on a pre tax
basis determined as of the effective date of such transaction.
AMENDMENT AND WAIVER
Subject to the provisions of applicable law, any provision of the Merger
Agreement may be amended or modified at any time prior to the Effective Time by
means of a written agreement executed and delivered by duly authorized officers
of the respective parties. The conditions to each of the parties' obligations to
consummate the Merger are for the sole benefit of such party and may be waived
by such party in whole or in part to the extent permitted by applicable law.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain officers and directors of People's Choice have certain agreements
and incentives which will be affected as a result of the Merger. These
agreements and incentives are discussed below.
MERGER/RECAPITALIZATION BONUS PROGRAM
The People's Choice Board has implemented a bonus program that would require
the payment of bonuses to six executive officers upon a change of control of
People's Choice, including a change of control occurring as a result of the
Merger. The executive officers included are Matthew Oristano, Chairman and Chief
Executive Officer, Charles Schwartz, Senior Vice President and Chief Financial
Officer, Peter Lynch, Senior Vice President-Operations and Marketing, Todd
Rowley, Senior Vice President-Market Development, Donald Olander, Vice President
and General Counsel, and Michael Whalen, Vice President-Finance and Acquisitions
(the "Executive Officers"). Each Executive Officer will be entitled to receive a
bonus in the amount of $75,000 upon a change of control of People's Choice.
CHANGE OF CONTROL SEVERANCE AGREEMENTS
People's Choice has entered into change of control severance agreements (the
"Severance Agreements") with the Executive Officers and Michael Denny, Vice
President-Engineering. Under these agreements, if a change of control of
People's Choice occurs and the employment of such person is terminated by
People's Choice (i) without Cause (as such term is defined in the applicable
Severance Agreement) or (ii) such executive terminates his employment for Good
Reason (as such term is defined in the applicable Severance Agreement), such
person will be entitled to receive two times his annual base salary and most
recent bonus. The Severance Agreements also provide that People's Choice will
maintain the executive officer's existing life, disability, accident and health
insurance benefits for a period of twelve months after termination. If all of
the executive officers were terminated after the Merger or resigned for Good
Reason, the total aggregate payment required to be made by People's Choice under
such agreements is approximately $3.5 million. In addition to the foregoing
amounts, if an amount payable to an executive officer under a Severance
Agreement or otherwise would subject the executive officer to the excise tax
under Section 4999 of the Code, People's Choice will make an additional payment
to such executive officer such that after the payment of all income and excise
taxes, the executive officer will be in the same after-tax position as if no
excise tax under Section 4999 of the Code had been imposed.
STOCK OPTIONS
Immediately prior to the Effective Time, each option granted pursuant to
People's Choice stock option plans (and certain non-plan options) will become
fully vested and immediately exercisable. Each holder of a stock option
outstanding immediately prior to Effective Time will be entitled to receive and
will be paid in full satisfaction of such stock option, or each stock option
will after the Effective Time be exercisable for, a cash payment equal to the
product of (i) the excess, if any, of the Merger Consideration over the exercise
price per share of Common Stock subject to such option multiplied by (ii) the
number of shares of Common Stock subject to such option immediately prior to the
Effective Time, less any income or employment tax withholding required under the
Code or any provision of state, local or foreign tax law.
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CONSULTING AGREEMENT
People's Choice also has a written consulting agreement with Alda Limited
Partners pursuant to which Alda Limited Partners and its chairman, Mr. Victor
Oristano (a director of People's Choice and father of Matthew Oristano) have
agreed to render management consulting services to People's Choice, including
advice concerning strategic and financial planning matters, wireless
communications system development and operation activities and public and
stockholder relations matters. This agreement provides that the consultant shall
be paid consulting fees of $158,000 per annum and provides that the consultant
may receive an annual performance bonus to be determined by People's Choice. The
term of the agreement expires on July 8, 2000. If the agreement is terminated by
People's Choice without cause, the consultant is entitled to be paid an amount
equal to the base consulting fees for the remainder of the consulting term.
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RELATED AGREEMENTS AND TRANSACTIONS
PREFERRED PURCHASE AGREEMENT
Sprint publicly disclosed that, on April 6, 1999, Sprint acquired 497,405
shares of Preferred Stock pursuant to the Securities Purchase and Option
Agreement, dated as of April 2, 1999 (the "Preferred Purchase Agreement"),
between Sprint and Wireless Holding LLC, a Delaware limited liability company.
In its public filing, Sprint stated that it entered into the Preferred Purchase
Agreement with the purpose of facilitating its efforts to consummate the Merger.
The shares of Preferred Stock are convertible at any time into shares of
Common Stock at a conversion price of $22.50 (approximately 4.444 shares of
Common Stock for each share of Preferred Stock), subject to certain adjustments.
The Preferred Stock is entitled to vote as a single class with the Common Stock
on all matters submitted to a vote of the stockholders. Each share of Preferred
Stock is entitled to approximately 4.444 votes per share when voting as a single
class with the Common Stock. Each share of Common Stock is entitled to one vote
per share.
Pursuant to the Preferred Purchase Agreement, Sprint also acquired (i) an
option to purchase from Wireless Holding 123,699 shares of Preferred Stock (the
"First Preferred Option") and (ii) an option to acquire 125,000 shares of
Preferred Stock (the "Second Preferred Option" and collectively, with the First
Preferred Option, the "Preferred Options").
The shares of Preferred Stock underlying the Preferred Options are
convertible at any time at the option of the holder into an aggregate of
1,105,328 shares of Common Stock.
On June 2, 1999, Sprint disclosed it had exercised the First Preferred
Option and subsequently purchased 123,699 shares of Preferred Stock. The Second
Preferred Option may be exercised by Sprint at any time prior to the Preferred
Expiration Date described below.
The Second Preferred Option expires on the 18th-month anniversary of the
date of the Preferred Purchase Agreement (the "Preferred Expiration Date"),
subject to early termination by Wireless Holding if early termination or
expiration of the HSR Act waiting period has not occurred within 150 days of the
date of the Preferred Purchase Agreement. If the Second Preferred Option has not
been exercised prior to the Preferred Expiration Date, Wireless Holding has the
right to require Sprint to purchase the shares of Preferred Stock at the
applicable option price together with accrued interest.
STOCKHOLDER AND OPTION AGREEMENTS
ORISTANO OPTION AGREEMENT. On April 12, 1999, as a condition and inducement
to Sprint entering into the Merger Agreement, the Oristano Holders entered into
a Stockholder and Option Agreement (the "Oristano Option Agreement") with
Sprint.
Pursuant to the Oristano Option Agreement, the Oristano Holders granted to
Sprint: (i) an irrevocable option (the "Oristano Option") to purchase 1,694,823
shares of Common Stock (the "Oristano Option Shares"), at a purchase price equal
to $8.00 in cash per Option Share (the "Oristano Option Price"), and (ii) an
irrevocable proxy to vote (or refrain from voting) the Oristano Option Shares
with respect to any issue brought before the stockholders of People's Choice,
other than with respect to the election of directors of People's Choice.
If, following the date of any purchase, Sprint purchases any shares of
Common Stock for an amount per share in excess of the sum of the Oristano Option
Price plus, if applicable, the excess amount plus any other amount previously
remitted pursuant to the Oristano Option Agreement, then Sprint will remit to
the stockholder an amount equal to the subsequent excess amount for each
Oristano Option Share purchased at the closing of the Oristano Option Agreement.
On April 29, 1999, Sprint announced it had entered into option agreements with
certain stockholders, whereby Sprint would acquire these stockholders' shares of
Common Stock at a price of $10.00 per share. As a result,
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the Merger Consideration and Oristano Option Price increased, under the terms of
the Merger Agreement and the Oristano Option, from $8.00 to $10.00 per share.
See "--Other Option Agreements."
On June 2, 1999, Sprint disclosed it had exercised the Oristano Option and
subsequently purchased the 1,695,631 shares of Common Stock.
Sprint may in the future enter into additional option agreements or
agreements by which Sprint receives a proxy to vote shares of Common Stock of
the Company, but in no case prior to the receipt of necessary approvals from the
FCC shall Sprint acquire 50% or more of the voting power of the Company's
capital stock.
The foregoing description is qualified in its entirety by reference to the
Oristano Option Agreement, which is attached hereto as Appendix B.
OTHER OPTION AGREEMENTS. On April 13, 1999, Sprint publicly announced that
on April 12, 1999, it entered into an option agreement with Bay Harbour (the
"Bay Option Agreement") to purchase 881,600 shares of Common Stock under the
same terms and conditions described above with respect to the Oristano Option
Agreement. On April 29, 1999, Sprint disclosed it had entered into option
agreements with certain other stockholders who granted to Sprint irrevocable
options to purchase in the aggregate 2,227,000 additional shares of Common Stock
at a purchase price of $10.00 in cash per share and an irrevocable proxy to vote
such shares at the Special Meeting. As a result of the transaction announced by
Sprint on April 29, 1999, the consideration to be paid by Sprint to the holders
of Common Stock in the Merger and upon any exercise of the Bay Option Agreement
increased from $8.00 to $10.00 per share. On June 2, 1999, Sprint disclosed it
had exercised the foregoing options and subsequently purchased in the aggregate
3,108,600 shares of Common Stock, in addition to the Oristano Option Shares
owned by the Oristano Holders.
RIGHTS PLAN
On April 11, 1999, the People's Choice Board authorized and declared a
distribution of one right (a "Right") for each of its outstanding shares of
Common Stock. The distribution is payable as of April 22, 1999 (the "Rights
Record Date") to holders of record of shares of Common Stock on that date. Each
Right entitles the registered holder thereof to purchase from the Company one
one-thousandth (1/1000) of a share of Series A Junior Participating Preferred
Stock, par value $.01 per share, of People's Choice ("Series A Preferred Stock")
at a price of $35.00 (the "Exercise Price"), subject to certain adjustments. The
description and terms of the Rights will be set forth in a Rights Agreement, as
the same may be amended from time to time (the "Rights Agreement"), between
People's Choice and Harris Trust Company of New York, as rights agent (the
"Rights Agent").
Initially the Rights will not be exercisable, certificates will not be sent
to stockholders and the Rights will automatically trade with the shares of
Common Stock.
The Rights, unless earlier redeemed or exchanged by the People's Choice
Board, become exercisable upon the close of business on the day (the
"Distribution Date") which is the earlier of (i) the tenth day following a
public announcement that a person or group of affiliated or associated persons
(other than certain exceptions set forth below, an "Acquiring Person") which has
acquired beneficial ownership or voting control of 15% or more of the
outstanding shares of Common Stock, (ii) the tenth business day (or such later
date as may be determined by the People's Choice Board prior to such time as any
person or group of affiliated or associated persons becomes an Acquiring Person)
after the date of the commencement or public announcement of a person's or
group's intention to commence a tender or exchange offer, the consummation of
which would result in the acquisition of beneficial ownership or voting control
of 15% or more of the outstanding shares of Common Stock (even if no shares of
Common Stock are actually acquired pursuant to such offer) or (iii) the
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Expiration Date (as defined therein). Prior to a Distribution Date, the Rights
will not be exercisable, will not be represented by a separate certificate, and
will not be transferable apart from the shares of Common Stock, but will instead
be evidenced, with respect to any of the Common Stock certificates outstanding
as of the Rights Record Date, by such Common Stock certificate itself. An
Acquiring Person does not include (i) People's Choice, (ii) any subsidiary of
People's Choice, (iii) any employee benefit plan of People's Choice or of any
subsidiary of People's Choice, or any trust or other entity holding shares of
Common Stock for or pursuant to the terms of any such plan, or (iv) any person
or group of affiliated or associated persons whose beneficial ownership or
voting control of 15% or more of the outstanding shares of Common Stock results
solely from a reduction in the number of outstanding shares of Common Stock
(provided that any such person or group that does not become an Acquiring Person
by reason of the exception provided by this clause (iv) shall become an
Acquiring Person upon acquisition of any additional outstanding shares of Common
Stock unless such acquisition of additional shares of Common Stock will not
result in such person or group becoming an Acquiring Person). In addition,
Sprint and Sub shall not be deemed to be an "Acquiring Person" solely by virtue
of their acquisition of Preferred Stock pursuant to the Preferred Purchase
Agreement between Sprint and Wireless Holding or the acquisition of Common Stock
pursuant to or otherwise permitted by the Merger Agreement or any other
agreement contemplated thereby.
Until the Distribution Date (or earlier redemption, exchange or expiration
of the Rights), new certificates for shares of Common Stock issued after the
Rights Record Date will contain a legend incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption, exchange or
expiration of the Rights), the surrender for transfer of shares of Common Stock
outstanding as of the Rights Record Date also will constitute the transfer of
the Rights attaching to such shares. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of shares of Common Stock as
of the close of business on the Distribution Date, and such separate Rights
Certificates alone will evidence the Rights from and after the Distribution
Date.
The Rights are not exercisable until the Distribution Date. The Rights will
expire at the close of business on April 22, 2009 (the "Final Expiration Date"),
unless earlier redeemed or exchanged by People's Choice as described below.
The number of one one-thousandth of a share of Series A Preferred Stock
issuable upon exercise of the Rights is subject to certain adjustments from time
to time in the event of a share distribution on, or a subdivision or combination
of, the Common Stock. The Exercise Price of the Rights is also subject to
adjustment in certain events.
Unless the Rights are earlier redeemed or exchanged, in the event that a
person or group of affiliated or associated persons becomes an Acquiring Person,
the Rights Agreement provides that each holder of record of a Right, other than
the Acquiring Person (whose Rights will thereupon become null and void), will
thereafter have the right to receive, upon payment of the Exercise Price, that
number of shares of Common Stock having a market value at the time of the
transaction equal to two times the Exercise Price.
In addition, unless the Rights are earlier redeemed or exchanged, in the
event that after the time that a person or group of affiliated or associated
persons becomes an Acquiring Person and People's Choice were to be acquired in a
merger or other business combination (in which any shares are changed into or
exchanged for other securities or assets) or more than 50% of the assets or
earning power of the Company and its subsidiaries (taken as a whole) were to be
sold or transferred in one or a series of related transactions, the Rights
Agreement provides that proper provision will be made so that each holder of
record of a Right, other than the Acquiring Person (whose rights will thereupon
become null and void), will from and after such date have the right to receive,
upon payment of the
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Exercise Price, that number of shares of common stock of the acquiring company
having a market value at the time of such transaction equal to two times the
Exercise Price.
At any time on or prior to the earlier of (i) the close of business on the
tenth day after a public announcement that a person or group of affiliated or
associated persons has become an Acquiring Person (or such earlier or later date
as may be authorized by the People's Choice Board), or (ii) the Final Expiration
Date, People's Choice may redeem the Rights in whole, but not in part, at a
price of $.01 per Right ("Redemption Price"), payable at the election of
People's Choice in cash, shares of Common Stock or other consideration
determined to be appropriate by the People's Choice Board. Following the
effective time of the action of the People's Choice Board authorizing redemption
of the Rights, the right to exercise the Rights will terminate and the only
right of the holders of the Rights will be to receive the Redemption Price.
For as long as the Rights are then redeemable, People's Choice may, except
with respect to the Redemption Price or date of expiration of the Rights, amend
the Rights in any manner, including an amendment to extend the time period in
which the Rights may be redeemed. At any time when the Rights are not then
redeemable, People's Choice may amend the Rights in any manner that does not
materially adversely affect the interests of holders of the Rights as such.
Until a Right is exercised, the holder, as such, will have no rights as a
stockholder of People's Choice, including, without limitation, the right to vote
or to receive distributions.
The foregoing description is qualified in its entirety by reference to the
Summary of Rights to Purchase Shares of Series A Junior Participating Preferred
Stock which is attached hereto as Appendix F.
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OWNERSHIP OF PREFERRED AND COMMON STOCK
The table below sets forth, as of May 28, 1999, certain information
regarding beneficial ownership of Common Stock or Preferred Stock with respect
to (i) each person or entity known to People's Choice who beneficially owns 5%
or more of the outstanding shares of Common Stock or Preferred Stock, (ii) each
director, (iii) People's Choice's Chief Executive Officer and other most highly
compensated executive officers in fiscal year 1998 and (iv) all executive
officers and directors of People's Choice as a group:
<TABLE>
<CAPTION>
NUMBER AND PERCENTAGE NUMBER AND PERCENTAGE
OF SHARES OF PREFERRED PERCENTAGE OF SHARES OF VOTING
NAME OF BENEFICIAL OWNER+ STOCK OF COMMON STOCK POWER
- --------------------------------------------- -------------------------- -------------------------- -------------
<S> <C> <C> <C> <C> <C>
Sprint Corporation (1)....................... 621,104 83.2% 4,804,231 36.6% 46.0%
Blackstone Capital Partners II Merchant
Banking Fund L.P. (2)...................... 93,933 12.6% 2.5%
Blackstone Offshore Capital
Partners II L.P. (2)....................... 24,647 3.3% *
Blackstone Family Investment Partnership II
L.P. (2)................................... 6,420 * *
Wireless Holding LLC (2)..................... 125,000 16.8% 3.4%
Murray Capital Management, Inc. (3).......... 125,000 16.8% 3.4%
Matthew Oristano (4)......................... 205,000 1.6% 1.2%
Robert Fleming, Inc. (5)..................... 1,222,350 9.3% 7.4%
Dimensional Fund Advisors (6)................ 774,825 5.9% 4.7%
BCI Growth III, L.P. (7)..................... 669,474 5.1% 4.1%
Victor Oristano (8).......................... 102,500 * *
Terry L. Scott (9)........................... 9,600 * *
Todd A. Rowley (9)........................... 85,996 * *
Charles F. Schwartz (9)...................... 56,665 * *
Peter Lynch (9).............................. 46,665 * *
Donald Olander (9)........................... 35,000 * *
All executive officers and directors as a
group (9 persons) (10)..................... 592,022 4.5% 3.6%
</TABLE>
- ------------------------------
+ For purposes of this table, ownership is determined in accordance with the
beneficial ownership rules of the Exchange Act which deems shares to be
beneficially owned by any person who has, or shares, voting or investment
power with respect to the Common Stock and Preferred Stock.
* Less than 1%
(1) The principal address of Sprint is 2330 Shawnee Mission Parkway, Westwood,
Kansas 66205. Based on information conatined in Amendment No. 2 of Schedule
13D filed by Sprint on June 2, 1999.
(2) The principal address of Blackstone Capital Partners II Merchant Banking
Fund L.P. ("BCPII") and Blackstone Family Investment Partnership II L.P.
("BFIPII") is 118 North Bedford Road, Mount Kisco, New York 10549. The
principal address of Blackstone Offshore Capital Partners II L.P. ("BCP
Offshore") is c/o Mees Pierson Management (Cayman), British American Center,
Dr. Roy's Drive, Georgetown, Grand Cayman, British West Indies. BCPII,
BFIPII and BCP Offshore are collectively referred to herein as the "Funds."
The general partner of each of the Funds is Blackstone Management Associates
II L.L.C. ("BMAII"). The Funds hold limited member interests in Wireless
Holding and as such, have shared voting and dispositive power over the
Preferred Stock. The principal address of Wireless Holding is 110 East 59th
Street, 24th Floor, New York, New York 10022. Wireless Holding, subject to
certain investor protection rights reserved by the Funds, has the power to
vote and dispose of the Preferred Stock held by Wireless Holding.
(3) The principal address of Murray Capital Management, Inc. ("Murray") is 110
East 59th Street, 24th Floor, New York, New York 10022. Murray is the sole
managing member of Wireless Holding, and subject to certain investor
protection rights reserved by the Funds, has the power to vote and dispose
of the Preferred Stock held by Wireless Holding.
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(4) Includes 205,000 shares of Common Stock which Matthew Oristano has an option
to acquire within 60 days of the date hereof pursuant to stock option
agreements.
(5) The address of Robert Fleming, Inc. is 320 Park Ave., New York, New York
10022.
(6) The address of Dimensional Fund Advisors is 1299 Ocean Avenue, Santa Monica,
California 90401.
(7) BCI Growth III, L.P.'s mailing address is c/o BCI Advisors, Inc., Glenpointe
Centre West, Teaneck, New Jersey 07666.
(8) Includes 102,500 shares of Common Stock which Victor Oristano has an option
to acquire within 60 days of the date hereof pursuant to a stock option
agreement.
(9) Includes shares of Common Stock which the individuals have the option to
acquire within 60 days of the date hereof pursuant to stock option
agreements.
(10) Includes 592,022 shares of Common Stock which all directors and executive
officers of the Company have the option to acquire within 60 days of the
date hereof.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The following are or may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995:
(a) certain statements concerning possible or assumed future results of
operations of People's Choice contained in "The Merger--Background of the
Merger," "The Merger--Reasons for the Merger," "The Merger--Certain Company
Projections" and "The Merger--Opinions of People's Choice's Financial
Advisors," including any forecasts, projections and descriptions of
anticipated cost savings or other synergies referred to in this Proxy
Statement, and certain statements incorporated by reference from documents
filed with the Securities and Exchange Commission by People's Choice,
including any statements contained in this Proxy Statement, or in the
documents incorporated by reference, regarding the development of possible
or assumed future results of operations of People's Choice's businesses, the
markets for People's Choice's services and products, anticipated capital
expenditures, regulatory developments, competition or the effects of the
Merger;
(b) any statements preceded by, followed by or that include the words
"believes," "expects," "anticipates," "intends" or similar expressions
contained in the sections of this Proxy Statement cited above or
incorporated herein; and
(c) other statements contained or incorporated by reference in this
Proxy Statement regarding matters that are not historical facts.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. People's Choice's stockholders are cautioned not to
place undue reliance on such statements, which speak only as of the date of this
Proxy Statement or, in the case of People's Choice's documents incorporated by
reference, the date of such documents.
All subsequent written and oral forward-looking statements attributable to
People's Choice or persons acting on its or their behalf are expressly qualified
in their entirety by the cautionary statements contained or referred to in this
section. People's Choice does not undertake any obligation to release publicly
any revisions to such forward-looking statements to reflect events or
circumstances after the date of this Proxy Statement or to reflect the
occurrence of unanticipated events.
NO PERSON HAS BEEN AUTHORIZED BY PEOPLE'S CHOICE TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY PEOPLE'S CHOICE. THIS PROXY STATEMENT DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT, UNDER ANY
CIRCUMSTANCES, IMPLY OR CREATE ANY IMPLICATION THAT THERE HAVE NOT BEEN ANY
CHANGES IN THE AFFAIRS OF PEOPLE'S CHOICE OR IN THE INFORMATION SET FORTH OR
INCORPORATED BY REFERENCE HEREIN SUBSEQUENT TO THE DATE HEREOF.
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AVAILABLE INFORMATION
People's Choice files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information we file at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Our filings are also available to the public from commercial document retrieval
services and at the web site maintained by the SEC at "http://www.sec.gov."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information into this Proxy
Statement, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this Proxy Statement, except
for any information superseded by information in this Proxy Statement. This
Proxy Statement incorporates by reference the documents set forth below that we
have previously filed with the SEC under file number 0-2192. These documents
contain important information about us and our finances.
(1) People's Choice's Annual Report on Form 10-K for the fiscal year
ended
December 31, 1998;
(2) People's Choice Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999 filed on May 12, 1999;
(3) People's Choice's Current Report on Form 8-K filed April 15, 1999;
and
(4) the description of the Common Stock as contained in Item 1 of
People's Choice's Registration Statement on Form 8-A filed on June 14, 1993.
We are also incorporating by reference additional documents that we file
with the SEC between the date of this Proxy Statement and the date of the
Special Meeting. Any statement made in this Proxy Statement or incorporated by
reference into this proxy statement will be modified or superseded to the extent
any document subsequently filed by us with the SEC does so.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC.
Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this Proxy Statement. If you would like to request documents from us,
please do so by June 23, 1999 to make sure you receive them before the Special
Meeting.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of April 12,
1999, by and among Sprint Corporation, a Kansas corporation ("PARENT"), MM
Acquisition Corp., a Delaware corporation ("BUYER") and wholly owned subsidiary
of Parent, and People's Choice TV Corp., a Delaware corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, the parties to this Agreement desire to effect the acquisition of
the Company by Buyer;
WHEREAS, in furtherance of the foregoing, upon the terms and subject to the
conditions of this Agreement and in accordance with the Delaware General
Corporation Law of the State of Delaware (the "DGCL"), Buyer will merge with and
into the Company (the "MERGER") in accordance with the provisions of the DGCL,
with the Company as the surviving corporation;
WHEREAS, as of the date hereof, Matthew Oristano, members of his family and
family trusts and foundations (collectively, the "ORISTANO STOCKHOLDERS")
beneficially own or have the power to vote shares of the common stock, par value
$.01 per share, of the Company (including any and all rights to be attached
thereto to acquire shares of preferred stock of the Company pursuant to the
Rights Plan (as hereinafter defined), and any other rights associated therewith,
to be adopted by the Company pursuant to Section 5.21, the "COMPANY COMMON
STOCK"), representing approximately 10.5% of the outstanding Company Common
Stock;
WHEREAS, concurrently with the execution and delivery of this Agreement, and
as a condition and inducement to Parent entering into this Agreement, the
Oristano Stockholders have entered into a stockholder's agreement, dated as of
the date hereof (the "STOCKHOLDER'S AGREEMENT"), pursuant to which, among other
things, the Oristano Stockholders have granted an option in favor of Parent with
respect to the shares of Company Common Stock held by the Oristano Stockholders,
subject to the terms and conditions contained therein;
WHEREAS, the Board of Directors of the Company has unanimously determined
that the Merger and this Agreement are fair to, and in the best interests of,
the Company and the holders of Company Common Stock;
WHEREAS, the Board of Directors of Parent and Buyer have each approved this
Agreement and the Merger, upon the terms and subject to the conditions set forth
herein;
WHEREAS, the Board of Directors of the Company has unanimously approved this
Agreement and the Merger, and the transactions contemplated hereby, which
approval was based in part on the opinions of Chase Securities, Inc. and
Houlihan Lokey Howard & Zukin Capital (the "INDEPENDENT ADVISORS"), independent
financial advisors to the Board of Directors of the Company, that, as of the
date of such opinions and based on the assumptions, qualifications and
limitations contained therein, the consideration to be received by the Company's
stockholders for their shares of Company Common Stock in the Merger is fair,
from a financial point of view, to these stockholders;
WHEREAS, the Board of Directors of the Company has unanimously resolved to
recommend acceptance of the Merger to the holders of the Company Common Stock
and has determined that the consideration to be paid for each share of Company
Common Stock in the Merger is fair to the holders of the Company Common Stock
and to recommend that the holders of the Company Common Stock approve the
Merger, this Agreement and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements contained in this
Agreement and intending to be legally bound hereby, the parties hereto agree as
follows:
A-1
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ARTICLE I.
THE MERGER
Section 1.1. THE MERGER. Upon the terms and subject to the conditions of
this Agreement, and in accordance with the DGCL, at the Effective Time (as
hereinafter defined), Buyer shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Buyer shall cease and
the Company shall continue as the surviving corporation following the Merger
(the "SURVIVING CORPORATION"). The corporate existence of the Company, with all
its purposes, rights, privileges, franchises, powers and objects, shall continue
unaffected and unimpaired by the Merger and, as the Surviving Corporation, it
shall be governed by the laws of the State of Delaware.
Section 1.2. EFFECTIVE TIME; CLOSING. As promptly as practicable (and in
any event within five (5) business days) after the satisfaction or waiver of the
conditions set forth in Article VI hereof, the parties hereto shall cause the
Merger to be consummated by filing a certificate of merger or certificate of
ownership and merger, if applicable (the "CERTIFICATE OF MERGER"), with the
Secretary of State of the State of Delaware and by making all other filings or
recordings required under the DGCL in connection with the Merger, in such form
as is required by, and executed in accordance with the relevant provisions of,
the DGCL. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Secretary of State of the State of Delaware, or at
such other time as the parties hereto agree shall be specified in the
Certificate of Merger (the date and time the Merger becomes effective, the
"EFFECTIVE TIME"). On the date of such filing, a closing (the "CLOSING") shall
be held at 10:00 a.m., Eastern Standard Time, at the offices of the King &
Spalding, 1185 Avenue of the Americas, New York, New York 10036, or at such
other time and location as the parties hereto shall otherwise agree.
Section 1.3. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Buyer shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of the Company
and Buyer shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
Section 1.4. CONVERSION OF COMPANY COMMON STOCK. At the Effective Time, by
virtue of the Merger and without any action on the part of Buyer, the Company or
the holders of any of the following securities:
(a) Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares canceled pursuant to Section
1.4(c) and Dissenting Shares (as defined in Section 1.5), if any) shall be
canceled and, subject to Section 1.5, shall by virtue of the Merger and without
any action on the part of the holder thereof be converted automatically into the
right to receive an amount in cash equal to $8.00 payable, without interest, to
the holder of such share of Company Common Stock, upon surrender of the
certificate that formerly evidenced such share of Company Common Stock in the
manner provided in Section 1.7 (the "MERGER CONSIDERATION"); provided, if prior
to the consummation of the Merger, Parent or any of its affiliates purchases, or
enters into an option to purchase, shares of Company Common Stock at a price per
share in excess of the Merger Consideration, the Merger Consideration shall be
increased to the highest such price per share;
(b) Each share of Preferred Stock (as hereinafter defined) issued and
outstanding immediately prior to the Effective Time (other than shares canceled
pursuant to Section 1.4(c)) shall continue to be an issued and outstanding share
of Preferred Stock of the Surviving Corporation following the Effective Time;
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(c) Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time that is owned by Parent or Buyer and each share of
Company Common Stock and Preferred Stock (collectively, "COMPANY STOCK") that is
owned by the Company as treasury stock shall be canceled and retired and cease
to exist and no payment or distribution shall be made with respect thereto;
(d) At the Effective Time, all shares of the Company Common Stock converted
pursuant to Section 1.4(a) shall no longer be outstanding and shall
automatically be canceled and retired and cease to exist, and each holder of a
certificate ("Certificate") representing any such shares of Company Common Stock
shall cease to have any rights with respect thereto, except the right to receive
the Merger Consideration in accordance with Section 1.4(a).
(e) Each share of common stock, par value $1.00 per share, of Buyer 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 $1.00 per share, of the Surviving Corporation and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation.
Section 1.5. DISSENTING SHARES.
(a) Notwithstanding anything in this Agreement to the contrary, shares of
Company Stock that are issued and outstanding immediately prior to the Effective
Time and which are held by holders of Company Stock (the "COMPANY STOCKHOLDERS")
who have demanded and perfected their demands for appraisal of such shares of
Company Stock in the time and manner provided in Section 262 of the DGCL and, as
of the Effective Time, have neither effectively withdrawn nor lost their rights
to such appraisal and payment under the DGCL (the "DISSENTING SHARES") shall not
be converted as described in Section 1.4(a), but shall, by virtue of the Merger,
be entitled to only such rights as are granted by Section 262 of the DGCL;
PROVIDED, HOWEVER, that if such holder shall have failed to perfect or shall
have effectively withdrawn or lost his, her or its right to appraisal and
payment under the DGCL, such holder's shares of Company Stock shall thereupon be
deemed to have been converted, at the Effective Time, as described in Section
1.4(a), into the right to receive the Merger Consideration set forth in such
provisions, without any interest thereon.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal pursuant to Section 262 of the DGCL received by the Company,
withdrawals of such demands, and any other instruments served pursuant to the
DGCL and received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Parent or
as otherwise required by applicable law, make any payment with respect to any
such demands for appraisal or offer to settle or settle any such demands.
Section 1.6. STOCK OPTION PLANS. The Company shall take all commercially
reasonable efforts necessary to ensure that, pursuant to the Company's 1993 Key
Employee Non-qualified Stock Option Plan, 1993 Founders Non-qualified Option
Plan and 1993 Stock Option Plan (collectively, the "COMPANY STOCK OPTION
PLANS"), all outstanding options to acquire Company Common Stock (the "COMPANY
OPTIONS") granted under the Company Stock Option Plans shall be exercisable in
full immediately prior to the consummation of the Merger and all Company Options
that are not exercised prior to the consummation of the Merger will terminate
and expire as of the consummation date of the Merger. In addition, the Company
shall, by written notice to each holder of Company Options, offer to pay such
holder upon the consummation of the Merger, in exchange for the cancellation of
such holder's Company Options (regardless of exercise price) upon the
consummation of the Merger, an amount in cash determined by MULTIPLYING (A) the
excess, if any, of the Merger Consideration over the applicable exercise price
per share of the Company Option by (B) the number of shares of Company Common
Stock such holder could have purchased had such holder exercised such Company
Option in
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full immediately prior to the consummation of the Merger (such amount, the
"OPTION CONSIDERATION"), and each such Company Option shall thereafter be
canceled.
Section 1.7. SURRENDER OF SHARES OF COMPANY COMMON STOCK; STOCK TRANSFER
BOOKS.
(a) Prior to the Effective Time, Parent shall designate a bank or trust
company to act as agent (the "PAYING AGENT") for the holders of shares of
Company Common Stock reasonably acceptable to the Company to receive the funds
necessary to make the payments to such holders pursuant to Section 1.4 upon
surrender of their Certificates. Parent will, on or prior to the Effective Time,
deposit with the Paying Agent the Merger Consideration to be paid in respect of
the shares of Company Common Stock (the "FUND"). The Fund shall be invested by
the Paying Agent as directed by Parent. Any net profit resulting from, or
interest or income produced by, such investments, shall be payable to the
Surviving Corporation. Parent shall replace any monies lost through any
investment made pursuant to this Section 1.7(a). The Paying Agent shall make the
payments provided in Section 1.4.
(b) Promptly after the Effective Time, the Surviving Corporation shall cause
to be mailed to each person who was, at the Effective Time, a holder of record
of shares of Company Common Stock entitled to receive the Merger Consideration
pursuant to Section 1.4 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 effecting the surrender of the Certificates pursuant
to such letter of transmittal. Upon surrender to the Paying Agent of a
Certificate, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such other
documents as may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration for each share of Company Common Stock formerly evidenced by such
Certificate, and such Certificate shall then be canceled. Until so surrendered,
each such Certificate shall, at and after the Effective Time, represent for all
purposes, only the right to receive such Merger Consideration. No interest shall
accrue or be paid to any beneficial owner of shares of Company Common Stock or
any holder of any Certificate with respect to the Merger Consideration payable
upon the surrender of any Certificate. If payment of the Merger Consideration is
to be made to a person other than the person in whose name the surrendered
Certificate is registered on the stock transfer books of the Company, it shall
be a condition of payment that the Certificate so surrendered shall be endorsed
in blank or to the Paying Agent or otherwise be in proper form for transfer and
that the person requesting such payment shall have paid all transfer and other
taxes required by reason of the payment of the Merger Consideration to a person
other than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such taxes
either have been paid or are not applicable. If any Certificate shall have been
lost, stolen or destroyed, upon making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation or Parent, the posting by such person of a
bond, in such reasonable amount as the Surviving Corporation or Parent may
direct, as indemnity against any claim that may be made against it with respect
to such Certificate, the Paying Agent will issue in exchange for such lost,
stolen or destroyed Certificate the applicable Merger Consideration such holder
is entitled to receive pursuant to Section 1.4.
(c) At any time following the sixth (6th) month after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any portion of the Fund which had been made available to the
Paying Agent and not disbursed to holders of shares of Company Common Stock
(including, without limitation, all interest and other income received by the
Paying Agent in respect of all amounts held in the Fund or other funds made
available to it), and thereafter each such holder shall be entitled to look only
to the Surviving Corporation (subject to abandoned property, escheat and other
similar laws), and only as general creditors thereof, with respect to any Merger
Consideration that may be payable upon due surrender of the Certificates held by
such holder. If any Certificates representing shares of Company Common Stock
shall not have been surrendered
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immediately prior to such date on which the Merger Consideration in respect of
such Certificate would otherwise escheat to or become the property of any
Governmental Entity (as hereinafter defined), any such cash, shares, dividends
or distributions payable in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interest of any person previously entitled
thereto. Notwithstanding the foregoing, none of the Surviving Corporation,
Parent, Buyer or the Paying Agent shall be liable to any holder of a share of
Company Common Stock for any Merger Consideration delivered in respect of such
share of Company Common Stock to a public official pursuant to any abandoned
property, escheat or other similar law.
(d) At the Effective Time, the stock transfer books of the Company shall be
closed and thereafter there shall be no further registration of transfers of
shares of Company Common Stock on the records of the Company. From and after the
Effective Time, except for Parent and Buyer, the holders of shares of Company
Common Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares of Company Common Stock except as
otherwise provided herein or by applicable law, and all cash paid pursuant to
this Article I upon the surrender or exchange of Certificates shall be deemed to
have been paid in full satisfaction of all rights pertaining to the shares of
Company Common Stock theretofore represented by such Certificate.
(e)] Parent, Buyer, the Surviving Corporation and the Paying Agent, as the
case may be, shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock and Company Options such amounts that Parent,
Buyer, the Surviving Corporation or the Paying Agent is required to deduct and
withhold with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "CODE"), the rules and regulations promulgated
thereunder or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by Parent, Buyer, the Surviving Corporation or the
Paying Agent, such amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the shares of Company Common Stock and
Company Options in respect of which such deduction and withholding was made by
Parent, Buyer, the Surviving Corporation or the Paying Agent.
ARTICLE II.
THE SURVIVING CORPORATION
Section 2.1. CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation,
until the same shall thereafter be altered, amended or repealed in accordance
with applicable law or such Certificate of Incorporation.
Section 2.2. BYLAWS. The Bylaws of the Company as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation,
until the same shall thereafter be altered, amended or repealed in accordance
with applicable law, the Certificate of Incorporation of the Surviving
Corporation or such Bylaws.
Section 2.3. DIRECTORS AND OFFICERS. From and after the Effective Time,
until the earlier of their resignation or removal or until their respective
successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of Buyer at the Effective Time shall be the
directors of the Surviving Corporation, and (ii) the officers of the Company at
the Effective Time shall be the officers of the Surviving Corporation.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the other parties hereto as
follows:
Section 3.1. ORGANIZATION AND STANDING. Each of the Company and each
subsidiary of the Company (a "SUBSIDIARY") (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (ii) has full corporate power and authority and all necessary
government approvals to own, lease and operate its properties and assets and to
conduct its business as presently conducted and (iii) is duly qualified or
licensed to do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing necessary
except where failure to be so qualified or licensed would not, individually or
in the aggregate, have a Company Material Adverse Effect (as hereinafter
defined). The Company has furnished or made available to Parent true and
complete copies of its certificate of incorporation (including any certificates
of designations attached thereto, the "COMPANY CERTIFICATE OF INCORPORATION")
and bylaws (the "COMPANY BYLAWS") and the certificate of incorporation and
bylaws (or equivalent organizational documents) of each Subsidiary, each as
amended to date. Such certificate of incorporation, bylaws or equivalent
organizational documents are in full force and effect, and neither the Company
nor any Subsidiary is in violation of any provision of its certificate of
incorporation, bylaws or equivalent organizational documents.
Section 3.2. CAPITALIZATION. The authorized capital stock of the Company
consists of 75,000,000 shares of Company Common Stock and 5,000,000 shares of
preferred stock, $.0l par value per share (the "PREFERRED STOCK"). As of the
date hereof, (i) 12,923,817 shares of Company Common Stock are issued and
outstanding, all of which are validly issued, fully paid and nonassessable and
free of preemptive rights, (ii) no shares of Company Common Stock are held in
the treasury of the Company, (iii) 2,392,975 Company Options are outstanding
pursuant to the Company Stock Option Plans (including certain additional
non-plan options), each such option entitling the holder thereof to purchase one
share of Company Common Stock, and 2,392,975 shares of Company Common Stock are
authorized and reserved for future issuance pursuant to the exercise of such
Company Options, (iv) 746,104 shares of Preferred Stock are issued and
outstanding designated as Convertible Cumulative Pay-in-Kind Preferred Stock
(the "Convertible Preferred Stock"), liquidation preference of $100 per share,
and (v) 629,321 shares of Company Common Stock are reserved for future issuance
pursuant to the exercise of outstanding Company Warrants. The Company will
authorize and reserve 75,000 shares of Series A Junior Participating Preferred
Stock for future issuance pursuant to the Rights Plan. The Company Disclosure
Letter delivered by the Company to the other parties hereto concurrently with
the execution of this Agreement (the "COMPANY DISCLOSURE LETTER") sets forth a
true and complete list of the outstanding Company Options with the exercise
price. Except as set forth above or in the Company Disclosure Letter, there are
no options, warrants, convertible securities, subscriptions, stock appreciation
rights, phantom stock plans or stock equivalents or other rights, agreements,
arrangements or commitments (contingent or otherwise) of any character issued or
authorized by the Company relating to the issued or unissued capital stock of
the Company or any Subsidiary or obligating the Company or any Subsidiary to
issue or sell any shares of capital stock of, or options, warrants, convertible
securities, subscriptions or other equity interests in, the Company or any
Subsidiary. All shares of Company Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in the Company Disclosure Letter, there are
no outstanding contractual obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any shares of Company Stock or any
capital stock of any Subsidiary or to pay any dividend or make any other
distribution in respect thereof or to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in, any person.
Except as set forth
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in the Company Disclosure Letter, the Company owns beneficially and of record
all of the issued and outstanding capital stock of each Subsidiary and does not
own an equity interest in any other corporation, partnership or entity, other
than in the Subsidiaries. Each outstanding share of capital stock of each
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
each such share owned by the Company or another Subsidiary is free and clear of
all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on the Company's or such other Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever.
Section 3.3. AUTHORITY FOR AGREEMENT. (a) The Company has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and, subject to obtaining necessary stockholder approval,
to consummate the Merger and the other transactions contemplated by this
Agreement. The execution, delivery and performance by the Company of this
Agreement, and the consummation by the Company of the Merger and the other
transactions contemplated by this Agreement, have been duly authorized by all
necessary corporate action (including, without limitation, the unanimous
approval of the Board of Directors of the Company) and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the Merger or the other transactions contemplated by this
Agreement (other than, with respect to the Merger, the approval and adoption of
this Agreement by the affirmative vote of a majority of the voting power of the
then outstanding shares of Company Common Stock and Convertible Preferred Stock
voting as a single class and the approval by two-thirds of the holders of the
outstanding shares of Convertible Preferred Stock voting as a separate class and
the filing and recordation of appropriate merger documents as required by the
DGCL). This Agreement has been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Buyer,
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. The affirmative vote of
holders of the outstanding shares of Company Stock and Convertible Preferred
Stock voting as a single class entitled to vote at a duly called and held
meeting of stockholders and the affirmative vote of two-thirds of the holders of
the outstanding shares of the Convertible Preferred Stock are the only votes of
the Company Stockholders necessary to approve this Agreement, the Merger and the
other transactions contemplated by this Agreement.
(b) At a meeting duly called and held on April 11, 1999, the Board of
Directors of the Company unanimously (i) determined that this Agreement and the
other transactions contemplated hereby, including the Merger, are fair to and in
the best interests of the Company and the holders of the Company Common Stock,
(ii) approved, authorized and adopted this Agreement, the Merger and the other
transactions contemplated hereby, and (iii) resolved to recommend approval and
adoption of this Agreement and the Merger by the holders of the Company Common
Stock.
(c) The Independent Advisors have delivered to the Board of Directors of the
Company their written opinions, dated as of the date of this Agreement, that, as
of such date and based on the assumptions, qualifications and limitations
contained therein, the consideration to be received by the holders of Company
Common Stock in the Merger is fair, from a financial point of view, to such
holders. Copies of such opinions are included in the Company Disclosure Letter.
Section 3.4. NO CONFLICT. The execution and delivery of this Agreement by
the Company do not, and the performance of this Agreement by the Company and the
consummation of the Merger and the other transactions contemplated by this
Agreement will not, (i) conflict with or violate the Company Certificate of
Incorporation or Company Bylaws or equivalent organizational documents of any of
its Subsidiaries, (ii) subject to Section 3.5, conflict with or violate any
United States federal, state or local or any foreign statute, law, rule,
regulation, ordinance, code, order, judgment, decree or any other requirement or
rule of law (a "LAW") applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected, or (iii) except as set forth in the Company Disclosure Letter,
result in a breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, give to others any right of
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termination, amendment, acceleration or cancellation of, result in triggering
any payment or other obligations, or result in the creation of a lien or other
encumbrance on any property or asset of the Company or any of its Subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries or any property or asset of any of them is bound or affected,
except in the case of clauses (ii) and (iii) above for any such conflicts,
violations, breaches, defaults or other occurrences which could not,
individually or in the aggregate, have a Company Material Adverse Effect.
"COMPANY MATERIAL ADVERSE EFFECT" shall mean, with respect to the Company, any
change, event or effect shall have occurred or been threatened that, when taken
together with all other adverse changes, events or effects that have occurred or
been threatened, is or is reasonably likely to (i) be materially adverse to the
business, operations, properties, condition (financial or otherwise), assets,
liabilities (including, without limitation, contingent liabilities) of the
Company and its Subsidiaries taken as a whole or (ii) prevent or materially
delay the performance by the Company of any of its obligations under this
Agreement or the consummation of the Merger or the other transactions
contemplated by this Agreement.
Section 3.5. REQUIRED FILINGS AND CONSENTS. The execution and delivery of
this Agreement by the Company do not, and the performance of this Agreement by
the Company will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any United States federal, state or local or
any foreign government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"GOVERNMENTAL ENTITY"), except (i) for applicable requirements, if any, of the
Securities and Exchange Act of 1934, as amended (the "EXCHANGE ACT"), state
securities or "blue sky" laws ("BLUE SKY LAWS") and filing and recordation of
appropriate merger documents as required by the DGCL, (ii) for those required by
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), (iii) for those required by the Federal Communications Commission or any
successor entity (the "FCC") under the Communications Act of 1934, as amended,
and the rules, regulations and policies of the FCC promulgated thereunder
(collectively, the "COMMUNICATIONS ACT"), including those required in connection
with the transfer of control of the Company and the assignment of the FCC
Licenses held by the Alda Companies (as hereinafter defined) (the "FCC
FILINGS"), (iv) for filings contemplated by Section 3.15 hereof, and (v) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, could not, individually or in the aggregate,
have a Company Material Adverse Effect.
Section 3.6. COMPLIANCE. Subject to Section 3.7 and except as disclosed in
the Company Disclosure Letter, each of the Company and its Subsidiaries (i) has
been operated at all times in compliance with all Laws applicable to the Company
or any of its Subsidiaries or by which any property, business or asset of the
Company or any of its Subsidiaries is bound or affected and (ii) is not in
default or violation of any notes, bonds, mortgages, indentures, contracts,
agreements, leases, licenses, permits, franchises, or other instruments or
obligations to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any property or asset of the
Company or any of its Subsidiaries is bound or affected, except in either case
for any such failures to comply, conflicts, defaults or violations that could
not, individually or in the aggregate, have a Company Material Adverse Effect.
Section 3.7. LICENSES AND PERMITS. (a)The Company Disclosure Letters sets
forth all of the FCC licenses, permits, applications, and authorizations for MDS
(as hereinafter defined), ITFS (as hereinafter defined), I Channels and other
FCC licensed facilities (collectively, the "FCC Licenses") either held by the
Company, or a Subsidiary or affiliate thereof, or that are subject to an
agreement pursuant to which the use of the transmission capacity associated
therewith is leased by the Company, a Subsidiary or an affiliate thereof (the
"Channel Leases"). The Company Disclosure Letter correctly sets forth the
identity of the holder and lessor and lessee (if applicable) of the transmission
capacity of such
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FCC Licenses and the termination date of such FCC Licenses. Each FCC License was
duly and validly issued and assigned to the holder thereof by the FCC pursuant
to procedures which comply with all requirements of applicable Law, including
the requirements of any international agreements implemented by the FCC related
to channel use or frequency coordination, and there has been no occurrence of
any event or the existence of any circumstances which may lead to the
forfeiture, revocation, suspension, impairment, adverse modification or
non-renewal of any FCC License. Each FCC License has been duly authorized and is
in full force and effect and the holders of the FCC Licenses and the Company
(and its Subsidiaries and affiliates, as applicable) are in substantial and
material compliance therewith and with the FCC rules and policies and there is
no known conflict with the valid rights of others which could have a material
adverse effect on the value and use of the FCC Licenses or the transmission
capacity associated therewith. No event has occurred which permits, or after
notice or lapse of time or both would permit, the forfeiture, revocation,
impairment, adverse modification or non-renewal of any FCC License, or the
imposition of a monetary fine or forfeiture. Except as set forth in the Company
Disclosure Letter, there are no agreements, arrangements or understandings
relating to the assignment, transfer, conveyance or pledge of any FCC License,
in whole or in part, or any interest therein for the markets of Chicago,
Detroit, Houston, Indianapolis, Milwaukee, Phoenix, Saint Louis, Salt Lake City
and Tucson (the "Major Markets").
(b) The Company and each of the holders of the FCC Licenses has duly filed
in a timely manner all filings and reports relating to the FCC Licenses and the
Channel Leases required to be filed by the holders of the FCC Licenses, or the
Company, as the case may be, under the Communications Act, other applicable Laws
and FCC rules and are in compliance with other applicable Laws and the
Communications Act, including, without limitation, the rules and regulations of
the FCC relating to the operation and use of the FCC Licenses, and, to the
knowledge of the Company, each filing and report filed with respect to the FCC
Licenses is true, correct and complete in all respects and there have been no
changes in the ownership of the FCC Licenses since the filing of the most recent
ownership report.
(c) The Company Disclosure Letter correctly sets forth all of the Channel
Leases pursuant to which the Company may use the transmission capacity of the
FCC Licenses corresponding thereto. Each of the Channel Leases was duly and
validly entered into by the parties thereto pursuant to procedures which comply
with all requirements of applicable Law, including the requirements of the FCC,
and no event has occurred or circumstances exist which may lead to the
revocation, suspension, termination, breach, default, adverse modification or
non-renewal of any Channel Lease or material provision thereof, or cause any
Channel Lease, or any material provision thereof, not to comply with the
requirements of the FCC. The Company Disclosure Letter sets forth, on a market
by market basis, for the Major Markets, (i) the aggregate amount of transmission
capacity (including the number of 6 MHZ channels) available to the Company in
each of the Major Markets pursuant to the FCC Licenses and the Channel Leases
(the "Aggregate Capacity") and (ii) the amount of Aggregate Capacity, in
analogue mode, that is reserved for the holder of the FCC Licenses pursuant to
the Channel Leases for uses other the commercial uses associated with the
Company's business, without regard to the recapture requirements under the
Channel Leases. Buyer upon the closing of the transactions contemplated by this
Agreement, will have the sole right to use the transmission capacity of the FCC
License under each of the Channel Leases (other than the transmission capacity
expressly reserved by such Channel Lease for the holder of an FCC License). Each
Channel Lease is in full force and effect and the parties thereto are in
compliance with the terms thereof with no known conflicts with the valid rights
of others. No third party has any rights to assert any interests in any of the
Channel Leases or the rights and benefits granted to the Company pursuant
thereto (other than the rights of the federal government and the rights of the
holder of an FCC License which is the subject of a Channel Lease). No event has
occurred which permits, or after notice or lapse of time or both would permit
the revocation, suspension, termination, breach, default, adverse modification
or non-renewal of any Channel Lease by the lessor. There are no existing or
alleged material defaults by the lessors or the Company under any of the Channel
Leases, including any defaults relating to the payment obligations
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thereunder. The consummation of the transactions contemplated by this Agreement
will not result in the breach or violation of any of the terms, conditions, or
provisions of any of the Channel Leases.
(d) Except as set forth in the company Disclosure Letter, neither the
Company, any Subsidiary or affiliate of the Company, nor any lessor under any
Channel Lease has agreed to accept any interference from any third party or to
take any action to protect any third party's reception from interference that
would have a Company Material Adverse effect on the current operations of the
Company. The Company Disclosure Letter sets forth all interference agreements
with respect to the FCC Licenses to which the Company or any of its Subsidiaries
or affiliates is a party or any of the parties to the Channel Leases.
(e) Except as set forth in the Company Disclosure Letter, (i) each
Colocation Application (as hereinafter defined) and Other Application (as
hereinafter defined) complies with the FCC rules (including the interference
protection requirements), has been accepted for filing by the FCC, and cut-off
from competing and conflicting applications; (ii) the deadline for filing timely
petitions to deny each Colocation Application and each Other Application has
lapsed; (iii) there are no threatened or pending petitions to deny, informal
objections, competing or conflicting applications, outstanding no-objection
letters, comments, petitions for reconsideration, petitions for review or waiver
requests relating to such Colocation Applications and Other Applications; and
(iv) a protected service area for the FCC License has been granted or requested.
For purposes hereof, (i) a "COLOCATION APPLICATION" shall mean any Major Market
application filed with, or granted by, the FCC to authorize the operation of the
facilities associated with each FCC License at a common transmitter site with
other ITFS and Multichannel Multipoint Distribution Service and Multipoint
Distribution Service stations (collectively, "MDS") pursuant to common technical
parameters of the FCC License and (ii) "OTHER APPLICATION" shall mean any other
Major Market applications, in addition to Colocation Applications, filed with or
granted by the FCC to authorize the provision of digital services and/or two-way
services on the facilities associated with each FCC License.
(f) There is no outstanding adverse judgment, injunction, decree or order
that has been issued by the FCC against the Company, or a Subsidiary or
affiliate thereof or the holder of an FCC License, or any action, proceeding or
investigation pending before or threatened by the FCC or a third party
specifically, including, but not limited to, any pending or threatened
proceeding that would have the effect of revoking or restricting or impairing
one or more of the FCC Licenses or the operations of the Company or a Subsidiary
or affiliate thereof.
(g) Except as set forth in the Company Disclosure Letter, all regulatory
fees and expenses due and payable associated with the FCC Licenses have been
paid to the FCC, including all fees and costs associated with the FCC Licenses
held by the Company to provide LMDS or MDS service in basic trading areas, as
defined by Rand McNally (the "BTA AUTHORIZATIONS"). The Company Disclosure
Letter discloses any discounts or bidding credits that the Company received from
the FCC in conjunction with the licensing of the BTA Authorizations.
Section 3.8. SEC FILINGS, FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports, statements and documents
required to be filed with the Securities and Exchange Commission (the "SEC")
since January 1, 1997 (collectively, the "SEC REPORTS"), each of which has
complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and the rules and
regulations promulgated thereunder, or the Exchange Act, and the rules and
regulations promulgated thereunder, each as in effect on the date so filed. None
of the SEC Reports (including, but not limited to, any financial statements or
schedules included or incorporated by reference therein) contained when filed
any untrue statement of a material fact or omitted or omits to state a material
fact required to be stated or incorporated by reference therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
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(b) Each of the audited consolidated balance sheets of the Company as of
December 31, 1998 and December 31, 1997 and the related consolidated statements
of operations, shareholders' equity/(deficit) and cash flows for the three
fiscal years in the period ended December 31, 1998 included in its Annual Report
on Form 10-K for the fiscal year ended December 31, 1998, in each case,
including any related notes thereto, as filed with the SEC (collectively, the
"COMPANY FINANCIAL STATEMENTS"), has been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto) and
fairly presents in all material respects the consolidated financial position of
the Company and its Subsidiaries at the respective date thereof and the
consolidated results of its operations and changes in cash flows for the periods
indicated.
(c) Except as disclosed in the Company Disclosure Letter, there are no
liabilities of the Company or any of its Subsidiaries of any kind whatsoever,
whether or not accrued and whether or not contingent or absolute, that are
material to the Company and its Subsidiaries, taken as a whole, other than (i)
liabilities disclosed or provided for in the consolidated balance sheet of the
Company and its Subsidiaries at December 31, 1998, including the notes thereto,
(ii) liabilities disclosed in the SEC Reports, (iii) liabilities incurred on
behalf of the Company in connection with this Agreement and the contemplated
Merger, and (iv) liabilities incurred in the ordinary course of business
consistent with past practice since December 31, 1998, none of which are,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect.
(d) The Company has heretofore furnished or made available to Parent a
complete and correct copy of any amendments or modifications which have not yet
been filed with the SEC to agreements, documents or other instruments which
previously had been filed by the Company with the SEC as exhibits to the SEC
Reports pursuant to the Securities Act and the rules and regulations promulgated
thereunder or the Exchange Act and the rules and regulations promulgated
thereunder.
Section 3.9. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as contemplated
by this Agreement or as disclosed in the Company Disclosure Letter or the SEC
Reports filed prior to the date hereof, since December 31, 1998, the Company and
its Subsidiaries have conducted their respective businesses only in the ordinary
course and consistent with prior practice and there has not been (i) any event
or occurrence of any condition that has had or would reasonably be expected to
have a Company Material Adverse Effect, (ii) any declaration, setting aside or
payment of any dividend or any other distribution with respect to any of the
capital stock of the Company or any Subsidiary, (iii) any material change in
accounting methods, principles or practices employed by the Company, or (iv) any
action of the type described in Sections 5.1(b) (other than Section 5.1(b)(v)
and (vi)) or 5.1(c) which had such action been taken after the date of this
Agreement would be in violation of any such Section.
Section 3.10. TAXES. Except as set forth in the Company Disclosure Letter,
the Company and each of its Subsidiaries have timely filed all material Tax
Returns required to be filed by any of them. All such Tax Returns are true,
correct and complete in all material respects. All Taxes of the Company and its
Subsidiaries which are (i) shown as due on such Tax Returns, (ii) otherwise due
and payable or (iii) claimed or asserted by any taxing authority to be due, have
been paid, except for those Taxes being contested in good faith and for which
adequate reserves have been established in the financial statements included in
the SEC Reports in accordance with GAAP. There are no liens for any Taxes upon
the assets of the Company or any of its Subsidiaries, other than statutory liens
for Taxes not yet due and payable and liens for real estate Taxes contested in
good faith. The Company does not know of any proposed or threatened Tax claims
or assessments which, if upheld, could individually or in the aggregate have a
Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries
has made an election under Section 341(f) of the Code. Neither the Company nor
any of its Subsidiaries has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency. Except as set forth in the Company Disclosure Letter, the Company
and each Subsidiary has withheld and paid over to the relevant taxing authority
all Taxes
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required to have been withheld and paid in connection with payments to
employees, independent contractors, creditors, shareholders or other third
parties, except for such Taxes which individually or in the aggregate could not
have a Company Material Adverse Effect. The unpaid Taxes of the Company and its
Subsidiaries for the current taxable period (A) did not, as of the most recent
Company Financial Statement, exceed the reserve for Tax liability (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the balance sheet in the most
recent Company Financial Statement (rather than in any notes thereto) and (B) do
not exceed that reserve as adjusted for the passage of time through the Closing
in accordance with the past custom and practice of the Company and its
Subsidiaries in filing their Tax Returns. For purposes of this Agreement, (a)
"TAX" (and, with correlative meaning, "TAXES") means any federal, state, local
or foreign income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, premium, withholding, alternative or added
minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty or addition thereto, whether disputed or
not, imposed by any Governmental Entity, and (b) "TAX RETURN" means any return,
report or similar statement required to be filed with respect to any Tax
(including any attached schedules), including, without limitation, any
information return, claim for refund, amended return or declaration of estimated
Tax.
Section 3.11. TITLE TO ASSETS.
(a) Except as set forth in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 (the "10-K") or in the Company Disclosure
Letter, the Company and each of its Subsidiaries have good and marketable title
to, or a valid leasehold interest in, all of their real and personal properties
and assets reflected in the 10-K or acquired after December 31, 1998 (other than
assets disposed of since December 31, 1998 in the ordinary course of business
consistent with past practice), in each case free and clear of all title
defects, liens, encumbrances and restrictions, except for (i) liens,
encumbrances or restrictions which secure indebtedness which are properly
reflected in the 10-K; (ii) liens for Taxes accrued but not yet payable; (iii)
liens arising as a matter of law in the ordinary course of business with respect
to obligations incurred after December 31, 1998, provided that the obligations
secured by such liens are not delinquent; and (iv) such title defects, liens,
encumbrances and restrictions, if any, as individually or in the aggregate are
not reasonably likely to have a Company Material Adverse Effect. The Company
Disclosure Letter sets forth a true, correct and complete list of all real
property (i) owned or leased by the Company or a Subsidiary, (ii) as to which
the Company or a Subsidiary has a license, easement or right of way to use,
(iii) as to which the Company or a Subsidiary has the option to purchase, lease,
license or acquire an easement or right of way or (iv) in which the Company or a
Subsidiary has any other interest. Except as set forth in the Company Disclosure
Letter, the Company and each of its Subsidiaries either own, or have valid
leasehold interests in, all properties and assets used by them in the conduct of
their business, except where the absence of such ownership or leasehold interest
could not individually or in the aggregate have a Company Material Adverse
Effect.
(b) Except as set forth in the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries has any legal obligation, absolute or
contingent, to any other person to sell or otherwise dispose of any of its
assets with an individual value of $25,000 or an aggregate value in excess of
$100,000.
Section 3.12. CHANGE OF CONTROL AGREEMENTS. Except as set forth in Section
1.6 or the Company Disclosure Letter, neither the execution and delivery of this
Agreement nor the consummation of the Merger or the other transactions
contemplated by this Agreement, will (either alone or in conjunction with any
other event) result in, cause the accelerated vesting or delivery of, or
increase the amount or value of, any payment or benefit to any director, officer
or employee of the Company. Except as set forth in the Company Disclosure
Letter, without limiting the generality of the foregoing, no amount paid or
payable by the Company in connection with the Merger or the other transactions
contemplated
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by this Agreement, including accelerated vesting of options, (either solely as a
result thereof or as a result of such transactions in conjunction with any other
event) will be an "excess parachute payment" within the meaning of Section 280G
of the Code.
Section 3.13. LITIGATION. Except for such matters disclosed in the Company
Disclosure Letter which, if adversely determined, have not had, and would not
reasonably be expected to have, a Company Material Adverse Effect, there are no
claims, suits, actions, investigations, indictments or information, or
administrative, arbitration or other proceedings ("LITIGATION") pending or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries. Except for such matters which have not had, and could not
reasonably be expected to have, a Company Material Adverse Effect, there are no
judgments, orders, injunctions, decrees, stipulations or awards (whether
rendered by a court, administrative agency, or by arbitration, pursuant to a
grievance or other procedure) against or relating to the Company or any of its
Subsidiaries.
Section 3.14. CONTRACTS AND COMMITMENTS. The Company Disclosure Letter
sets forth a true, correct and complete list of the following contracts to which
the Company or a Subsidiary is a party (including every amendment, modification
or supplement to the foregoing): (i) any contracts of employment, (ii)
agreements or arrangements for the purchase or sale of any assets (otherwise
than in the ordinary course of business), (iii) agreements, contracts or
indentures relating to the borrowing of money, (iv) agreements with unions,
material independent contractor agreements and material leased or temporary
employee agreements, (v) leases of any real property involving annual rent of
$5,000 or more, and (vi) other than respect to contracts identified in the
Company Disclosure Letter pursuant to Section 3.7, all other contracts,
agreements or commitments involving payments made by or to the Company or a
Subsidiary of $100,000. Except for agreements, arrangements or commitments
disclosed in the Company Disclosure Letter, neither the Company nor any of its
Subsidiaries is a party to any agreement, arrangement or commitment which is
material to the business of the Company taken as a whole. The Company has
delivered or made available true, correct and complete copies of all such
agreements, arrangements and commitments to Parent. Neither the Company nor any
of its Subsidiaries is in default under any such agreement, arrangement or
commitment which has had, or could reasonably be expected to have, a Company
Material Adverse Effect.
Section 3.15. INFORMATION SUPPLIED. The proxy statement to be mailed to
the Company Stockholders in connection with the meeting (the "STOCKHOLDER'S
MEETING") to be called to consider the Merger (the "PROXY STATEMENT") at the
date such document is first published, sent or delivered to Company Stockholders
or, unless promptly corrected, at any time during the pendency of the
Stockholder's Meeting, will not 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. The Proxy Statement will comply as to form
and substance in all material respects with the requirements of the Exchange Act
and the applicable rules and regulations of the SEC thereunder. Notwithstanding
the foregoing, no representation or warranty is made by the Company with respect
to statements made or incorporated by reference therein based on information
supplied by Parent or Buyer for inclusion or incorporation by reference in the
foregoing document.
Section 3.16. EMPLOYEE BENEFIT PLANS. All employee benefit plans,
compensation arrangements and other benefit arrangements covering employees of
the Company or any of its Subsidiaries (the "COMPANY BENEFIT PLANS") and all
employee agreements providing for compensation, severance or other benefits to
any employee or former employee of the Company or any of its Subsidiaries are
set forth in the Company Disclosure Letter. True and complete copies of the
Company Benefit Plans have been made available to Parent. To the extent
applicable, the Company Benefit Plans comply with the requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
Code, and any Company Benefit Plan intended to be qualified under Section 401(a)
of the Code has received a determination letter or is a model prototype plan and
continues to satisfy the
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requirements for such qualification. Neither the Company nor any of its
Subsidiaries nor any ERISA Affiliate of the Company maintains, contributes to or
has maintained or contributed in the past six (6) years to any benefit plan
which is covered by Title IV of ERISA or Section 412 of the Code. Neither any
Company Benefit Plan, nor the Company nor any Subsidiary has incurred any
material liability or penalty under Section 4975 of the Code or Section 502(i)
of ERISA or engaged in any transaction that is reasonably likely to result in
any such liability or penalty. Except as set forth in the Company Disclosure
Letter, each Company Benefit Plan has been maintained and administered in
compliance with its terms and with ERISA and the Code to the extent applicable
thereto, except for such non-compliance which individually or in the aggregate
could not reasonably be expected to have a Company Material Adverse Effect.
There is no pending or anticipated Litigation against or otherwise involving any
of the Company Benefit Plans and no Litigation (excluding claims for benefits
incurred in the ordinary course of Company Benefit Plan activities) has been
brought against or with respect to any such Company Benefit Plan, except for any
of the foregoing which individually or in the aggregate could not have a Company
Material Adverse Effect. All contributions required to be made as of the date
hereof to the Company Benefit Plans have been made or provided for. Except as
described in the SEC Reports or as required by Law, neither the Company nor any
of its Subsidiaries maintains or contributes to any plan or arrangement which
provides or has any liability to provide life insurance or medical or other
employee welfare benefits to any employee or former employee upon his retirement
or termination of employment, and neither the Company nor any of its
Subsidiaries has ever represented, promised or contracted (whether in oral or
written form) to any employee or former employee that such benefits would be
provided.
For purposes of this Agreement "ERISA AFFILIATE" means any business or
entity which is a member of the same "controlled group of corporations," an
"affiliated service group" or is under "common control" with an entity within
the meanings of Sections 414(b), (c) or (m) of the Code, is required to be
aggregated with the entity under Section 414(o) of the Code, or is under "common
control" with the entity, within the meaning of Section 4001(a)(14) of ERISA, or
any regulations promulgated or proposed under any of the foregoing Sections.
Section 3.17. LABOR AND EMPLOYMENT MATTERS. Except as set forth in the
Company Disclosure Letter:
(a) There are no agreements or arrangements on behalf of any officer,
director or employee providing for payment or other benefits to such person
contingent upon the execution of this Agreement, the Closing or a transaction
involving a change of control of the Company.
(b) Neither the Company nor any of its Subsidiaries is a party to, or bound
by, any collective bargaining agreement or other contracts, arrangements,
agreements or understandings with a labor union or labor organization that was
certified by the National Labor Relations Board ("NLRB"). Except for such
matters which, individually or in the aggregate, could not have a Company
Material Adverse Effect, there is no existing, pending or threatened (i) unfair
labor practice charge or complaint, labor dispute, labor arbitration proceeding
or any other matter before the NLRB or any other comparable state agency against
or involving the Company or any of its Subsidiaries, (ii) activity or proceeding
by a labor union or representative thereof to organize any employees of the
Company or any of its Subsidiaries, (iii) certification or decertification
question relating to collective bargaining units at the premises of the Company
or any of its Subsidiaries or (iv) lockout, strike, organized slowdown, work
stoppage or work interruption with respect to such employees.
(c) Neither the Company nor any of its Subsidiaries has taken any action
that would constitute a "Mass Layoff" or "Plant Closing" within the meaning of
the Worker Adjustment and Retraining Notification ("WARN") Act or would
otherwise trigger notice requirements or liability under any state or local
plant closing notice law. No agreement, arbitration or court decision or
governmental order in
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any way limits or restricts any of the Company, any of its Subsidiaries or
Parent from relocating or closing any of the operations of the Company or any of
its Subsidiaries.
(d) Neither the Company nor any of its Subsidiaries has failed to pay when
due any wages, bonuses, commissions, benefits, taxes, penalties or assessments
or other monies, owed to, or arising out of the employment of or any
relationship or arrangement with, any officer, director, employee, sales
representative, contractor, consultant or other agent. There are no citations,
investigations, administrative proceedings or formal complaints of violations of
any federal or state wage and hour laws pending or threatened before the
Department of Labor or any federal, state or administrative agency or court
against or involving the Company or any of its Subsidiaries.
(e) The Company and each of its Subsidiaries are in compliance with all
immigration laws relating to employment and have properly completed and
maintained all applicable forms (including but not limited to I-9 forms) and, to
the knowledge of the Company, there are no citations, investigations,
administrative proceedings or formal complaints of violations of the immigration
laws pending or threatened before the Immigration and Naturalization Service or
any federal, state or administrative agency or court against or involving the
Company or any of its Subsidiaries.
(f) There are no investigations, administrative proceedings, charges or
formal complaints of discrimination (including discrimination based upon sex,
age, marital status, race, national origin, sexual preference, disability,
handicap or veteran status) pending or threatened before the Equal Employment
Opportunity Commission or any federal, state or local agency or court against or
involving the Company or any of its Subsidiaries. No discrimination and/or
retaliation claim is pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries under the 1866, 1877, 1964 or
1991 Civil Rights Acts, the Equal Pay Act, the Age Discrimination in Employment
Act, as amended, the Americans with Disabilities Act, the Family and Medical
Leave Act, the Fair Labor Standards Act, ERISA, or any other federal law
relating to employment or any comparable state or local fair employment
practices act regulating discrimination in the workplace, and no wrongful
discharge, libel, slander, invasion of privacy or other claim (including but not
limited to violations of the Fair Credit Reporting Act, as amended, and any
applicable whistleblower statutes) under any state or federal law is pending or
threatened against the Company or any of its Subsidiaries.
(g) If the Company or any of its Subsidiaries is a Federal, State or local
contractor obligated to develop and maintain an affirmative action plan, no
discrimination claim, show-cause notice, conciliation proceeding, sanctions or
debarment proceedings is pending or has been threatened against the Company or
any of it Subsidiaries with the Office of Federal Contract Compliance Programs
or any other Federal agency or any comparable state or local agency or court and
no desk audit or on-site review is in progress.
(h) There are no citations, investigations, administrative proceedings or
formal complaints of violations of local, state or federal occupational safety
and health laws pending or threatened before the Occupational Safety and Health
Review Commission or any federal, state or local agency or court against or
involving the Company or any of its Subsidiaries.
(i) No workers' compensation or retaliation claim is pending against the
Company or any of its Subsidiaries in excess of $250,000 in the aggregate and
the Company maintains adequate insurance with respect to workers' compensation
claims pursuant to insurance policies that are currently in force, or has
accrued an adequate liability for such obligations, including, without
limitation, adequate accruals with respect to accrued but unreported claims and
retroactive insurance premiums.
Section 3.18. ENVIRONMENTAL COMPLIANCE AND DISCLOSURE. Except as set forth
in the Company Disclosure Letter:
(a) The Company possesses, and is in compliance in all material respects
with, all permits, licenses and government authorizations and has filed all
notices that are required under local, state and federal
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Laws and regulations relating to protection of the environment, pollution
control, product registration and hazardous materials ("ENVIRONMENTAL LAWS")
applicable to the Company, and the Company is in compliance with all applicable
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in those laws or contained in
any Law, regulation, code, plan, order, decree, judgment, notice, permit or
demand letter issued, entered, promulgated or approved thereunder;
(b) The Company has not received notice of actual or threatened liability
under the Federal Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") or any similar state or local statute or ordinance from
any governmental agency or any third party and, to the knowledge of the Company,
there are no facts or circumstances which could form the basis for the assertion
of any claim against the Company under any Environmental Laws including, without
limitation, CERCLA or any similar local, state or foreign Law with respect to
any on-site or off-site location;
(c) The Company has neither entered into nor agreed to, nor does it
contemplate entering into any consent decree or order, and is not subject to any
judgment, decree or judicial or administrative order relating to compliance
with, or the cleanup of hazardous materials under, any applicable Environmental
Laws;
(d) The Company has not been subject to any administrative or judicial
proceeding pursuant to and, to the knowledge of the Company, has not been
alleged to be in violation of, applicable Environmental Laws or regulations
either now or any time during the past five years;
(e) The Company has not received notice that it is subject to any claim,
obligation, liability, loss, damage or expense of whatever kind or nature,
contingent or otherwise, incurred or imposed or based upon any provision of any
Environmental Law and arising out of any act or omission of the Company, its
employees, agents or representatives or, to the knowledge of the Company,
arising out of the ownership, use, control or operation by the Company of any
plant, facility, site, area or property (including, without limitation, any
plant, facility, site, area or property currently or previously owned or leased
by the Company) from which any hazardous materials were released into the
environment (the term "release" meaning any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment, and the term "environment" meaning any surface
or ground water, drinking water supply, soil, surface or subsurface strata or
medium, or the ambient air);
(f) The Company has heretofore provided Parent with true, correct and
complete copies of all files of the Company relating to environmental matters
(or an opportunity to review such files). The Company has not paid any fines,
penalties or assessments within the last five years with respect to
environmental matters; and
(g) To the Company's knowledge, none of the assets owned by the Company or
any real property leased by the Company contain any friable asbestos, regulated
PCBs or underground storage tanks.
As used in this Section 3.18, the term "HAZARDOUS MATERIALS" means any
waste, pollutant, hazardous substance, toxic, ignitable, reactive or corrosive
substance, hazardous waste, special waste, industrial substance, by-product,
process intermediate product or waste, petroleum or petroleum-derived substance
or waste, chemical liquids or solids, liquid or gaseous products, or any
constituent of any such substance or waste, the use, handling or disposal of
which by the Company is in any way governed by or subject to any applicable Law,
rule or regulation of any Governmental Entity.
Section 3.19. INTELLECTUAL PROPERTY.
(a) The Company Disclosure Letter sets forth a true and complete list of (i)
all United States and foreign patents, trademark, service mark and copyright
registrations and applications therefor, and
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material trademarks, trade names, service marks and copyrights owned by the
Company and its Subsidiaries (the "INTELLECTUAL PROPERTY RIGHTS") and (ii) all
United States and foreign patents, trademarks, trade names, service marks and
copyrights licensed to the Company or any of its Subsidiaries (the "LICENSED
RIGHTS"). The Company represents and warrants that, except as set forth in the
Company Disclosure Letter, (i) the Intellectual Property Rights are free and
clear of any liens, claims or encumbrances, are not subject to any license
(royalty bearing or royalty free) and are not subject to any other arrangement
requiring any payment to any person or the obligation to grant rights to any
person in exchange; (ii) to the knowledge of the Company, the Licensed Rights
are free and clear of any liens, claims, encumbrances, royalties or other
obligations; and (iii) the Intellectual Property Rights and the Licensed Rights
are all those material rights necessary to the conduct of the business of each
of the Company, its Subsidiaries and the Company's affiliates as presently
conducted. Except as set forth in the Company Disclosure Letter, the validity of
the Intellectual Property Rights and title thereto, (i) have not been questioned
in any prior Litigation; (ii) are not being questioned in any pending
Litigation; and (iii) to the knowledge of the Company, are not the subject(s) of
any threatened or proposed Litigation. The business of each of the Company and
its Subsidiaries, as presently conducted, does not conflict with and, to the
knowledge of the Company, has not been alleged to conflict with any patents,
trademarks, trade names, service marks, copyrights or other intellectual
property rights of others. The consummation of the transactions contemplated
hereby will not result in the loss or impairment of any of the Intellectual
Property Rights or the Company's or its Subsidiaries' right to use any of the
Licensed Rights. To the knowledge of the Company, there are no third parties
using any of the Intellectual Property Rights material to the business of the
Company or its Subsidiaries as presently conducted.
(b) Except as identified in the Company Disclosure Letter, each of the
Company and its Subsidiaries owns, or possesses valid rights to, all computer
software programs that are material to the conduct of the business of the
Company and its Subsidiaries. To the Company's knowledge, there are no
infringement suits, actions or proceedings pending or threatened against the
Company or any Subsidiary with respect to any software owned or licensed by the
Company or any Subsidiary.
Section 3.20. YEAR 2000 COMPLIANCE. The Company has made available to
Parent the Company's plan to ensure that it will be Year 2000 Compliant (the
"YEAR 2000 PLAN"). To the Company's knowledge, the Year 2000 Plan will enable
the Company to be Year 2000 Compliant in a timely manner except as to matters
which are not reasonably likely to result in a Company Material Adverse Effect
and the cost for the Company to become Year 2000 Compliant is estimated to be
$400,000.
"YEAR 2000 COMPLIANT" means that (a) the products, services, or other
item(s) at issue accurately process, provide and/or receive date/time data
(including calculating, comparing, and sequencing), within, from, into, and
between centuries (including the twentieth and twenty-first centuries and the
years 1999 and 2000), including leap year calculations, and (b) neither the
performance nor the functionality nor the supply of the products, services, and
other item at issue will be affected by dates/ times prior to, on, after, or
spanning January 1, 2000. The design of the products, services, and other item
at issue to ensure compliance with the foregoing warranties and representations
includes proper date/time data century recognition and recognition of 1999 and
2000, calculations that accommodate same century and multicentury formulae and
date/time values before, on, after, and spanning January 1, 2000, and date/time
data interface values that reflect the century, 1999, and 2000. In particular,
but without limitation, (i) no value for current date/time will cause any error,
interruption, or decreased performance in or for such product, service, and
other item, (ii) all manipulations of date and time related data (including
calculating, comparing, sequencing, processing, and outputting) will produce
correct results for all valid dates and times, including when used in
combination with other products, services, or items, (iii) all date/time
elements in interfaces and data storage will specify the century to eliminate
date ambiguity without human intervention, including leap year calculations,
(iv) where any date/time element is represented without a century, the correct
century will be unambiguous for all
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manipulations involving that element, (v) authorization codes, passwords, and
zaps (purge functions) will function normally and in the same manner during
prior to, on, and after January 1, 2000, including the manner in which they
function with respect to expiration dates and CPU serial numbers, and (vi) the
Company's and its Subsidiaries' supply of the product, service, and other item
will not be interrupted, delayed, decreased, or otherwise affected by the advent
of the year 2000.
Section 3.21. BROKERS. Except pursuant to the Independent Advisor
Engagement Letters (as hereinafter defined), no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with this Agreement, the Merger or the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. The Company Disclosure Letter includes a complete and correct copy
of all agreements between the Company and the Independent Advisors pursuant to
which such firms would be entitled to any payment relating to this Agreement,
the Merger or the other transactions contemplated by this Agreement.
Section 3.22. [Intentionally Omitted.]
Section 3.23. INSURANCE POLICIES SECTION. The Company has delivered to
Parent prior to the date hereof a complete and accurate list of all insurance
policies in force naming the Company, any of its Subsidiaries or employees
thereof as an insured or beneficiary or as a loss payable payee or for which the
Company or any Subsidiary has paid or is obligated to pay all or part of the
premiums. Neither the Company nor any Subsidiary has received notice of any
pending or threatened cancellation or premium increase (retroactive or
otherwise) with respect thereto, and each of the Company and the Subsidiaries is
in compliance in all material respects with all conditions contained therein.
There are no material pending claims against such insurance policies by the
Company or any Subsidiary as to which insurers are defending under reservation
of rights or have denied liability, and there exists no material claim under
such insurance policies that has not been properly filed by the Company or any
Subsidiary. Except for the self-insurance retentions or deductibles set forth in
the policies contained in the aforementioned list, the policies are adequate in
scope and amount to cover all prudent and reasonably foreseeable risks which may
arise in the conduct of the business of the Company and the Subsidiaries that
would reasonably be expected to have a Company Material Adverse Effect.
Section 3.24. NOTES AND ACCOUNTS RECEIVABLE.
(a) Except as disclosed in the Company Disclosure Letter, there are no notes
receivable of the Company or any Subsidiary owing by any director, officer,
stockholder or employee of the Company or any Subsidiary.
(b) Except as disclosed in the Company Disclosure Letter, all accounts
receivable of the Company and any Subsidiary are current or covered by adequate
reserves for uncollectability, and there are no material disputes regarding the
collectibility of any such accounts receivable that would reasonably be expected
to have a Company Material Adverse Effect.
Section 3.25. TRANSACTIONS WITH AFFILIATES. Except as set forth in the
Company Disclosure Letter (other than compensation and benefits received in the
ordinary course of business as an employee or director of the Company or its
Subsidiaries), no director, officer or other "affiliate" or "associate" (as such
terms are defined in Rule 12b-2 under the Exchange Act) of the Company or any
Subsidiary or any entity in which, to the knowledge of the Company, any such
director, officer or other affiliate or associate, owns any beneficial interest
(other than a publicly held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market and less than 1% of the
stock of which is beneficially owned by any such persons) has any interest in:
(i) any contract, arrangement or understanding with, or relating to the business
or operations of Company or any Subsidiary; (ii) any loan, arrangement,
understanding, agreement or contract for or relating to indebtedness of the
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Company or any Subsidiary; or (iii) any property (real, personal or mixed),
tangible, or intangible, used or currently intended to be used in, the business
or operations of the Company or any Subsidiary.
Section 3.26. NO EXISTING DISCUSSIONS. As of the date hereof, the Company
is not engaged, directly or indirectly, in any negotiations or discussions with
any other party with respect to an Acquisition Proposal (as hereinafter
defined).
Section 3.27. DISCLOSURE. No representation, warranty or covenant made by
the Company in this Agreement or in the Company Disclosure Letter contains an
untrue statement of a material fact or omits to state a material fact required
to be stated herein or therein or necessary to make the statements contained
herein or therein not misleading. Any matter expressly disclosed in the Company
Disclosure Letter shall be deemed to be disclosed as to such matter so long as
such disclosure being made states clearly the matter being disclosed and the
context for which it is being disclosed.
Section 3.28. COMPANY WARRANTS. Upon the consummation of the Merger, each
of the Company's outstanding warrants to acquire shares of Company Common Stock
shall, pursuant to their terms, become exercisable, upon payment of the
applicable exercise price thereof, into the right to receive an amount in cash
determined by multiplying (A) the Merger Consideration by (B) the number of
shares of Company Common Stock such holder could have purchased had such holder
exercised such warrant in full immediately prior to the consummation of the
Merger.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Each of Parent and Buyer represents and warrants to the Company as follows:
Section 4.1. ORGANIZATION AND STANDING. Such person (a) is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (b) has full corporate power and authority to
own, lease and operate it properties and assets and to conduct its business as
presently conducted and (c) is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed would not, individually or in the
aggregate, have a material adverse effect on Parent or Buyer.
Section 4.2. AUTHORITY FOR AGREEMENT. Such person has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the Merger and the other
transactions contemplated by this Agreement. The execution, delivery and
performance by such person of this Agreement, and the consummation by each such
person of the Merger and the other transactions contemplated by this Agreement,
have been duly authorized by all necessary corporate action and no other
corporate proceedings on the part of such person are necessary to authorize this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement (other than, with respect to the Merger, the filing and
recordation of appropriate merger documents as required by the DGCL). This
Agreement has been duly executed and delivered by such person and, assuming due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of each of such person enforceable against such person in
accordance with its terms.
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Section 4.3. NO CONFLICT. The execution and delivery of this Agreement by
such person do not, and the performance of this Agreement by such person and the
consummation of the Merger and the other transactions contemplated by this
Agreement will not, (i) conflict with or violate the certificate of
incorporation or bylaws of such person, (ii) conflict with or violate any Law
applicable to such person or by which any property or asset of such person is
bound or affected, or (iii) result in any breach of or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of such person pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which such person is a party or by which such person
or any property or asset of either of them is bound or affected, except in the
case of clauses (ii) and (iii) for any such conflicts, violations, breaches,
defaults or other occurrences which would not, individually or in the aggregate,
prevent or materially delay the performance by such person of its respective
obligations under this Agreement or the consummation of the Merger or the other
transactions contemplated by this Agreement.
Section 4.4. REQUIRED FILINGS AND CONSENTS. The execution and delivery of
this Agreement by such person do not, and the performance of this Agreement by
such person will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Entity, except (i) for
applicable requirements, if any, of the Exchange Act, Blue Sky Laws and filing
and recordation of appropriate merger documents as required by the DGCL, (ii)
for those required by the HSR Act, (iii) for the FCC Filings, (iv) for filings
contemplated by Section 3.15 and (v) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not, individually or in the aggregate, prevent or materially delay the
performance by such person of any of its respective obligations under this
Agreement or the consummation of the Merger or the other transactions
contemplated by this Agreement.
Section 4.5. INFORMATION SUPPLIED. None of the information supplied or to
be supplied by such person for inclusion or incorporation by reference in the
Proxy Statement will, at the date such document is first published, sent or
delivered to Company Stockholders or, unless promptly corrected, at any time
during the pendency 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. Notwithstanding
the foregoing, no representation or warranty is made by such person with respect
to statements made or incorporated by reference therein based on information
supplied by the Company for inclusion or incorporation by reference in the
foregoing document.
Section 4.6. BROKERS. No broker, finder or investment banker (other than
Warburg Dillon Read LLC) is entitled to any brokerage, finder's or other fee or
commission payable by such person in connection with this Agreement, the Merger
or the other transactions contemplated by this Agreement based upon arrangements
made by or on behalf of such person.
Section 4.7. NO PRIOR ACTIVITIES. Except for obligations or liabilities
incurred in connection with its incorporation or organization or the negotiation
and consummation of this Agreement, the Merger and the transactions contemplated
hereby and the purchase of the shares of Convertible Preferred Stock, Buyer has
not incurred any obligations or liabilities, and has not engaged in any business
or activities of any type or kind whatsoever or entered into any agreements or
arrangements with any person or entity.
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ARTICLE V.
COVENANTS
Section 5.1. CONDUCT OF THE BUSINESS PENDING THE MERGER.
(a) The Company covenants and agrees that between the date of this Agreement
and the Effective Time, unless Parent shall otherwise agree in writing, (i) the
business of the Company and its Subsidiaries shall be conducted only in, and the
Company and its Subsidiaries shall not take any action except in, the ordinary
course of business and in a manner consistent with prior practice, (ii) the
Company and its Subsidiaries shall use all commercially reasonable efforts to
maintain and protect the FCC Licenses and Channel Leases, to preserve
substantially intact their business organizations, to keep available the
services of their current officers and employees and to preserve the current
relationships of the Company and its Subsidiaries with customers, suppliers and
other persons with which the Company or its Subsidiaries has significant
business relations, and (iii) the Company will comply in all material respects
with all applicable Laws and regulations wherever its business is conducted,
including, without limitation, the timely filing of all reports, forms or other
documents with the FCC and with the SEC required pursuant to the Securities Act
or the Exchange Act.
(b) The Company covenants and agrees that between the date of this Agreement
and the Effective Time, the Company shall not, nor shall the Company permit any
of its Subsidiaries to, (i) declare or pay any dividends on or make other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, except for dividends (x) by a wholly owned Subsidiary of the
Company to the Company or another wholly owned Subsidiary of the Company, (y)
with respect to the Convertible Preferred Stock and (z) with respect to the
preferred stock of Speedchoice of Detroit, Inc.; (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock; (iii) repurchase or otherwise acquire any
shares of its capital stock; (iv) issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock or
any securities convertible into any such shares of its capital stock, or any
rights, warrants or options to acquire any such shares or convertible securities
or any stock appreciation rights, phantom stock plans or stock equivalents,
other than the issuance of shares of Company Common Stock upon (x) the exercise
of Company Options outstanding as of the date of this Agreement, (y) exercise of
warrants and (z) conversion of Convertible Preferred Stock; (v) willfully take
any action that would make the Company's representations and warranties set
forth in Article III not true and correct in all material respects; or (vi) take
any action that would, or could reasonably be expected to, result in any of the
conditions set forth in Article VI not being satisfied.
(c) The Company covenants and agrees that between the date of this Agreement
and the Effective Time, the Company shall not, nor shall the Company permit any
of its Subsidiaries to, (i) amend its certificate of incorporation (including
any certificate of designations attached thereto) or bylaws or other equivalent
organizational documents; (ii) incur any indebtedness for borrowed money or
guaranty any such indebtedness of another person, other than (A) borrowings
under existing lines of credit (or under any refinancing of such existing lines)
or (B) indebtedness owing to, or guaranties of indebtedness owing to, the
Company (iii) make any loans or advances to any other person other than loans or
advances between any Subsidiaries of the Company or between the Company and any
of its Subsidiaries (other than loans or advances less than $50,000 made in the
ordinary course of business consistent with past practice); (iv) merge or
consolidate with any other entity in any transaction, or sell any business or
assets in a single transaction or series of transactions in which the aggregate
consideration is $100,000 or greater; (v) change its accounting policies except
as required by GAAP; (vi) make any change in employment terms for any of its
directors or officers; (vii) alter, amend or create any obligations with respect
to compensation, severance, benefits, change of control payments or any other
payments to employees, directors or affiliates of the Company or its
Subsidiaries, other than
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with respect to alterations or amendments made with respect to non-officers and
non-directors in the ordinary course of business consistent with past practice
or as expressly contemplated by this Agreement or consented to in writing by
Parent; (viii) make any change to the Company Benefit Plans; (ix) enter into any
leasing or licensing agreements, take-or-pay arrangements or other affiliations,
alignments or agreements with respect to the FCC Licenses, provided, the Company
may renegotiate any Channel Leases in the ordinary course of business; or (x)
commit or agree to take any of the actions described in this Section 5.1.
(d) The Company Disclosure Letter sets forth the projected operating
expenses and capital expenditures for Company and its Subsidiaries on a
consolidated basis from the date of this Agreement through December 31, 1999 as
agreed to by the Company and Parent (the "PROJECTIONS"). The Company agrees that
it shall not incur material operating expenses or capital expenditures, in the
aggregate, in excess of those identified in the Projections.
Section 5.2. ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) From the date hereof to the Effective Time, the Company shall, and shall
cause the officers, directors, employees, auditors, attorneys, financial
advisors, lenders and other agents (collectively, the "REPRESENTATIVES") of the
Company to, afford the Representatives of Parent and Buyer reasonable access at
all reasonable times to the officers, employees, agents, properties, offices and
other facilities, books and records of the Company and its Subsidiaries, and
shall furnish Parent and Buyer with all financial, operating and other data and
information as Parent or Buyer, through its Representatives, may reasonably
request. Parent will remain subject to the terms of a confidentiality agreement
with the Company dated March 20, 1998 (the "CONFIDENTIALITY AGREEMENT").
(b) No investigation pursuant to this Section 5.2 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
Section 5.3. NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence, or nonoccurrence, of any event which would be likely to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate and (ii) any failure by such party (or Buyer, in the case of Parent)
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery of any
notice pursuant to this Section 5.3 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice. If any event or
matter arises after the date of this Agreement which, if existing or occurring
at the date of this Agreement, would have been required to be set forth or
described in the Company Disclosure Letter or which is necessary to correct any
information in the Company Disclosure Letter which has been rendered inaccurate
thereby, then the Company shall promptly supplement, or amend, and deliver to
Parent the Company Disclosure Letter which it has delivered pursuant to this
Agreement.
Section 5.4. FURTHER ASSURANCES.
(a) Upon the terms and subject to the conditions hereof, each of the parties
hereto shall use all commercially reasonable efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under Law to consummate and make effective the
Merger and the other transactions contemplated by this Agreement, including,
without limitation, using all commercially reasonable efforts to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of each Governmental Entity and parties to contracts with the Company and
its Subsidiaries as are necessary for the consummation of the Merger and the
other transactions contemplated by this Agreement and to fulfill the conditions
set forth in Article VI. If at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers of each party to this Agreement and the Surviving
Corporation shall use all commercially reasonable efforts to take all such
action.
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(b) In connection with, and without limiting the foregoing, the Company
shall (i) take all actions necessary to ensure that no state antitakeover
statute or similar statute or regulation is or becomes operative with respect to
this Agreement, the Merger or any other transactions contemplated by this
Agreement and (ii) if any state antitakeover statute or similar statute or
regulation is or becomes operative with respect to this Agreement, the Merger or
any other transaction contemplated by this Agreement, take all actions necessary
to ensure that this Agreement, the Merger and any other transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the effect of
such statute or regulation on the Merger and the other transactions contemplated
by this Agreement.
(c) The parties hereto shall use their best efforts to secure promptly all
necessary approvals from the FCC that are required to consummate this Agreement.
Without limitation to the foregoing, promptly after the date of this Agreement,
the parties shall file with the FCC applications seeking authorization for the
transfer of control of the Company to Buyer at the Closing and the assignment of
any FCC Licenses held by the Alda Companies to an entity designated by Buyer at
the Closing. The parties shall use their best efforts to prosecute such
applications with diligence and shall diligently oppose any objections to such
applications to the end that each application, as soon as practicable, shall be
granted by the FCC and such grants shall no longer be subject to any further
administrative or judicial review.
Section 5.5. BOARD RECOMMENDATIONS.
(a) In connection with the Merger and Stockholders' Meeting, the Board of
Directors of the Company shall (i) subject to Section 5.5(b), recommend to the
holders of the Company Common Stock to vote in favor of the Merger and use all
commercially reasonable efforts to obtain the necessary approvals by the Company
Stockholders of this Agreement and (ii) otherwise comply with all legal
requirements applicable to such meeting.
(b) Neither the Board of Directors of the Company nor any committee thereof
shall, except as expressly permitted by this Section 5.5(b) (i) withdraw,
qualify or modify, or propose publicly to withdraw, qualify or modify, in a
manner adverse to Parent, the approval or recommendation of such Board of
Directors or such committee of the Merger or this Agreement, (ii) approve or
recommend, or propose publicly to approve or recommend, any transaction
involving an Acquisition Proposal (as hereinafter defined) from a third party
(an "ALTERNATIVE TRANSACTION"), or (iii) cause the Company to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement (each, an "ACQUISITION AGREEMENT") related to any Alternative
Transaction. Notwithstanding the foregoing, if prior to the approval of this
Agreement by the Company Stockholders, the Board of Directors of the Company
determines in good faith, after it has received a Superior Proposal (as
hereinafter defined) in compliance with Section 5.9 and after receipt of written
advice from outside counsel that it is required to do so by its fiduciary duties
to Company Stockholders under applicable Law, the Board of Directors of the
Company may (subject to this and the following sentences) inform Company
Stockholders that it no longer believes that the Merger is advisable and no
longer recommends approval (a "SUBSEQUENT DETERMINATION") and enter into an
Acquisition Agreement with respect to a Superior Proposal, but only at a time
that is after the third business day following Parent's receipt of written
notice advising Parent that the Board of Directors of the Company has received a
Superior Proposal. Such written notice shall specify the material terms and
conditions of such Superior Proposal (and include a copy thereof with all
accompanying documentation, if in writing), identify the person making such
Superior Proposal and state that the Board of Directors of the Company intend to
make a Subsequent Determination. During such three business day period, the
Company shall provide an opportunity for Parent to propose such adjustments to
the terms and conditions of this Agreement as would enable the Company to
proceed with its recommendation to its stockholders without a Subsequent
Determination; PROVIDED, HOWEVER, that any such proposed adjustment shall be at
the discretion of the parties hereto at the time. For purposes of this
Agreement, a "SUPERIOR PROPOSAL"
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means any proposal (on its most recently amended or modified terms, if amended
or modified) made by a third party to enter into an Alternative Transaction
which the Board of Directors of the Company determines in its good faith
judgment (based on, among other things, the written advice of an independent
financial advisor) to be more favorable to the Company Stockholders than the
Merger, taking into account all relevant factors (including whether, in the good
faith judgment of the Board of Directors of the Company, after obtaining the
advice of such independent financial advisor, the third party is reasonably able
to finance the transaction, and any proposed changes to this Agreement that may
be proposed by Parent in response to such Alternative Transaction).
Notwithstanding any other provision of this Agreement, the Company shall submit
this Agreement (whether or not terminated) to the Company Stockholders whether
or not the Board of Directors of the Company makes a Subsequent Determination.
Nothing contained in this Section 5.5 or any other provision hereof shall
prohibit the Company or the Board of Directors of the Company from (A) taking
and disclosing to the Company Stockholders pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act a position with respect to a tender or
exchange offer by a third party, which is consistent with its obligations
hereunder or (B) making such disclosure to the Company Stockholders as, in the
good faith judgment of the Board of Directors of the Company, after receiving
advice from outside counsel is consistent with its obligations hereunder and is
required by applicable law; PROVIDED, that the Company may not, except as
provided by this Section 5.5(b), withdraw, qualify or modify, in a manner
adverse to Parent, the approval or recommendation of such Board of Directors of
the Merger or this Agreement.
Section 5.6. STOCKHOLDER LITIGATION. The Company shall give Parent the
opportunity to participate in the defense or settlement of any stockholder
Litigation against the Company and its directors relating to the transactions
contemplated by this Agreement or the Merger; PROVIDED, HOWEVER, that no such
settlement shall be agreed to without Parent's consent which consent will not be
unreasonably withheld.
Section 5.7. INDEMNIFICATION.
(a) It is understood and agreed that all rights to indemnification by the
Company now existing in favor of each present and former director, officer,
employee and agent of the Company or its Subsidiaries (the "INDEMNIFIED
PARTIES") as provided in the Company Certificate of Incorporation or the Company
Bylaws, in each case as in effect on the date of this Agreement, or pursuant to
any other agreements in effect on the date hereof, copies of which have been
provided to Parent, shall survive the Merger and Parent shall (i) cause the
Surviving Corporation to continue in full force and effect for a period of at
least six (6) years from the Effective Time and (ii) perform, or cause the
Surviving Corporation to perform, in a timely manner, the Surviving
Corporation's obligation with respect thereto. Parent and Buyer agree that any
claims for indemnification hereunder as to which they have received written
notice prior to the sixth anniversary of the Effective Time shall survive,
whether or not such claims shall have been finally adjudicated or settled.
(b) Parent shall cause the Surviving Corporation to, and the Surviving
Corporation shall, maintain in effect for six (6) years from the Effective Time,
if available, the current directors' and officers' liability insurance policies
("D&O INSURANCE") covered by such policies (provided that the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are not materially less favorable) with
respect to matters occurring prior to the Effective Time; PROVIDED, HOWEVER,
that in no event shall the Surviving Corporation be required to expend pursuant
to this Section 5.7(b) more than an amount per year equal to one hundred fifty
percent (150%) of current annual premiums paid by the Company for such
insurance. In the event that, but for the proviso to the immediately preceding
sentence, the Surviving Corporation would be required to expend more than one
hundred fifty percent (150%) of current annual premiums, the Surviving
Corporation shall obtain the maximum amount of such insurance obtainable by
payment of annual premiums equal to one hundred fifty percent (150%) of current
annual premiums. If the Surviving Corporation elects to reduce the amount of
insurance coverage pursuant to the preceding
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sentence, it will furnish to the officers and directors currently covered by
such D&O Insurance reasonable notice of such reduction in coverage and shall, to
the extent additional coverage is available, afford such persons the opportunity
to pay such additional premiums as may be necessary to maintain the existing
level of D&O Insurance coverage.
(c) If the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation shall assume the obligations
set forth in this Section 5.7.
(d) The provisions of this Section 5.7 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
his or her representatives.
Section 5.8. PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or the Merger and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by Law or any listing agreement with a national
securities exchange or trading system to which Parent or the Company is a party.
The parties agree that the initial press release to be issued with respect to
the transactions contemplated by this Agreement is set forth in EXHIBIT 5.8 to
this Agreement.
Section 5.9. ACQUISITION PROPOSALS. The Company shall not, nor shall it
authorize or permit any of its Subsidiaries or Representatives to, directly or
indirectly, (a) solicit, initiate or encourage the submission of any Acquisition
Proposal or (b) participate in or encourage any discussion or negotiations
regarding, or furnish to any person any non-public information with respect to,
or take any other action to facilitate any inquiries or the making of, any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; PROVIDED, HOWEVER, that the foregoing shall not prohibit
the Board of Directors of the Company from furnishing information to, or
entering into discussions or negotiations with, any person or entity that makes
an unsolicited Acquisition Proposal prior to the approval of this Agreement by
the Company Stockholders if, and to the extent that, (A) the Board of Directors
of the Company, based upon the written advice of independent outside legal
counsel, determines in good faith that such action is required for the Board of
Directors of the Company to comply with its fiduciary obligations to the Company
Stockholders under applicable Delaware law, (B) prior to taking such action, the
Company receives from such person or entity an executed agreement in reasonably
customary form relating to the confidentiality of information to be provided to
such person or entity and (C) the Board of Directors of the Company concludes in
good faith, based upon written advice from its independent financial advisor,
that the Acquisition Proposal is a Superior Proposal. The Company shall provide
immediate oral and written notice to Parent of (a) the receipt of any such
Acquisition Proposal or any inquiry which could reasonably be expected to lead
to any Acquisition Proposal, (b) the material terms and conditions of such
Acquisition Proposal or inquiry, (c) the identity of such person or entity
making any such Acquisition Proposal or inquiry and (d) the Company's intention
to furnish information to, or enter into discussions or negotiations with, such
person or entity. The Company shall continue to keep Parent informed of the
status and details of any such Acquisition Proposal or inquiry. For purposes of
this Agreement, "ACQUISITION PROPOSAL" means any bona fide proposal with respect
to a merger, consolidation, share exchange, tender offer or similar transaction
involving the Company, or any purchase or other acquisition of all or any
significant portion of the assets of the Company or any equity interest in the
Company.
Section 5.10. COMPANY STOCKHOLDERS' MEETING.
(a) The Company shall cause the Stockholders' Meeting to be duly called and
held as soon as practicable for the purpose of voting on the approval and
adoption of this Agreement and the Merger. The Company shall take all action
necessary in accordance with applicable Law and the Company
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Certificate of Incorporation and Company Bylaws to duly call, give notice of,
and convene the Stockholders' Meeting.
(b) The Company shall, at the direction of Parent, solicit from holders of
shares of Company Stock entitled to vote at the Stockholders' Meeting proxies in
favor of such approval and shall take all other action necessary or, in the
reasonable judgment of Parent, helpful to secure the vote or consent of such
holders required by the DGCL or this Agreement to effect the Merger.
Section 5.11. PROXY STATEMENT.
(a) Parent and the Company will as promptly as practicable following the
execution of this Agreement jointly prepare, and the Company shall file, the
Proxy Statement with the SEC and will use all commercially reasonable efforts to
respond to the comments of the SEC and to cause the Proxy Statement to be mailed
to the Company Stockholders at the earliest practical time. The Company shall
furnish all information concerning it and the holders of its capital stock as
Parent may reasonably request in connection with such actions. Each party to
this Agreement will notify the other parties and the Board of Directors of the
Company promptly of the receipt of the comments of the SEC, if any, and of any
request by the SEC for amendments or supplements to the Proxy Statement or for
additional information with respect thereto, and will supply the other parties
with copies of all correspondence between such party or its Representatives, on
the one hand, and the SEC or members of its staff, on the other hand, with
respect to the Proxy Statement or the Merger. If (A) at any time prior to the
Stockholders' Meeting, any event should occur relating to the Company or any of
its Subsidiaries which should be set forth in an amendment of, or a supplement
to, the Proxy Statement, the Company will promptly inform Parent and (B) if at
any time prior to the Stockholders' Meeting, any event should occur relating to
Parent or Buyer or any of their respective associates or affiliates, or relating
to the plans of any such persons for the Company after the Effective Time that
should be set forth in an amendment of, or a supplement to, the Proxy Statement,
Parent will promptly inform the Company, and in the case of (A) or (B) the
Company and Parent, will, upon learning of such event, promptly prepare, and the
Company shall file and, if required, mail such amendment or supplement to the
Company Stockholders; PROVIDED, prior to such filing or mailing, the Company and
Parent shall consult with each other with respect to such amendment or
supplement and shall incorporate the other's comments thereon. Parent shall
vote, or cause to be voted, in favor of the Merger and this Agreement all shares
of Company Stock directly or indirectly beneficially owned by it.
(b) The Company hereby consents to the inclusion in the Proxy Statement of
the recommendation of the Board of Directors of the Company described in Section
3.3, subject to any modification, amendment or withdrawal thereof, and
represents that the Independent Advisors have, subject to the terms of their
engagement letters with the Company and the Board of Directors of the Company
(the "INDEPENDENT ADVISOR ENGAGEMENT LETTERS"), consented to the inclusion of
references to their opinions in the Proxy Statement. The Company and its counsel
shall permit Parent and its counsel to participate in all communications with
the SEC and its staff, including any meetings and telephone conferences,
relating to the Proxy Statement, the Merger or this Agreement.
Section 5.12. STOCKHOLDER LISTS. The Company shall promptly upon the
request by Parent, or shall cause its transfer agent to promptly, furnish Parent
and Buyer with mailing labels containing the names and addresses of all record
holders of shares of Company Stock and with security position listings of shares
of Company Stock held in stock depositories, each as of the most recent
practicable date, together with all other available listings and computer files
containing names, addresses and security position listings of record holders and
beneficial owners of shares of Company Stock. The Company shall furnish Parent
and Buyer with such additional information, including, without limitation,
updated listings and computer files of the Company Stockholders, mailing labels
and security position listings, and such other assistance as Parent, Buyer or
their agents may reasonably request.
Section 5.13. [Intentionally Omitted.]
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Section 5.14. [Intentionally Omitted.]
Section 5.15. FCC APPLICATION. The Company and Parent shall coordinate
efforts and cooperate with each other, to the extent permitted by the FCC rules,
in the preparation and filing of Colocation Applications and Other Applications
with the FCC. Without limitation to the foregoing, upon the request of Parent,
the Company shall use all commercially reasonable efforts to prepare and file
and/or to cause the lessor of a Channel Lease to prepare and file, at the
Company's expense, a Colocation Application or Other Application to be filed
with the FCC, as soon as practicable, and to the extent applicable, in no event
after: (i) the end of the initial one week filing window in which the FCC will
accept Other Applications for the provision of Two-Way Services pursuant to the
newly adopted FCC rules governing the provision of Two-Way Services; or (ii) the
end of a filing window for ITFS major modification applications established
pursuant to Section 74.911(c) of the FCC rules.
Section 5.16. UNDERTAKINGS OF PARENT. Parent shall perform, or cause to be
performed, when due all obligations of Buyer under this Agreement.
Section 5.17. TRANSFER OF FCC LICENSES. The Company shall cause, prior to
the consummation of the Merger, the FCC Licenses and Channel Leases owned by
Alda Wireless Holdings, Inc., Alda Tucson, Inc. and Alda Gold, Inc.
(collectively, the "ALDA COMPANIES") to be transferred to the Company in a
manner reasonably satisfactory to Parent. In connection with such transfer, the
Company shall cause each of the Alda Companies to release the Company from any
liabilities to the Alda Companies associated with such FCC Licenses and Channel
Leases and acknowledge that the Company has no further obligations to the Alda
Companies with respect to such FCC Licenses and Channel Leases.
Section 5.18. DIRECTOR RESIGNATIONS. The Company shall cause to be
delivered to Parent resignations of all the directors of the Company's
Subsidiaries to be effective upon the consummation of the Merger. The Company
shall cause such directors, prior to resignation, to appoint new directors
nominated by Parent to fill such vacancies.
Section 5.19. COMPANY OPTIONS. As promptly as practicable following the
date hereof, the Company shall use all commercially reasonable efforts to cause
all of the holders of Company Options to agree to the termination and expiration
of their Company Options immediately prior to the consummation of the Merger in
exchange for the Option Consideration described in Section 1.6.
Section 5.20. [Intentionally Omitted.]
Section 5.21. RIGHTS PLAN. The Board of Directors of Company shall as
promptly as practicable, and in any event prior to 5:00 p.m., New York time, on
April 12, 1999, adopt a Rights Agreement between the Company and Harris Trust
Company of New York (the "RIGHTS PLAN") and shall approve the appropriate
resolutions so that (i) neither Parent nor Buyer will become an "Acquiring
Person" (as defined in the Rights Plan) as a result of the transactions
contemplated by this Agreement or the Merger, (ii) no "Stock Acquisition Date"
or "Distribution Date" (as such terms are defined in the Rights Plan) will occur
as a result of this Agreement or the Merger or the consummation of the
transactions contemplated by this Agreement or the Merger, and (iii) all
outstanding rights to purchase Series A Junior Participating Preferred Stock
issued and outstanding under the Rights Plan will expire at the Effective Time.
Section 5.22. YEAR 2000 PLAN. The Company shall use all commercially
reasonable efforts to ensure that the Year 2000 Plan shall be completed in a
timely manner. The Company shall (i) allow Parent to monitor the Company's Year
2000 Compliance issues and Year 2000 Plan, (ii) provide prompt notice to Parent
if the Company does not achieve, or reasonably expects it shall not achieve,
milestones and objectives identified in the Year 2000 Plan and (iii) cooperate
in good faith with Parent's efforts to ensure that the Company is Year 2000
Compliant.
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Section 5.23. PURCHASE OF COMPANY STOCK. The Company shall in no way
prohibit Parent or any of its affiliates from purchasing shares of Company Stock
or entering into option, lock-up, voting or proxy agreements or any other
similar agreements with respect to Company Stock (including, but not limited to,
amending the Rights Plan to cause such acquisition or agreement to trigger a
Stock Acquisition Date or Distribution Date or cause Parent or any or its
affiliates to become an Acquiring Person) at any time prior to the consummation
of the Merger.
Section 5.24. APPOINTMENT OF DIRECTORS. Unless or until permitted by FCC
rules and regulations, Parent shall not appoint any directors to the Board of
Directors of the Company pursuant to rights relating to shares of Company Stock
owned directly or indirectly by Parent.
ARTICLE VI.
CONDITIONS
Section 6.1. CONDITIONS TO THE OBLIGATION OF EACH PARTY. The respective
obligations of Parent, Buyer and the Company to effect the Merger are subject to
the satisfaction of the following conditions, unless waived in writing by all
parties:
(a) This Agreement and the Merger shall have been approved and adopted by
the requisite vote of the Company Stockholders, as required by the DGCL, the
Company Certificate of Incorporation and the Company Bylaws;
(b) No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition (including, any statute, rule, regulation, injunction,
order or decree proposed, enacted, enforced, promulgated, issued or deemed
applicable to, or any consent or approval withheld with respect to, the Merger,
by any Governmental Entity) preventing the consummation of the Merger shall be
in effect; PROVIDED, HOWEVER, that the parties invoking this condition shall use
all commercially reasonable efforts to have any such order or injunction
vacated; and
(c) All actions by or in respect of or filings with any Governmental Entity
required to permit the consummation of the Merger shall have been obtained or
made (including any necessary approval by the FCC and the expiration or
termination of any applicable waiting period under the HSR Act).
Section 6.2. CONDITIONS TO OBLIGATIONS OF PARENT AND BUYER TO EFFECT THE
MERGER. The obligations of Parent and Buyer to effect the Merger are further
subject to satisfaction or waiver at or prior to the Effective Time of the
following conditions:
(a) (i) the representations and warranties of the Company in this Agreement
that are qualified by materiality shall be true and correct in all respects as
of the date of the Agreement and as of the Effective Time; (ii) the
representations and warranties of the Company in the Agreement that are not
qualified by materiality shall be true and correct in all material respects as
of the date of this Agreement and as of the Effective Time; (iii) the Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement; (iv) the Alda Companies shall have
transferred to the Company the FCC Licenses and Channel Leases pursuant to
Section 5.17; (v) the directors of the Company's Subsidiaries shall have
resigned and appointed nominees to fill their vacancies as provided in Section
5.18; and (vi) an officer of the Company shall have delivered to Parent and
Buyer a certificate to the effect that each of the foregoing conditions is
satisfied in all respects; PROVIDED, HOWEVER, for purposes of this condition, as
used in the representations and warranties of the Company contained in Article
III of this Agreement, a Company Material Adverse Effect shall not include
adverse developments in the Company's or its Subsidiaries' revenue or results of
operations so long as the operating expenses and capital expenditures, in the
aggregate, are not in excess of those identified in the Projections;
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(b) The Company and its Subsidiaries shall have procured all necessary third
party consents in connection with the consummation of the Merger and the
transactions contemplated hereby;
(c) There shall not be instituted, pending or threatened any action,
investigation or proceeding by any Governmental Entity, or there shall not be
instituted, pending or threatened any action or proceeding by any other person,
domestic or foreign, before any Governmental Entity, which is reasonably likely
to be determined adversely to Buyer, (A) challenging or seeking to make illegal,
to delay materially or otherwise, directly or indirectly, to restrain or
prohibit the consummation of the Merger, seeking to obtain material damages or
imposing any material adverse conditions in connection therewith or otherwise,
directly or indirectly, relating to the transactions contemplated by the Merger,
(B) seeking to restrain, prohibit or delay the exercise of full rights of
ownership or operation by Buyer or its affiliates of all or any portion of the
business or assets of the Company and its Subsidiaries, taken as a whole, or of
Buyer or any of its affiliates, or to compel Buyer or any of its affiliates to
dispose of or hold separate all or any material portion of the business or
assets of the Company and its Subsidiaries, taken as a whole, or of Buyer or any
of its affiliates, (C) seeking to impose or confirm material limitations on the
ability of Buyer or any of its affiliates effectively to exercise full rights of
ownership of the shares of Company Common Stock, including, without limitation,
the right to vote the shares of Company Common Stock acquired or owned by Buyer
or any of its affiliates on all matters properly presented to the Company
Stockholders, (D) seeking to require divestiture by Buyer or any of its
affiliates of the shares of Company Common Stock, or (E) that otherwise would
reasonably be expected to have a Company Material Adverse Effect; or
(d) There shall not have occurred any change, condition, event or
development that has resulted in, or would reasonably be expected to result in,
a Company Material Adverse Effect; PROVIDED, that for purposes of this
condition, a Company Material Adverse Effect shall not include adverse
developments in the Company's or its Subsidiaries' revenue or results of
operations so long as the operating expenses and capital expenditures, in the
aggregate, are not in excess of those identified in the Projections.
Section 6.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT THE
MERGER. The obligations of the Company to effect the Merger are further subject
to satisfaction or waiver at or prior to the Effective Time of the following
conditions:
(a) The representations and warranties of Parent and Buyer in this Agreement
that are qualified by materiality shall be true and correct in all respects as
of the date of this Agreement and as of the Effective Time;
(b) The representations and warranties of Parent and Buyer in this Agreement
that are not qualified by materiality shall be true and correct in all material
respects as of the date of this Agreement and as of the Effective Time;
(c) Parent and Buyer shall have performed in all material respects all
obligations required to be performed by them under this Agreement; and
(d) Parent and Buyer shall have delivered to the Company a certificate to
the effect that each of the conditions specified in Sections 6.3(a), (b) and (c)
is satisfied in all respects.
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ARTICLE VII.
TERMINATION, AMENDMENT AND WAIVER
Section 7.1. TERMINATION. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after approval of matters presented in connection with the Merger by the Company
Stockholders:
(a) By mutual written consent duly authorized by the Boards of Directors of
Parent and the Company;
(b) By any of Parent, Buyer or the Company if any court of competent
jurisdiction or other Governmental Entity shall have issued an order, decree,
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; PROVIDED HOWEVER, that the party terminating
this Agreement pursuant to this Section 7.1(b) shall use all commercially
reasonable efforts to have such order, decree, ruling or action vacated;
(c) By any of Parent, Buyer or the Company if the Merger shall not have been
consummated on or before December 31, 1999; PROVIDED, HOWEVER, that the right to
terminate this Agreement under this Section 7.1(c) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
primary cause of, or resulted in, the failure to consummate the Merger on or
before such date;
(d) By Parent or Buyer if the Board of Directors of the Company (i) shall
have withdrawn or shall have modified in a manner adverse to Parent or Buyer its
approval or recommendation of the Merger or this Agreement, (ii) causes the
Company to enter into an agreement with respect to an Acquisition Proposal,
(iii) shall have endorsed, approved or recommended any Acquisition Proposal or
(iv) shall have resolved to do any of the foregoing;
(e) By any of the Company, Parent or Buyer, if this Agreement and the Merger
shall fail to be approved and adopted by the Company Stockholders at the
Stockholders' Meeting;
(f) By Parent or Buyer, if (i) any of the conditions set forth in Section
6.2 shall have become incapable of fulfillment and shall not have been waived by
Parent and Buyer or (ii) the Company shall breach in any material respect any of
its representations, warranties, covenants or other obligations hereunder and,
within ten (10) days after written notice of such breach to the Company from
Parent, such breach shall not have been cured in all material respects or waived
by Parent or Buyer and the Company shall not have provided reasonable assurance
to Parent and Buyer that such breach will be cured in all material respects on
or before the Effective Time;
(g) By the Company, if (i) any of the conditions set forth in Section 6.3
shall have become incapable of fulfillment and shall not have been waived by the
Company or (ii) Parent or Buyer shall breach in any material respect any of
their respective representations, warranties or obligations hereunder and,
within ten (10) days after written notice of such breach to Parent from the
Company, such breach shall not have been cured in all material respects or
waived by the Company and Parent or Buyer, as the case may be, shall not have
provided reasonable assurance to the Company that such breach will be cured in
all material respects on or before the Effective Time; or
(h) By the Company if, in compliance with its obligations under Sections 5.5
and 5.9, (i) the Board of Directors of the Company shall have withdrawn or shall
have modified in a manner adverse to Parent or Buyer its approval or
recommendation of the Merger or this Agreement and (ii) the Company shall have
entered into an agreement with respect to a Superior Proposal.
Section 7.2. EFFECT OF TERMINATION.
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(a) In the event of the termination of this Agreement pursuant to Section
7.1 hereof, this Agreement shall forthwith be terminated and have no further
effect except as specifically provided herein and, except as provided in this
Section 7.2 and in Section 8.12, there shall be no liability on the part of any
party hereto, provided that nothing herein shall relieve any party from
liability for any willful breach hereof.
(b) If (i) Parent or Buyer exercises its right to terminate this Agreement
under Section 7.1(d), the Company shall pay to Parent $14 million (the
"TERMINATION FEE"), payable in same-day funds, as liquidated damages and not as
a penalty to reimburse Parent for its time, expense and lost opportunity costs
of pursuing the Merger, upon consummation of the transaction relating to such
Acquisition Proposal.
(c) If within one year after termination of this Agreement, the Company
shall enter into any agreement relating to, or consummate, an Acquisition
Proposal with a person other than Parent or Buyer, then immediately prior to,
and as a condition of, consummation of such transaction the Company shall pay to
Parent upon demand $14 million, payable in same-day funds, as liquidated damages
and not as a penalty, to reimburse Parent for its time, expense and lost
opportunity costs of pursuing the Merger; PROVIDED that no such amount shall be
payable if the Termination Fee shall have become payable or have been paid in
accordance with Section 7.2(b) of this Agreement or if this Agreement shall have
been terminated by the Company in accordance with clause (ii) of Section 7.1(g);
PROVIDED, no such amount shall be payable if the fair market value of the per
share consideration to be received by the holders of Company Stock pursuant to
such Acquistion Proposal is less than 90% of the Merger Consideration on a pre
tax basis determined as of the effective date of such transaction.
(d) Notwithstanding anything to the contrary set forth in this Agreement, if
the Company fails promptly to pay to Parent any amounts due under this Section
7.2, the Company shall pay the costs and expenses (including reasonable legal
fees and expenses) in connection with any action, including the filing of any
lawsuit or other legal action, taken to collect payment, together with interest
on the amount of any unpaid fee or obligation at the publicly announced prime
rate of Citibank, N.A. in effect from time to time from the date such fee or
obligation was required to be paid.
Section 7.3. AMENDMENTS. This Agreement may not be amended except by
action of the board of directors of each of the parties hereto (and, in the case
of the Company, with the approval of the Board of Directors of the Company) set
forth in an instrument in writing signed on behalf of each of the parties
hereto; PROVIDED, HOWEVER, that after approval of the Merger by the Company
Stockholders (if required), no amendment may be made without the further
approval of the Company Stockholders if the effect of such amendment would be to
reduce the Merger Consideration or change the form thereof.
Section 7.4. WAIVER. At any time prior to the Effective Time, whether
before or after the Stockholders' Meeting, any party hereto, by action taken by
its board of directors, may (i) extend the time for the performance of any of
the covenants, obligations or other acts of any other party hereto or (ii) waive
any inaccuracy of any representations or warranties or compliance with any of
the agreements, covenants or conditions of any other party or with any
conditions to its own obligations. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party by its duly authorized
officer. 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.
The waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
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ARTICLE VIII.
GENERAL PROVISIONS
Section 8.1. NO THIRD PARTY BENEFICIARIES. Other than the provisions of
Sections 5.6 and 5.7 hereof, nothing in this Agreement shall confer any rights
or remedies upon any person other than the parties hereto.
Section 8.2. ENTIRE AGREEMENT. This Agreement constitutes the entire
Agreement among the parties with respect to the subject matter hereof and
supersedes any prior understandings, agreements, or representations by or among
the parties, written or oral, with respect to the subject matter hereof.
Section 8.3. SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors. No party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval of the
other parties; PROVIDED, HOWEVER, that Buyer may freely assign its rights to
another wholly owned subsidiary of Parent without such prior written approval
but no such assignment shall relieve Buyer of any of its obligations hereunder.
Section 8.4. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Section 8.5. HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.6. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to principles of conflicts of law thereof.
Section 8.7. SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
Section 8.8. SPECIFIC PERFORMANCE. Each of the parties acknowledges and
agrees that the other party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the parties agrees that
the other party shall be entitled to seek an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction over the
parties and the matter, in addition to any other remedy to which it may be
entitled, at law or in equity.
Section 8.9. CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
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Section 8.10. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.1, as the case may be, except that (i) the agreements set
forth in Articles I and VIII and Sections 5.4, 5.6 and 5.7 shall survive the
Effective Time indefinitely and (ii) the agreements set forth in Sections 5.6,
5.7, 5.23 and 7.2 and in Article VIII shall survive the termination of this
Agreement indefinitely.
Section 8.11. CERTAIN DEFINITIONS. For purposes of this Agreement, the
terms "associate" and "affiliate" shall have the same meaning as set forth in
Rule l2b-2 promulgated under the Exchange Act, and the term "person" shall mean
any individual, corporation, partnership (general or limited), limited liability
company, limited liability partnership, trust, joint venture, joint-stock
company, syndicate, association, entity, unincorporated organization or
government or any political subdivision, agency or instrumentality thereof.
Section 8.12. FEES AND EXPENSES. Each party hereto shall pay its own costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby.
Section 8.13. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties at the following addresses, or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 8.13:
If to Parent or Buyer:
Sprint Corporation
2330 Shawmee Mission Parkway
Westwood, Kansas 66205
Telecopier: (913) 624-8426
Attention: President
with a copy to:
Sprint Corporation
2330 Shawmee Mission Parkway
Westwood, Kansas 66205
Telecopier: (913) 624-8426
Attention: J. Richard Devlin
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Telecopier: (404) 572-5100
Attention: Bruce N. Hawthorne, Esq.
If to the Company:
People's Choice TV Corp.
2 Corporate Drive
Shelton, Connecticut 06484
Telecopier: (203) 925-6250
Attention: Matthew Oristano
Donald Olander
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with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Telecopier: (212) 728-8111
Attention: Mario M. Cuomo
Daniel D. Rubino
Section 8.14. CONTROL. Buyer has not exercised and shall not exercise any
control of the Company or the FCC Licenses held by the Company or the Alda
Companies prior to the Closing and the grant of the necessary approvals by the
FCC.
IN WITNESS WHEREOF, the Company, Parent and Buyer and have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
<TABLE>
<CAPTION>
PEOPLE'S CHOICE TV CORP.
<S> <C> <C>
By: /s/ MATTHEW ORISTANO
----------------------------------------
Chairman and Chief Executive Officer
SPRINT CORPORATION
By: /s/ THEODORE H. SCHELL
----------------------------------------
Senior Vice President
MM ACQUISITION CORP.
By: /s/ THEODORE H. SCHELL
----------------------------------------
Senior Vice President
</TABLE>
A-34
<PAGE>
APPENDIX B
STOCKHOLDER AND OPTION AGREEMENT
THIS STOCKHOLDER AND OPTION AGREEMENT (this "Agreement") dated as of April
12, 1999, is entered into between Sprint Corporation, a Kansas corporation
("Parent"), and Matthew Oristano, an individual resident of the State of
Connecticut, on his own behalf and as attorney-in-fact for the stockholders
identified on Schedule I hereto (collectively, "Stockholder"), with respect to
the shares of common stock, par value $.01 per share (the "Company Common
Stock"), of People's Choice TV Corp., a Delaware corporation (the "Company"),
owned by Stockholder.
W I T N E S S E T H:
WHEREAS, as of the date hereof, the Stockholder beneficially owns and has
the power to vote 1,694,823 shares of Company Common Stock as identified on
Schedule I hereto (including any and all rights attached thereto to acquire
shares of stock of the Company if the Company adopts a stockholders' rights
plan, and any other rights associated therewith, the "Option Shares"); and
WHEREAS, Parent desires to enter into this Agreement in connection with its
efforts to consummate an acquisition of the Company and Parent requires that
Stockholder enter into this Agreement as a condition to its willingness to enter
into an acquisition agreement with the Company.
NOW, THEREFORE, in contemplation of the foregoing and in consideration of
the mutual agreements, covenants, representations and warranties contained
herein and intending to be legally bound hereby, the parties hereto agree as
follows:
1. CERTAIN COVENANTS.
1.1. LOCK-UP. Stockholder hereby covenants and agrees during the term
of this Agreement that (a) except as consented to in writing by Parent in its
sole discretion, Stockholder will not sell, transfer, assign, pledge,
hypothecate, tender or otherwise dispose of or limit its right to vote in any
manner any of the Option Shares, or agree to do any of the foregoing, and (b)
Stockholder will not take any action which would have the effect of preventing
or disabling Stockholder from performing its obligations under this Agreement.
1.2. IRREVOCABLE PROXY. Stockholder has revoked or terminated any
proxies, voting agreements or similar arrangements previously given or entered
into with respect to the Option Shares and hereby irrevocably appoints Parent,
during the term of this Agreement, as proxy for Stockholder to vote (or refrain
from voting) in any manner as Parent, in its sole discretion, may see fit, all
of the Option Shares for Stockholder and in Stockholder's name, place and stead,
at any annual, special or other meeting or action of the stockholders of the
Company, as applicable, or at any adjournment thereof or pursuant to any consent
of the stockholders of the Company, in lieu of a meeting or otherwise, with
respect to any issue brought before the stockholders of the Company, other than
with respect to the election of directors of the Company, for which the
stockholders of the Company are entitled to vote.
1.3. PUBLIC ANNOUNCEMENT. Stockholder shall consult with Parent before
issuing any press releases or otherwise making any public statements with
respect to the transactions contemplated herein and shall not issue any such
press release or make any such public statement without the approval of Parent,
except as may be required by law.
1.4. STOP TRANSFER INSTRUCTION. Promptly following the date hereof,
Stockholder and Parent shall deliver joint written instructions to the Company
and to the Company's transfer agent stating that the Option Shares may not be
sold, transferred, pledged, assigned, hypothecated, tendered or otherwise
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disposed of in any manner without the prior written consent of Parent or except
in accordance with the terms and conditions of this Agreement.
1.5. HSR FILING. Promptly following the date hereof, Parent will make
all filings with and give all notices to governmental or regulatory authorities
required of Parent pursuant to the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended ("HSR Act"), in connection with consummating the
transactions contemplated by this Agreement. Parent will use all commercially
reasonable efforts to obtain early termination of all applicable waiting periods
under the HSR Act.
2. GRANT OF OPTION.
2.1. OPTION. Upon the terms and subject to the conditions of this
Agreement, Stockholder hereby grants to Parent or Parent's designee an
irrevocable option (the "Option") to purchase the Option Shares. Upon exercise
of the Option and purchase of the Option Shares, Parent shall not assume any
liabilities or obligations (if any) of Stockholder related to or in connection
with such Option Shares and arising prior to the Option Closing Date (as defined
hereinafter).
2.2. OPTION PRICE. The purchase price payable by Parent or its designee
at the Option Closing (as hereinafter defined) for the Option Shares shall be an
amount equal to $8.00 per Option Share (the "Option Price"); PROVIDED, HOWEVER,
if prior to the Option Closing, Parent shall purchase any shares of the Company
Common Stock for an amount per share in excess of the Option Price (the "Excess
Amount"), then the amount per Option Share to be paid by Parent shall equal the
sum of the Option Price plus the Excess Amount. If following the Option Closing,
Parent shall purchase any shares of the Company Common Stock for an amount per
share in excess of the sum of the Option Price plus, if applicable, the Excess
Amount plus any other amount previously remitted pursuant to this Section 2.2
(the "Subsequent Excess Amount"), then Parent shall forthwith remit to
Stockholder an amount equal to the Subsequent Excess Amount for each Option
Share purchased at the Option Closing.
2.3. EXERCISE.
(a) Parent or its designee shall be entitled to exercise the Option by
giving written notice to Stockholder. Such notice shall specify a date (not
earlier than one business day or later than three business days from the date
such notice is delivered to Stockholder) and place for closing of the exercise
of the Option (the "Option Closing"). Upon delivery of notice exercising the
Option, the Option shall be deemed to have been exercised by Parent or its
designee irrespective of the actual date of the Option Closing (the actual date
of the Option Closing is referred to hereinafter as the "Option Closing Date").
At the Option Closing, Parent or its designee will deliver to Stockholder the
Option Price (as adjusted pursuant to Section 2.2, if necessary) with respect to
the Option Shares, by wire transfer of immediately available funds to an account
designated in writing by Stockholder prior to the Option Closing Date.
(b) Upon payment of the Option Price as provided in Section 2.3 hereof,
the Stockholder shall deliver to Parent or its designee at the Option Closing,
(i) the certificates representing the Option Shares duly endorsed in blank for
transfer, or accompanied by duly executed stock powers in blank, in each case
with signatures guaranteed by a national bank or trust company or a member firm
of the New York Stock Exchange, Inc. and (ii) all such other agreements,
endorsements, assignments and other instruments as are necessary or desirable,
in Parent's sole and absolute discretion, to vest in Parent or its designee good
and marketable title to such Option Shares or to evidence of record the sale and
assignment of such Option Shares to Parent or its designee.
2.4. OPTION EXPIRATION/PUT RIGHT. Except as provided below, the Option
shall terminate and expire ten days after the transactions contemplated by this
Agreement receive approval required by the HSR Act ("HSR Approval") if the
Option has not been exercised by Parent or its designee on or before such date
(the "Expiration Date"). If the Option has not been exercised by Parent on or
before
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the Expiration Date, Stockholder shall have the right at such time, and for a
period of 30 days thereafter, to deliver a written notice to Parent (the
"Stockholder Notice") requiring that Parent or its designee purchase the Option
Shares at the Option Price, as adjusted (if necessary) in accordance with
Section 2.2 hereof (the "Put Right"). Upon the exercise by Stockholder of the
Put Right, the parties hereto shall consummate the purchase and sale of the
Option Shares in accordance with Section 2.3 hereof.
3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER. Stockholder hereby
represents and warrants to Parent, as of the date hereof and as of the Closing
Date, as follows:
3.1. OWNERSHIP. Stockholder has good and marketable title to, and is
the sole legal and beneficial owner of the Option Shares, in each case free and
clear of all liabilities, claims, liens, options, proxies, charges,
participations and encumbrances of any kind or character whatsoever. At the
Option Closing, Stockholder will transfer and convey to Parent or its designee
good and marketable title to the Option Shares, free and clear of all
liabilities, claims, liens, options, proxies, charges, participations and
encumbrances of any kind or character whatsoever created by or arising through
Stockholder.
3.2. AUTHORIZATION. Stockholder has all requisite power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby and has sole voting power and sole power of disposition,
with respect to all of the Option Shares owned by Stockholder with no
restrictions on its voting rights or rights of disposition pertaining thereto.
Stockholder has duly executed and delivered this Agreement and this Agreement is
a legal, valid and binding agreement of Stockholder, enforceable against
Stockholder in accordance with its terms.
3.3. STOCKHOLDER HAS ADEQUATE INFORMATION. Stockholder is a
sophisticated seller with respect to the Option Shares and has adequate
information concerning the business and financial condition of the Company to
make an informed decision regarding the sale of the Option Shares and has
independently and without reliance upon Parent and based on such information as
Stockholder has deemed appropriate, made its own analysis and decision to enter
into this Agreement. Stockholder acknowledges that Parent has not made and does
not make any representation or warranty, whether express or implied, of any kind
or character except as expressly set forth in this Agreement. Stockholder
acknowledges that the sale of the Option Shares by Stockholder to Parent is
irrevocable, and that Stockholder shall have no recourse to the Option Shares or
Parent, except with respect to breaches of representations, warranties,
covenants and agreements expressly set forth in this Agreement.
3.4. PARENT'S EXCLUDED INFORMATION. Stockholder acknowledges and
confirms that (a) Parent may possess or hereafter come into possession of
certain non-public information concerning the Option Shares and the Company
which is not known to Stockholder and which may be material to Stockholder's
decision to sell the Option Shares ("Parent's Excluded Information"), (b)
Stockholder has requested not to receive Parent's Excluded Information and has
determined to sell the Option Shares notwithstanding its lack of knowledge of
Parent's Excluded Information, and (c) Parent shall have no liability or
obligation to Stockholder in connection with, and Stockholder hereby waives and
releases Parent from, any claims which Stockholder or its successors and assigns
may have against Parent (whether pursuant to applicable Option Shares, laws or
otherwise) with respect to the non-disclosure of Parent's Excluded Information;
PROVIDED, HOWEVER, nothing contained in this Section 3.4 shall limit
Stockholder's right to rely upon the express representations and warranties made
by Parent in this Agreement, or Stockholder's remedies in respect of breaches of
any such representations and warranties.
4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of Stockholder and Parent contained herein shall
not be deemed waived or otherwise affected by any
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investigation made by the other party hereto, and each representation and
warranty contained herein shall survive the closing of the transactions
contemplated hereby until the expiration of the applicable statute of
limitations, including extensions thereof.
5. SPECIFIC PERFORMANCE. Stockholder acknowledges that Parent will be
irreparably harmed and that there will be no adequate remedy at law for a
violation of any of the covenants or agreements of Stockholder which are
contained in this Agreement. It is accordingly agreed that, in addition to any
other remedies which may be available to Parent upon the breach by Stockholder
of such covenants and agreements, Parent shall have the right to obtain
injunctive relief to restrain any breach or threatened breach of such covenants
or agreements or otherwise to obtain specific performance of any of such
covenants or agreements.
6. MISCELLANEOUS.
6.1. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
representatives and permitted successors and assigns.
6.2. ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties and supersedes all prior agreements and understandings between
the parties with respect to its subject matter. This Agreement may be amended
only by a written instrument duly executed by the parties hereto.
6.3. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Time is of the essence with respect to all
provisions of this Agreement.
6.4. ASSIGNMENT. This Agreement may not be transferred or assigned by
Stockholder but may be assigned by Parent to any of its affiliates or to any
successor to its business and will be binding upon and inure to the benefit of
any such affiliate or successor.
6.5. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but each of which together
shall constitute one and the same Agreement.
6.6. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given if so given) by delivery, telegram or telecopy,
or by mail (registered or certified mail, postage prepaid, return receipt
requested) or by any national courier service, provided that any notice
delivered as herein provided shall also be delivered by telecopy at the time of
such delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses (or at such other address for a party as
shall be specified by like notice, provided that notices of a change of address
shall be effective only upon receipt thereof):
(a) If to Parent:
Sprint Corporation
Shawnee Mission Parkway
Westwood, Kansas 66205
Attention: Corporate Secretary
Telecopy: (913) 624-2256
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with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Bruce N. Hawthorne, Esq.
Telecopy: (404) 572-5146
(b) If to
Stockholder:
Matthew Oristano
Old Quarry Road
Woodbridge, CT 06525
Telecopy: (203) 393-3852
with a copy to:
Cummings & Lockwood
Stamford Plaza
Box 120
Stamford, CT 06904
Attention: John Flaherty
Telecopy: (203) 351-4140
6.7. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York, without
regard to its principles of conflicts of laws.
6.8. ENFORCEABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
6.9. FURTHER ASSURANCES. From time to time at or after the Option
Closing, at Parent's request and without further consideration, Stockholder
shall execute and deliver to Parent such documents and take such action as
Parent may reasonably request in order to consummate more effectively the
transactions contemplated hereby and to vest in Parent good, valid and
marketable title to the Option Shares, including, but not limited to, using its
best efforts to cause the appropriate transfer agent or registrar to transfer of
record the Option Shares.
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IN WITNESS WHEREOF, Parent and Stockholder have caused this Agreement to be
duly executed as of the day and year first above written.
<TABLE>
<CAPTION>
SPRINT CORPORATION
<S> <C> <C>
By: /s/ THEODORE H. SCHELL
----------------------------------------
Senior Vice President
MATTHEW ORISTANO
/s/ MATTHEW ORISTANO
----------------------------------------
In his individual capacity and as
attorney-in-fact for the stockholders
identified on Schedule I hereto
</TABLE>
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SCHEDULE I
<TABLE>
<CAPTION>
SHARES OF COMPANY
NAME OF STOCKHOLDER COMMON STOCK
- ---------------------------------------------------------------------------------------------- ------------------
<S> <C>
Alda Multichannels Limited.................................................................... 936,327
Matthew Oristano.............................................................................. 10,000
Jean Oristano................................................................................. 45,000
Matthew Oristano, as custodian for............................................................ 110,000
Rachel Oristano
Mark Oristano................................................................................. 79,357
Michael Oristano.............................................................................. 105,809
Trust FBO Stacey Oristano..................................................................... 13,226
Trust FBO Kelley Oristano..................................................................... 13,226
Victor Oristano............................................................................... 5,000
Joan and Victor Oristano Gifting Trust # 1.................................................... 179,522
Joan and Victor Oristano Gifting Trust # 2.................................................... 72,743
Joan Oristano Generation Skipping Trust....................................................... 6,613
exempt marital trust
The Oristano Foundation....................................................................... 108,000
Alda LP....................................................................................... 10,000
TOTAL:........................................................................................ 1,694,823
</TABLE>
B-7
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APPENDIX C
[LOGO]
CHASE SECURITIES INC.
270 Park Avenue
New York, NY 10017-2070
April 12, 1999
Board of Directors
People's Choice TV Corp.
2 Corporate Drive
Shelton, Connecticut 06484
Members of the Board:
People's Choice TV Corp. (the "Company") proposes to enter into an Agreement
and Plan of Merger (the "Agreement") with Sprint Corporation ("Parent") and MM
Acquisition Corp. ("Buyer"), a wholly owned subsidiary of Parent. Pursuant to
the Agreement, Buyer will be merged with and into the Company (the "Merger")
pursuant to which each issued and outstanding share of common stock, par value
of $.01 per share ("Common Stock"), of the Company (other than shares owned by
Parent or Buyer and Dissenting Shares (as defined in the Agreement)) will be
converted solely into the right to receive $8.00 in cash (the "Merger
Consideration").
You have requested our opinion as to the fairness, from a financial point of
view, of the Merger Consideration to the holders of the Company Common Stock
(other than Parent and its affiliates).
In conducting our investigation and analysis and in arriving at our opinion
herein, we have reviewed such information and taken into account such financial
and economic factors as we have deemed relevant under the circumstances. In that
connection, we have, among other things: (i) reviewed certain internal
information, primarily financial in nature, including projections, concerning
the business and operations of the Company furnished to us for purposes of our
analysis, as well as publicly available information including but not limited to
the Company's recent filings with the Securities and Exchange Commission; (ii)
reviewed the Agreement in the form presented to the Company's Board of
Directors; (iii) compared the historical market prices and trading activity of
the Company's common stock with those of certain other publicly traded companies
we deemed relevant; (iv) compared the financial position and operating results
of the Company with those of other publicly traded companies we deemed relevant;
and (v) compared the proposed financial terms of the Merger with the financial
terms of certain other transactions we deemed relevant. We have held discussions
with members of the Company's senior management concerning the Company's
historical and current financial condition and operating results, as well as the
future prospects of the Company. We have not been requested to, and did not,
solicit third party indications of interest in acquiring all or any part of the
Company. We have also considered such other information, financial studies,
analysis and
Chase Securities Inc. is a member NASD/SIPC, and is a wholly-owned subsidiary of
The Chase Manhattan Corporation.
C-1
<PAGE>
investigations and financial, economic and market criteria which we deemed
relevant for the preparation of this opinion.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of all of the financial and other information that was publicly
available or provided to us by or on behalf of the Company, and have not been
engaged to independently verify any such information. We have assumed, with your
consent, (i) that all material assets and liabilities (contingent or otherwise,
known or unknown) of the Company are as set forth in the Company's financial
statements, (ii) the Merger will be accounted for under the purchase method of
accounting and (iii) the Merger will be consummated in accordance with the terms
of the Agreement, without waiver or amendment of any of the respective
obligations of the parties thereunder. We have also assumed, with your consent,
that the financial forecasts examined by us were reasonably prepared on bases
reflecting the best available estimates and good faith judgments of the
Company's senior management as to future performance of the Company. In
conducting our review, we have not undertaken nor obtained an independent
evaluation or appraisal of any of the assets or liabilities (contingent or
otherwise) of the Company, nor have we made a physical inspection of the
properties or facilities of the Company. Our opinion necessarily is based upon
economic, regulatory, monetary and market conditions as they exist and can be
evaluated on the date hereof, and does not predict or take into account any
changes which may occur, or information which may become available, after the
date hereof.
Our opinion has been prepared at the request and for the information of the
Board of Directors of the Company, and shall not be reproduced, disseminated,
quoted, summarized, referred to or used for any other purpose or disclosed to
any other party without the prior written consent of Chase Securities Inc.;
provided, however, that this letter may be reproduced in full in the Proxy
Statement to be filed by the Company in connection with the Merger. This opinion
does not address the relative merits of the Merger and any other potential
transactions or business strategies considered by the Company's Board of
Directors, and does not constitute a recommendation to any shareholder of the
Company as to how such shareholder should vote with respect to the Merger.
Chase Securities Inc., as part of its financial advisory business, is
engaged in the evaluation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. We will receive a fee
for rendering this opinion. In the past, we have provided investment banking
services to Parent, for which we received our customary compensation. In the
ordinary course of our business, we may from time to time trade the securities
of the Company or Parent for our own account or the accounts of our customers
and, accordingly, may at any time hold long or short positions in such
securities.
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Merger Consideration is fair, from a financial point of
view, to the holders of Company Common Stock (other than Parent and its
affiliates).
Very truly yours,
/s/ Chase Securities, Inc.
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APPENDIX D
[LOGO]
April 12, 1999
The Board of Directors of
People's Choice TV Corp.
Dear Members of the Board:
We understand that People's Choice TV Corp. (the "Company") is contemplating
entering into an agreement (the "Agreement") with Sprint Corporation ("Sprint")
in which Sprint would acquire 100 percent of the Company's common stock for
$8.00 per share in cash. Such transaction and all related transactions are
referred to collectively herein as the "Transaction."
You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Transaction nor does it address the process through which the
Transaction was entered into. We have not been requested to, and did not,
solicit third party indications of interest in acquiring all or any part of the
Company. Furthermore, at your request, we have not negotiated the Transaction or
advised you with respect to alternatives to it.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. reviewed the Company's annual reports to shareholders and on Form 10-K
for the fiscal year ended December 31, 1998 which the Company's
management has identified as being the most current financial statements
available;
2. reviewed copies of the following documents and agreements:
(i) copy of the Agreement dated April 12, 1999;
(ii) the by-laws and certificate of incorporation of the Company;
(iii) the Prospectus / Offer to Exchange and Consent Solicitation
Statement on Form S-4 dated April 24, 1998; and
(iv) the Indenture governing the 13-1/8% Senior Discount Notes due 2004
draft dated April 4, 1995.
3. met with certain members of the senior management of the Company to
discuss the operations, financial condition, future prospects and
projected operations and performance of the Company;
4. visited certain facilities and business offices of the Company;
5. reviewed forecasts and projections prepared by the Company's management
with respect to the Company for the years ended December 31, 1999
through 2003;
6. reviewed the historical market prices and trading volume for the
Company's publicly traded securities;
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<PAGE>
7. reviewed certain other publicly available financial data for certain
companies that we deem comparable to the Company, and publicly available
prices and premiums paid in other transactions that we considered
similar to the Transaction; and
8. conducted such other studies, analyses and inquiries as we have deemed
appropriate.
Our Opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this Opinion, we do not have any obligation to update,
revise or reaffirm this Opinion. Our Opinion addresses only the fairness of the
consideration received by the common stockholders of the Company in the
Transaction from a financial point of view. Our Opinion does not address the
relative merits of the Transaction and the other business strategies being
considered by the Company's Board of Directors.
It is understood that this letter is for the information of the Board of
Directors of the Company in connection with its evaluation of the Transaction
and does not constitute a recommendation to any stockholder as to how such
stockholder should vote with respect to any matter relating to the Transaction.
Neither this Opinion nor the services provided by us in connection herewith may
be publicly disclosed or referred to in any manner by the Company without our
prior written approval. We consent to the inclusion of this Opinion in its
entirety and any reference to this Opinion in any prospectus, proxy statement or
solicitation recommendation statement, as the case by be, required to be
distributed to the Company's stockholders in connection with the Transaction so
long as such inclusion or reference is in form and substance reasonably
acceptable to us and our counsel.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and condition of the Company, and that there has been no material change
in the assets, financial condition, business or prospects of the Company since
the date of the most recent financial statements made available to us.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility with respect to it. We have not made any physical inspection or
independent appraisal of any of the properties or assets of the Company. Our
opinion is necessarily based on business, economic, market and other conditions
as they exist and can be evaluated by us at the date of this letter.
Based upon the foregoing, and in reliance thereon, it is our opinion that
the consideration to be received by the common stockholders of the Company in
connection with the Transaction is fair to them from a financial point of view.
/S/ HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL
D-2
<PAGE>
APPENDIX E
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
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 Section228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's 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 Section251 (other than a merger effected pursuant to
Section251 (g) of this title), Section252, Section254, Section257, Section258,
Section263 or Section264 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 stockholders of the surviving corporation as
provided in subsection (f) of Section251 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
SectionSection251, 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 in
respect thereof) 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
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.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section253 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 such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's 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 such stockholder's 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 Section228
or Section253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's 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 such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on
or within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent
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to each stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent
of the corporation that is required to give either notice that such notice
has been given shall, in the absence of fraud, be prima facie evidence of
the facts stated therein. For purposes of determining the stockholders
entitled to receive either notice, each constituent corporation may fix, in
advance, a record date that shall be not more than 10 days prior to the date
the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to
the effective date, the record date shall be the close of business on the
day next preceding the day on which the notice is given.
(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 such
stockholder's 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 of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's 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
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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 such stockholder's certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder 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.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded 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 such stockholder's
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. (Last amended by Ch. 339, L.
"98, eff. 7-1-98.)
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APPENDIX F
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On April 11, 1999, the Board of Directors of People's Choice TV Corp. (the
"Company") declared a dividend distribution of one Right for each outstanding
share of common stock, par value $.01 per share (the "Common Stock"), of the
Company. The dividend is payable to stockholders of record at the close of
business on April 22, 1999 (the "Record Date") and with respect to the Common
Stock issued thereafter until the Distribution Date (defined below) and, in
certain circumstances, with respect to the Common Stock issued after the
Distribution Date. Except as set forth below, each Right, when it becomes
exercisable, entitles the registered holder to purchase from the Company a unit
consisting initially of one one-thousandth of a share (a "Unit") of Series A
Junior Participating Preferred Stock, par value $.01 per share (the "Preferred
Stock"), of the Company, at a Purchase Price of $35 per Unit, subject to
adjustment (the "Purchase Price"). The description and terms of the Rights are
set forth in a Rights Agreement (the "Rights Agreement"), dated as of April 12,
1999, between the Company and Harris Trust Company of New York, as Rights Agent.
Initially, the Rights will be attached to all certificates representing
shares of Common Stock then outstanding, and no separate certificates evidencing
the Rights ("Rights Certificates") will be distributed. The Rights will separate
from the Common Stock and a Distribution Date will occur upon the earlier of (i)
ten (10) days (or such later date as the Board of Directors shall determine)
following public disclosure that a person or group of affiliated or associated
persons has become an "Acquiring Person" (as defined below), or (ii) ten (10)
business days (or such later date as the Board shall determine) following the
commencement of a tender offer or exchange offer that would result in a person
or group becoming an "Acquiring Person". Except as set forth below, an
"Acquiring Person" is a person or group of affiliated or associated persons who
has acquired beneficial ownership of 15% or more of the outstanding shares of
Common Stock. The term "Acquiring Person" excludes (i) the Company, (ii) any
subsidiary of the Company, (iii) any employee benefit plan of the Company or any
subsidiary of the Company, and (iv) any person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan. In
addition, Sprint Corporation and MM Acquisition Corp. shall not be deemed to be
an "Acquiring Person" solely by virtue of their acquisition of preferred stock
of the Company pursuant to the Securities Purchase and Option Agreement between
Sprint Corporation and Wireless Holding LLC dated as of April 2, 1999 and the
acquisition of Common Stock pursuant to or otherwise permitted by the Agreement
and Plan of Merger dated as of April 12, 1999 by and among Sprint Corporation,
MM Acquisition Corp. and the Company or any other agreement contemplated
thereby.
Until the occurrence of the Distribution Date, (i) the Rights will be
evidenced by the Common Stock certificates and will be transferred with and only
with such Common Stock certificates, (ii) new Common Stock certificates issued
after the Record Date will contain a notation incorporating the Rights Agreement
by reference, and (iii) the surrender for transfer of any certificates for
Common Stock outstanding will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate. Pursuant to
the Rights Agreement, the Company reserves the right to require prior to the
occurrence of a Triggering Event (as defined below) that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock will be issued.
As soon as practicable after the occurrence of the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except in certain
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circumstances specified in the Rights Agreement or as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
The Rights are not exercisable until the occurrence of the Distribution Date
and until the Rights no longer are redeemable. The Rights will expire at the
close of business on April 22, 2009, unless extended or earlier redeemed by the
Company as described below.
In the event that, at any time following the Distribution Date, a person
becomes the beneficial owner of more than 15% of the then outstanding shares of
Common Stock (except pursuant to an offer for all outstanding shares of Common
Stock at a price and on terms determined to be fair to, and in the best
interests of, the stockholders by at least a majority of the Board of
Directors), becomes an Acquiring Person, each holder of a Right will thereafter
have the right to receive, upon exercise of the Right, Common Stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a value equal to two times the exercise price of the Right. Notwithstanding any
of the foregoing, following the occurrence of the event set forth in this
paragraph, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person will be null
and void and nontransferable and any holder of any such right (including any
purported transferee or subsequent holder) will be unable to exercise or
transfer any such right. For example, at an exercise price of $35 per Right,
each Right not owned by an Acquiring Person (or by certain related parties)
following an event set forth in the preceding paragraph would entitle its holder
to purchase $70 worth of Common Stock (or other consideration, as noted above)
for $35. Assuming that the Common Stock had a per share value of $5 at such
time, the holder of each valid Right would be entitled to purchase sixteen (16)
shares of Common Stock for $35.
In the event that, at any time following the date on which there has been
public disclosure that, or of facts indicating that, a person has become an
Acquiring Person (the "Stock Acquisition Date"), (i) the Company is acquired in
a merger or other business combination transaction in which the Company is not
the surviving corporation (other than a merger which follows an offer described
in the preceding paragraph), or (ii) 50% or more of the Company's assets or
earning power is sold, mortgaged or transferred, each holder of a Right (except
Rights which previously have been voided as set forth above) shall thereafter
have the right to receive, upon exercise, common stock of the acquiring company
having a value equal to two times the exercise price of the Right. There is an
exception for a merger that is approved by a majority of the Board of Directors
at a price which is fair to, and otherwise in the best interests of, the
stockholders and in which all stockholders of the Company receive equal
consideration. The events set forth in this paragraph and in the preceding
paragraph are referred to as the "Triggering Events."
The Purchase Price payable, and the number of Units of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) if holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Stock or convertible securities at less than
the current market price of the Preferred Stock, or (iii) upon the distribution
to holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Preferred Stock on the last
trading date prior to the date of exercise.
Because of the nature of the Preferred Stock's dividend, liquidation and
voting rights, the value of the one one-thousandth interest in a share of
Preferred Stock purchasable upon exercise of each Right should approximate the
value of one share of Common Stock. Shares of Preferred Stock purchasable
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upon exercise of the Rights will not be redeemable. Each share of Preferred
Stock will be entitled to a quarterly dividend payment of 1000 times the
dividend declared per share of Common Stock. In the event of liquidation, each
share of Preferred Stock will be entitled to an aggregate payment of 1000 times
the aggregate payment made per share of Common Stock. Each share of Preferred
Stock will have 1000 votes, voting together with the shares of Common Stock.
These rights are protected by customary antidilution provisions.
At any time until ten days following the Stock Acquisition Date, the Company
may redeem the Rights in whole, but not in part, at a price (the "Redemption
Price") of $.01 per Right (payable in cash, Common Stock or other consideration
deemed appropriate by the Board of Directors) by resolution of a majority of the
Board of Directors. The redemption of the Rights may be made effective at such
time on such basis with such conditions as the Board of Directors in its sole
discretion may establish. Immediately upon such action of the Board of Directors
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to stockholders or to the Company, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by
resolution adopted by a majority of the Board of Directors prior to the
Distribution Date. After the Distribution Date, the provisions of the Rights
Agreement may be amended by resolution adopted by a majority of the Board of
Directors in order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person or its affiliates or associates), or to shorten or lengthen any
time period under the Rights Agreement; PROVIDED, HOWEVER, that no amendment to
adjust the time period governing redemption shall be made at such time as the
Rights are not redeemable.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
April 15, 1999. A copy of the Rights Agreement is available free of charge from
the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by reference.
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PEOPLE'S CHOICE TV CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR USE AT THE
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD AT 10:00 A.M., LOCAL TIME, ON JULY 7,
1999.
The undersigned hereby appoints Matthew Oristano and Donald E. Olander, and
each of them, as Proxies, each with full power of substitution, to represent and
to vote as designated herein all the shares of Common Stock and/or Preferred
Stock of People's Choice TV Corp. held of record by the undersigned on May 28,
1999, at the Special Meeting of Stockholders to be held at 10:00 a.m., local
time, on July 7, 1999 at One Corporate Drive, Shelton, Connecticut 06484 or any
adjournment or adjournments thereof.
1. To approve and adopt the Agreement and Plan of Merger dated as of April 12,
1999 among the Company, Sprint Corporation and MM Acquisition Corp. and the
Merger contemplated thereby.
/ / FOR / / AGAINST / / ABSTAIN
2. In his discretion, the Proxy is authorized to vote upon such other business
as may properly come before the Special Meeting.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
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(CONTINUED FROM FRONT)
PROPERLY EXECUTED PROXIES WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED. IF NO SUCH DIRECTIONS ARE GIVEN, SUCH PROXIES WILL BE VOTED "FOR"
PROPOSAL 1.
Please be sure to sign and date
this Proxy below.
Date: _____________________, 1999
Signature _______________________
Signature _______________________
(When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If stockholder is a corporation, corporate name should
be signed by an authorized officer and the corporate seal affixed. If
stockholder is a partnership, please sign in partnership name by authorized
persons. For joint accounts, each joint owner must sign.)
PLEASE MARK, SIGN, DATE AND MAIL YOUR PROXY CARD TODAY.
