<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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
Palmer Wireless, Inc.
- - - - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- - - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] 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:
Class A Common Stock and Class B Common Stock
- - - - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
30,664,093
- - - - --------------------------------------------------------------------------------
(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):
$17.50
- - - - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$536,621,627.50
- - - - --------------------------------------------------------------------------------
(5) Total fee paid:
$107,324.33
- - - - --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- - - - --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- - - - --------------------------------------------------------------------------------
(3) Filing party:
- - - - --------------------------------------------------------------------------------
(4) Date filed:
- - - - --------------------------------------------------------------------------------
<PAGE> 2
PALMER WIRELESS, INC.
12800 UNIVERSITY DRIVE
FORT MYERS, FLORIDA 33907
August 13, 1997
Dear Stockholder:
This invites you to attend a special meeting of stockholders of
Palmer Wireless to be held on September 10, 1997 at 9:00 a.m. at company
headquarters, 12800 University Drive, Fort Myers, Florida.
At the special meeting, you will be asked to approve a merger
transaction among Palmer Wireless, Price Communications Corporation and a wholly
owned subsidiary of Price Communications. If stockholders approve the merger,
Price Communications is to pay you $17.50 in cash for each share of common
stock.
Your Board of Directors has determined that the merger is fair
to, and in the best interests of, Palmer Wireless and its stockholders and has
unanimously approved the merger agreement. THE BOARD UNANIMOUSLY RECOMMENDS THAT
YOU VOTE "FOR" APPROVAL OF THE MERGER. Goldman, Sachs & Co., Inc., a financial
advisor, has given the Board an opinion that the cash payment of $17.50 is fair
to the stockholders.
Please read this proxy statement. It contains a description and a
copy of the merger agreement with Price Communications. In addition, we have
been told that Price Communications will be making a separate exchange offer for
your shares. We have summarized the terms of that proposed offer in our proxy
statement, but Price Communications will also send materials directly to you.
Please read both carefully.
It is very important that your shares be represented and voted at
the special meeting. Whether or not you plan to attend the special meeting,
please complete, date, sign and return the proxy card in the enclosed postage
paid envelope. PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES UNTIL YOU HAVE
RECEIVED SEPARATE INSTRUCTIONS AND A LETTER OF TRANSMITTAL. IF THE MERGER IS
APPROVED, THESE WILL BE SENT TO YOU PROMPTLY AFTER THE MERGER IS COMPLETED.
Sincerely,
/s/ WILLIAM J. RYAN
William J. Ryan
President and Chief Executive
Officer
<PAGE> 3
PALMER WIRELESS, INC.
12800 University Drive
Fort Myers, Florida 33907
(941) 433-4350
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 10, 1997
<TABLE>
<S> <C>
Date, Time and Place: September 10, 1997 at 9:00 a.m.; Company headquarters,
12800 University Drive, Fort Myers, Florida
Matters to be Voted on: - Proposal to approve an Agreement and Plan of Merger
dated as of May 23, 1997, among Palmer Wireless,
Inc., Price Communications Corporation and a wholly
owned subsidiary of Price Communications
Corporation, under which stockholders will receive
$17.50 in cash for each share of common stock of
Palmer Wireless
- Any other matters that may be properly brought
before the meeting
</TABLE>
By Order of the Board of Directors
/s/ WILLIAM J. RYAN
William J. Ryan
President and Chief Executive
Officer
Fort Myers, Florida
August 13, 1997
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION........................................................................ 1
SUMMARY OF MERGER PROPOSAL AND RELATED INFORMATION.................................. 3
The Merger.......................................................................... 3
Parties to the Agreement....................................................... 3
Background of the Merger....................................................... 3
Recommendation of the Board of Directors....................................... 3
Opinion of Financial Advisor................................................... 4
Representations and Warranties; Conduct of Business Pending the Merger......... 4
Conditions to Consummation of the Merger; Regulatory Approvals................. 4
Effective Time................................................................. 4
Termination, Amendment and Waiver.............................................. 4
Cost of Merger................................................................. 5
The Voting Agreement........................................................... 5
Interests of Certain Persons in the Merger..................................... 5
Certain Federal Income Tax Consequences........................................ 5
Market Prices of Shares........................................................ 5
Appraisal Rights............................................................... 5
SELECTED CONSOLIDATED FINANCIAL DATA................................................ 7
THE MERGER.......................................................................... 9
General Description of the Merger.............................................. 9
Parties to the Agreement....................................................... 9
Background of the Merger....................................................... 9
Recommendation of Board of Directors; Reasons for the Merger; Advantages and
Disadvantages of the Merger................................................... 12
Opinion of Financial Advisor................................................... 13
Representations and Warranties................................................. 16
Conduct of Business Pending the Merger......................................... 17
No Solicitation of Proposals................................................... 18
Conditions to Consummation of the Merger; Regulatory Approvals................. 18
Cost of the Merger............................................................. 19
Effective Time................................................................. 20
Termination, Amendment and Waiver.............................................. 20
Exchange of Shares for Cash.................................................... 20
Effect on Benefit Plans and Related Matters.................................... 21
Accounting Treatment........................................................... 21
Interests of Certain Persons in the Merger..................................... 21
Appraisal Rights............................................................... 23
Certain Federal Income Tax Consequences........................................ 25
Fees and Expenses.............................................................. 26
THE VOTING AGREEMENT................................................................ 26
MARKET PRICE OF COMMON STOCK AND DIVIDEND POLICY.................................... 28
The Company.................................................................... 28
Price Communications........................................................... 28
BENEFICIAL OWNERSHIP OF COMMON STOCK................................................ 29
DESCRIPTION OF PRICE COMMUNICATIONS................................................. 31
INDEPENDENT AUDITORS................................................................ 31
DEADLINE FOR STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING OF STOCKHOLDERS.......... 31
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................................... 32
</TABLE>
<PAGE> 5
PALMER WIRELESS, INC.
12800 UNIVERSITY DRIVE
FORT MYERS, FLORIDA 33907
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
SEPTEMBER 10, 1997
INTRODUCTION
THE SPECIAL MEETING
Palmer Wireless, Inc. is sending these proxy materials to you, on or
about August 13, 1997, for the solicitation of proxies by the Board of Directors
to be used at a special meeting of stockholders. The meeting will be held on
September 10, 1997 at 9:00 a.m. at our headquarters, 12800 University Drive,
Fort Myers, Florida.
At the special meeting, you will vote on an agreement and plan of
merger among Palmer Wireless, Price Communications Corporation and a wholly
owned subsidiary of Price Communications. Under the merger agreement, Palmer
Wireless will merge with the Price Communications subsidiary, and stockholders
will receive $17.50 in cash for each share of common stock of Palmer Wireless.
VOTING OF PROXIES AND REVOCABILITY
If the enclosed form of proxy is properly signed and returned to Palmer
Wireless in time to be voted at the special meeting, and not subsequently
revoked, the shares represented by the proxy will be voted as instructed. SIGNED
PROXIES WITHOUT INSTRUCTIONS WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT.
If any other matters are properly brought before the special meeting, proxies
will be voted in the discretion of the proxy holders. Palmer Wireless is not
aware of any other matters that are proposed to be presented at the special
meeting. A stockholder may revoke a proxy by delivering a written notice of
revocation to the Secretary of Palmer Wireless at the address set forth on the
cover page. A stockholder may also deliver a later dated proxy to Palmer
Wireless prior to the special meeting or attend the special meeting and vote in
person.
REQUIRED VOTE
The securities which can be voted at the special meeting are shares of
Class A common stock and Class B common stock held of record on July 29, 1997.
Each share of Class A common stock has one vote on each matter at the special
meeting. Each share of Class B common stock has five votes on each matter at the
special meeting, although Palmer Wireless's certificate of incorporation
prohibits holders of Class B common stock from casting more than 75% of the
votes on any matter. There were 10,519,681 shares of Class A common stock and
17,293,578 shares of Class B common stock entitled to vote on the record date.
There must be at least a majority of the common stock represented at
the special meeting for a quorum. The merger agreement must be approved by a
majority of the votes cast. Abstentions and broker non-votes are not included as
votes cast and will be excluded from the total number of votes upon which a
majority is based. This means that votes to abstain and broker non-votes will
have no effect on the vote count. The Company's Secretary has been appointed by
the Board to act as inspector of election for the special meeting and will
tabulate the vote.
PALMER COMMUNICATIONS INCORPORATED OWNS ALL OF THE OUTSTANDING SHARES
OF CLASS B COMMON STOCK, WHICH REPRESENTS 75% OF THE COMBINED VOTING POWER OF
BOTH CLASSES OF COMMON STOCK. PALMER COMMUNICATIONS HAS AGREED TO VOTE FOR THE
MERGER AGREEMENT. THIS MEANS THERE WILL BE A QUORUM AT THE SPECIAL MEETING AND
THE MERGER AGREEMENT WILL BE APPROVED. In addition, directors and executive
officers own, in the aggregate, 318,535 shares of Class A common stock,
representing approximately 3.0% of shares of the common stock outstanding, or
<PAGE> 6
0.8% of the voting power. Directors and executive officers intend to vote their
shares of Class A common stock for the approval of the merger agreement. Price
Communications owns 1,577,200 shares of Class A common stock, representing
approximately 15.0% of the shares of Class A common stock outstanding, or 3.8%
of the voting power. To Palmer Wireless's knowledge, Price Communications
intends to vote its shares of common stock for the approval of the merger
agreement.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU PLAN TO
ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE PROXY
CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE. YOU MAY, IF YOU WISH, REVOKE YOUR
PROXY AT ANY TIME PRIOR TO THE TIME IT IS VOTED.
------------------
IF THE MERGER IS COMPLETED, YOU WILL BE GIVEN INSTRUCTIONS PROMPTLY FOR THE
DELIVERY OF YOUR STOCK CERTIFICATES.
- 2 -
<PAGE> 7
SUMMARY OF MERGER PROPOSAL AND RELATED INFORMATION
The following is a summary of certain information in this proxy statement
or in the documents attached as appendices. Each stockholder should give careful
consideration to all of the information contained in this proxy statement
(including information incorporated from other documents) and the attached
appendices.
THE MERGER
Under the merger agreement, Price Communications will pay $17.50 in
cash in exchange for each share of common stock of Palmer Wireless, as part of a
merger transaction with Palmer Wireless. See "The Merger." The merger agreement
is attached to this proxy statement as Appendix A. Stockholders should read the
merger agreement in full.
PARTIES TO THE AGREEMENT
Palmer Wireless, Inc. Palmer Wireless is engaged in the construction,
development, management and operation of cellular telephone systems in the
southeastern United States. At March 31, 1997, Palmer Wireless provided cellular
telephone service to 310,823 subscribers in Alabama, Florida, Georgia and South
Carolina in a total of 18 licensed service areas composed of nine Metropolitan
Statistical Areas and nine Rural Services Areas, with an aggregate estimated
population of 3.9 million.
Price Communications Corporation. Price Communications historically has
been a nationwide communications company. Prior to 1995, Price Communications
has bought and sold a number of television, radio, newspaper, cellular telephone
and other communications and related properties. All information contained in
this proxy statement concerning Price Communications has been supplied by Price
Communications.
BACKGROUND OF THE MERGER
In December 1996, Palmer Wireless engaged Goldman, Sachs & Co., Inc.
("Goldman Sachs") as its financial advisor to assist with the development and
evaluation of strategic alternatives available to Palmer Wireless to maximize
value to its stockholders, including a business combination or other
extraordinary transaction. Over the ensuing five months, Goldman Sachs provided
information about Palmer Wireless to 20 parties who signed confidentiality
agreements with Palmer Wireless. Six of those parties expressed indications of
interest regarding a potential business combination. Four of these parties
interviewed members of management and conducted due diligence reviews of
information.
The Board held six meetings between January 27, 1997 and May 22, 1997
to evaluate the strategic alternatives available to Palmer Wireless, including
the indications of interest which had been expressed. During April and May 1997,
the Board, through management and Goldman Sachs, conducted extensive
negotiations with two parties, including Price Communications.
On May 22, 1997, the Board reviewed the proposed agreement with Price
Communications. After Goldman Sachs' presentation on the financial effects of
the proposed merger, the Board approved the merger agreement and authorized its
signing and delivery. On May 23, 1997, Palmer Wireless and Price Communications
signed the merger agreement. See "The Merger -- Background of the Merger."
RECOMMENDATION OF THE BOARD OF DIRECTORS
Based on a number of factors, including the opinion of Goldman Sachs,
the Board believes that the merger agreement is fair to, and in the best
interests of, stockholders. The Board has unanimously approved and unanimously
recommends that stockholders vote "FOR" approval of the merger agreement. See
"The Merger -- Recommendation of Board of Directors; Reasons for the Merger."
- 3 -
<PAGE> 8
OPINION OF FINANCIAL ADVISOR
Goldman Sachs has delivered its written opinion to the Board that the
merger consideration is fair to stockholders. The full text of the written
opinion of Goldman Sachs, which sets forth assumptions made, matters considered
and limitations on the review undertaken, is attached as Appendix B.
Stockholders should read such opinion in full. See "The Merger -- Opinion of
Financial Advisor."
REPRESENTATIONS AND WARRANTIES;
CONDUCT OF BUSINESS PENDING THE MERGER
The parties have made certain customary representations and warranties
to each other in the merger agreement on a variety of corporate and other
matters. In addition, Price Communications has represented that it will have
funds available necessary to consummate the transactions contemplated by the
merger agreement. See "The Merger -- Representations and Warranties."
Palmer Wireless has agreed to operate its business in the usual and
ordinary course and generally to preserve its business organization, properties
and assets until the merger is completed. In addition, Palmer Wireless has
agreed to a number of specific conditions on the conduct of business until the
closing of the merger. See "The Merger -- Conduct of Business Pending the
Merger."
CONDITIONS TO CONSUMMATION OF THE MERGER; REGULATORY APPROVALS
The merger requires stockholder and regulatory approval and
satisfaction of certain other customary closing conditions, including that not
more than 10% of the outstanding shares of Class A common stock demand appraisal
rights. See "The Merger -- Conditions to Consummation of the Merger; Regulatory
Approvals."
EFFECTIVE TIME
The effective time of the merger will be at the time specified on a
certificate of merger to be filed with the Secretary of State of Delaware at the
closing of the merger. The closing of the merger and the effective time are
expected to occur no later than October 1997. See "The Merger -- Conditions to
Consummation of the Merger," and "-- Waiver and Amendment; Termination."
TERMINATION, AMENDMENT AND WAIVER
Termination. The merger agreement may be terminated if it is not
approved by stockholders, if a party breaches a material representation or
warranty, if there is a legal action preventing or prohibiting the merger, or if
the merger is not completed before December 31, 1997. See "The Merger --
Termination, Amendment and Waiver." Under certain circumstances, if Palmer
Wireless fails to comply with its obligations under the merger agreement, and
the merger agreement terminates, Palmer Wireless will have to pay Price
Communications a break-up fee of $15,000,000. See "The Merger -- Fees and
Expenses."
Amendment. The merger agreement may be amended by mutual agreement of
the parties, provided that after approval of the merger agreement by the
Company's stockholders, no amendment may be made that would reduce the amount or
change the type of consideration paid in the merger. See "The
Merger -- Termination, Amendment and Waiver."
Waiver. Either party may extend the time for the performance of the
obligations of the other party. Also, either party may waive any inaccuracies in
the representations and warranties or noncompliance by the other party with any
of the agreements or conditions in the merger agreement. See "The Merger --
Termination, Amendment and Waiver."
- 4 -
<PAGE> 9
COST OF MERGER
Price Communications is expected to pay approximately $880 million for
all outstanding shares of Palmer Wireless's common stock, stock options and
purchase rights, and amounts outstanding under Palmer Wireless's credit
facility. At the time of the merger agreement, Price Communications represented
that it would have available funds for such payments. See "The Merger -- Cost of
the Merger." Each party will pay its own expenses in the merger. See "The
Merger -- Fees and Expenses."
THE VOTING AGREEMENT
As an inducement to Price Communications's entering into the merger
agreement, Palmer Communications, the largest stockholder of Palmer Wireless,
entered into a voting agreement with Price Communications. Under this agreement,
Palmer Communications has agreed not to transfer any of its shares of Class B
common stock other than to Price Communications and not to convert any shares of
Class B common stock into Class A common stock. Palmer Communications also will
vote all of its shares in favor of the merger agreement and against certain
specified transactions. Palmer Communications owns all of the outstanding shares
of Class B common stock, which represents 75% of the combined voting power of
both classes of common stock. This means the merger will be approved regardless
of the vote of any other stockholder. Under the voting agreement, Palmer
Communications also granted Price Communications an option to purchase all of
the shares owned by Palmer Communications at a cash exercise price of $17.50 per
share. This option is exercisable if Palmer Communications fails to vote its
shares as required by the voting agreement. A copy of the voting agreement is
attached as Appendix C. Stockholders should read this agreement in full.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and executive officers have interests in the merger
in addition to their interests as stockholders. These interests include, among
others, provisions in the merger agreement relating to payments under Palmer
Wireless's stock option and purchase plans, indemnification and insurance. In
addition, if the merger is consummated, certain executive officers would be
eligible for severance payments under their employment agreements if their
employment is terminated under certain specified conditions. See "The
Merger -- Interests of Certain Persons in the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The merger will be a taxable transaction to stockholders. Stockholders
will recognize gain or loss in the merger in an amount determined by the
difference between the cash received and their tax basis in the exchanged
shares. For further information regarding certain federal income tax
consequences to stockholders, see "Certain Federal Income Tax Consequences."
MARKET PRICES OF SHARES
The Class A common stock is quoted and traded on the Nasdaq National
Market under the symbol "PWIR". On May 22, 1997, the last trading day before the
public announcement of the merger agreement, the reported closing sale price per
share of Class A common stock on the Nasdaq National Market was $12 1/16. On
August 12, 1997, the last full trading day prior to the date of this proxy
statement, the reported closing sale price per share of Class A common stock on
the Nasdaq National Market was $16 15/16.
APPRAISAL RIGHTS
Under Delaware law, each stockholder who does not vote in favor of (or
otherwise consent to) the merger will be entitled to dissent and demand an
appraisal of the "fair value" of that stockholder's shares if, prior to the vote
on the merger at the special meeting, such stockholder has delivered to Palmer
Wireless a written demand for appraisal.
- 5 -
<PAGE> 10
This represents the exclusive statutory remedy available under Delaware
law to stockholders who seek appraisal of the fair value of their shares.
Beneficial owners of shares of common stock whose shares are held of record by
another person, such as a broker, bank or nominee, and who wish to seek
appraisal, should instruct the record holder to follow the procedures in the
relevant provision of the Delaware law, which is included as Appendix D to this
proxy statement. Failure to take any necessary step may result in a termination
or waiver of appraisal rights under Delaware law. See "The Merger -- Appraisal
Rights."
- 6 -
<PAGE> 11
SELECTED CONSOLIDATED FINANCIAL DATA
Set forth below are (i) selected consolidated financial data as of and
for the five years ended December 31, 1996, which data have been derived from
Palmer Wireless's Consolidated Financial Statements that have been audited by
KPMG Peat Marwick LLP; (ii) selected condensed consolidated statement of
operations data for the three months ended March 31, 1996 and 1997, which data
have been derived from Palmer Wireless's unaudited condensed consolidated
statements of operations from such periods; and (iii) selected condensed
consolidated balance sheet data as of March 31, 1997, which data have been
derived from Palmer Wireless's unaudited consolidated balance sheet at that
date. There were no cash dividends or distributions declared or made by Palmer
Wireless during the periods presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------------------- -------------------------
1992 1993 1994(1) 1995(2) 1996 1996 1997
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue
Service...................... $ 23,017 $ 35,173 $ 61,021 $ 96,686 $ 151,119 $ 34,915 $ 42,220
Equipment sales and
installation............... 4,284 6,285 7,958 8,220 8,624 2,035 2,463
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total revenue.............. $ 27,301 $ 41,458 $ 68,979 $ 104,906 $ 159,743 $ 36,950 $ 44,683
------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating expenses:
Engineering, technical and
other direct............... $ 5,395 $ 7,343 $ 12,776 $ 18,184 $ 28,717 $ 7,683 $ 7,430
Cost of equipment............ 5,071 7,379 11,546 14,146 17,944 3,931 5,807
Selling, general and
administrative............. 9,348 13,886 19,757 30,990 46,892 10,924 13,360
Depreciation and
amortization............... 11,687 10,689 9,817 15,004 25,013 5,898 7,553
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total operating expenses... $ 31,611 $ 39,297 $ 53,896 $ 78,324 $ 118,566 $ 28,436 $ 34,150
------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating Income (loss)....... $ (4,310) $ 2,161 $ 15,083 $ 26,582 $ 41,177 $ 8,514 $ 10,533
------------ ------------ ------------ ------------ ------------ ------------ ------------
Other income (expense):
Interest, net................ (8,290) (9,006) (12,715) (21,213) (31,462) (7,945) (7,872)
Other, net................... (5) (590) (70) (687) (429) -- 71
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total other expense........ $ (8,295) $ (9,596) $ (12,785) $ (21,900) $ (31,891) $ (7,945) $ (7,801)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income (loss) before minority
interest share of (income)
loss and income taxes........ $ (12,605) $ (7,435) $ 2,298 $ 4,682 $ 9,286 $ 569 $ 2,732
Minority interest share of
(income) losses.............. 377 83 (636) (1,078) (1,880) (452) (331)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Income (loss) before income
taxes........................ $ (12,228) $ (7,352) $ 1,662 $ 3,604 $ 7,406 $ 117 2,401
Income taxes.................. -- -- -- 2,650 2,724 (41) (1,224)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net income (loss)............. $ (12,228) $ (7,352) $ 1,662 $ 954 $ 4,682 $ 76 $ 1,177
------------ ------------ ------------ ------------ ------------ ------------ ------------
PER SHARE DATA:
Net income (loss) per share of
common stock(3).............. $ (0.68) $ (0.41) $ 0.09 $ 0.04 $ 0.18 $ 0.00 $ 0.04
Average shares of common stock
outstanding(4)............... 17,993,333 17,993,333 18,000,000 22,326,613 26,132,455 23,561,923 27,813,259
OTHER DATA:
Capital expenditures.......... $ 3,835 $ 13,304 $ 22,541 $ 36,564 $ 41,445 $ 6,618 $ 16,987
Total subscribers at end of
period(5).................... 37,209 65,761 117,224 211,985 279,816 227,400 310,823
Operating income before
depreciation and amortization
("EBITDA")(6)................ $ 7,377 $ 12,850 $ 24,900 $ 41,586 $ 66,196 $ 14,412 $ 18,086
EBITDA margin on service
revenue...................... 32.1% 36.5% 40.8% 43.0% 43.8% 41.3% 42.8%
CONSOLIDATED STATEMENT OF
CASH FLOWS DATA:
Net cash flows from operating
activities................... $ 78 $ 9,108 $ 7,238 $ 27,660 $ 30,130 $ 6,779 $ 12,330
Net cash flows from investing
activities................... (11,113) (27,362) (116,850) (196,776) (110,610) (7,637) (48,487)
Net cash flows from financing
activities................... 11,221 19,481 110,940 169,554 78,742 1,975 36,550
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------------------
1992 1993 1994(7) 1995(8) 1996
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash..................................... $ 443 $ 1,670 $ 2,998 $ 3,436 $ 1,698
Working capital (deficit)................ (740) 799 2,490 (1,435) 296
Property, plant, and equipment, net...... 17,371 23,918 51,884 100,936 132,438
Licenses and other intangibles, net...... 103,901 114,955 199,265 332,850 387,067
Total assets............................. 127,867 150,054 273,020 462,871 549,942
Total debt(9)............................ 106,811 131,361 245,609 350,441 343,662
Equity................................... 10,659 3,244 4,915 74,553 164,930
<CAPTION>
AS OF MARCH 31, 1997
--------------------
<S> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash..................................... $ 2,091
Working capital (deficit)................ 2,282
Property, plant, and equipment, net...... 148,121
Licenses and other intangibles, net...... 411,314
Total assets............................. 589,566
Total debt(9)............................ 378,698
Equity................................... 166,107
</TABLE>
- - - - ---------------------------
(1) Includes the acquisition by Palmer Wireless on October 31, 1994 of the
cellular telephone systems of Southeast Georgia Cellular Limited
Partnership and Georgia 12 Cellular Limited Partnership (the "Georgia
Acquisition"), which occurred on October 31, 1994. For the two months ended
December 31, 1994, the Georgia Acquisition resulted in revenues to Palmer
Wireless of $1,803 and operating loss of ($645).
(footnotes continued on next page)
- 7 -
<PAGE> 12
(2) Includes the acquisition by Palmer Wireless of Georgia Metronet, Inc. and
Augusta Metronet, Inc., which occurred on December 1, 1995. For the one
month ended December 31, 1995, the GTE Acquisition resulted in revenues to
Palmer Wireless of $2,126 and operating income of $208.
(3) Net income (loss) for the period divided by the weighted average number of
shares of common stock outstanding.
(4) Excludes 2,058,334 shares of Class A common stock reserved for issuance
under stock option and stock purchase plans; however, for the 12 months
ended December 31, 1996 and the three months ended March 31, 1997, stock
options outstanding have been considered common stock equivalents and have
increased the average shares of common stock outstanding by 148,616 shares
and 0 shares, respectively (computed using the treasury stock method).
(5) Amounts at December 31, 1992 and 1993 include the subscribers in the
Alabama-7 RSA where Palmer Wireless had interim operating authority through
July 1, 1994. The number of subscribers served in the Alabama-7 RSA was 955
and 2,576 at December 31, 1992 and 1993, respectively. In 1994, Palmer
Wireless entered into an agreement to sell the accounts of its subscribers
in the Alabama-7 RSA to the third party licensee of this RSA.
(6) Operating income before depreciation and amortization should not be
considered in isolation or as an alternative to net income (loss),
operating income (loss) or any other measure of performance under generally
accepted accounting principles, and may not be comparable to similarly
titled measures by other companies. Palmer Wireless believes that operating
income before depreciation and amortization is viewed as a relevant
supplemental measure of performance in the cellular telephone industry.
(7) Includes the Georgia Acquisition, which occurred on October 31, 1994.
(8) Includes the GTE Acquisition, which occurred on December 1, 1995.
(9) Includes current installments of long-term debt and amounts due Palmer
Communications Incorporated.
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<PAGE> 13
THE MERGER
Any of the following information which relates to the merger agreement
or the voting agreement between Palmer Communications and Price Communications
is qualified by reference to these agreements, which are attached as Appendix A
and Appendix C. Please read these agreements in full.
GENERAL DESCRIPTION OF THE MERGER
Under an Agreement and Plan of Merger dated as of May 23, 1997 (the
"Agreement") among Palmer Wireless, Inc. (the "Company"), Price Communications
and a subsidiary of Price Communications ("Merger Sub"), Price Communications
will pay $17.50 in cash in exchange for each share of the Company's Class A and
Class B common stock (together the "Common Stock"), as part of a transaction in
which Merger Sub will merge with and into the Company (the "Merger"). The
Company will be the surviving corporation and a wholly owned, indirect
subsidiary of Price Communications. Stockholders of outstanding shares will have
no further ownership interest in the Company but will be entitled to receive
$17.50 in cash for each of their shares. Price Communications will also make
certain payments with respect to outstanding options under the Company's stock
option plans and purchase rights under the Company's stock purchase plans. The
separate existence of Merger Sub will cease, and the Company will survive as
"Price Communications Wireless, Inc." and continue to conduct the business of a
cellular telephone company from its main office in Fort Myers, Florida.
PARTIES TO THE AGREEMENT
Palmer Wireless, Inc. The Company is a Delaware corporation that is
engaged in the construction, development, management and operation of cellular
telephone systems in the southeastern United States. At March 31, 1997, the
Company provided cellular telephone service to 310,823 subscribers in Alabama,
Florida, Georgia and South Carolina in a total of 18 licensed service areas
composed of nine Metropolitan Statistical Areas and nine Rural Services Areas,
with an aggregate estimated population of 3.9 million. The address of the
Company's principal executive offices is 12800 University Drive, Fort Myers,
Florida 33907-5333 and its telephone number is (941) 433-4350.
Price Communications Corporation. Price Communications is a New York
corporation that historically has been a nationwide communications company.
Prior to 1995, Price Communications has bought and sold a number of television,
radio, newspaper, cellular telephone and other communications and related
properties. The address of Price Communications's principal office is 45
Rockefeller Plaza, Suite 3200, New York, New York 10020, and its telephone
number is (212) 757-5600.
Price Communications Wireless, Inc. Merger Sub is a Delaware
corporation and a subsidiary of Price Communications. Merger Sub currently has
no operations. The address of Merger Sub's principal office is 45 Rockefeller
Plaza, Suite 3200, New York, New York 10020, and its telephone number is (212)
757-5600.
BACKGROUND OF THE MERGER
At a meeting on December 19, 1996, the Board authorized the officers of
the Company to develop and evaluate strategic alternatives available to the
Company which would maximize value to stockholders, including a business
combination or other extraordinary transaction. This authorization was based on
the Board's determination that the Company could likely face an increasingly
competitive operating environment, due in part to consolidation in the cellular
telephone industry and the introduction of new technologies such as personal
communications services (PCS). The Board also authorized the engagement of
Goldman Sachs as the Company's financial advisor, subject to the terms of a
proposed engagement letter. At a Board meeting on January 27, 1997, Goldman
Sachs met with the Board to discuss strategic issues and valuation trends in the
wireless industry. At that meeting, the Board approved an engagement letter,
which was subsequently signed.
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<PAGE> 14
During February 1997, Goldman Sachs, on behalf of the Company, provided
certain information regarding the Company, including public information or
documents, to 20 parties who signed confidentiality agreements with the Company.
Four parties subsequently submitted written indications of interest, and one
party orally expressed interest, concerning a possible business combination
transaction with the Company.
At a meeting on March 7, 1997, Goldman Sachs reviewed for the Board the
indications of interest, and the Board authorized Goldman Sachs to ask the
interested parties to complete their due diligence and submit final proposals
for a transaction with the Company. Between March 18, 1997 and March 21, 1997,
the four parties who had submitted written indications of interest interviewed
members of the Company's management and reviewed additional information made
available by the Company regarding its individual markets, cellular licenses and
other assets, contracts, business operations, employee benefit plans and
business projections. Each of these parties submitted a written proposal for a
business combination transaction.
At a meeting on April 14, 1997, the Board of Directors, with the
assistance of Goldman Sachs and executive officers of the Company, reviewed the
four written proposals as well as one additional proposal which had been made
orally to Goldman Sachs. In addition, the Board received advice from the
Company's outside legal counsel, Hogan & Hartson L.L.P., as to legal matters.
The Board determined that none of the proposals was acceptable and that the best
alternative at that time for maximizing stockholder value was for Goldman Sachs
to contact the five parties which had expressed interest concerning a possible
business combination to attempt to negotiate higher offer prices.
Between April 15, 1997 and April 21, 1997, Goldman Sachs contacted
these parties to seek an increased price. On April 22, 1997, at a special
meeting of the Board, Goldman Sachs reported that one of those parties had
submitted a higher bid (the "Last Bidder"), but that none of the other parties
had submitted an improved bid. The Board authorized certain executive officers
of the Company and the Company's legal and financial advisors to communicate
directly with the Last Bidder and to negotiate terms of a business combination,
subject to approval by the Board.
Between April 27, 1997 and May 5, 1997, the Last Bidder conducted an
additional due diligence review of the Company and its business. Also, during
this period, the Company and the Last Bidder, through respective counsel,
exchanged drafts and negotiated the terms of a proposed agreement and plan of
merger, pursuant to which the Last Bidder would acquire all of the Company's
outstanding capital stock and stock options for cash. During this period the
Company agreed not to negotiate with other bidders.
On May 5, 1997, the Board held a special meeting and approved a
proposed agreement and plan of merger, subject to revision or clarification of
certain key terms. Despite continued negotiations, these terms could not be
resolved to the Board's satisfaction, and on May 6, 1997 the Board held a
special meeting and determined that the Last Bidder's offer was unacceptable
because certain terms could not be agreed upon. The Board instructed Goldman
Sachs to communicate to the Last Bidder that its offer was not acceptable. The
Company terminated the exclusivity agreement with the Last Bidder, but continued
to negotiate with the Last Bidder.
On May 13, 1997, Price Communications contacted Goldman Sachs to
express its interest regarding an all cash business combination at a per share
price that was higher than the Last Bidder's last proposal. Price Communications
had not been involved in the Company's earlier discussions regarding a possible
business combination, although its principal executive officer is also a
principal officer of one of the four parties which had earlier expressed a
written indication of interest in purchasing the Company. On May 14, 1997,
counsel to the Company sent a proposed draft of the Agreement to Price
Communications's counsel.
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<PAGE> 15
On May 15, 1997, Price Communications submitted a written indication of interest
to acquire the Company. On May 16, the Board met to discuss Price
Communications's written expression of interest. In addition, during this period
Price Communications provided the Company with information regarding its ability
to finance an acquisition of the Company, including a letter of commitment for
financing from a financial institution. Following a meeting held to discuss
Price Communications's proposal, the Board authorized Goldman Sachs to contact
Price Communications to negotiate a definitive agreement by no later than May
22, 1997. Between May 16, 1997 and May 22, 1997, the Company, Price
Communications and their representatives negotiated the terms of that agreement
and the voting agreement. During that period, the Company provided Price
Communications's representatives the same access to its management, properties
and information regarding its business as had been provided to the Last Bidder.
On May 22, 1997, at a special meeting, the Board reviewed, with input
from counsel, the terms of a proposed form of the Agreement with Price
Communications, by which Price Communications would acquire the Company for
$17.50 in cash per share for all outstanding shares of Common Stock (the "Merger
Consideration"). This per share price was superior to that proposed by any other
of the parties which had expressed an interest in acquiring the Company. At the
same time, the Board discussed the fact that a number of contacts between the
Last Bidder and Goldman Sachs had not produced a meaningful improvement in the
Last Bidder's last proposal. After a presentation by Goldman Sachs regarding the
financial aspects of the proposed merger transaction and receipt of the opinion
of Goldman Sachs that the Merger Consideration was fair to stockholders, the
Board approved the Agreement and authorized its execution and delivery. On May
23, 1997, the Company and Price Communications signed the Agreement. At no time
prior to the signing did Price Communications make anything but an all cash
offer.
In June 1997, Price Communications informed Goldman Sachs that it was
interested in providing the Company's stockholders with the opportunity to
receive Price Communications's common stock instead of cash. Price
Communications did not request an amendment to the Agreement for this purpose.
The Company informed Price Communications that it would not object if Price
Communications initiated a tender offer, so long as Price Communications
presented the tender offer directly to stockholders.
In July 1997, Price Communications requested that the Company
restructure its $500 million credit facility to minimize the tax consequences of
the sale of the Fort Myers cellular system. Price Communications has agreed to
reimburse the Company for all expenses of such restructuring. See "The
Merger -- Cost of the Merger."
Also in July 1997, Price Communications entered into an employment
agreement with Mr. Ryan. The Company expects that Price Communications will
enter into a comparable employment agreement with Mr. Wisehart and employment
agreements with other key employees prior to the Merger. See "The
Merger -- Interests of Certain Persons in the Merger."
On August 1, 1997, Price Communications informed the Company through
counsel that it intends to conduct an exchange offer (the "Exchange Offer"), in
which Price Communications will offer, for each share of Class A Common Stock
that is purchased in the Exchange Offer, shares of Price Communications's common
stock with an aggregate market value of $18.00. Price Communications later
furnished the Company with copies of its preliminary proxy materials for the
approval by Price Communications's shareholders of the Exchange Offer. Those
materials state that, for purposes of determining the exchange ratio for the
Exchange Offer, the market value of Price Communications's common stock would be
determined by taking the average closing price per share of Price
Communications's common stock for the five trading days ending on September 12,
1997. The Exchange Offer would be limited to up to 3,000,000 shares of the
Company's Class A common stock. Price
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<PAGE> 16
Communications has indicated that the Exchange Offer will be conditioned upon
the approval by Price Communications's shareholders and the satisfaction of
conditions to the Merger, which include the condition that the holders of not
more than 10% of the outstanding shares of Class A common stock may demand
appraisal for such shares in accordance with Section 262 of the Delaware
General Corporation Law ("DGCL"). See "The Merger -- Conditions to Consummation
of the Merger; Regulatory Approvals" and "-- Appraisal Rights."
On August 8, 1997, the Company's Board met to consider the Exchange
Offer. Because the Board had recently conducted an extensive review of
alternatives available to maximize stockholder value and conducted an auction to
obtain an agreement that the Board believed was fair to stockholders from a
financial point of view, the Board determined that it would express no position
and remain neutral toward the Exchange Offer. In reaching this determination,
the Board also noted that it had made no investigation of Price Communications,
the ongoing management of the Company's cellular operations by Price
Communications, or the advisability of an investment in Price Communications
common stock. The Company anticipates that the Exchange Offer will commence in
August.
In considering the Agreement, including whether to exercise appraisal
rights, stockholders should consider carefully the Exchange Offer materials that
will be sent to them by Price Communications, which will include a full
description of the terms, tax consequences and pro forma effects of the Exchange
Offer. Any stockholder who does not receive such materials should contact Price
Communications directly. Any stockholder who has sent a proxy to the Company
prior to receiving such materials may revoke his or her proxy by one of the
three methods described on page one of this proxy statement under "Voting of
Proxies and Revocability." Stockholders should note particularly that Price
Communications has indicated that the Exchange Offer will not be completed if
the conditions to the Merger have not been satisfied (or waived), which includes
that appraisal rights not be sought by more than 10% of the Class A common
stock. This means that if more than 10% of the Class A common stock were to
demand appraisal rights in the Merger, Price Communications could elect not to
complete both the Merger and the Exchange Offer. Stockholders will be able to
accept the Exchange Offer regardless of how they vote on the Agreement,
including if they demand appraisal rights, subject to the right of Price
Communications not to complete the Exchange Offer if more than 10% of the Class
A common stock seeks appraisal.
RECOMMENDATION OF BOARD OF DIRECTORS; REASONS FOR THE MERGER; ADVANTAGES AND
DISADVANTAGES OF THE MERGER
The Board has unanimously approved the Agreement and the transactions
contemplated thereby and has determined that the Merger is fair to, and in the
best interests of, the Company and its stockholders. The Board therefore
unanimously recommends that stockholders vote "FOR" approval of the Agreement.
In reaching its determination that the Agreement is fair to, and in the
best interests of, the Company and stockholders, the Board considered a number
of factors, including the following:
(i) presentations by Goldman Sachs and the oral and written opinion of
Goldman Sachs that the Merger Consideration is fair to stockholders;
(ii) information provided by Goldman Sachs indicating that the comparable
acquisition multiples for the Company, based on the Merger Consideration,
compare favorably with the other transactions reviewed by Goldman Sachs (see
"-- Opinion of Financial Advisor");
(iii) the fact that the Merger Consideration was above the market price for
shares of Common Stock preceding the announcement of the Merger;
(iv) oral presentations by executive officers of the Company regarding the
business, financial condition and recent results of operations of the
Company, and their best estimates of the prospects of the Company;
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<PAGE> 17
(v) the current and prospective environment in which the Company operates,
including the competitive environment for telecommunications companies
generally and cellular telephone service providers specifically, and the
trend toward consolidation in the cellular telephone services industry;
(vi) the process followed by Goldman Sachs to obtain acquisition proposals
and the fact that no potential acquirors were identified that were prepared
to make a proposal competitive to that of Price Communications;
(vii) the fact that the terms of the Agreement were determined through
arm's-length negotiations;
(viii) the terms of the Agreement and the voting agreement as reviewed by the
Board with its legal and financial advisors;
(ix) the Board's assessment that Price Communications has the financial
capability to acquire the Company for the Merger Consideration and therefore
is likely to consummate the Merger, which assessment was based in part upon
(A) the assets of Price Communications, as represented by its balance sheet,
(B) Price Communications's representation in the Agreement that it will have
available on the Effective Time sufficient funds to acquire the Company for
the Merger Consideration and (C) a commitment for financing received by Price
Communications from a financial institution; and
(x) the Board's belief, after consultation with its legal counsel, that
the required regulatory approvals could be obtained for the Merger.
The Board did not quantify or attach any particular numerical weight
to the various factors that it considered in reaching its determination that
the Merger is in the best interests of stockholders.
In evaluating the Merger, the Board identified several advantages and
disadvantages. The primary advantages of the Merger were (i) the fact that the
consideration to be received by stockholders exceeded both the current market
price and, according to the Company's financial advisor, the price received by
sellers in recent similar transactions; (ii) the Company's increasingly
competitive operating environment, which the Board believes could negatively
affect the Company's performance and stock price; and (iii) the absence of
selling expenses for the Company's stockholders. The primary disadvantage of the
Merger was that stockholders would be unable to participate in the potential
growth of the Company.
OPINION OF FINANCIAL ADVISOR
On May 22, 1997, Goldman Sachs delivered its oral opinion to the Board
that as of the date of such opinion, the Merger Consideration is fair to the
stockholders. Goldman Sachs subsequently confirmed its oral opinion by delivery
of its written opinion dated June 24, 1997, which opinion was subsequently
confirmed as of the date of this proxy statement. Although Goldman Sachs
evaluated the fairness of the Merger Consideration to the stockholders, the
Merger Consideration itself was determined by the Company and Price
Communications through arm's-length negotiations. Goldman Sachs did not
recommend the form or amount of the Merger Consideration. In addition, Goldman
Sachs did not express any opinion as to the fairness to stockholders of the
proposed consideration to be received in the Exchange Offer.
The full text of the written opinion of Goldman Sachs, dated August
13, 1997, which sets forth assumptions made, matters considered and limitations
on the review undertaken in connection with the opinion, is attached hereto as
Appendix B and is incorporated herein by reference. Stockholders are urged to,
and should, read such opinion in its entirety.
In connection with its opinion, Goldman Sachs reviewed, among other
things, (i) the Agreement; (ii) the voting agreement; (iii) annual reports to
stockholders and annual reports on Form 10-K of the Company for the years ended
December 31, 1995 and 1996; (iv) certain interim reports to stockholders,
quarterly reports on Form 10-Q and certain other communications from the Company
to the stockholders; and (v) certain internal financial analyses and forecasts
for the
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<PAGE> 18
Company prepared by its management. Goldman Sachs also held discussions with
members of the senior management of the Company regarding its past and current
business operations, financial condition and future prospects of the Company. In
addition, Goldman Sachs reviewed the reported price and trading activity for the
Class A common stock, compared certain financial and stock market information
for the Company with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of certain
recent business combinations in the wireless industry specifically and in other
industries generally and performed such other studies and analyses as it
considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of rendering its opinion. In addition, Goldman Sachs
had not made an independent evaluation or appraisal of the assets and
liabilities of the Company. Goldman Sachs' advisory services and its opinion are
provided for the information and assistance of the Board in connection with its
consideration of the transaction contemplated by the Agreement and such opinion
does not constitute a recommendation as to how any holder of Common Stock should
vote with respect to such transaction.
The following is a summary of certain of the financial analyses used by
Goldman Sachs in connection with providing its oral opinion to the Board on May
22, 1997. Goldman Sachs utilized substantially the same type of financial
analyses in connection with providing the written opinion attached hereto as
Appendix B.
(i) Historical Stock Trading Analysis. Goldman Sachs reviewed the
historical trading prices and volumes for the shares of the Class A common
stock. In addition, Goldman Sachs analyzed the consideration to be received
by the holders of the Common Stock in relation to the market prices of the
Class A common stock at April 11, 1997 and at January 29, 1997. Such analysis
indicated that the price per share of Class A common stock to be paid
pursuant to the Agreement represented a premium of 35.9% based on the April
11, 1997 market price of $12.875 per share and 79.5% based on the January 29,
1997 market price of $9.75 per share.
(ii) Selected Companies Analysis. Goldman Sachs reviewed and
compared certain financial information relating to the Company to
corresponding financial information, ratios and public market multiples for
four publicly traded developed cellular providers: AirTouch Communications,
Inc., 360 Communications Co., Vanguard Cellular Systems Inc. and Vodafone
Group PLC (the "Selected Companies"). Goldman Sachs calculated and compared
various financial multiples and ratios. The multiples for the Company and the
Selected Companies were calculated using the closing market prices of each of
the companies' respective shares on April 11, 1997. Except as set forth
below, the multiples and ratios for the Company were based on its
management's estimates and the multiples and ratios for each of the Selected
Companies were based on the most recent publicly available information. With
respect to the Selected Companies, Goldman Sachs considered levered market
capitalization (i.e., market value of common equity plus estimated market
value of debt less cash) as a multiple of latest twelve months ("LTM") sales,
as a multiple of LTM earnings before interest and taxes ("EBIT") and as a
multiple of LTM earnings before interest, taxes, depreciation and
amortization ("EBITDA"). Goldman Sachs's analyses of the Selected Companies
indicated levered multiples of LTM sales, which ranged from a low of 3.6x to
a high of 4.7x and LTM EBIT, which ranged from a low of 11.2x to a high of
18.6x and LTM EBITDA, which ranged from a low of 9.3x to a high of 11.3x
compared to levered multiples of 4.7x, 18.1x and 11.3x, respectively, for the
Company. Goldman Sachs also considered for the Selected Companies estimated
EBITDA multiples for calendar years 1996 and 1997, which for the Selected
Companies ranged from a low of 8.7x to a high of 10.0x for calendar year
1996, and from a low of 7.2x to a high of
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<PAGE> 19
8.4x for calendar year 1997, compared to 11.3x and 8.8x, respectively, for the
Company. Goldman Sachs also considered for the Selected Companies levered market
capitalization values per potential cellular population unit ("POP"), which for
the Selected Companies ranged from a low of $135 to a high of $182, compared to
$191 for the Company.
Goldman Sachs reviewed and compared certain financial information
relating to the Company to corresponding financial information, ratios and
public market multiples for six publicly traded lesser developed cellular
providers: Centennial Cellular Corp., CommNet Cellular Inc., PriCellular
Wireless Corp., Rural Cellular Corp., United States Cellular Corporation and
Western Wireless Corp. (the "Lesser Developed Companies"). Goldman Sachs
calculated and compared various financial multiples and ratios. The multiples
for the Company and the Lesser Developed Companies were calculated using the
closing market prices of each of the companies' respective shares on April
11, 1997. Except as set forth below, the multiples and ratios for the Company
were based on its management's estimates and the multiples and ratios for
each of the Lesser Developed Companies were based on the most recent publicly
available information. With respect to the Lesser Developed Companies,
Goldman Sachs considered levered market capitalization as a multiple of LTM
sales, as a multiple of LTM EBIT and as a multiple of LTM EBITDA. Goldman
Sachs's analyses of the lesser Developed Companies indicated levered
multiples of LTM sales, which ranged from a low of 2.6x to a high of 6.7x,
with a mean of 4.7x and a median of 4.7x, and LTM EBIT, which ranged from a
low of 8.1x to a high of 61.4x, with a mean of 39.4x and a median of 43.9x,
and LTM EBITDA, which ranged from a low of 9.8x to a high of 20.4x, with a
mean of 13.7x and a median of 14.6x, compared to levered multiples of 4.7x,
18.1x and 11.3x, respectively for the Company. Goldman Sachs also considered
for the Lesser Developed Companies estimated EBITDA multiples for calendar
years 1996 and 1997, which for the Lesser Developed Companies ranged from a
low of 10.0x to a high of 17.9x, with a mean of 12.6x and a median of 11.4x,
for calendar year 1996, and from a low of 6.8x to a high of 11.5x, with a
mean of 8.5x and a median of 8.1x, for calendar year 1997, compared to 11.3x
and 8.8x, respectively, for the Company. Goldman Sachs also considered for
the Lesser Developed Companies levered market capitalization values per POP,
which for the Lesser Developed Companies ranged from a low of $103 to a high
of $163, with a mean of $135 and a median of $140, compared to $191 for the
Company.
(iii) Discounted Cash Flow Analysis. Goldman Sachs performed a
discounted cash flow analysis using the Company's management estimates of
operating performance. Goldman Sachs calculated a net present value of
unlevered free cash flow for the years 1997 through 2001 using discount rates
ranging from 10.0% to 14.0%. Goldman Sachs calculated the Company's terminal
values in the year 2001 based on multiples ranging from 9.0x EBITDA to 11.0x
EBITDA. These terminal values were then discounted to present value using
discount rates ranging from 10.0% to 14.0%. Using the Company's terminal
values in the year 2001 based on multiples ranging from 9.0x EBITDA to 11.0x
EBITDA and discounting these terminal values to present value using discount
rates ranging from 10.0% to 14.0%, the implied per share values (which is the
present value of cash flows plus the present value of the terminal value,
less net debt and minority interest, divided by the number of shares of fully
diluted Common Stock outstanding) ranged from a low of $14.62 to a high of
$25.61.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analysis or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman
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<PAGE> 20
Sachs considered the results of all such analyses. No company or transaction
used in the above analyses as a comparison is directly comparable to the Company
or the contemplated transaction. The analyses were prepared solely for purposes
of Goldman Sachs providing its opinion to the Board as to the fairness of the
Merger Consideration and do not purport to be appraisals or necessarily reflect
the prices at which businesses or securities actually may be sold. Analyses
based upon forecasts of futures results are not necessarily indicative of actual
future results, which may be significantly more or less favorable than suggested
by such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, neither the Company nor Goldman Sachs nor any other
person assumes responsibility if future results are materially different from
those forecast. As described above, Goldman Sachs' opinion to the Board was one
of many factors taken into consideration by the Board in making its
determination to approve the Agreement. The foregoing summary does not purport
to be a complete description of the analysis performed by Goldman Sachs and is
qualified by reference to the written opinion of Goldman Sachs set forth in
Appendix B hereto.
Goldman Sachs, as part of its investment banking business, is
continually engaged in the valuation 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. The Company
selected Goldman Sachs as its financial advisor because it is an internationally
recognized investment banking firm that has substantial experience in
transactions similar to the Merger. Goldman Sachs is familiar with the Company,
having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Agreement. Goldman
Sachs is also familiar with the Company having provided certain investment
banking services to the Company from time to time, including acting as managing
underwriter of public offerings of Class A Common Stock in March, 1995 and June,
1996.
The Company engaged Goldman Sachs to act as its financial advisor under
an agreement dated January 29, 1997. Under this agreement, assuming the
aggregate consideration paid by Price Communications is $880 million, the
Company will pay Goldman Sachs a fee of approximately $5,500,000. The Company
has also agreed to reimburse Goldman Sachs for its reasonable out-of-pocket
expenses, including attorney's fees, plus any sales, use or similar taxes
arising in connection with the Merger, and to indemnify Goldman Sachs against
certain liabilities, including certain liabilities under the federal securities
laws.
REPRESENTATIONS AND WARRANTIES
The Company, Price Communications and Merger Sub have made certain
representations and warranties to each other in the Agreement. The Company
represents and warrants, among other things, as to organization, capitalization,
corporate authority and approvals, ownership of subsidiaries, enforceability of
the Agreement, financial reports, absence of undisclosed liabilities, absence of
material adverse effects, absence of certain claims and regulatory proceedings,
labor matters and employee benefit plans, title to its assets, environmental
matters, and compliance with laws. Price Communications represents and warrants,
among other things, as to organization, corporate authority and approvals,
enforceability of the Agreement and availability of funds necessary to
consummate the transactions contemplated by the Agreement, including payment of
the Merger Consideration for all shares of Common Stock, payments required with
respect to options and purchase rights, and payment necessary to satisfy amounts
outstanding under the Company's credit facility.
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<PAGE> 21
CONDUCT OF BUSINESS PENDING THE MERGER
The Agreement provides that, without the prior written agreement of
Price Communications, the Company will:
(i) operate its business in the usual and ordinary course consistent
with past practices;
(ii) use its reasonable efforts to preserve substantially intact its
business organization, maintain its rights and franchises, retain the
services of its respective principal officers and key employees and
maintain its relationship with its respective principal customers and
suppliers;
(iii) use its reasonable efforts to maintain and keep its properties and
asset in as good repair and condition as at the time the Agreement was
signed, ordinary wear and tear excepted; and
(iv) use its reasonable efforts to keep its insurance in full force and
effect.
Pending consummation of the Merger, except as otherwise permitted in
the Agreement or otherwise consented to in writing by Price Communications, the
Company will not:
(i) increase the compensation payable to any of its directors or
employees, except for increases payable to or to become payable in the
ordinary course of business and consistent with past practice;
(ii) grant any severance or termination pay (other than under
arrangements in effect on the date of the Agreement) to, or enter into or
modify any employment or severance agreement with, any of its directors or
employees;
(iii) adopt or amend any employee benefit plan or arrangement, except as
may be required by applicable law;
(iv) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of its capital stock;
(v) redeem, repurchase or otherwise reacquire any share of its capital
stock or any securities or obligations convertible into or exchangeable
for any share of its capital stock, or any options, warrants or conversion
or other rights to acquire any shares of its capital stock or any such
securities or obligations (except in connection with the exercise of
certain outstanding options);
(vi) effect any reorganization or recapitalization;
(vii) 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;
(viii) issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale of, any shares of any class of
its capital stock (including shares held in treasury), any securities
convertible into or exercisable or exchangeable for any such shares
(including any phantom options or stock appreciation rights), or any
rights, warrants, or options to acquire, any such shares (except for the
issuance of shares upon the exercise of outstanding options and the
issuance of shares under Company stock purchase plans);
(ix) amend or otherwise modify the terms of any rights, warrants or
options in a manner inconsistent with the provisions of the Agreement or
the effect of which shall be to make such terms more favorable to the
holders thereof;
(x) or otherwise acquire or agree to acquire any assets of any other
person (other than the purchase of assets in the ordinary course of
business and consistent with past practice), or make or commit to make any
capital expenditures other than capital expenditures in the ordinary
course of business consistent with past practice;
(xi) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, any of its material assets
- 17 -
<PAGE> 22
except for the grant of purchase money security interests not to exceed Five
Hundred Thousand Dollars ($500,000) in the aggregate and dispositions in the
ordinary course of business and consistent with past practice;
(xii) propose or adopt any amendments to its certificate of incorporation
or, as to its bylaws or partnership agreement, as the case may be, any
amendments that would have an adverse impact on the consummation of the
transactions contemplated by the Agreement or would be adverse to Price
Communications's interests;
(xiii) change any of its methods of accounting in effect at January 1,
1997;
(xiv) make or rescind any express or deemed election relating to taxes,
settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes (except
where the amount of such settlements or controversies, individually or in
the aggregate, does not exceed $500,000), or change any of its methods of
reporting income or deductions for federal income tax purposes from those
employed in the preparation of the federal income tax returns for the
taxable year ending December 31, 1996, except as may be required by law or
generally accepted accounting principles;
(xv) incur any obligation or borrowed money, whether or not evidenced by
a note, bond, debenture or similar instrument, other than (a) purchase
money indebtedness not to exceed $500,000 in the aggregate, (b) certain
specified indebtedness incurred in the ordinary course of business under
the existing loan agreements, and (c) capitalized leases not to exceed
$1,000,000 in the aggregate;
(xvi) without the written consent of Price Communications (which consent
shall not be unreasonably withheld, delayed or conditioned), enter into or
modify in any material respect any material agreement; or
(xvii) agree in writing or otherwise to do any of the foregoing.
NO SOLICITATION OF PROPOSALS
Under the Agreement, the Company may not, directly or indirectly,
encourage or solicit any offer to acquire all or a substantial part of the
business and properties or capital stock of the Company or its subsidiaries, or
engage in any discussions or negotiations or provide any information to any
person relating thereto. Under certain circumstances, however, the Agreement
provides that the Company may (i) furnish information to a third party who makes
an unsolicited request for such information for the purpose of making an
acquisition proposal, provided that such third party executes and delivers a
confidentiality agreement, and (ii) engage in discussions with a third party who
submits a written acquisition proposal that the Board believes, based on advice
of its financial advisors, is reasonably likely to be superior to the
transactions contemplated by the Agreement from a financial point of view to all
stockholders.
CONDITIONS TO CONSUMMATION OF THE MERGER; REGULATORY APPROVALS
The respective obligations of the parties to cause the Merger to be
consummated are subject to the satisfaction or waiver of certain conditions,
including, among other things: (i) the approval of the Agreement by the
requisite vote of the Company's stockholders; (ii) the receipt and effectiveness
of all regulatory approvals and waivers required to consummate the transactions
contemplated thereby; (iii) the absence of any order, decree or injunction which
enjoins or prohibits the consummation of the Merger; (iv) receipt of all
consents and authorizations required to be obtained from the Federal
Communications Commission ("FCC") by the Company, Price Communications and
Merger Sub; and (v) the condition that the holders of not more than 10% of the
outstanding shares of Class A common stock may demand appraisal for such
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<PAGE> 23
shares in accordance with Section 262 of the
DGCL. The Company has received notice from the Federal Trade Commission of the
early termination of all applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976. By August 8, 1997, the FCC had released
public notice of its grant of approval of the transfer of the Company's cellular
licenses, and all but two of its microwave licenses, to Merger Sub. Absent a
protest of that notice, the FCC's approval of the transfer of those licenses to
Merger Sub will become final on September 17, 1997. The Company believes that
the FCC will soon release public notice of its grant of approval of the transfer
of the Company's remaining two microwave licenses. The approval of Price
Communications's stockholders is not a condition to the Merger.
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVAL. THERE CAN BE NO ASSURANCE THAT SUCH REGULATORY APPROVALS WILL BE
OBTAINED, AND, IF THE MERGER IS APPROVED, THERE CAN BE NO ASSURANCE AS TO THE
DATES OF ANY OF SUCH APPROVALS. ANY APPROVALS, IF AND WHEN RECEIVED FROM THE
APPLICABLE REGULATORY AGENCIES, DO NOT CONSTITUTE A RECOMMENDATION OR
ENDORSEMENT OF THE MERGER OF SUCH AGENCIES.
COST OF THE MERGER
It is estimated that the total consideration to be paid by Price
Communications for all outstanding shares of Common Stock, options and purchase
rights and amounts outstanding under the Company's credit facility would be
approximately $880 million. At the time of the Agreement, Price Communications
represented that it would have available funds necessary to consummate the
transactions contemplated by the Agreement, including such payments. At the time
of the Agreement, Price Communications had a letter of commitment for financing
from a financial institution. Subsequent to signing the Agreement, Price
Communications has informed the Company of the following transactions or plans
it has undertaken to facilitate the financing of the Merger.
- - - - - On July 2, 1997, Merger Sub issued $175 million aggregate principal amount of
11.75% Senior Subordinated Notes due 2007.
- - - - - Also, on July 2, 1997, Price Communications received an executed commitment
letter from a financial institution to provide a senior loan facility (the "New
Credit Facility") providing for term loan borrowings in the aggregate principal
amount of approximately $325 million and revolving loan borrowings of $200
million. At the Effective Time, Merger Sub is expected to borrow all term loans
available under the New Credit Facility and approximately $100 million of
revolving loans. Price Communications expects that the remaining revolving loans
will, subject to a borrowing base and certain other conditions be available to
fund the working capital requirements of Merger Sub. The commitment is subject
to significant conditions, including the absence of a material adverse change in
the business of the Company, negotiation, execution and delivery of definitive
documentation and consummation of the sale of the Company's Fort Myers, Florida
cellular system (or arrangements satisfactory to the lenders under the New
Credit Facility for short-term financing bridging such sale).
- - - - - Price Communications raised an additional $47.5 million of the purchase price
for the acquisition of the Company through the offering by Price Communications
Cellular Holdings, Inc. ("Cellular Holdings"), a wholly-owned indirect
subsidiary of Price Communications and direct parent of Merger Sub, of units
consisting of 13 1/2% Senior Secured Discount Notes of Cellular Holdings due
2007 and warrants to purchase shares of common stock of Price Communications.
- - - - - Price Communications also has agreed to sell the Fort Myers, Florida cellular
region of the Company for $166.3 million to Wireless One Network LP (the "Fort
Myers Sale"). See "Description of Price Communications." In connection with that
sale, at the request of Price Communications, the Company is restructuring its
credit facility to minimize the tax consequences to Price Communications of the
Fort Myers Sale. Price Communications
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<PAGE> 24
has agreed to reimburse the Company for all expenses of such restructuring.
- - - - - Price Communications has said it intends to make the Exchange Offer. See "The
Merger -- Background of the Merger." If the Exchange Offer is completed, the
number of shares of Class A common stock to be acquired in the Merger will be
reduced. Price Communications has indicated that the aggregate cash
consideration to be paid by Price Communications in the Merger will be reduced
by $52.5 million, assuming 100% acceptance of the Exchange Offer. In addition,
if the Exchange Offer is consummated, Price Communications has said that its
initial borrowings under the New Credit Facility will be reduced.
The Company will pay for the cost of soliciting proxies for the special
meeting. In addition to mailing this proxy statement, directors, officers and
regular employees of the Company, without extra remuneration, may, if necessary,
solicit proxies by telephone, direct personal contact or otherwise. The Company
will request persons, firms and corporations holding shares in their name or in
the names of their nominees, which are beneficially owned by others, to send
proxy materials to and obtain proxies from the beneficial owners and will
reimburse the holders for their reasonable expense in doing so.
EFFECTIVE TIME
Subject to the conditions to the obligations of the parties to effect
the Merger, the Merger will become effective at the time specified on the
Certificate of Merger to be filed with the Secretary of State of Delaware at the
closing of the Merger. Subject to the foregoing, it is currently anticipated
that the closing of the Merger and the effective time will occur no later than
October 1997.
TERMINATION, AMENDMENT AND WAIVER
Termination. The Agreement may be terminated, and the Merger
abandoned, prior to the effective time of the Merger, either before or after its
approval by the Company's stockholders, as follows: (i) by the mutual consent of
the Company and Price Communications; (ii) by either the Company or Price
Communications if (a) the Company's stockholders fail to approve the Agreement
at the special meeting and the Merger has not been consummated within 45 days
thereafter, (b) there is a breach by the other party thereto of any material
representation or warranty contained in the Agreement, which breach would cause
certain specified conditions to not be satisfied and is not cured within 30 days
after notice thereof, (c) there is a decree, permanent injunction, order or
other action preventing or prohibiting consummation of the Merger or (d) the
Merger is not consummated before December 31, 1997. Under certain circumstances
relating to the Company's failure to comply with its obligations under the
Agreement, termination of the Agreement will result in the obligation by the
Company to pay Price Communications a break-up fee of $15,000,000. See "The
Merger -- Fees and Expenses."
Amendment. The Agreement may be amended by either the Company or Price
Communications by action taken by or on behalf of their respective boards at any
time prior to the effective time of the Merger; provided, however, that after
approval of the Agreement by the Company's stockholders, no amendment may be
made which would reduce the amount or change the type of consideration into
which each share of Common Stock shall be converted pursuant to the Agreement
upon consummation of the Merger.
Waiver. At any time prior to the effective time of the Merger, either
the Company or Price Communications may (a) extend the time for the performance
of any of the obligations or other acts of the other party, (b) waive any
inaccuracies in the representations and warranties contained in the Agreement
and (c) waive compliance by the other party with any of the agreements or
conditions contained in the Agreement.
EXCHANGE OF SHARES FOR CASH
Promptly after the effective time of the Merger, each stockholder of
record of the Company will be provided with written instruction from a payment
agent for how
- 20 -
<PAGE> 25
shares of Common Stock may be surrendered and exchanged for payment of the
Merger Consideration. CERTIFICATES EVIDENCING SHARES SHOULD NOT BE SURRENDERED
FOR PAYMENT PRIOR TO RECEIPT OF WRITTEN INSTRUCTIONS FROM THE PAYMENT AGENT. As
of the effective time of the Merger, Price Communications will deposit with the
payment agent an amount in cash equal to the product of the number of shares
outstanding immediately prior to the effective time of the Merger and the Merger
Consideration. If a certificate for shares of Common Stock has been lost, stolen
or destroyed, payment will be made in accordance with the Agreement upon receipt
by the payment agent of an affidavit setting forth that fact by the person
claiming such lost, stolen or destroyed certificate and granting a reasonable
indemnity against any claim that may be made against Price Communications or the
payment agent with respect to such certificate.
EFFECT ON BENEFIT PLANS AND RELATED MATTERS
General. The Agreement provides that for a period of two years after
the effective time of the Merger, Price Communications shall provide benefits to
the Company's employees, which, in the aggregate, are no less favorable than
those employee benefits provided on May 23, 1997.
Stock Option Plans. Under the Agreement, all stock options previously
issued under the Company's 1995 Employee Stock Option Plan and 1995 Directors
Stock Option Plan, and each "phantom option" issued by the Company, will
terminate immediately prior to the effective time of the Merger, Price
Communications will pay each holder of stock options an amount in cash equal to
the excess, if any, of the Merger Consideration over the per share exercise
price of such option, multiplied by the number of shares of Class A common stock
into which the stock option remains unexercised. As of August 4, 1997,
directors, executive officers and other employees held in the aggregate options
to purchase 745,834 shares of Class A common stock.
Stock Purchase Plans. Under the Agreement, as of the effective time of
the Merger, the Company's 1995 Employee Stock Purchase Plan and 1995
Non-Employee Director Stock Purchase Plan (collectively, the "Purchase Plans")
will be terminated, and the then applicable accumulation periods shall be deemed
to have ended on the last trading day of the Class A common stock immediately
prior to the effective time of the Merger. Price Communications will pay to each
director, executive officer and other employee who is a participant in a
Purchase Plan as of the effective time of the Merger an amount in cash equal to
the Merger Consideration multiplied by the number of shares of Class A common
stock which the accumulated funds in such person's account would have been
entitled to purchase under the terms of the applicable Purchase Plan as of the
end of the accumulation period.
ACCOUNTING TREATMENT
The Merger, if completed as proposed, will be treated as a purchase for
accounting purposes. Accordingly, under generally accepted accounting
principles, the assets and liabilities of the Company will be recorded on the
books of Price Communications at their respective fair market values at the time
of the consummation of the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board with respect to the
Merger, stockholders should be aware that certain directors and executive
officers may be deemed to have interests in the Merger, in addition to their
interests as stockholders.
Stock Options. As of August 4, 1997, directors and executive officers
held in the aggregate options to purchase 517,500 shares of Class A common
stock. Under the terms of the Agreement, the directors and executive officers
who hold such stock options would be
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<PAGE> 26
entitled to receive the following amounts upon consummation of the Merger:
<TABLE>
<CAPTION>
DIRECTORS AMOUNT OF PAYMENT
- - - - -------------------------- -----------------
<S> <C>
James S. Cownie $35,438
Clark R. Mandigo 35,438
Thomas D. McCloskey, Jr. 35,438
Vickie A. Palmer 35,438
Kermit S. Sutton 35,438
</TABLE>
<TABLE>
<CAPTION>
OFFICERS AMOUNT OF PAYMENT
- - - - -------------------------- -----------------
<S> <C>
William J. Ryan $ 422,500
Robert G. Engelhardt 390,000
M. Wayne Wisehart 243,750
Leon J. Hensen 243,750
K. Patrick Meehan 211,250
</TABLE>
Indemnification and Insurance. Pursuant to the Agreement, Price
Communications has agreed that it will not, for a period of six years after the
effective time of the Merger, amend the Company's certificate of incorporation
or bylaws in any manner that would adversely affect the rights of persons who at
any time prior to the effective time of the Merger were identified as
prospective indemnitees in respect of actions or omissions occurring at or prior
to the effective time of the Merger. In addition, the Agreement provides that
Price Communications will, after the effective time of the Merger and to the
extent permitted by Delaware law, indemnify, defend and hold harmless the
present and former officers, directors and employees of the Company and its
subsidiaries against all losses, expenses, claims, damages, liabilities or
amounts that are paid in settlement of, with the approval of Price
Communications and the Company (as the surviving corporation in the Merger), or
otherwise in connection with, any claim, action, suit, proceeding or
investigation based in whole or in part on the fact that such person is or was
such a director, officer or employee and arising out of actions or omissions
occurring at or prior to the effective time of the Merger. Price Communications
also agreed to cause to be maintained in effect for not less than six years
after the effective time of the Merger the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by
the Company with respect to matters occurring prior to the effective time of the
Merger.
Employment Agreements. In 1997, the Company entered into employment
agreements with each of Messrs. Ryan and Engelhardt, for an initial term of
three years, and Wisehart, Hensen and Meehan, for an initial term of two years.
Each agreement has an automatic one year renewal on each anniversary date until
terminated by either party. Base salaries under the agreements for 1997 were
$340,000, $252,000, $160,000, $178,500 and $140,000, respectively. Each
agreement specifies that if the executive officer is terminated by the Company
other than for cause (as defined therein), disability or death, or if the
executive officer terminates the agreement for good reason (as defined therein),
including a termination within one year after a change in control (as defined
therein) of the Company, the Company will pay to the executive officer: (i) the
full base salary through the date of termination and all other unpaid amounts,
if any, to which the executive officer is entitled as of the date of termination
in connection with any fringe benefits or under any incentive compensation plan
or program of the Company at the time such payments are due; and (ii) the full
base salary and any other amounts (including an annual cash bonus equal to the
average dollar bonus earned during the two fiscal years immediately prior to the
date of termination) that would have been payable to the executive officer from
the date of termination through what would have been the remaining term of the
agreement (or, in the case of a termination within one year after a change in
control (as defined therein), the entire term of the agreement), at the time
such payments would otherwise have been due in accordance with the Company's
normal payroll practices. Such severance payments for Messrs. Ryan, Engelhardt,
Wisehart, Hensen and Meehan would currently be approximately $1.4 million,
$989,000, $450,000, $478,000 and $374,000, respectively.
In addition, under the Agreement, Price Communications shall cause the
Company to provide specified executive officers with the employee benefits
provided to those officers on May 23, 1997 and for the time
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<PAGE> 27
period set forth in each such officer's employment agreement. To the extent that
any contributions under a qualified retirement plan by any of those specified
officers would be prohibited by applicable law, Price Communications will cause
the Company to make cash payments to such officers equal to the value of such
contributions which cannot be so made under applicable law.
On July 8, 1997, Price Communications entered into an employment
agreement with Mr. Ryan providing for Mr. Ryan's employment with Price
Communications commencing on the effective time of the Merger for a term to
expire on December 31, 1999. Under that agreement, which will replace Mr. Ryan's
existing employment agreement as of the effective time of the Merger, Price
Communications will pay Mr. Ryan a lump sum of approximately $1.4 million and a
base salary of $500,000. Price Communications expects to enter into a comparable
employment agreement with Mr. Wisehart and employment agreements with other key
employees prior to the Merger.
APPRAISAL RIGHTS
Under Section 262 of the DGCL, a copy of which is included as Appendix
D to this proxy statement, each stockholder who does not vote in favor of (or
otherwise consent to) the Merger will be entitled to dissent and demand an
appraisal of the "fair value" of that Stockholder's shares if, prior to the vote
on the Merger at the special meeting, such stockholder has delivered to the
Company a written demand for appraisal.
Section 262 represents the exclusive statutory remedy available under
the DGCL to stockholders who elect to seek appraisal of the fair value of their
shares. Persons who are beneficial owners of shares but whose shares are held of
record by another person, such as a broker, bank or nominee, should instruct the
record holder to follow the procedure outlined below and in Section 262 if such
persons wish to dissent with respect to any or all of their shares. Failure to
take any necessary step may result in a termination or waiver of appraisal
rights under Section 262.
Under Section 262, not less than 20 days prior to the special meeting,
the Company is required to notify each stockholder eligible for appraisal rights
of the availability of such appraisal rights. This proxy statement constitutes
notice to the stockholders that appraisal rights are available to them.
Stockholders of record who desire to exercise their appraisal rights must
satisfy all of the following conditions. A written demand for appraisal of any
shares must be filed with the Company before the taking of the vote on the
Merger. Such written demand must reasonably inform the Company of the identity
of the stockholder of record and of such stockholder's intention to demand
appraisal of the shares held by such stockholder. This written demand for
appraisal of shares must be in addition to and separate from any proxy or vote
abstaining from or voting against the Merger. Neither voting against, abstaining
from voting on, failing to return a proxy with respect to, nor failing to vote
on the Merger will constitute a demand for appraisal within Section 262. A
written demand for appraisal by a stockholder should be sent to Robert E.
Engelhardt, Secretary, Palmer Wireless, Inc., 12800 University Drive, Fort
Myers, Florida 33907.
Only the stockholder of record of shares is entitled to seek appraisal
of the fair value of the shares registered in such stockholder's name. A demand
for appraisal must be executed by or for the stockholder of record, fully and
correctly, as such stockholder's name appears on the certificate(s) representing
the shares. If the shares are owned of record in a fiduciary capacity (such as
by a trustee, guardian or custodian), such demand must be executed by the
fiduciary. If the shares are owned of record by more than one person (as in a
joint tenancy or tenancy in common), such demand must be executed by all owners.
An authorized agent, including an agent for two or more joint owners, may
execute the demand for appraisal for a stockholder of record; however, the agent
must identify the record owner and expressly disclose the fact that, in
exercising the demand, such agent is acting as agent for the record owners.
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<PAGE> 28
A record owner, such as a broker who holds shares as a nominee for
others, may exercise the right of appraisal with respect to the shares held for
all or fewer than all beneficial owners of shares as to which the stockholder is
the record owner. In such case, the written demand must set forth the number of
shares covered by such demand. Where the number of shares is expressly stated,
the demand will be presumed to cover all shares outstanding in the name of such
record owner. A dissent submitted by a beneficial owner who is not the record
owner will not be honored.
Within 10 days after the effective time of the Merger, the Company
shall notify each stockholder exercising appraisal rights in compliance with
Section 262 of the DGCL of the date that the Merger has become effective. At any
time within 60 days after the effective time of the Merger, any stockholder
shall have the right to withdraw a demand for appraisal and to accept the terms
offered upon the Merger. If the Merger is approved and becomes effective, any
stockholder that fails to comply with the requirements described above will be
bound by the terms of the Merger.
Within 120 days after the effective time of the Merger, the Company, as
the surviving corporation, or any stockholders who perfected appraisal rights,
may file a petition in the Delaware Court of Chancery (the "Court") demanding a
determination of the value of the stock of all such stockholders. If no petition
for appraisal is filed with the Court within 120 days after the effective time
of the merger, stockholders' rights to appraisal shall cease, and all
stockholders shall be entitled to accept the terms offered upon the Merger.
Inasmuch as the Company has no obligation to file such a petition, and has no
present intention to do so, any stockholder who desires such a petition to be
filed is advised to file it on a timely basis. However, no petition timely filed
in the Court demanding appraisal 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.
At the hearing on such petition, the Court shall determine the
stockholders who have complied with Section 262 of the DGCL and who have become
entitled to appraisal rights. The Court may require that the stockholders submit
their certificates of stock, if any, 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.
After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares as to their fair value. In determining their fair
value, the Court shall take into account all relevant factors. In Weinberger v.
UOP, Inc., 457 A.2d 701 (1983), the Delaware Supreme Court expanded the factors
that could be considered in determining fair value in an appraisal proceeding,
stating that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered and that "fair price obviously requires
consideration of all relevant facts involving the value of a company. . . ." The
Delaware Supreme Court stated that in making this determination of fair value,
the court must consider market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts which could be
ascertained as of the date of the merger which throw any light on future
prospects of the merged corporation. Section 262 provides that fair value is to
be "exclusive of any element of value arising from the accomplishment or
expectation of the merger." In Weinberger, the Delaware Supreme Court held that
"elements of future value, including the nature of the enterprise, which are
known or susceptible of proof as of the date of the merger and not the product
of speculation, may be considered."
Stockholders considering seeking appraisal should be aware that the
fair value of their shares determined under Section 262 could be more than, the
same as or less than the value of the consideration received for such shares
pursuant to the Agreement if they seek appraisal rights, and that investment
banking opinions as to fairness from a financial point of view are not
necessarily opinions as to fair value under Section 262.
- 24 -
<PAGE> 29
The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the Company to stockholders entitled to such
payment. The costs of the proceedings may be determined by the Court and taxed
against the Company, the stockholders or both as the court deems equitable under
the circumstances.
Any stockholder who has duly demanded appraisal in compliance with
Section 262 will not, after the effective date of the Merger, be entitled to
vote for any purpose the shares subject to such demand for appraisal or to
receive payment of dividends or other distribution on such shares, except for
dividends or distribution payable to stockholders of record at a date prior to
the effective date of the Merger.
THE FOREGOING SUMMARY OF THE RIGHTS OF STOCKHOLDERS REQUESTING AN
APPRAISAL CONTAINS MATERIAL INFORMATION RELATING TO THE EXERCISE OF APPRAISAL
RIGHTS BUT DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE
FOLLOWED BY THE STOCKHOLDERS DESIRING TO EXERCISE THEIR RIGHTS OF APPRAISAL. THE
PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS ARE CONDITIONED ON STRICT
ADHERENCE TO THE APPLICABLE PROVISIONS OF SECTION 262 OF THE DGCL. EACH
STOCKHOLDER DESIRING TO EXERCISE APPRAISAL RIGHTS SHOULD REFER TO SECTION 262
FOR A COMPLETE STATEMENT OF THE STOCKHOLDER'S RIGHTS AND THE STEPS WHICH MUST BE
FOLLOWED IN CONNECTION WITH THE EXERCISE OF THOSE RIGHTS.
For further information relating to the exercise of appraisal rights,
see Appendix D to this proxy statement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion, based on current law, of certain
of the expected federal income tax consequences applicable to stockholders who
receive cash in exchange for their shares pursuant to the Merger. This summary
discusses only certain tax consequences to United States persons (i.e., citizens
or residents of the United States and domestic corporations) who hold shares as
capital assets. It does not discuss the tax consequences to holders of options
issued by the Company who receive cash in exchange for their options pursuant to
the Merger, nor does it discuss the tax consequences that might be relevant to
stockholders who acquired their shares through the exercise of options or
otherwise as compensation. In addition, it does not discuss the tax consequences
that might be relevant to stockholders entitled to special treatment under the
federal income tax law (such as Individual Retirement Accounts and other
deferred accounts, life insurance companies and tax exempt organizations) or to
stockholders who hold their shares in special circumstances (such as
stockholders who hold shares as part of a straddle or conversion transaction).
For federal income tax purposes, the Merger will be treated as a
taxable purchase of stock by Price Communications from the stockholders. A
stockholder will recognize taxable gain or loss for federal income tax purposes
equal to the difference, if any, between the amount of cash received pursuant to
the Merger and such stockholder's tax basis in the shares surrendered in
exchange therefor. In general, such gain or loss will be capital gain or loss if
such shares are capital assets in the hands of such stockholder at the time of
the exchange and will be long-term capital gain or loss if, at the time of the
exchange, such stockholder's holding period for the shares is more than one
year.
Under The Taxpayer Relief Act of 1997, net capital gains (excess of
long-term capital gains over short-term capital losses) of individuals are taxed
at a maximum federal income tax rate of 20%, provided that the shares have been
held for more than 18 months at the effective time of the Merger. Capital gains
of corporations are taxed at the same federal income tax rates as ordinary
income. In general capital losses are deductible only against capital gains and
are not available to offset ordinary income. However, individual taxpayers are
allowed to deduct a limited amount of capital losses against ordinary income.
Under federal income tax backup withholding rules, the payment agent is
required to withhold and remit to the United States Treasury 31% of the gross
cash
- 25 -
<PAGE> 30
proceeds paid to a stockholder or other payee pursuant to the Merger, unless an
exception applies under the applicable law or regulations (such as a Certificate
of Foreign Status on Form W-8), or unless the stockholder or other payee signs a
Substitute Form W-9 that provides his or her taxpayer identification number
(employer identification number or social security number) and certifies that
such number is correct. Therefore, unless such an exception exists and can be
proven in a manner satisfactory to Price Communications and the payment agent,
each stockholder should complete and sign the Substitute Form W-9 which will be
included as part of the letter of transmittal from the payment agent to be used
to surrender shares for cash. The exceptions provide that certain stockholders
(including, among others, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. In order for
a foreign individual to qualify as an exempt recipient, however, he or she must
submit a statement, signed under penalties of perjury, attesting to his or her
exempt status. Any amounts withheld will be allowed as a credit against the
stockholder's federal income tax liability, or in general, refunded by the
Internal Revenue Service ("IRS") assuming that the appropriate procedures are
followed.
No ruling has been requested from the IRS as to any of the tax effects
to stockholders of the transactions discussed in this proxy statement, and no
opinion of counsel has or will be rendered to stockholders with respect to any
of the tax effects of the Merger or the other related transactions.
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX AND FINANCIAL ADVISORS
AS TO FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO THEM, AND ALSO AS TO ANY
STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES.
FEES AND EXPENSES
The Agreement provides that the Company and Price Communications will
each pay its own expenses in connection with the Agreement and the transactions
contemplated thereby. In addition, the Company is obligated to pay Price
Communications a break-up fee of $15,000,000 in the event that the Agreement is
(i) terminated either (A) by Price Communications as a result of the Company's
breach of certain specified obligations under the Agreement (including the
obligations to conduct its business consistent with past practices, take all
action necessary to obtain stockholder approval of the Agreement, and file all
necessary applications regarding the Merger with the FCC), or (B) by the Company
or Price Communications if stockholders fail to approve the Agreement, and (ii)
either (A) an "alternative transaction" (as defined below) has been publicly
announced and has not been withdrawn at the time of such termination or (B) an
"alternative transaction" (as defined below) is consummated prior to May 24,
1998. The Agreement defines "alternative transaction" to mean any transaction or
proposed transaction providing for the receipt by the Company and/or the holders
of more than 50 percent of the Common Stock of consideration equivalent to a
value in excess of the Merger Consideration.
THE VOTING AGREEMENT
As an inducement to Price Communications entering into the Agreement,
Palmer Communications Incorporated ("PCI"), the largest stockholder of the
Company, entered into the voting agreement with Price Communications as of May
23, 1997, under which PCI agreed that it (i) would not sell or otherwise
transfer any of its 17,293,578 shares of Class B Common Stock of the Company to
any entity other than Price Communications, (ii) would not convert any shares of
Class B Common Stock of the Company into Class A Common Stock, and (iii) would
vote all of its shares in favor of the Merger and the Agreement and the
transactions contemplated thereby, and against certain specified transactions.
PCI owns all of the outstanding shares of Class B Common Stock, which represents
75% of the combined voting power of both classes of Common Stock. Accordingly,
approval of the Merger is assured regardless of the vote of any other
stockholder of the Company. Under the voting agreement, PCI also granted Price
Communications an option to purchase all of
- 26 -
<PAGE> 31
the shares of Class B common stock owned by PCI at a cash exercise price of
$17.50 per share, which option is exercisable at any time prior to the
termination of the voting agreement if PCI fails to vote its shares as required
by the voting agreement. The voting agreement is attached as Appendix C to this
proxy statement.
- 27 -
<PAGE> 32
MARKET PRICE OF COMMON STOCK
AND DIVIDEND POLICY
THE COMPANY
The Class A common stock is quoted and traded on the Nasdaq National
Market under the symbol "PWIR". On May 22, 1997, the last trading day before the
public announcement of the execution of the Agreement, the reported closing sale
price per share of Class A common stock on the Nasdaq National Market was
$12 1/16. On August 12, 1997, the last full trading day prior to the date of
this proxy statement, the reported closing sale price per share of Class A
common stock on the Nasdaq National Market was $16 15/16.
The Company has not declared or paid any cash dividends or
distributions on its capital stock since its initial public offering in March
1995. The Company does not anticipate paying dividends on the Common Stock, cash
or otherwise, in the foreseeable future. The Agreement prohibits the payment of
cash dividends by the Company without the consent of Price Communications. See
"The Merger -- Conduct of Business Pending the Merger." In addition, the
Company's credit facility prohibits the payment of cash dividends by the Company
without consent of the lenders. Future dividends, if any, will be at the
discretion of the Company's board of directors and will depend upon, among other
things, the Company's operations, capital requirements and surplus, general
financial condition, contractual restrictions and such other factors as the
board of directors may deem relevant.
PRICE COMMUNICATIONS
Price Communications's common stock is quoted and traded on the
American Stock Exchange ("AMEX") under the symbol "PR". On May 22, 1997, the
last trading day before the public announcement of the execution of the
Agreement, the reported closing sale price per share of Price Communications's
common stock on the AMEX was $9 3/8. On August 12, 1997, the last full trading
day prior to the date of this proxy statement, the reported closing sale price
per share of Price Communications's common stock on the AMEX was $7 7/8.
Price Communications has not declared or paid any cash dividends or
distributions on its capital stock since Price Communications was organized in
1979. Price Communications's board of directors will determine future dividend
policy based on Price Communications's earnings, financial condition, capital
requirements and other circumstances. The Agreement prohibits Price
Communications from declaring or paying any dividends or distributions on its
capital stock prior to the effective time of the Merger. Price Communications
has indicated that it is not anticipated that dividends will be paid on Price
Communications's common stock in the foreseeable future.
- 28 -
<PAGE> 33
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of July 31, 1997 by (i) each director of the
Company, (ii) the Chief Executive Officer and each of the other four most highly
compensated executive officers whose total annual salary and bonus exceeded
$100,000 during the year ended December 31, 1996 (the "Named Executive
Officers"), (iii) all persons known to the Company to be beneficial owners of
more than 5% of its outstanding Common Stock and (iv) all directors and
executive officers as a group. Under the rules of the Securities and Exchange
Commission (the "Commission"), a person is deemed a "beneficial owner" of a
security if such person has or shares the power to vote or direct the voting of
such security or the power to dispose or direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities of
which that person has the right to acquire beneficial ownership within 60 days.
More than one person may be deemed to be a beneficial owner of the same
securities.
<TABLE>
<CAPTION>
NUMBER OF SHARES
---------------------------------- PERCENT OF
NUMBER OF NUMBER OF COMMON STOCK
NAME AND TITLE(1) CLASS A SHARES CLASS B SHARES OUTSTANDING(2)
- - - - ------------------------------------------ -------------- -------------- --------------
<S> <C> <C> <C>
Palmer Communications Incorporated(3)..... -- 17,293,578 62.2%
Bonnie P. McCloskey....................... 278,622(4) 16,017,658(2) 58.6
Jenny W. Sutton........................... 278,622(5) 16,017,658(2) 58.6
Vickie A. Palmer, Director................ 175,104(6) 14,741,738(2) 53.6
FMR Corporation........................... 3,189,800(7) -- 11.5
Price Communications Corporation.......... 1,577,200(8) -- 5.7
T. Rowe Price Associates, Inc............. 1,127,350(9) 4.1
William J. Ryan, Director, President and
Chief Executive Officer................. 111,152(10) -- *
Robert G. Engelhardt, Director, Executive
Vice President and Secretary............ 100,184(11) -- *
Wayne Wisehart, Vice President, Treasurer
and Chief Financial Officer............. 54,564(12) -- *
Leon J. Hensen, Senior Vice President-
General Manager......................... 54,576(13) -- *
K. Patrick Meehan, Vice President-General
Counsel and Assistant Secretary......... 49,228(14) -- *
Thomas D. McCloskey, Director............. 43,926(15) -- *
Kermit S. Sutton, Director................ 29,426(16) -- *
James S. Cownie, Director................. 42,376(17) -- *
Clark R. Mandigo, Director................ 20,500(18) -- *
Directors and executive officers as a
group (10 persons)...................... 681,036(19) 14,741,738(2) 55.5
</TABLE>
- - - - ---------------------------
* Less than 1%
(1) The address of Palmer Communications Incorporated ("PCI") is: 1535 Linden
Street, Suite 201, Des Moines, Iowa 50309. The address of each of Vickie
A. Palmer, Bonnie P. McCloskey and Jenny W. Sutton is c/o Palmer Wireless,
Inc., 12800 University Drive, Fort Myers, Florida 33907-5333. The address
of FMR Corporation is 82 Devonshire Street, Boston, Massachusetts 02109.
(2) Includes interest in shares of Class B Common Stock held by PCI. See note
3 below.
(3) PCI has issued Class A voting shares and Class B non-voting shares.
Ownership of PCI is divided among 16 stockholders. Thomas D. McCloskey,
Jr. and Bonnie Palmer McCloskey, trustees of the Thomas D. and Bonnie P.
McCloskey Revocable Trust of 1994 (the "Revocable Trust"), hold a 15.290%
total stock equity interest in PCI and control 7.378% of the voting
shares. Jenny W. Sutton holds a 15.784% total stock equity interest in PCI
and
- 29 -
<PAGE> 34
controls 7.378% of the voting shares. The Bonnie P. McCloskey Trust U/T/A
David D. Palmer holds a 21.117% total stock equity interest in PCI and
owns 29.632% of the voting shares. The Jenny W. Sutton Trust U/T/A David
D. Palmer holds a 21.117% total stock equity interest in PCI and owns
29.632% of the voting shares. The Vickie A. Palmer Trust U/T/A David D.
Palmer holds a 21.117% total stock equity interest in PCI and owns 25.980%
of the voting shares. The trustees for each of the above described trusts
other than the Revocable Trust are Bonnie P. McCloskey, Jenny W. Sutton,
Vickie A. Palmer, Richard Braunstein and Norwest Bank, N.A. Each trust
provides that actions of trustees must be approved by a majority of the
trustees. Two grantor trusts created by Bonnie P. McCloskey, with Thomas
D. McCloskey as trustee, own a total of a 2.666% stock equity interest and
hold no voting shares. One grantor trust created by Jenny W. Sutton, with
Kermit S. Sutton as Trustee, owns 1.333% stock equity interest and holds
no voting shares. Eight other trusts for the benefit of the Sutton and
McCloskey children own the remaining 1.576% stock equity and hold no
voting shares in PCI.
(4) Includes 139,622 shares held by the Thomas D. and Bonnie P. McCloskey
Revocable Trust of 1994, and 139,000 shares held by the McCloskey Family
Charitable Trust.
(5) Includes 139,000 shares held by the Sutton Family Foundation.
(6) Includes 10,500 shares subject to options.
(7) Based on information provided in a Schedule 13G filed by FMR Corporation
("FMR") with the Commission on February 14, 1997, FMR, through its control
of Fidelity Management & Research Company ("FMRC"), has the sole power to
dispose of the 2,749,300 Class A shares owned by FMRC. FMR does not have
the power to vote or direct the voting of these shares. In addition, FMR,
through its control of Fidelity Management Trust Company ("FMTC"), has the
sole power to dispose of the 440,500 Class A shares owned by FMTC. FMR has
the power to vote or direct the voting of 435,900 Class A shares which are
owned by FMTC, and no power to vote or direct the voting of the remaining
4,600 Class A shares owned by FMTC. The Schedule 13G filed by FMR
Corporation also reports that Edward C. Johnson 3d has the sole power to
dispose, but not to vote or direct the voting, of the 2,749,300 Class A
shares owned by FMRC. In addition, Mr. Johnson has the sole power to
dispose of the 440,500 Class A shares owned by FMTC. Mr. Johnson has the
power to vote or direct the voting of 435,900 Class A shares which are
owned by FMTC, and no power to vote or direct the voting of the remaining
4,600 Class A shares owned by FMTC.
(8) Based on information provided in a Schedule 13D/A filed by Price
Communications with the Commission on July 10, 1997.
(9) Based on information provided in Schedule 13G filed by T. Rowe Price
Associates, Inc. with the Commission on February 13, 1997. T. Rowe Price
Associates has the sole power to dispose of 1,127,350 class A shares and
has sole voting power of 61,750 Class A shares.
(10) Includes 86,667 shares subject to options.
(11) Includes 80,000 shares subject to options.
(12) Includes 50,000 shares subject to options and 1,715 shares held by Mr.
Wisehart as trustee for a minor child. Includes 623 shares held by Mr.
Wisehart's wife.
(13) Includes 50,000 shares subject to options. Includes 1,384 shares held by
Mr. Hensen's wife.
(14) Includes 43,334 shares subject to options.
(15) Includes 10,500 shares subject to options. Includes 33,000 shares held by
The Thomas D. McCloskey, Jr. and Bonnie P. McCloskey Revocable Trust of
1994. Thomas D. McCloskey, Jr. is married to Bonnie P. McCloskey.
(16) Includes 10,500 shares subject to options. Kermit S. Sutton is married to
Jenny W. Sutton.
(17) Includes 10,500 shares subject to options.
(18) Includes 10,500 shares subject to options.
(19) Includes 362,501 shares subject to options.
- 30 -
<PAGE> 35
DESCRIPTION OF PRICE COMMUNICATIONS
GENERAL
Price Communications has historically been a nationwide communications
company. Price Communications's business strategy is to acquire communications
properties at prices it considers attractive, finance such properties on terms
satisfactory to it, manage such properties in accordance with its operating
strategy and dispose of such properties if and when Price Communications
determines such dispositions to be in its best interest. Price Communications
was organized as a New York corporation in 1979, and began active operations in
1981.
In 1992, Price Communications filed a Consensual Plan of Reorganization
pursuant to Chapter 11 of the United States Bankruptcy Code. That Consensual
Plan, as amended, was confirmed on June 11, 1992 and became effective on
December 30, 1992.
Since 1995, Price Communications has owned a number of television,
radio, newspaper, cellular telephone and other communications and related
properties, which have been disposed of pursuant to Price Communications's
long-standing policy of buying and selling communications properties at times
deemed advantageous by Price Communications's Board of Directors. Price
Communications has on several occasions purchased warrants and common stock of
PriCellular Corporation ("PriCellular"), which currently owns and operates FCC
licensed cellular telephone systems, principally in the Midwest and Mid-Atlantic
Regions. Price Communications currently has no operating revenues.
For additional information regarding Price Communications, please see
Price Communications's annual report to stockholders for the fiscal year ended
December 31, 1996 which is attached hereto as Appendix E, and Price
Communications's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1997 which is attached hereto as Appendix F.
INDEPENDENT AUDITORS
Representatives of KPMG Peat Marwick LLP, the Company's current independent
auditors, are expected to be present at the special meeting. They will be given
an opportunity to make a statement if they desire to do so and will be available
to respond to appropriate questions.
DEADLINE FOR STOCKHOLDER
PROPOSALS FOR
1998 ANNUAL MEETING
OF STOCKHOLDERS
In the event that the Merger is not consummated, any proposal intended
to be presented by any stockholder for action at the 1998 Annual Meeting of
Stockholders must have been received by the Secretary of the Company at 12800
University Drive, Fort Myers, Florida prior to November 18, 1997 in order for
the proposal to be considered for inclusion in the proxy statement and proxy
relating to that meeting.
- 31 -
<PAGE> 36
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
The following documents filed with the SEC by the Company pursuant to
the Securities Exchange Act of 1934, as amended, are incorporated by reference
in this proxy statement.
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
2. The Company's Quarterly report on Form 10-Q for the quarter ended March
31, 1997; and
3. The Company's Current Reports on Form 8-K filed on February 14, 1997
and June 2, 1997.
In addition, all documents filed by the Company with the SEC prior to September
10, 1997 shall be deemed to be incorporated by reference into this proxy
statement.
By Order of the Board of Directors,
/s/ WILLIAM J. RYAN
William J. Ryan
President and Chief Executive Officer
Ft. Myers, Florida
August 13, 1997
- 32 -
<PAGE> 37
APPENDIX A
Agreement and Plan of Merger
<PAGE> 38
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PALMER WIRELESS, INC.,
PRICE COMMUNICATIONS CORPORATION
AND
PRICE COMMUNICATIONS CELLULAR MERGER CORP.
DATED AS OF MAY 23, 1997
<PAGE> 39
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1
AGREEMENT AND PLAN OF MERGER.........................................................
ARTICLE I THE MERGER...................................................... 1
SECTION 1.1. The Merger...................................................... 1
SECTION 1.2. Effective Time.................................................. 1
SECTION 1.3. Effect of the Merger............................................ 1
SECTION 1.4. Certificate of Incorporation; Bylaws............................ 2
SECTION 1.5. Directors and Officers.......................................... 2
SECTION 1.6. Closing......................................................... 2
SECTION 1.7. Subsequent Actions.............................................. 2
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES.............. 2
SECTION 2.1. Conversion of Securities........................................ 2
SECTION 2.2. Payment......................................................... 3
SECTION 2.3. Company Options; Stock Purchase Plan............................ 4
SECTION 2.4. Stock Transfer Books............................................ 5
SECTION 2.5. Dissenting Shares............................................... 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... 6
SECTION 3.1. Organization and Qualification; Subsidiaries.................... 6
SECTION 3.2. Certificate of Incorporation and Bylaws......................... 6
SECTION 3.3. Capitalization.................................................. 6
SECTION 3.4. Authority....................................................... 7
SECTION 3.5. No Conflict; Required Filings and Consents...................... 7
SECTION 3.6. SEC Filings; Financial Statements............................... 8
SECTION 3.7. Absence of Certain Changes or Events............................ 9
SECTION 3.8. Absence of Litigation........................................... 9
SECTION 3.9. Licenses and Permits; Compliance with Laws...................... 9
SECTION 3.10. Taxes........................................................... 9
SECTION 3.11. Intellectual Property........................................... 10
SECTION 3.12. Material Contracts.............................................. 10
SECTION 3.13. Employee Benefit Plans.......................................... 11
SECTION 3.14. Properties; Assets.............................................. 12
SECTION 3.15. Labor Relations................................................. 13
SECTION 3.16. Environmental Matters........................................... 13
SECTION 3.17. Insurance....................................................... 14
SECTION 3.18. FCC Matters and Governmental Matters............................ 14
SECTION 3.19. Board Approval; Vote Required................................... 15
SECTION 3.20. Opinion of Financial Advisor.................................... 16
SECTION 3.21. Brokers......................................................... 16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF MERGER SUB.................... 16
SECTION 4.1. Organization and Qualification.................................. 16
SECTION 4.2. Certificate of Incorporation and Bylaws......................... 16
SECTION 4.3. Authority....................................................... 16
SECTION 4.4. No Conflict; Required Filings and Consents...................... 17
SECTION 4.5. Vote Required................................................... 17
</TABLE>
i
<PAGE> 40
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE V REPRESENTATIONS AND WARRANTIES OF ACQUIROR...................... 17
SECTION 5.1. Organization and Qualification; Subsidiaries.................... 17
SECTION 5.2. Organizational Documents........................................ 18
SECTION 5.3. Authority....................................................... 18
SECTION 5.4. No Conflict; Required Filings and Consents...................... 18
SECTION 5.5. Vote Required................................................... 19
SECTION 5.6. Financing....................................................... 19
SECTION 5.7. Qualification of Acquiror....................................... 19
SECTION 5.8. Absence of Litigation........................................... 19
SECTION 5.9. Brokers......................................................... 19
SECTION 5.10. SEC Filings; Financial Statements............................... 19
SECTION 5.11. Absence of Certain Changes or Events............................ 20
ARTICLE VI COVENANTS....................................................... 20
SECTION 6.1. Affirmative Covenants of the Company............................ 20
SECTION 6.2. Negative Covenants of the Company............................... 20
SECTION 6.3. Negative Covenants of Acquiror.................................. 22
SECTION 6.4. Control of Operations........................................... 22
ARTICLE VII ADDITIONAL AGREEMENTS........................................... 22
SECTION 7.1. Access and Information.......................................... 22
SECTION 7.2. Confidentiality................................................. 22
SECTION 7.3. Stockholder Approval............................................ 22
SECTION 7.4. Proxy Statement................................................. 23
SECTION 7.5. FCC Application................................................. 23
SECTION 7.6. Further Action; Best Efforts.................................... 24
SECTION 7.7. Public Announcements............................................ 24
SECTION 7.8. Indemnification; Directors' and Officers' Insurance............. 25
SECTION 7.9. Employee Benefits Matters....................................... 26
SECTION 7.10. HSR Act Matters................................................. 27
SECTION 7.11. Negotiation With Others......................................... 27
ARTICLE VIII CLOSING CONDITIONS.............................................. 28
SECTION 8.1. Conditions to Obligations of Acquiror, Merger Sub and the
Company to Effect the Merger.................................. 28
SECTION 8.2. Additional Conditions to Obligations of Acquiror................ 29
SECTION 8.3. Additional Conditions to Obligations of the Company............. 29
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER............................... 30
SECTION 9.1. Termination..................................................... 30
SECTION 9.2. Effect of Termination........................................... 30
SECTION 9.3. Expenses; Fee................................................... 30
SECTION 9.4. Amendment....................................................... 31
SECTION 9.5. Waiver.......................................................... 31
ARTICLE X GENERAL PROVISIONS.............................................. 31
SECTION 10.1. Nonsurvival of Representations, Warranties and Agreements....... 31
SECTION 10.2. Notices......................................................... 32
SECTION 10.3. Certain Definitions............................................. 32
SECTION 10.4. Headings........................................................ 33
SECTION 10.5. Severability.................................................... 33
</TABLE>
ii
<PAGE> 41
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 10.6. Entire Agreement................................................ 33
SECTION 10.7. Specific Performance............................................ 33
SECTION 10.8. Assignment...................................................... 33
SECTION 10.9. Third Party Beneficiaries....................................... 34
SECTION 10.10. Governing Law................................................... 34
SECTION 10.11. Counterparts.................................................... 34
EXHIBITS
Exhibit A Form of Opinion of Company's FCC Counsel
</TABLE>
iii
<PAGE> 42
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
SECTION
---------
<S> <C>
Acquiror..................................................................... PREAMBLE
Acquiror Material Adverse Effect............................................. 5.1
Acquiror Representatives..................................................... 7.1
Acquiror SEC Reports......................................................... 5.10(a)
Acquiror Subsidiaries........................................................ 5.1
Acquisition Proposal......................................................... 7.11(a)
affiliate.................................................................... 10.3(a)
Agreement.................................................................... PREAMBLE
Alternative Transaction...................................................... 9.3(b)
Balance Sheet................................................................ 3.14
benefit liabilities.......................................................... 3.13(c)
beneficial owner............................................................. 10.3(b)
Benefit Plans................................................................ 3.13(a)
business day................................................................. 10.3(c)
Certificate of Merger........................................................ 1.2
Certificate and Certificates................................................. 2.2(b)
Claim........................................................................ 7.8(b)
Class A Common Stock......................................................... 2.1(a)
Class B Common Stock......................................................... 2.1(a)
Closing...................................................................... 1.6
Closing Date................................................................. 1.6
Code......................................................................... 3.10
Common Stock................................................................. 2.1(a)
Commonly Controlled Entity................................................... 3.13(a)
Communications Act........................................................... 3.5(b)
Company...................................................................... PREAMBLE
Company Material Adverse Effect.............................................. 3.1(a)
Company SEC Reports.......................................................... 3.6(a)
Company Stock Option Plans................................................... 2.3(a)
Company Stock Purchase Plans................................................. 2.3(c)
Company Subsidiary and Company Subsidiaries.................................. 3.1(a)
Confidentiality Agreement.................................................... 7.2
control, controlled by, under common control with............................ 10.3(d)
Delaware Law................................................................. PREAMBLE
Director Stock Purchase Plan................................................. 2.3(c)
Dissenting Shares............................................................ 2.5
Effective Time............................................................... 1.2
employee benefit plans....................................................... 3.13(a)
employee pension benefit plans............................................... 3.13(a)
Employee Stock Purchase Plan................................................. 2.3(b)
Encumbrances................................................................. 3.3
Environmental Claim.......................................................... 3.16(d)(i)
Environmental Laws........................................................... 3.16(d)(ii)
Environmental Reports........................................................ 3.16(a)
ERISA........................................................................ 3.13(a)
ERISA Plan................................................................... 3.13(a)
Exchange Act................................................................. 3.5(b)
FAA.......................................................................... 3.18(a)
FCC.......................................................................... 1.1
</TABLE>
iv
<PAGE> 43
<TABLE>
<CAPTION>
SECTION
---------
<S> <C>
FCC Application.............................................................. 7.5(a)
FCC Licenses................................................................. 3.18(a)
FCC Transfer Approvals....................................................... 8.1(d)
Fee.......................................................................... 9.3(b)
Final Order.................................................................. 8.1(d)
Governmental Entity.......................................................... 3.5(b)
Hazardous Materials.......................................................... 3.16(d)(iii)
HSR Act...................................................................... 3.5(b)
Indemnified Parties.......................................................... 7.8(b)
Intellectual Property........................................................ 3.11
Material Contracts........................................................... 3.12(a)
Merger....................................................................... 1.1
Merger Consideration......................................................... 2.2(b)
Merger Sub................................................................... PREAMBLE
Multiemployer Plan........................................................... 3.13(d)
Options...................................................................... 2.3(a)
Paying Agent................................................................. 2.2(a)
Payment Fund................................................................. 2.2(a)
PCI.......................................................................... PREAMBLE
Per Share Amount............................................................. 2.1(a)
Permits...................................................................... 3.9
person....................................................................... 10.3(e)
Phantom Option............................................................... 2.3(a)
Plan Option.................................................................. 2.3(a)
Proxy Statement.............................................................. 7.4(a)
qualified.................................................................... 3.13(b)
SEC.......................................................................... 3.6(a)
Securities Act............................................................... 3.6(a)
Statutes..................................................................... 3.18(e)
Stockholders' Meeting........................................................ 7.3
Subsidiary................................................................... 3.1(b)
Surviving Corporation........................................................ 1.1
tax, taxable and taxes....................................................... 3.10
Termination Date............................................................. 9.1(f)
unfunded current liability................................................... 3.13(c)
Voting Agreement............................................................. PREAMBLE
</TABLE>
v
<PAGE> 44
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into this
23rd day of May, 1997, by and among PALMER WIRELESS, INC., a Delaware
corporation (the "Company"), PRICE COMMUNICATIONS CORPORATION, a New York
corporation ("Acquiror"), and PRICE COMMUNICATIONS CELLULAR MERGER CORP., a
Delaware corporation ("Merger Sub").
WHEREAS, the Boards of Directors of the Company, Acquiror and Merger Sub
have each determined that it is fair to, and in the best interests of their
respective stockholders that Merger Sub, a wholly-owned subsidiary of Acquiror,
merge with and into the Company, pursuant to and subject to the terms and
conditions of this Agreement and the Delaware General Corporation Law ("Delaware
Law"); and
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Acquiror to enter into this Agreement, Palmer Communications
Incorporated, a Delaware corporation ("PCI"), has entered into a voting
agreement with Acquiror (the "Voting Agreement") pursuant to which, among other
things, PCI has agreed to vote its shares of common stock of the Company in
favor of this Agreement, the Merger (as defined below) and the other
transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER.
Upon the terms and subject to the conditions set forth in this Agreement
(including approval of the Federal Communications Commission (the "FCC")), and
in accordance with Delaware Law, at the Effective Time (as defined in Section
1.2) Merger Sub shall be merged with and into the Company (the "Merger"). As a
result of the Merger, the separate corporate existence of Merger Sub shall cease
and the Company shall continue as the surviving corporation of the Merger
(sometimes referred to herein as the "Surviving Corporation") and a wholly-owned
subsidiary of Acquiror. The name of the Company shall continue as the name of
the Surviving Corporation.
SECTION 1.2. EFFECTIVE TIME.
At the Closing, the parties hereto shall cause the Merger to be
consummated by filing a certificate of merger (the "Certificate of Merger") with
the Secretary of State of the State of Delaware, in such form as required by,
and executed in accordance with the relevant provisions of, Delaware Law and in
such form as approved by the Company and Acquiror prior to such filing (the date
and time of the filing of the Certificate of Merger or the time specified
therein being the "Effective Time").
SECTION 1.3. EFFECT OF THE MERGER.
At the Effective Time, the effect of the Merger shall be as provided in
the applicable provisions of Delaware Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, except as otherwise
provided herein, all the rights, privileges, powers and franchises of Merger Sub
and the Company, shall vest in the Surviving Corporation, and all debts,
<PAGE> 45
liabilities and duties of Merger Sub and the Company shall become the debts,
liabilities and duties of the Surviving Corporation.
SECTION 1.4. CERTIFICATE OF INCORPORATION; BYLAWS.
At the Effective Time, subject to the terms and conditions of Section 7.8
hereof, (a) the certificate of incorporation of Merger Sub, as in effect
immediately prior to the Effective Time and as amended by the Certificate of
Merger, shall be the certificate of incorporation of the Surviving Corporation,
and (b) the bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation.
SECTION 1.5. DIRECTORS AND OFFICERS.
The directors of Merger Sub (or such other or additional individuals as
Acquiror may designate prior to Closing) shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the certificate of
incorporation and bylaws of the Surviving Corporation; and the officers of the
Company shall continue as the officers of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed and
qualified.
SECTION 1.6. CLOSING.
Subject to the terms and conditions of this Agreement, the closing of the
Merger (the "Closing") will take place as promptly as practicable after
satisfaction of the latest to occur or, if permissible, waiver of the conditions
set forth in Article VIII hereof (the "Closing Date"), at the offices of Hogan &
Hartson L.L.P., Columbia Square, 555 13th Street, N.W., Washington, D.C. 20004,
unless another date or place is agreed to in writing by the parties hereto.
SECTION 1.7. SUBSEQUENT ACTIONS.
If, at any time after the Effective Time, the Surviving Corporation shall
consider or be advised that any deeds, bills of sale, assignments, assurances or
any other actions or things are necessary or desirable to continue in, vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties,
privileges, franchises or assets of either of its constituent corporations
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation shall be directed and
authorized to execute and deliver, in the name and on behalf of either of such
constituent corporations, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each of such
corporations or otherwise, all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties, privileges, franchises or assets in
the Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.1. CONVERSION OF SECURITIES.
At the Effective Time, by virtue of the Merger and without any action on
the part of Acquiror, Merger Sub, the Company or the holders of any of the
following securities:
(a) Company Common Stock. Subject to the other provisions of
this Section 2.1, each share of (i) Class A common stock, par value $.01
per share, of the Company ("Class A Common Stock"), issued and
outstanding immediately prior to the Effective Time (excluding any shares
described in Sections 2.1(b) and (c) and any Dissenting
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Shares (as hereinafter defined)), and (ii) Class B common stock, par value $.01
per share, of the Company ("Class B Common Stock"; together with the Class A
Common Stock, the "Common Stock"), shall be converted into the right to receive
Seventeen Dollars and Fifty Cents ($17.50) in cash, without interest (the "Per
Share Amount"). All such shares of Common Stock shall cease to be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each certificate previously evidencing any such shares shall thereafter
represent only the right to receive the Merger Consideration as described below.
The holders of certificates previously evidencing such shares of Common Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such shares of Common Stock, except as otherwise provided
herein or by law. Each such certificate previously evidencing such shares of
Common Stock shall be exchanged for the Per Share Amount multiplied by the
number of shares previously evidenced by the canceled certificate upon the
surrender of such certificate in accordance with the provisions of Section 2.2,
without interest;
(b) Acquiror-Owned Shares. All shares of capital stock of the
Company owned, directly or indirectly, by Acquiror, Merger Sub or any
Acquiror Subsidiary (as defined in Section 5.1) shall be canceled and
extinguished without any conversion thereof and no cash shall be
delivered or deliverable in exchange therefor;
(c) Treasury Stock. All shares of capital stock of the Company
held in the treasury of the Company immediately prior to the Effective
Time shall be canceled and extinguished without any conversion thereof
and no cash shall be delivered or deliverable in exchange therefor; and
(d) Merger Sub Stock. Each share of common stock, par value
$.01 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one (1) duly
and validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation.
SECTION 2.2. PAYMENT.
(a) Paying Agent. As of the Effective Time, Acquiror shall, on behalf of
Merger Sub, deposit with a bank theretofore designated by the Company and
Acquiror (the "Paying Agent"), for the benefit of the holders of shares of
Common Stock (excluding any shares described in Sections 2.1(b) and (c) and any
Dissenting Shares), for payment in accordance with this
Article II, through the Paying Agent, cash in an amount equal to the Per Share
Amount multiplied by the number of shares of Common Stock outstanding
immediately prior to the Effective Time (excluding any shares described in
Sections 2.1(b) and (c) and any Dissenting Shares) (such cash being hereinafter
referred to as the "Payment Fund"). Acquiror shall cause the Paying Agent,
pursuant to irrevocable instructions, to deliver the cash contemplated to be
paid pursuant to Section 2.1(a) out of the Payment Fund. The Payment Fund shall
not be used for any other purpose.
(b) Payment Procedures. Promptly after the Effective Time, Acquiror
shall cause the Paying Agent to mail to each record holder, as of the Effective
Time, of an outstanding certificate (each a "Certificate" and collectively, the
"Certificates") that immediately prior to the Effective Time evidenced
outstanding shares of Common Stock (excluding any shares described in Sections
2.1(b) and (c) and any Dissenting Shares), a form letter of transmittal and
instructions for use in effecting the surrender of the Certificates for payment
therefor. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal duly executed, and any other required documents, the
holder of such Certificate shall be entitled to receive in exchange therefor the
consideration set forth in Section 2.1(a) (the "Merger Consideration"), and such
Certificate shall forthwith be canceled. No interest will be paid or accrued on
the cash payable upon the surrender of the Certificates. Until surrendered in
accordance with the provisions of this
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Section 2.2, each Certificate shall represent for all purposes only the right to
receive the consideration set forth in Section 2.1(a), without any interest
thereon.
(c) No Further Rights in Common Stock. All cash paid upon conversion of
the shares of Common Stock in accordance with the terms of this Article II, and
all cash paid pursuant to Section 2.5, shall be deemed to have been paid in full
satisfaction of all rights pertaining to such shares of Common Stock.
(d) Termination of Payment Fund. Any portion of the Payment Fund that
remains undistributed to the holders of Common Stock for one hundred eighty
(180) days after the Effective Time shall be delivered to Acquiror, upon demand,
and any holders of Common Stock that have not theretofore complied with this
Article II shall thereafter look only to the Surviving Corporation and Acquiror
for the Merger Consideration to which they are entitled.
(e) No Liability. Neither Acquiror nor the Surviving Corporation shall
be liable to any holder of shares of Common Stock for any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(f) Lost, Stolen or Destroyed Certificates. In the event any Certificate
evidencing shares of Common Stock shall have been lost, stolen or destroyed,
upon the making of an affidavit setting forth that fact by the person claiming
such lost, stolen or destroyed Certificate(s) and granting a reasonable
indemnity against any claim that may be made against Acquiror or the Paying
Agent with respect to such Certificate(s), Acquiror shall cause the Paying Agent
to pay to such person the Merger Consideration with respect to such lost, stolen
or destroyed Certificate(s).
SECTION 2.3. COMPANY OPTIONS; STOCK PURCHASE PLAN.
(a) Company Options. Immediately prior to the Effective Time, (i) each
outstanding stock option to purchase shares of Class A Common Stock (a "Plan
Option") granted under the Company's 1995 Stock Option Plan and 1995 Directors'
Stock Option Plan, each as amended to the date of this Agreement (collectively,
the "Company Stock Option Plans"), and (ii) each phantom option to purchase
shares of Class A Common Stock described on Schedule 3.3 hereto (a "Phantom
Option"; together with the Plan Options, the "Options"), whether or not any such
Options are exercisable, shall be terminated by the Company, and Acquiror shall,
on behalf of Merger Sub, pay to the holder thereof at the Effective Time, in
consideration for such termination, an amount in cash equal to the excess, if
any, of the Per Share Amount over the per share exercise price of such Option,
multiplied by the number of shares of Class A Common Stock into which the Option
remains unexercised. Any such payment shall be subject to all applicable
federal, state and local tax withholding requirements. The Company shall
terminate the Company Stock Option Plans as of the Effective Time, and take all
such action as is necessary to terminate the Options as of the Effective Time,
so that on and after the Effective Time no holder of an Option shall have any
option to purchase shares of Class A Common Stock or any other equity interest
in the Company under the Company Stock Option Plans or the Phantom Option
agreements.
(b) Employee Stock Purchase Plan. Effective as of the Effective Time,
the Company's 1995 Employee Stock Purchase Plan (the "Employee Stock Purchase
Plan") shall be terminated and the then applicable Payroll Deduction Period (as
defined in the Employee Stock Purchase Plan) shall be deemed to have ended on
the last trading day of the Class A Common Stock immediately prior to the
Effective Time. At the Effective Time, Acquiror shall, on behalf of Merger Sub,
pay to each Company employee who is a participant in the Employee Stock Purchase
Plan as of the Effective Time, an amount in cash equal to the Per Share Amount
multiplied by the number of shares of Class A Common Stock which the accumulated
funds in such employee's account would have been entitled to purchase under the
terms of the Employee Stock Purchase Plan as of the end of such Payroll
Deduction Period. Such payments shall be deemed to satisfy all obligations of
the Company and the Surviving Corporation to the participants in the Employee
Stock Purchase Plan. Such payments shall be subject to all applicable federal,
state and local tax
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withholding requirements. All funds in the accounts of the participants as of
the Effective Time after such payments, shall belong to and be disbursed in
accordance with the instructions of Acquiror. The Company shall terminate the
Employee Stock Purchase Plan as of the Effective Time so that on and after the
Effective Time no former participant in the Employee Stock Purchase Plan shall
have any right to purchase shares of Class A Common Stock or any other equity
interest in the Company under the Employee Stock Purchase Plan.
(c) Non-Employee Director Stock Purchase Plan. Effective as of the
Effective Time, the Company's 1995 Non-Employee Director Stock Purchase Plan
(the "Director Stock Purchase Plan"; together with the Employee Stock Purchase
Plan, the "Company Stock Purchase Plans"), shall be terminated and the then
applicable Accumulation Period (as defined in the Director Stock Purchase Plan)
shall be deemed to have ended on the last trading day of the Class A Common
Stock immediately prior to the Effective Time. At the Effective Time, Acquiror
shall, on behalf of Merger Sub, pay to each member of the Company's Board of
Directors who is a participant in the Director Stock Purchase Plan as of the
Effective Time, an amount in cash equal to the Per Share Amount multiplied by
the number of shares of Class A Common Stock which the accumulated funds in such
director's account would have been entitled to purchase under the terms of the
Director Stock Purchase Plan as of the end of such Accumulation Period. Such
payments shall be deemed to satisfy all obligations of the Company and the
Surviving Corporation to the participants in the Director Stock Purchase Plan.
Such payments shall be subject to all applicable federal, state and local tax
withholding requirements. All funds in the accounts of the participants as of
the Effective Time after such payments, shall belong to and be disbursed in
accordance with the instructions of Acquiror. The Company shall terminate the
Director Stock Purchase Plan as of the Effective Time so that on and after the
Effective Time no former participant in the Director Stock Purchase Plan shall
have any right to purchase shares of Class A Common Stock or any other equity
interest in the Company under the Director Stock Purchase Plan.
SECTION 2.4. STOCK TRANSFER BOOKS.
At the Effective Time, the stock transfer books of the Company with
respect to all shares of capital stock of the Company shall be closed and no
further registration of transfers of such shares of capital stock shall
thereafter be made on the records of the Company. On or after the Effective
Time, any Certificates for shares of Common Stock (excluding any shares
described in Sections 2.1(b) and (c) and Dissenting Shares) presented to the
Paying Agent, the Surviving Corporation or Acquiror for any reason shall be
converted into the Merger Consideration.
SECTION 2.5. DISSENTING SHARES.
Notwithstanding any other provisions of this Agreement to the contrary,
shares of Class A Common Stock that are issued and outstanding immediately prior
to the Effective Time and that are held by stockholders who shall not have voted
in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such shares in accordance with
Section 262 of Delaware Law (collectively, the "Dissenting Shares") shall not be
converted into or represent the right to receive the Merger Consideration. Such
stockholders shall be entitled to receive payment of the appraised value of such
shares of Class A Common Stock held by them in accordance with the provisions of
such Section 262, except that all Dissenting Shares held by stockholders who
shall have failed to perfect or who effectively shall have withdrawn or lost
their rights to appraisal of such shares of Class A Common Stock under such
Section 262 shall thereupon be deemed to have been converted into and to have
become exchangeable, as of the Effective Time, for the right to receive, without
any interest thereon, the Merger Consideration, upon surrender, in the manner
provided in Section 2.2, of the certificate or certificates that formerly
evidenced such shares of Class A Common Stock.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Acquiror and Merger Sub as
follows:
SECTION 3.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Company and each Subsidiary (as defined below) of the Company
(each a "Company Subsidiary" and collectively, the "Company Subsidiaries") is a
corporation or partnership duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization. The Company and each
Company Subsidiary is duly qualified to conduct its business, and is in good
standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary, except for such failure which would not have a Company Material
Adverse Effect (as defined below). The Company and each Company Subsidiary has
the requisite power and authority and any necessary governmental authority,
franchise, license or permit to own, operate, lease and otherwise to hold and
operate its assets and properties and to carry on the businesses as now being
conducted, except for such failures which would not in the aggregate have a
Company Material Adverse Effect. The Company has no Subsidiaries (as defined
below) or any equity or similar interest in any entity other than those listed
in Schedule 3.1. As used herein, the term "Company Material Adverse Effect"
means any material adverse effect on the business, assets, financial condition
or results of operations of the Company and the Company Subsidiaries taken as a
whole.
(b) For purposes of this Agreement, a "Subsidiary" of any person means
any corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other Subsidiary) (i) owns,
directly or indirectly, fifty percent (50%) or more of the stock, partnership
interests or other equity interests the holders of which are generally entitled
to vote for the election of the board of directors or other governing body of
such corporation, partnership, joint venture or other legal entity; or (ii)
possesses, directly or indirectly, control over the direction of management or
policies of such corporation, partnership, joint venture or other legal entity
(whether through ownership of voting securities, by agreement or otherwise).
SECTION 3.2. CERTIFICATE OF INCORPORATION AND BYLAWS.
The Company has heretofore made available to Acquiror a complete and
correct copy of the certificate or articles of incorporation and the bylaws of
the Company and each Company Subsidiary that is a corporation, and a correct
copy of the partnership agreement for each Company Subsidiary that is a
partnership, each as amended to date. Each such certificate or articles of
incorporation, bylaws and partnership agreement is in full force and effect.
Neither the Company nor any Company Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws,
partnership agreement or other organizational document.
SECTION 3.3. CAPITALIZATION.
The authorized capital stock of the Company consists, as of the date of
this Agreement, of: (a) seventy-three million (73,000,000) shares of Class A
Common Stock, of which ten million five hundred nineteen thousand six hundred
and eighty-one (10,519,681) shares are issued and outstanding; (b) eighteen
million (18,000,000) shares of Class B Common Stock, of which seventeen million
two hundred ninety-three thousand five hundred and seventy-eight (17,293,578)
shares are issued and outstanding; and (c) ten million (10,000,000) shares of
preferred stock, par value $.01 per share, of which no shares are issued and
outstanding. One million nine hundred thousand (1,900,000) shares of Class A
Common Stock have been reserved for issuance upon the exercise of Plan Options
granted under the Company Stock Option Plans, of which seven hundred forty-five
thousand eight hundred and thirty-four (745,834) shares are
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issuable upon the exercise of Plan Options outstanding under the Company Stock
Option Plans as of the date hereof. The Phantom Options assume the issuance of
twenty thousand (20,000) shares of Class A Common Stock upon exercise thereof.
One hundred sixty thousand (160,000) shares of Class A Common Stock are reserved
for issuance under the Company's 1995 Employee Stock Purchase Plan and
twenty-five thousand (25,000) shares of Class A Common Stock are reserved for
issuance under the Company's 1995 Non-Employee Director Stock Purchase Plan.
Seventeen million two hundred ninety-three thousand five hundred and
seventy-eight (17,293,578) shares of Class A Common Stock are reserved for
purposes of effecting conversions of Class B Common Stock into Class A Common
Stock. Since December 31, 1996, no shares of Class A Common Stock or Class B
Common Stock have been issued, except for shares of Class A Common Stock issued
upon the exercise of options granted under the Company's Stock Option Plans and
shares of Class A Common Stock issued pursuant to the Company's Stock Purchase
Plan. Except as set forth in Schedule 3.3, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of the Company or any Company Subsidiary
or obligating the Company or any Company Subsidiary to issue or sell any shares
of capital stock of, or other equity interests in the Company or any Company
Subsidiary. Except as set forth in Schedule 3.3, there are no outstanding
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any shares of its capital stock or make any material investment (in the
form of a loan, capital contribution or otherwise) in any other person. All of
the issued and outstanding shares of Class A Common Stock and Class B Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable and not subject to preemptive rights. Except as set forth in
Schedule 3.3, with respect to each Company Subsidiary that is a corporation, all
of the outstanding shares of capital stock of such Company Subsidiary have been
duly authorized and validly issued and are fully paid and nonassessable. Except
as set forth in Schedule 3.3, with respect to each Company Subsidiary that is a
partnership, all of the partnership interests owned by the Company, and with
respect to each Company Subsidiary that is a corporation, all of the outstanding
shares of capital stock owned by the Company, are owned by the Company free and
clear of any liens, security interests, pledges, agreements, options, rights,
claims, charges or encumbrances (the "Encumbrances"). As of the date hereof, the
only outstanding indebtedness for borrowed money of the Company and the Company
Subsidiaries is as set forth in Schedule 3.3 and all such indebtedness is
prepayable in full without premium or penalty in accordance with its terms.
SECTION 3.4. AUTHORITY.
The Company has the necessary corporate power and authority to enter into
this Agreement and subject to obtaining any necessary stockholder approval of
the Merger, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby, other than the approval of this Agreement by the
stockholders of the Company in accordance with Delaware Law. This Agreement has
been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Acquiror and Merger Sub, constitutes a
legal, valid and binding obligation of the Company, enforceable in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights generally and by the
application of general principles of equity.
SECTION 3.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the Company do not,
and the performance by the Company of its obligations under this Agreement will
not, subject to
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compliance with the requirements set forth in Section 3.5(b) below, (i) conflict
with or violate the certificate or articles of incorporation, bylaws,
partnership agreement or other organizational document of the Company or any
Company Subsidiary, (ii) conflict with or violate any law, statute, ordinance,
rule, regulation, order, judgment or decree applicable to the Company or any
Company Subsidiary or by which any of their respective properties is bound or
affected, (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of an Encumbrance on any of the
properties or assets of the Company or any Company Subsidiary pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any Company
Subsidiary is a party or by which the Company, any Company Subsidiary or any of
their respective properties or assets is bound or affected, or (iv) result in
any material breach of or constitute a material default (or an event which with
notice or lapse of time or both would become a material default) or give rise to
any material rights to other parties under any Material Contract described in
Section 3.12(a)(i), except, in the case of clauses (ii) and (iii) above for any
such conflicts, violations, breaches, defaults or other alterations or
occurrences that in the aggregate (A) would not prevent or delay consummation of
the Merger in any material respect, or otherwise prevent the Company from
performing its obligations under this Agreement in any material respect, and (B)
would not have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign (each a
"Governmental Entity"), except (i) for (A) applicable requirements, if any, of
the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), state
takeover laws, the exchange on which the Company's securities are traded, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Communications Act of 1934, as amended, together with the rules,
regulations and published decisions of the FCC (collectively, the
"Communications Act"), (B) applicable requirements, if any, of the consents,
approvals, authorizations or permits described in Schedule 3.5, and (C) filing
and recordation of appropriate merger documents as required by Delaware Law and
(ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not in the aggregate
prevent or delay consummation of the Merger in any material respect, or
otherwise prevent the Company from performing its obligations under this
Agreement in any material respect, and would not in the aggregate have a Company
Material Adverse Effect.
SECTION 3.6. SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports, statements and other
documents required to be filed with the Securities and Exchange Commission (the
"SEC") since March 21, 1995, and has heretofore made available to Acquiror, in
the form filed with the SEC since such date, together with any amendments
thereto, its (i) Annual Reports on Form 10-K, (ii) all Quarterly Reports on Form
10-Q, (iii) all proxy statements relating to meetings of stockholders (whether
annual or special), (iv) all reports on Form 8-K, and (v) all other reports or
registration statements filed by the Company (collectively, the "Company SEC
Reports"). As of their respective filing dates the Company SEC Reports (i)
complied as to form in all material respects with the requirements of the
Exchange Act and the Securities Act of 1933, as amended (the "Securities Act")
and (ii) did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
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(b) The financial statements, including all related notes and schedules,
contained in the Company SEC Reports (or incorporated by reference therein)
fairly present the consolidated financial position of the Company and the
Company Subsidiaries as at the respective dates thereof and the consolidated
results of operations and cash flows of the Company and the Company Subsidiaries
for the periods indicated in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be noted therein) and subject in the case of interim financial statements
to normal year-end adjustments.
SECTION 3.7. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as disclosed in the Company SEC Reports filed prior to the date of
this Agreement or as set forth in Schedule 3.7, since December 31, 1996, the
Company and the Company Subsidiaries have not incurred any material liability,
except in the ordinary course of the businesses consistent with their past
practices, and there has not been any change in the business, financial
condition or results of operations of the Company or any of the Company
Subsidiaries or the occurrence of any other event, which has had, or is
reasonably likely to have, a Company Material Adverse Effect, and the Company
and the Company Subsidiaries have conducted their respective businesses in the
ordinary course consistent with their past practices.
SECTION 3.8. ABSENCE OF LITIGATION.
Except as set forth in Schedule 3.8, as of the date hereof there are (a)
no claims, actions, suits, investigations, or proceedings pending or, to the
Company's knowledge, threatened against the Company or any of the Company
Subsidiaries before any court, administrative, governmental, arbitral, mediation
or regulatory authority or body, domestic or foreign, that (i) if adversely
determined would individually involve the payment of more than One Hundred
Thousand Dollars ($100,000) by the Company or any Company Subsidiary, (ii) if
adversely determined would individually or in the aggregate be reasonably likely
to have a Company Material Adverse Effect, (iii) challenge or seek to prevent,
enjoin, alter or materially delay the transactions contemplated hereby, or (iv)
seek material injunctive relief against the Company or any Company Subsidiary,
and (b) no material judgments, decrees, injunctions or orders of any
Governmental Entity or arbitrator outstanding against the Company or any Company
Subsidiary.
SECTION 3.9. LICENSES AND PERMITS; COMPLIANCE WITH LAWS.
The Company and the Company Subsidiaries hold all permits, licenses and
approvals (none of which has been modified or rescinded and all of which are in
full force and effect) from all Governmental Entities (collectively, the
"Permits") necessary for the Company and the Company Subsidiaries to own, lease
and operate their respective properties and to carry on their respective
businesses as now being conducted, except for the Permits for which the failure
to obtain would not have a Company Material Adverse Effect. The businesses of
the Company and the Company Subsidiaries are not being conducted in violation of
any applicable law, statute, ordinance, regulation, judgment, Permits, order,
decree, concession, grant or other authorization of any Governmental Entity,
except for violations that would not be reasonably likely to have a Company
Material Adverse Effect.
SECTION 3.10. TAXES.
Except as set forth in Schedule 3.10, the Company and the Company
Subsidiaries have prepared and filed on a timely basis with all appropriate
Governmental Entities all material returns in respect of taxes that they are
required to file on or prior to the Effective Time or by the date therefor
including extensions, and all such returns are correct and complete in all
material respects. Except as set forth in Schedule 3.10, the Company and the
Company Subsidiaries have paid in full all taxes due on or before the Effective
Time and, in the case of taxes accruing on or before the Effective Time that are
not due on or before the Effective Time, the Company has made adequate
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provision in its books and records and financial statements for such payment.
Except as set forth in Schedule 3.10, the Company and the Company Subsidiaries
have withheld from each payment made to any of its present or former employees,
officers and directors all amounts required by law to be withheld and has, where
required, remitted such amounts within the applicable periods to the appropriate
Governmental Entities. In addition, except as set forth in Schedule 3.10, (a)
there are no assessments of the Company or any Company Subsidiary with respect
to taxes that have been issued and are outstanding; (b) no Governmental Entity
has examined or audited the Company or any Company Subsidiary in respect of
taxes; (c) neither the Company nor any Company Subsidiary has executed or filed
any agreement extending the period of assessment or collection of any taxes; and
(d) neither the Company nor any Company Subsidiary has received written
notification from any Governmental Entity of its intention to commence any audit
or investigation. Except as set forth in Schedule 3.10, neither the Company nor
any Company Subsidiary is a party to, is bound by or has any obligation under
any tax sharing or tax indemnification agreement, provision or arrangement,
whether formal or informal, and no power of attorney, which is currently in
effect, has been granted with respect to any matter relating to taxes of the
Company or any Company Subsidiary. Except as set forth in Schedule 3.10, neither
the Company nor any Company Subsidiary is presently required or will be required
to include any adjustment in taxable income under Section 481 of the Internal
Revenue Code of 1986, as amended (the "Code"), (or any similar provision of the
tax laws of any jurisdiction) as a result of any change in method of accounting
or otherwise. Except as set forth in Schedule 3.10, neither the Company nor any
Company Subsidiary has entered into any "intercompany transaction" as to which
any item of deferred gain or loss has not been restored, and no "excess loss
account" exists with respect to the stock of any Company Subsidiary, as those
terms are defined in the Treasury Regulations issued under Section 1504 of the
Code. For the purpose of this Agreement, the term "tax" (including, with
correlative meaning, the terms "taxes" and "taxable") shall include except where
the context otherwise requires, all federal, state, local and foreign income,
profits, franchise, gross receipts, payroll, sales, employment, use, property,
withholding, excise, occupancy and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts.
SECTION 3.11. INTELLECTUAL PROPERTY.
Except as set forth in Schedule 3.11, the Company or one of the Company
Subsidiaries owns or possesses all rights to use of the service marks,
copyrights, franchises, trademarks, trade names, jingles, slogans, logotypes and
other similar intangible assets (the "Intellectual Property") maintained, owned,
used, held for use or otherwise held by the Company and the Company
Subsidiaries, and all of the rights, benefits and privileges associated
therewith material to the conduct of the business of the Company and the Company
Subsidiaries as currently conducted. To the knowledge of the Company, neither
the Company nor any Company Subsidiary is infringing upon any Intellectual
Property right or other legally protectable right of another. To the knowledge
of the Company, no person is materially infringing upon any Intellectual
Property right of the Company or any Company Subsidiary.
SECTION 3.12. MATERIAL CONTRACTS.
(a) Schedule 3.12 sets forth a complete and correct list, as of the date
of this Agreement, of all agreements of the following type to which the Company
or a Company Subsidiary is a party or may be bound (collectively, the "Material
Contracts"): (i) agreements filed as an exhibit to the Company SEC Reports and
each agreement that would have been required to be filed as an exhibit to the
Company SEC Reports had such agreement been entered into as of the date of
filing any such SEC Report; (ii) employment, severance, termination, consulting
and retirement agreements; (iii) loan agreements, indentures, letters of credit,
mortgages, notes and other debt instruments evidencing indebtedness in excess of
Five Hundred Thousand Dollars ($500,000); (iv) agreements that require aggregate
future payments to or by the Company or any Company Subsidiary of more
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than Five Hundred Thousand Dollars ($500,000) (other than purchase orders and
advertising sales contracts entered into in the ordinary course of business);
(v) agreements containing any "change of control" provisions which, if
triggered, would involve payments by the Company or any Company Subsidiary in
excess of Two Hundred Fifty Thousand Dollars ($250,000) or other material rights
or obligations; (vi) material agreements with any key employee, director,
officer, or person known to the Company to be a direct or indirect stockholder
of the Company; (vii) agreements prohibiting the Company or any Company
Subsidiary from engaging or competing in any line of business or limiting such
competition; (viii) except for the partnership agreements of the Company
Subsidiaries, any joint venture, partnership and similar agreements involving a
sharing of profits; (ix) acquisition or divestiture agreements relating to the
(A) sale of assets or stock of the Company or any Company Subsidiary (other than
sales of inventory in the ordinary course of business) or (B) the purchase of
assets or stock of any other person (other than the purchase of inventory in the
ordinary course of business and acquisitions of additional interests in Company
Subsidiaries involving payments by the Company of less than Five Hundred
Thousand Dollars ($500,000) in the aggregate); (x) brokerage, finder's or
financial advisory agreements; (xi) guarantees of indebtedness for borrowed
money of any person (other than a Company Subsidiary); (xii) interconnection
agreements and switch sharing agreements; and (xiii) agreements under which the
Company or any Company Subsidiary manages a cellular system of any third party.
(b) Except as set forth in Schedule 3.12, all the Material Contracts are
valid and in full force and effect on the date hereof except to the extent they
have previously expired in accordance with their terms, and neither the Company
nor any Company Subsidiary has (or has any knowledge that any other party
thereto has) violated any provision of, or committed or failed to perform any
act which with or without notice, lapse of time or both would constitute a
default under the provisions of, any Material Contract, except for defaults
which would not in the aggregate reasonably be expected to have a Company
Material Adverse Effect. True and complete copies of all Material Contracts have
been delivered to Acquiror or made available for inspection.
SECTION 3.13. EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.13 sets forth a list of all of the pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus or other material incentive plans, all other
material written employee programs, arrangements or agreements and all other
material employee benefit plans or fringe benefit plans, including, without
limitation, all "employee benefit plans" as that term is defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by the Company or for which the Company could incur a liability
or any entity required to be aggregated with the Company (each, a "Commonly
Controlled Entity") pursuant to Section 414 of the Code for the benefit of
present and former employees or directors of the Company and of each Company
Subsidiary or their beneficiaries, or providing benefits to such persons in
respect of services provided to any such entity (collectively, the "Benefit
Plans"). Any of the Benefit Plans which is an "employee pension benefit plan",
as that term is defined in Section 3(2) of ERISA, is referred to herein as an
"ERISA Plan".
(b) Each of the Benefit Plans intended to be "qualified" within the
meaning of Section 401(a) or 501 of the Code has been determined by the Internal
Revenue Service to be so qualified and to the Company's knowledge, no
circumstances exist that could reasonably be expected by the Company to result
in the revocation of any such determination. Each of the Benefit Plans is in
compliance with their terms and the applicable terms of ERISA and the Code and
any other applicable laws, rules and regulations the breach or violation of
which could result in a material liability to the Company or any Commonly
Controlled Entity.
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(c) No ERISA Plan which is a defined benefit pension plan has any
"unfunded current liability", as that term is defined in Section 302(d)(8)(A) of
ERISA, and the present fair market value of the assets of any such plan equals
or exceeds the plan's "benefit liabilities", as that term is defined in Section
4001(a)(16) of ERISA, when determined under actuarial factors that would apply
if the plan terminated in accordance with all applicable legal requirements.
(d) Except as disclosed in Schedule 3.13, no Benefit Plan is or has been
a multiemployer plan within the meaning of Section 3(37) of ERISA (a
"Multiemployer Plan"). Neither the Company nor any Commonly Controlled Entity
has completely or partially withdrawn from any Multiemployer Plan. No
termination liability to the Pension Benefit Guaranty Corporation or withdrawal
liability to any Multiemployer Plan that is material in the aggregate has been
or is reasonably expected to be incurred with respect to any Multiemployer Plan
by the Company or any Commonly Controlled Entity.
(e) The Company has made available to Acquiror complete copies, as of the
date hereof, of all of the Benefit Plans that have been reduced to writing,
together with all documents establishing or constituting any related trust,
annuity contract, insurance contract or other funding instrument. The Company
has made available to Acquiror complete copies of current plan summaries,
employee booklets, personnel manuals and other material documents or written
materials concerning the Benefit Plans that are in the possession of the Company
as of the date hereof.
(f) To the Company's knowledge, except as set forth in Schedule 3.13 and
except for claims for benefits in the ordinary course of business, no claim,
lawsuit, arbitration or other action has been threatened or instituted against
any Benefit Plan.
(g) Except as set forth in Schedule 3.13, Schedule 7.9 or as otherwise
contemplated by the terms of this Agreement, the consummation of the
transactions contemplated by this Agreement will not give rise to any liability,
including, without limitation, liability for severance pay or termination pay,
or accelerate the time of payment or vesting or increase the amount of
compensation or benefits due to any employee, director or stockholder of the
Company (whether current, former, or retired) or their beneficiaries solely by
reason of such transactions. No amounts payable under any Benefit Plan will fail
to be deductible for federal income tax purposes by virtue of Section 280G or
162(m) of the Code.
(h) Except as set forth in Schedule 3.13 or Schedule 7.9, neither the
Company nor any Company Subsidiary maintains, contributes to, or in any way
provides for any benefits of any kind (other than under Section 4980B of the
Code, the Federal Social Security Act, or a plan qualified under Section 401(a)
of the Code) to any current or future retiree or terminee.
(i) Neither the Company, any Company Subsidiary nor any Commonly
Controlled Entity has (or could incur) any liability under Title IV of ERISA.
SECTION 3.14. PROPERTIES; ASSETS.
Except as set forth in Schedule 3.14, the Company or one of the Company
Subsidiaries (a) has good and marketable title to all the properties and assets
reflected in the latest consolidated balance sheet of the Company dated as of
March 31, 1997 (the "Balance Sheet") as being owned by the Company or one of the
Company Subsidiaries (except properties sold or otherwise disposed of since the
date thereof in the ordinary course of business), or acquired after the date
thereof which are material to the Company's business on a consolidated basis,
free and clear of all Encumbrances except (i) statutory liens securing payments
not yet due, and (ii) such imperfections or irregularities of title, claims,
liens, charges, security interests or encumbrances as do not materially affect
the use of the properties or assets subject thereto or affected thereby or
otherwise materially impair business operations at such properties, and (b) is
the lessee of all leasehold estates which are material to its business on a
consolidated basis and is in possession of
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the properties purported to be leased thereunder, and to the knowledge of the
Company, each such lease is valid without default thereunder by the lessee or
lessor. The assets and properties of the Company and the Company Subsidiaries,
taken as a whole, are in good operating condition and repair (ordinary wear and
tear excepted), and constitute all of the assets and properties which are
required for the businesses and operations of the Company and the Company
Subsidiaries as presently conducted.
SECTION 3.15. LABOR RELATIONS.
Neither the Company nor any Company Subsidiary is a party to any
collective bargaining agreement or other contract or agreement with any labor
organization or other representative of any of the employees of the Company or
any Company Subsidiary. Except as set forth in Schedule 3.15, the Company and
each Company Subsidiary is in compliance in all material respects with all laws
relating to the employment or the workplace, including, without limitation,
provisions relating to wages, hours, collective bargaining, safety and health,
work authorization, equal employment opportunity, immigration and the
withholding of income taxes, unemployment compensation, worker's compensation,
employee privacy and right to know and social security contributions.
SECTION 3.16. ENVIRONMENTAL MATTERS.
(a) Except as specifically set forth in those environmental reports
previously made available to Acquiror in the Company's due diligence data room
(the "Environmental Reports"), and except for matters which would not in the
aggregate have a Company Material Adverse Effect, (i) the Company and each
Company Subsidiary is in compliance with all applicable Environmental Laws (as
defined below) in effect on the date hereof; (ii) all Permits and other
governmental authorizations currently held by the Company and each Company
Subsidiary pursuant to the Environmental Laws are in full force and effect, the
Company and each Company Subsidiary is in compliance with all of the terms of
such Permits and authorizations, and no other Permits or authorizations are
required by the Company or any Company Subsidiary for the conduct of their
respective businesses on the date hereof; and (iii) the management, handling,
storage, transportation, treatment, and disposal by the Company and each Company
Subsidiary of any Hazardous Materials (as defined below) has been in compliance
with all applicable Environmental Laws. Neither the Company nor any Company
Subsidiary has received any written communication that alleges that the Company
or any Company Subsidiary is not in compliance in all material respects with all
applicable Environmental Laws in effect on the date hereof. As of the date
hereof, the Environmental Reports do not set forth any facts or circumstances
which have had or are reasonably likely to have a Company Material Adverse
Effect.
(b) Except as specifically set forth in the Environmental Reports, there
is no material Environmental Claim (as defined below) pending or, to the
knowledge of the Company, threatened against or involving the Company or any of
the Company Subsidiaries or against any person or entity whose liability for any
material Environmental Claim the Company or any of the Company Subsidiaries has
or may have retained or assumed either contractually or by operation of law.
(c) Except as specifically set forth in the Environmental Reports and
except for matters which would not in the aggregate have a Company Material
Adverse Effect, to the knowledge of the Company, there are no past or present
actions or activities by the Company or any Company Subsidiary including the
storage, treatment, release, emission, discharge, disposal or arrangement for
disposal of any Hazardous Materials, that could reasonably form the basis of any
Environmental Claim against the Company or any of the Company Subsidiaries or
against any
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person or entity whose liability for any Environmental Claim the Company or any
Company Subsidiary may have retained or assumed either contractually or by
operation of law.
(d) As used herein, these terms shall have the following meanings:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, investigations, proceedings or notices of noncompliance or
violation (written or oral) by any person or governmental authority alleging
potential liability arising out of, based on or resulting from the presence, or
release or threatened release into the environment, of any Hazardous Materials
at any location owned or leased by the Company or any Company Subsidiary or
other circumstances forming the basis of any violation or alleged violation of
any Environmental Law.
(ii) "Environmental Laws" means all applicable foreign, federal,
state and local laws (including the common law), rules, requirements and
regulations relating to pollution, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata) or protection of human health as it relates to the environment
including, without limitation, laws and regulations relating to releases of
Hazardous Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials or relating to management of asbestos in buildings.
(iii) "Hazardous Materials" means wastes, substances, or materials
(whether solids, liquids or gases) that are deemed hazardous, toxic, pollutants,
or contaminants, including without limitation, substances defined as "hazardous
substances", "toxic substances", "radioactive materials", or other similar
designations in, or otherwise subject to regulation under, any Environmental
Laws.
SECTION 3.17. INSURANCE.
Schedule 3.17 contains a list of all insurance policies of title,
property, fire, casualty, liability, life, workmen's compensation, libel and
slander, and other forms of insurance in force at the date thereof with respect
to the Company and the Company Subsidiaries. All such insurance policies: (a)
insure against such risks, and are in such amounts, as appropriate and
reasonable considering the Company and the Company Subsidiaries' properties,
businesses and operations; (b) are in full force and effect; and (c) are valid,
outstanding, and enforceable. Neither the Company nor any of the Company
Subsidiaries has received or given notice of cancellation with respect to any of
the material insurance policies.
SECTION 3.18. FCC MATTERS AND GOVERNMENTAL MATTERS.
(a) The Company and the Company Subsidiaries hold all licenses, permits
and other authorizations issued by the FCC to the Company and the Company
Subsidiaries for the operation of their respective businesses (the "FCC
Licenses") as set forth in Schedule 3.18. The FCC Licenses constitute all of the
licenses, permits and authorizations from the FCC that are required for the
operations and businesses of the Company and the Company Subsidiaries as they
are now operated, except where the FCC has not issued a written microwave
authorization. Without limiting the foregoing, the Company and the Company
Subsidiaries have received all necessary authorizations from the Federal
Aviation Administration ("FAA") for all existing towers that are part of the
cellular systems operated by the Company and the Company Subsidiaries and for
any facilities the construction of which have been approved by the FCC or of
which applications or notifications have been filed for such approval.
(b) Schedule 3.18 sets forth each application and notification that the
Company and the Company Subsidiaries have pending before the FCC and sets forth
the expiration date for each of the cellular FCC Licenses. The Company and the
Company Subsidiaries have provided a copy to Acquiror of each of the FCC
Licenses and the applications and notifications listed in Schedule 3.18, except
where the FCC has not issued a written microwave authorization.
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(c) The FCC Licenses are valid and in full force and effect, unimpaired
by any condition or restriction or any act or omission by the Company or any of
the Company Subsidiaries which would reasonably be likely to have a Company
Material Adverse Effect. Except as set forth in Schedule 3.18, there are no
modifications, amendments, applications, revocations, or other proceedings, or
complaints pending or, to the knowledge of the Company, threatened, with respect
to the FCC Licenses (other than proceedings that apply to the cellular industry
generally). All fees due and payable to the FCC have been paid and no event has
occurred which, with or without the giving of notice or lapse of time or both,
would constitute grounds for revocation or modification of the FCC Licenses.
(d) All material reports required by the Communications Act or required
to be filed with the FCC by the Company and the Company Subsidiaries have been
timely filed and are accurate and complete in all material respects. All
material reports required to be filed by the Company and the Company
Subsidiaries with all other governmental or administrative authorities, federal,
state and local, have been timely filed and are accurate and complete in all
material respects.
(e) Except where a lack of compliance would not have a Company Material
Adverse Effect, the Company and the Company Subsidiaries are in compliance with,
and their cellular systems have been operated in compliance with, the
Communications Act and the rules, regulations, policies and orders of the
relevant state public utilities commissions and the FAA, including, without
limitation, the FCC's time and coverage requirements of 47 C.F.R. sec.sec.
22.142, 22.911, 22.912 and 22.946 (the "Statutes"). The Company and the Company
Subsidiaries have in operation validly licensed and adequate cellular base
stations required to provide 32 dBu contour coverage, as calculated under the
formula prescribed by the FCC in 47 C.F.R. sec. 22.911, to all areas of their
cellular markets except for coverage gaps that are less than 50 contiguous
square miles in size. Except as set forth in Schedule 3.10 and 3.18, the Company
and the Company Subsidiaries have not received any written notice to the effect,
or otherwise been advised in writing, that they are not in compliance with any
Statutes and do not have any reason to anticipate that any presently existing
circumstances are reasonably likely to result in violations of any Statutes.
(f) Without limiting the generality of the foregoing, except as set forth
in Schedule 3.8, no adverse finding has been made, no consent decree entered, no
adverse action has been approved or taken by the FCC or any court or other
administrative body, and no admission of liability has been made with respect to
the Company or any of the Company Subsidiaries or any of the Company's
stockholders or any management employee of the Company or the Company
Subsidiaries concerning any civil or criminal suit, action or proceeding brought
under the provision of any federal, state, territorial or local law relating to
any of the following: any felony; unlawful restraint of trade or monopoly;
unlawful combination; contract or agreement in restraint of trade; the use of
unfair methods of competition; fraud; unfair labor practice; or discrimination.
(g) Neither the Company nor any of the Company Subsidiaries has engaged
in any course of conduct that could reasonably be expected to impair the ability
of Merger Sub or its subsidiaries to be the holder of the FCC Licenses or is
aware of any reason why the FCC Licenses might not be renewed in the ordinary
course, why any of the FCC Licenses might be revoked, or why any pending
applications or notifications might not be approved.
SECTION 3.19. BOARD APPROVAL; VOTE REQUIRED.
The Board of Directors of the Company has determined that the
transactions contemplated by this Agreement are in the best interests of the
Company and its stockholders and has resolved to recommend to such stockholders
that they vote in favor thereof. The affirmative vote of a majority of the votes
entitled to be cast by the holders of outstanding shares of the Class A Common
Stock and Class B Common Stock (voting as a single class) is the only vote of
any class or series of capital stock of the Company necessary to approve the
transactions contemplated under this Agreement and the Merger.
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SECTION 3.20. OPINION OF FINANCIAL ADVISOR.
The Company's Board of Directors has received the opinion of Goldman,
Sachs & Co. that the consideration to be received in the Merger by the
stockholders of the Company is fair to such stockholders from a financial point
of view, a written copy of which opinion will be provided to Acquiror when
received by the Company, and such opinion has not been withdrawn or modified in
any material respect.
SECTION 3.21. BROKERS.
Except for Goldman, Sachs & Co., no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF MERGER SUB
Acquiror and Merger Sub jointly and severally represent and warrant to
the Company as follows:
SECTION 4.1. ORGANIZATION AND QUALIFICATION.
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Merger Sub was
formed solely for the purpose of engaging in the transactions contemplated by
this Agreement. As of the date of this Agreement, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement, Merger Sub has not incurred,
directly or indirectly, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
SECTION 4.2. CERTIFICATE OF INCORPORATION AND BYLAWS.
Merger Sub has heretofore made available to the Company a complete and
correct copy of the certificate of incorporation and the bylaws of Merger Sub,
each as amended to date. Such certificate of incorporation and bylaws are in
full force and effect. Merger Sub is not in violation of any of the provisions
of its certificate of incorporation or bylaws.
SECTION 4.3. AUTHORITY.
Merger Sub has the necessary corporate power and authority to enter into
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Merger Sub and the consummation by Merger Sub of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Merger Sub
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Merger Sub and, assuming the due authorization, execution and delivery by the
Company and Acquiror, constitutes a legal, valid and binding obligation of
Merger Sub, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and by the application of general
principles of equity.
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SECTION 4.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Merger Sub do not,
and the performance by Merger Sub of its obligations under this Agreement will
not, subject to compliance with the requirements set forth in Section 4.4(b)
below, (i) conflict with or violate the certificate of incorporation or bylaws
of Merger Sub, (ii) conflict with or violate any law, statute, ordinance, rule,
regulation, order, judgment or decree applicable to Merger Sub or by which any
of its properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of any
Encumbrance on any of the properties or assets of Merger Sub pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Merger Sub is a party or by
which Merger Sub or any of its properties or assets is bound or affected,
except, in the case of clauses (ii) and (iii) above for any such conflicts,
violations, breaches, defaults or other alterations or occurrences that would
not prevent or delay consummation of the Merger in any material respect, or
otherwise prevent Merger Sub from performing its obligations under this
Agreement in any material respect.
(b) The execution and delivery of this Agreement by Merger Sub does not,
and the performance of this Agreement by Merger Sub will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except (i) for (A) applicable requirements, if any,
of the Exchange Act, state takeover laws, exchanges on which Acquiror's
securities are traded, the HSR Act and the Communications Act, (B) applicable
requirements, if any, of the consents, approvals, authorizations or permits
described in Schedule 4.4, and (C) filing and recordation of appropriate merger
documents as required by Delaware Law and (ii) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Merger in any
material respect.
SECTION 4.5. VOTE REQUIRED.
The affirmative vote of Acquiror, the sole stockholder of Merger Sub, is
the only vote of the holders of any class or series of Merger Sub capital stock
necessary to approve any of the transactions contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Company as follows:
SECTION 5.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
Acquiror is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation. Acquiror is duly
qualified to conduct its business, and is in good standing, in each jurisdiction
where the character of its properties owned, operated or leased or the nature of
its activities makes such qualification necessary, except for such failure which
would not have an Acquiror Material Adverse Effect (as defined below). Acquiror
has the requisite power and authority and any necessary governmental authority,
franchise, license or permit to own, operate, lease and otherwise to hold and
operate its assets and properties and to carry on the business as now being
conducted, except for such failure which would not have an Acquiror Material
Adverse Effect. As used herein, the term "Acquiror Material Adverse Effect"
means any material adverse effect on the business, assets, financial condition
or results of operations of Acquiror and its subsidiaries (collectively, the
"Acquiror Subsidiaries") taken as a whole.
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SECTION 5.2. ORGANIZATIONAL DOCUMENTS.
Acquiror has heretofore made available to the Company a complete and
correct copy of the certificate of incorporation and bylaws of Acquiror, each as
amended to date. Such certificate of incorporation and bylaws are in full force
and effect. Acquiror is not in violation of any of the provisions of its
certificate of incorporation or bylaws.
SECTION 5.3. AUTHORITY.
Acquiror has the necessary power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Acquiror and the consummation by Acquiror of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
and no other proceedings on the part of Acquiror are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Acquiror and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of Acquiror, enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights generally and by the application of
general principles of equity.
SECTION 5.4. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Acquiror do not, and
the performance by Acquiror of its obligations under this Agreement will not,
subject to compliance with the requirements set forth in Section 5.4(b) below,
(i) conflict with or violate the certificate of incorporation or bylaws of
Acquiror, (ii) conflict with or violate any law, statute, ordinance, rule,
regulation, order, judgment or decree applicable to Acquiror or by which any of
its properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of an
Encumbrance on any of the properties or assets of Acquiror pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Acquiror is a party or by
which Acquiror or any of its properties or assets is bound or affected, except,
in the case of clauses (ii) and (iii) above for any such conflicts, violations,
breaches, defaults or other alterations or occurrences that would not prevent or
delay consummation of the Merger in any material respect, or otherwise prevent
Acquiror from performing its obligations under this Agreement in any material
respect, and would not have an Acquiror Material Adverse Effect.
(b) The execution and delivery of this Agreement by Acquiror does not,
and the performance of this Agreement by Acquiror will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for (A) applicable requirements, if any, of the
Exchange Act, state takeover laws, exchanges on which Acquiror's securities are
traded, the HSR Act and the Communications Act, (B) applicable requirements, if
any, of the consents, approvals, authorizations or permits described in Schedule
5.4, and (C) filing and recordation of appropriate merger documents as required
by Delaware Law and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or delay consummation of the Merger in any material respect, or
otherwise prevent Acquiror from performing its obligations under this Agreement
in any material respect, and would not have an Acquiror Material Adverse Effect.
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SECTION 5.5. VOTE REQUIRED.
No vote of the stockholders of Acquiror is necessary to approve any of
the transactions contemplated hereby.
SECTION 5.6. FINANCING.
Acquiror will have available on the Effective Time sufficient funds to
consummate the Merger and to make all the payments necessary to consummate the
transactions contemplated hereby, including, without limitation, payments under
Article II hereof for the Common Stock, Options and Dissenting Shares, and
payments necessary to satisfy all amounts outstanding as of the Closing Date
under the Company's credit facilities described on Schedule 3.3 hereto.
SECTION 5.7. QUALIFICATION OF ACQUIROR.
Acquiror is and pending the Effective Time will be legally, technically,
financially and otherwise qualified under the Communications Act and all rules,
regulations and policies of the FCC to acquire, own and operate the assets and
business of the Company and the Company Subsidiaries. There are no facts or
proceedings which would reasonably be expected to disqualify Acquiror under the
Communications Act or otherwise from acquiring or operating any of the assets
and business of the Company and the Company Subsidiaries or would cause the FCC
not to approve the FCC Application (as defined in Section 7.5(a)). Acquiror has
no knowledge of any fact or circumstance relating to Acquiror or any of its
affiliates that would reasonably be expected to (a) cause the filing of any
objection to the FCC Application, or (b) lead to a delay in the processing by
the FCC of the FCC Application. No waiver of any FCC rule or policy is necessary
to be obtained for the approval of the FCC Application, nor will processing
pursuant to any exception or rule of general applicability be requested or
required in connection with the consummation of the transactions herein.
SECTION 5.8. ABSENCE OF LITIGATION.
Except as set forth in Schedule 5.8, there are (a) no claims, actions,
suits, investigations, or proceedings pending or, to Acquiror's knowledge,
threatened against Acquiror or any of its properties or assets before any court,
administrative, governmental, arbitral, mediation or regulatory authority or
body, domestic or foreign, that challenge or seek to prevent, enjoin, alter or
materially delay the transactions contemplated hereby, and (b) no judgments,
decrees, injunctions or orders of any Governmental Entity or arbitrator
outstanding against Acquiror or any of its properties or assets that would
prevent or materially delay the transactions contemplated hereby.
SECTION 5.9. BROKERS.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Acquiror.
SECTION 5.10. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Acquiror has filed all forms, reports, statements and other documents
required to be filed with the SEC since December 31, 1996, and has heretofore
made available to the Company, in the form filed with the SEC since such date,
together with any amendments thereto, its (i) Annual Reports on Form 10-K, (ii)
all Quarterly Reports on Form 10-Q, (iii) all proxy statements relating to
meetings of stockholders (whether annual or special), (iv) all reports on Form
8-K, and (v) all other reports or registration statements filed by Acquiror
(collectively, the "Acquiror SEC Reports"). As of their respective filing dates
the Acquiror SEC Reports (i) complied as to form in all material respects with
the requirements of the Exchange Act and the Securities Act and (ii) did not at
the time they were filed contain any untrue statement of a material fact or omit
to state a
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material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The financial statements, including all related notes and schedules,
contained in the Acquiror SEC Reports (or incorporated by reference therein)
fairly present the consolidated financial position of Acquiror and Acquiror
Subsidiaries as at the respective dates thereof and the consolidated results of
operations and cash flows of Acquiror and Acquiror Subsidiaries for the periods
indicated in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved (except as may be noted
therein) and subject in the case of interim financial statements to normal
year-end adjustments.
SECTION 5.11. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as disclosed in the Acquiror SEC Reports filed prior to the date
of this Agreement or as set forth in Schedule 5.11, since March 31, 1997,
Acquiror and Acquiror Subsidiaries have not incurred any material liability,
except in the ordinary course of their businesses consistent with their past
practices, and there has not been any change in the business, financial
condition or results of operations of Acquiror or any of Acquiror Subsidiaries,
which has had, or is reasonably likely to have, an Acquiror Material Adverse
Effect, and Acquiror and Acquiror Subsidiaries have conducted their respective
businesses in the ordinary course consistent with their past practices. The
representations and warranties contained in this Section 5.11 shall be deemed to
speak only as of the date hereof.
ARTICLE VI
COVENANTS
SECTION 6.1. AFFIRMATIVE COVENANTS OF THE COMPANY.
The Company hereby covenants and agrees that, prior to the Effective
Time, unless otherwise expressly contemplated by this Agreement or consented to
in writing by Acquiror, the Company shall, and shall cause each Company
Subsidiary to, (a) operate its business in the usual and ordinary course
consistent with past practices; (b) use its reasonable efforts to preserve
substantially intact its business organization, maintain its rights and
franchises, retain the services of its respective principal officers and key
employees and maintain its relationship with its respective principal customers
and suppliers; (c) use its reasonable efforts to maintain and keep its
properties and assets in as good repair and condition as at present, ordinary
wear and tear excepted; and (d) use its reasonable efforts to keep in full force
and effect insurance comparable in amount and scope of coverage to that
currently maintained; provided, however, that in the event the Company or any of
the Company Subsidiaries deems it necessary to take certain actions that would
otherwise be prohibited by clauses (a)-(d) of this Section 6.1, the Company
shall consult with Acquiror and Acquiror shall consider in good faith the
Company's request to take such action and not unreasonably withhold or delay its
consent for such action.
SECTION 6.2. NEGATIVE COVENANTS OF THE COMPANY.
Except as expressly contemplated by this Agreement and except as set
forth in Schedule 6.2, or otherwise consented to in writing by Acquiror, from
the date hereof until the Effective Time, the Company shall not, and shall cause
each Company Subsidiary not to, do any of the following:
(a) (i) increase the compensation payable to or to become payable to any
of its directors, executive officers or employees, except for increases in
salary, wages or bonuses payable or to become payable in the ordinary course of
business and consistent with past practice; (ii) grant any severance or
termination pay (other than pursuant to existing severance arrangements or
policies
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as in effect on the date of this Agreement) to, or enter into or modify any
employment or severance agreement with, any of its directors, officers or
employees; or (iii) adopt or amend any employee benefit plan or arrangement,
except as may be required by applicable law;
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of its capital stock;
(c) (i) redeem, repurchase or otherwise reacquire any share of its
capital stock or any securities or obligations convertible into or exchangeable
for any share of its capital stock, or any options, warrants or conversion or
other rights to acquire any shares of its capital stock or any such securities
or obligations (except in connection with the exercise of outstanding Options
referred to in Schedule 3.3 in accordance with their terms); (ii) effect any
reorganization or recapitalization; or (iii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of, or in substitution for, shares of its
capital stock;
(d) (i) issue, deliver, award, grant or sell, or authorize or propose the
issuance, delivery, award, grant or sale (including the grant of any
Encumbrances) of, any shares of any class of its capital stock (including shares
held in treasury), any securities convertible into or exercisable or
exchangeable for any such shares (including any phantom options or stock
appreciation rights), or any rights, warrants or options to acquire, any such
shares (except for the issuance of shares upon the exercise of outstanding
Options and the issuance of shares under the Company Stock Purchase Plans); or
(ii) amend or otherwise modify the terms of any such rights, warrants or options
in a manner inconsistent with the provisions of this Agreement or the effect of
which shall be to make such terms more favorable to the holders thereof;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division (other than a wholly-owned Subsidiary)
thereof, or otherwise acquire or agree to acquire any assets of any other person
(other than the purchase of assets in the ordinary course of business and
consistent with past practice), or make or commit to make any capital
expenditures other than capital expenditures in the ordinary course of business
consistent with past practice;
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any of its material assets except for the grant of
purchase money security interests not to exceed Five Hundred Thousand Dollars
($500,000) in the aggregate and dispositions in the ordinary course of business
and consistent with past practice;
(g) propose or adopt any amendments to its certificate of incorporation
or, as to its bylaws or partnership agreement, as the case may be, any
amendments that would have an adverse impact on the consummation of the
transactions contemplated by this Agreement or would be adverse to Acquiror's
interests;
(h) (i) change any of its methods of accounting in effect at January 1,
1997, or (ii) make or rescind any express or deemed election relating to taxes,
settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes (except where
the amount of such settlements or controversies, individually or in the
aggregate, does not exceed Five Hundred Thousand Dollars ($500,000), or change
any of its methods of reporting income or deductions for federal income tax
purposes from those employed in the preparation of the federal income tax
returns for the taxable year ending December 31, 1996, except, in the case of
clause (i) or clause (ii), as may be required by law or generally accepted
accounting principles;
(i) incur any obligation for borrowed money, whether or not evidenced by
a note, bond, debenture or similar instrument, other than (i) purchase money
indebtedness not to exceed Five Hundred Thousand Dollars ($500,000) in the
aggregate, (ii) indebtedness incurred in the ordinary
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course of business under the existing loan agreements described on Schedule 3.3
hereto, and (iii) capitalized leases not to exceed One Million Dollars
($1,000,000) in the aggregate;
(j) without the written consent of Acquiror (which consent shall not be
unreasonably withheld, delayed or conditioned), enter into or modify in any
material respect any agreement which, if in effect as of the date hereof, would
have been required to be disclosed on Schedule 3.12 as a Material Contract; or
(k) agree in writing or otherwise to do any of the foregoing.
SECTION 6.3. NEGATIVE COVENANTS OF ACQUIROR.
From the date hereof until the Effective Time, Acquiror shall not (a)
declare or pay any dividend on or make any other distribution of cash or
property in respect of, outstanding shares of its capital stock; or (b) redeem,
repurchase or otherwise reacquire any shares of its capital stock or any
securities or obligations convertible into or exchangeable for any shares of its
capital stock.
SECTION 6.4. CONTROL OF OPERATIONS.
Nothing contained in this Agreement shall give Acquiror or Merger Sub,
directly or indirectly, except as expressly provided in this Agreement, the
right to control or direct the Company's operations prior to the Effective Time.
Prior to the Effective Time, each of the Company and Acquiror shall exercise,
consistent with the terms and conditions of this Agreement, complete control and
supervision over its respective operations.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1. ACCESS AND INFORMATION.
From the date hereof to the Effective Time, the Company shall, and shall
cause the Company Subsidiaries to, afford to Acquiror and its officers,
employees, accountants, consultants, legal counsel, representatives of current
and prospective sources of financing for the Merger and other representatives of
Acquiror (collectively, the "Acquiror Representatives"), reasonable access
during normal business hours to the properties, executive personnel and all
information concerning the business, properties, contracts, records and
personnel of the Company and the Company Subsidiaries as Acquiror may reasonably
request. The Company further agrees to reasonably cooperate with Acquiror in
connection with Acquiror's obtaining financing for this transaction (including
making appropriate officers of the Company available on a reasonable basis for
road show presentations).
SECTION 7.2. CONFIDENTIALITY.
Acquiror acknowledges and agrees that all information received from or on
behalf of the Company or any of the Company Subsidiaries in connection with the
Merger shall be deemed received pursuant to the confidentiality agreement, dated
as of May 21, 1997, between the Company and Acquiror (the "Confidentiality
Agreement") and Acquiror shall, and shall cause the Acquiror Representatives to
comply with the provisions of the Confidentiality Agreement with respect to such
information and the provisions of the Confidentiality Agreement are hereby
incorporated herein by reference with the same effect as if fully set forth
herein.
SECTION 7.3. STOCKHOLDER APPROVAL.
The Company shall, promptly after the date of this Agreement, take all
action necessary in accordance with Delaware Law and its certificate of
incorporation and bylaws to convene a meeting
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of the Company's stockholders (the "Stockholders' Meeting"), to approve and
adopt this Agreement and the Merger. The Company shall use its best efforts to
solicit from stockholders of the Company proxies in favor of the approval and
adoption of this Agreement and the Merger and to take all other actions
reasonably necessary or in Acquiror's reasonable judgment advisable to secure
such vote as promptly as practicable, unless otherwise required by applicable
fiduciary duties of the directors of the Company, as determined by such
directors in good faith after consultation with independent legal counsel.
SECTION 7.4. PROXY STATEMENT.
(a) As promptly as practicable after the execution and delivery of this
Agreement, the Company shall prepare and file with the SEC a proxy statement in
connection with the matters to be considered at the Stockholders' Meeting (the
"Proxy Statement"). The Company shall use its best efforts to cause the Proxy
Statement to be "cleared" by the SEC for mailing to the stockholders of the
Company as promptly as practicable and shall mail the Proxy Statement to its
stockholders as promptly as practicable thereafter. Acquiror shall furnish all
information concerning it and the holders of its capital stock as the Company
may reasonably request in connection with such actions. The Proxy Statement
shall include the recommendation of the Company's Board of Directors in favor of
approval and adoption of this Agreement and the Merger, unless otherwise
required by applicable fiduciary duties of the directors of the Company, as
determined by such directors in good faith after consultation with independent
legal counsel. Acquiror shall have the right to review the Proxy Statement
before it is filed with the SEC.
(b) The information supplied by Acquiror for inclusion in the Proxy
Statement shall not, at the date the Proxy Statement (or any supplement thereto)
is first mailed by stockholders or at the time of the Stockholders' Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. If at any time prior to the Stockholders' Meeting any event or
circumstance relating to Acquiror or any of its affiliates, or its or their
respective officers or directors, should be discovered by Acquiror that should
be set forth in a supplement to the Proxy Statement, Acquiror shall promptly
inform the Company.
(c) All information contained in the Proxy Statement (other than
information provided by Acquiror for inclusion therein) shall not, at the date
the Proxy Statement (or any supplement thereto) is first mailed to stockholders
or at the time of the Stockholders' Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. If at any time prior to
the Stockholders' Meeting any event or circumstance relating to the Company or
any of the Company Subsidiaries, or to its or their respective officers or
directors, should be discovered by the Company that should be set forth in a
supplement to the Proxy Statement, the Company shall promptly inform Acquiror.
All documents that the Company is responsible for filing with the SEC in
connection with the transactions contemplated herein will comply as to form and
substance in all material respects with the applicable requirements of the
Exchange Act and the rules and regulations thereunder.
SECTION 7.5. FCC APPLICATION.
(a) As promptly as practicable after the execution and delivery of this
Agreement, Acquiror, Merger Sub and the Company shall prepare all appropriate
applications for FCC consent, and such other documents as may be required, with
respect to the transfer of control of the Company to Acquiror (collectively, the
"FCC Application"). Not later than the fifth (5th) business day following
execution and delivery of this Agreement, Acquiror and Merger Sub shall deliver
to the Company their respective completed portions of the FCC Application. Not
later than the tenth (10th) business day following the execution and delivery of
this Agreement,
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the Company shall file, or cause to be filed, the FCC Application. Acquiror,
Merger Sub and the Company shall prosecute the FCC Application in good faith and
with due diligence in order to obtain such FCC consent as expeditiously as
practicable. If the Closing shall not have occurred for any reason within the
initial effective period of the granting of approval by the FCC of the FCC
Application, and neither Acquiror nor the Company shall have terminated this
Agreement pursuant to Section 9.1, Acquiror and the Company shall jointly
request one or more extensions of the effective period of such grant. No party
hereto shall knowingly take, or fail to take, any action the intent or
reasonably anticipated consequence of which action or failure to act would be to
cause the FCC not to grant approval of the FCC Application.
(b) Acquiror and the Company shall each pay one-half (1/2) of any FCC
fees that may be payable in connection with the filing or granting of approval
of the FCC Application. Acquiror and the Company shall each oppose any request
for reconsideration or judicial review of the granting of approval of the FCC
Application. The Company shall pay any cost incurred in connection with
complying with the FCC notice and advertisement requirements in connection with
the transfer of control of the Company.
SECTION 7.6. FURTHER ACTION; BEST EFFORTS.
(a) Each of the parties shall use best efforts to take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable laws or otherwise to consummate
and make effective the transactions contemplated by this Agreement as promptly
as practicable, including, without limitation, using its best efforts to obtain
all licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities and parties to contracts with the Company and
Acquiror as are necessary for the transactions contemplated herein. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and directors
of each party to this Agreement shall use commercially reasonable efforts to
take all such action.
(b) From the date of this Agreement until the Effective Time, each of the
parties shall promptly notify the other in writing of any pending or, to the
knowledge of such party, threatened action, proceeding or investigation by any
Governmental Entity or any other person (i) challenging or seeking damages in
connection with the Merger or the conversion of the Common Stock into the Merger
Consideration pursuant to the Merger or (ii) seeking to restrain or prohibit the
consummation of the Merger or otherwise limit the right of Acquiror to own or
operate all or any portion of the business or assets of the Company.
(c) The Company shall give prompt written notice to Acquiror, and
Acquiror and Merger Sub shall give prompt written notice to the Company, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date of this Agreement to the Effective Time. Each party shall use its best
efforts to not take any action, or enter into any transaction, which would cause
any of its representations or warranties contained in this Agreement to be
untrue or result in a breach of any covenant made by it in this Agreement.
SECTION 7.7. PUBLIC ANNOUNCEMENTS.
Acquiror and the Company shall consult with each other before issuing any
press release or otherwise making any public statements with respect to the
Merger and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or any
listing agreement of Acquiror or the Company with any exchange on which the
securities of the Company or Acquiror are traded.
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SECTION 7.8. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) The certificate of incorporation and bylaws of the Surviving
Corporation shall contain the provisions with respect to indemnification set
forth in the certificate of incorporation and bylaws of the Company on the date
of this Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six (6) years after the Effective Time in any manner
that would adversely affect the rights thereunder of persons who at any time
prior to the Effective Time were identified as prospective indemnities under the
certificate of incorporation or bylaws of the Company in respect of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement), unless such
modification is required by applicable law.
(b) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers, directors
and employees of the Company and the Company Subsidiaries (collectively, the
"Indemnified Parties") against all losses, expenses, claims, damages,
liabilities or amounts that are paid in settlement of, with the approval of
Acquiror and the Surviving Corporation (which approval shall not be unreasonably
withheld), or otherwise in connection with, any claim, action, suit, proceeding
or investigation (a "Claim"), based in whole or in part on the fact that such
person is or was such a director, officer or employee and arising out of actions
or omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement), in each case to
the fullest extent permitted under Delaware Law (and shall pay expenses in
advance of the final disposition of any such action or proceeding to each
Indemnified Party to the fullest extent permitted under Delaware Law, upon
receipt from the Indemnified Party to whom expenses are advanced of the
undertaking to repay such advances contemplated by Section 145(e) of Delaware
Law).
(c) Without limiting the foregoing, in the event any Claim is brought
against any Indemnified Party (whether arising before or after the Effective
Time) after the Effective Time (i) the Indemnified Parties may retain its
regularly engaged independent legal counsel as of the date of this Agreement, or
other independent legal counsel satisfactory to them provided that such other
counsel shall be reasonably acceptable to Acquiror and the Surviving
Corporation, (ii) the Surviving Corporation shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received, and (iii) the Surviving Corporation will use its
reasonable efforts to assist in the vigorous defense of any such matter,
provided that the Surviving Corporation shall not be liable for any settlement
of any Claim effected without its written consent, which consent shall not be
unreasonably withheld. Any Indemnified Party wishing to claim indemnification
under this Section 7.8, promptly upon learning of any such Claim, shall notify
the Surviving Corporation (although the failure so to notify the Surviving
Corporation shall not relieve the Surviving Corporation from any liability which
the Surviving Corporation may have under this Section 7.8, except to the extent
such failure prejudices the Surviving Corporation), and shall deliver to the
Surviving Corporation the undertaking contemplated by Section 145(e) of Delaware
Law. The Indemnified Parties as a group may retain one law firm (in addition to
local counsel) to represent them with respect to each such matter unless there
is, under applicable standards of professional conduct (as reasonably determined
by counsel to such Indemnified Parties) a conflict on any significant issue
between the position of any two or more of such Indemnified Parties, in which
event, an additional counsel as may be required may be retained by such
Indemnified Parties.
(d) Acquiror shall cause to be maintained in effect for not less than six
(6) years after the Effective Time the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by
the Company with respect to matters occurring prior to the Effective Time;
provided, however, that (i) Acquiror may substitute therefor policies of
substantially the same coverage containing terms and conditions that are
substantially the same for the Indemnified Parties to the extent reasonably
available and (ii) Acquiror shall not be required to pay an annual premium for
such insurance in excess of three hundred percent (300%) of the
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last annual premium paid prior to the date of this Agreement, but in such case
shall purchase as much coverage as possible for such amount.
(e) This Section 7.8 is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties referred to herein, their heirs and
personal representatives and shall be binding on Acquiror and Merger Sub and the
Surviving Corporation and their respective successors and assigns. Acquiror
hereby guarantees the Surviving Corporation's obligations pursuant to this
Section 7.8.
SECTION 7.9. EMPLOYEE BENEFITS MATTERS.
(a) For a period of two (2) years after the Effective Time, Acquiror
shall cause the Surviving Corporation to provide employee benefits under plans,
programs and arrangements, which, in the aggregate, will provide benefits to the
employees of the Company and the Company Subsidiaries which are no less
favorable, in the aggregate, than those provided pursuant to the plans, programs
and arrangements of the Company in effect and disclosed to Acquiror on the date
hereof; provided, however, that nothing herein shall interfere with the
Surviving Corporation's right or obligation to make such changes to such plans,
programs or arrangements as are necessary to conform with applicable law;
provided, further, however, that with respect to any such plan, program or
arrangement that provides for the issuance of the Company's Common Stock, or
options or securities exercisable or convertible into the Company's Common
Stock, the Surviving Corporation shall be required to adopt equity compensation
programs providing for the issuance of common stock of Acquiror to such
employees.
(b) In furtherance of the provisions of Section 7.9(a), Acquiror shall
cause the Surviving Corporation to provide to those executives listed on
Schedule 7.9 hereto with the employee benefits provided to each such executive
on the date hereof and for the time period set forth in the Company's employment
and/or severance agreements with such executives as set forth on Schedule 7.9
hereto; provided, however, that notwithstanding the foregoing, to the extent
that any contributions under a qualified retirement plan would be prohibited by
applicable law, Acquiror shall cause the Surviving Corporation to make cash
payments from time to time to such executives equal to the value of such
contributions which can not be so made under applicable law, as and when such
contributions would have been made as noted on Schedule 7.9. The employee
benefits provided to such executives on the date hereof under the Company's
employment and/or severance agreements with such executives are detailed on
Schedule 7.9 hereto.
(c) Acquiror acknowledges and agrees that prior to the Effective Time,
the Company will take all such actions as may be necessary to cause (i) all
participants to become fully vested in their benefits under the Company's 401(k)
Plan, and (ii) employer contributions to be made with respect to periods prior
to the Effective Time to the Company's 401(k) Plan to the extent that such
contributions would be made if the participants were employed by the Company on
the last day of the calendar year in which the Closing occurs. Acquiror will
allow employees of PCI to continue to participate in the Company's 401(k) Plan
at least until the end of the calendar year in which the Closing occurs.
(d) On or prior to the Effective Time, the Company shall pay a pro-rated
portion of the annual bonuses and gainshare that would have otherwise been
payable to the eligible employees of the Company after the end of the year, such
bonuses and gainshare to be consistent with the Company's 1997 Management and
Professional Bonus Plan and the Company's Gainshare Program, with past practice,
and the estimates contained in Schedule 7.9(d).
(e) Acquiror agrees that it will not allow the Surviving Corporation to
amend or terminate the Palmer Wireless, Inc. Change of Control Severance Program
for a period of one (1) year after the Effective Time.
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(f) Prior to Closing, the Company shall make, or shall make accruals on
its financial statements for, all payments required to be made by the Company
under the terms of any Benefit Plan or by any law applicable to any Benefit Plan
with respect to all periods through the Closing Date.
(g) On or prior to the Effective Time, the Company shall take, or cause
to be taken, such actions as are reasonably necessary to:
(i) cause the Company to adopt the PCI plans providing medical,
dental, vision, prescription drug, flexible spending account, pre-tax premium
contribution, travel accident, accidental death and dismemberment, long term
disability, and life insurance benefits for the benefit of Company employees;
(ii) add the Company as a contractholder under insurance contracts
providing insurance coverage, and administrative contracts relating to, for one
or more of the benefits listed in the immediately preceding paragraph (i) above
as well as workers compensation liability coverage and provide that such
contracts continue as to the Company after the Effective Time;
(iii) substitute the Company for PCI as the party to the Palmer
Communications Health Care Expense Fund which is a Code Section 501(c)(9) trust
used to fund certain of the benefits listed in paragraph (i) above and any other
trust or account which is used with respect to flexible spending accounts or
pre-tax premium contributions for Company employees; and
(iv) except as provided in Section 7.9(c) hereof, cease
participation and coverage in the Company plans, trusts and insurance contracts
referred to in paragraphs (i) through (iii) above with respect to all
individuals who are not Company employees as of the Effective Time.
SECTION 7.10. HSR ACT MATTERS.
Acquiror, Merger Sub and the Company (as may be required pursuant to the
HSR Act) promptly will complete all documents required to be filed with the
Federal Trade Commission and the United States Department of Justice in order to
comply with the HSR Act and, not later than fifteen (15) days after the date
hereof, together with the persons who are required to join in such filings,
shall file the same with the appropriate Governmental Entities. Acquiror, Merger
Sub and the Company shall promptly furnish all materials thereafter required by
any of the Governmental Entities having jurisdiction over such filings, and
shall take all reasonable actions and shall file and use best efforts to have
declared effective or approved all documents and notifications with any such
Governmental Entity, as may be required under the HSR Act or other Federal
antitrust laws for the consummation of the Merger and the other transactions
contemplated hereby.
SECTION 7.11. NEGOTIATION WITH OTHERS.
(a) Unless and until this Agreement shall have been terminated in
accordance with its terms, the Company shall not, through any officer, director,
employee, representative, agent or direct or indirect stockholder of the Company
or any Company Subsidiaries, directly or indirectly, encourage or solicit any
proposal that constitutes an Acquisition Proposal (as defined below), engage in
any discussions or negotiations or provide any information to any person
relating thereto or in furtherance thereof or accept any Acquisition Proposal;
provided, however, that nothing contained in this Section 7.11 shall prohibit
the Company, or its Board of Directors, from making any disclosure to its
stockholders that, in the judgment of its Board of Directors in accordance with,
and based upon, the advice of outside counsel, is required under applicable law.
For purposes of this Agreement, "Acquisition Proposal" means any offer to
acquire (or meaningful indication of interest in the acquisition of) all or any
substantial part of the business and properties or capital stock of the Company
or the Company Subsidiaries, whether by merger, consolidation, sale of assets or
stock, tender offer or similar transaction or series of transactions involving
the Company, the Company Subsidiaries or their direct or indirect stockholders.
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(b) Notwithstanding Section 7.11(a), the Board of Directors of the
Company, in the exercise of and as required by its fiduciary duties as
determined in good faith by the Board of Directors of the Company in accordance
with and based upon the advice of outside counsel, may (i) furnish information
(including, without limitation, confidential information) concerning the Company
to a third party who makes an unsolicited request for such information for the
purpose of making an Acquisition Proposal, provided that such third party
executes and delivers a confidentiality agreement substantially the same as the
Confidentiality Agreement, and (ii) engage in discussions or negotiations with a
third party who submits in writing an interest in making an Acquisition Proposal
that the Board of Directors believes, based on advice of its financial advisors,
is reasonably capable of being consummated and is reasonably likely to be
superior to the transactions contemplated by this Agreement from a financial
point of view to all stockholders of the Company, provided, however, that in the
case of clause (i) or (ii) hereof, the Company shall promptly notify Acquiror in
writing of such request for information or Acquisition Proposal, providing
reasonable details with respect thereto, and shall keep Acquiror informed as to
the status of any discussions or negotiations referred to in clause (ii) above.
ARTICLE VIII
CLOSING CONDITIONS
SECTION 8.1. CONDITIONS TO OBLIGATIONS OF ACQUIROR, MERGER SUB AND THE COMPANY
TO EFFECT THE MERGER.
The respective obligations of Acquiror, Merger Sub and the Company to
effect the Merger and the other transactions contemplated herein shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law:
(a) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the Company in
accordance with applicable law.
(b) No Order. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, judgment,
injunction or other order (whether temporary, preliminary or permanent), in any
case which is in effect and which prevents or prohibits consummation of the
Merger or any other transactions contemplated in this Agreement; provided,
however, that the parties shall use their reasonable efforts to cause any such
decree, judgment, injunction or other order to be vacated or lifted.
(c) HSR Act. Any waiting period with any extensions thereof under the
HSR Act shall have expired or been terminated.
(d) FCC Approval. All consents, waivers, approvals and authorizations
(the "FCC Transfer Approvals") required to be obtained, and all filings or
notices required to be made, by Acquiror, Merger Sub and the Company prior to
consummation of the transactions contemplated in this Agreement shall have been
obtained from, and made with, the FCC. Each of the FCC Transfer Approvals shall
have become a Final Order. For purposes of this Agreement, "Final Order" shall
mean an action by the FCC: (i) that is not reversed, stayed, enjoined, set
aside, annulled or suspended within the deadline, if any, provided by applicable
statute or regulation; (ii) with respect to which no request for stay, motion or
petition for reconsideration or rehearing, application or request for review, or
notice of appeal or other judicial petition for review that is filed within such
period is pending, and (iii) as to which the deadlines, if any, for filing any
such request, motion, petition, application, appeal or notice, and for the entry
of orders staying, reconsidering or reviewing on the FCC's own motion have
expired. Notwithstanding anything to
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the contrary contained herein or otherwise, Acquiror may, at is option by
written notice to the Company: (i) waive on behalf of the parties the
requirement that each of the FCC Transfer Approvals shall have become a Final
Order; and (ii) acquire the microwave licenses pursuant to special temporary
authority granted to Acquiror by the FCC.
SECTION 8.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF ACQUIROR.
The obligations of Acquiror to effect the Merger and the other
transactions contemplated in this Agreement are also subject to the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law:
(a) Representations and Warranties. The representations and warranties
of the Company made in this Agreement shall be true and correct in all material
respects, on and as of the Effective Time with the same effect as though such
representations and warranties had been made on and as of the Effective Time
(provided that any representation or warranty contained herein that is qualified
by a materiality standard shall not be further qualified hereby), except for
representations and warranties that speak as of a specific date or time other
than the Effective Time (which need only be true and correct in all material
respects as of such date or time). Acquiror shall have received a certificate of
the Chief Executive Officer or Chief Financial Officer of the Company to that
effect.
(b) Agreements and Covenants. The agreements and covenants of the
Company required to be performed on or before the Effective Time shall have been
performed in all material respects. Acquiror shall have received a certificate
of the Chief Executive Officer or Chief Financial Officer of the Company to that
effect.
(c) Legal Opinions. Acquiror shall have received (i) an opinion from
Hogan & Hartson L.L.P., counsel to the Company, in form and substance reasonably
satisfactory to Acquiror, and (ii) an opinion from the Company's FCC counsel in
substantially the form attached hereto as Exhibit A.
(d) Dissenting Shares. The Dissenting Shares shall constitute not
greater than ten percent (10%) of the shares of Class A Common Stock outstanding
on the Closing Date.
(e) No Company Material Adverse Effect. Since the date of this
Agreement, no Company Material Adverse Effect shall have occurred and be
continuing.
SECTION 8.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligations of the Company to effect the Merger and the other
transactions contemplated in this Agreement are also subject to the following
conditions any or all of which may be waived, in whole or in part, to the extent
permitted by applicable law:
(a) Representations and Warranties. The representations and warranties
of Acquiror and Merger Sub made in this Agreement shall be true and correct in
all material respects, on and as of the Effective Time with the same effect as
though such representations and warranties had been made on and as of the
Effective Time (provided that any representation or warranty contained herein
that is qualified by a materiality standard shall not be further qualified
hereby), except for representations and warranties that speak as of a specific
date or time other than the Effective Time (which need only be true and correct
in all material respects as of such date or time). The Company shall have
received a certificate of the Chief Executive Officer or Chief Financial Officer
of Acquiror to that effect.
(b) Agreements and Covenants. The agreements and covenants of Acquiror
and Merger Sub required to be performed on or before the Effective Time shall
have been performed in all material respects. The Company shall have received a
certificate of the Chief Executive Officer or Chief Financial Officer of
Acquiror to that effect.
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(c) Legal Opinion. The Company shall have received an opinion from
Proskauer Rose Goetz & Mendelsohn LLP, counsel to Acquiror and Merger Sub, in
form and substance reasonably satisfactory to the Company.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. TERMINATION.
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval of this Agreement and the Merger by the
stockholders of the Company:
(a) by mutual written consent of each of Acquiror and the Company;
(b) by Acquiror if the Company shall have breached, or failed to comply
with, in any material respect any of its obligations under this Agreement or any
representation or warranty made by the Company shall have been incorrect in any
material respect when made or shall have since ceased to be true and correct in
any material respect, such that as a result of such breach, failure or
misrepresentation the conditions set forth in Section 8.2(a), 8.2(b) or 8.2(e)
would not be satisfied, and such breach, failure or misrepresentation is not
cured within thirty (30) days after notice thereof;
(c) by the Company if Acquiror or Merger Sub shall have breached, or
failed to comply with, in any material respect any of its obligations under this
Agreement or any representation or warranty made by Acquiror or Merger Sub shall
have been incorrect in any material respect when made or shall have since ceased
to be true and correct in any material respect, such that as a result of such
breach, failure or misrepresentation the conditions set forth in Section 8.3(a)
or 8.3(b) would not be satisfied, and such breach, failure or misrepresentation
is not cured within thirty (30) days after notice thereof;
(d) by either Acquiror or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any Governmental Entity preventing or prohibiting consummation
of the Merger shall have become final and nonappealable;
(e) by either Acquiror or the Company if the Agreement shall fail to
receive the requisite vote for approval and adoption by the stockholders of the
Company at the Stockholders' Meeting and the Merger shall not have been
consummated within forty-five (45) days thereafter; and
(f) by either the Company or Acquiror if the merger shall not have been
consummated before December 31, 1997 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 9.1(f)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the Termination Date.
SECTION 9.2. EFFECT OF TERMINATION.
Except as provided in Section 9.3 or Section 10.1, in the event of the
termination of this Agreement pursuant to Section 8.1, this Agreement shall
forthwith become void, there shall be no liability on the part of Acquiror,
Merger Sub or the Company or any of their respective officers or directors to
the other parties hereto and all rights and obligations of any party hereto
shall cease, except that nothing herein shall relieve any party for any breach
of this Agreement.
SECTION 9.3. EXPENSES; FEE.
(a) Except as otherwise expressly provided herein, all expenses incurred
by the parties hereto shall be borne solely by the party that has incurred such
expenses. All FCC annual
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regulatory fees which are due and payable prior to Closing shall be paid by the
Company prior to Closing.
(b) Without in any way limiting the Company's obligations under this
Agreement (including without limitation under Sections 1.1, 1.2, 1.6, 2.3, 6.1,
6.2, 7.1, 7.3, 7.4, 7.5, 7.6, 7.10 and 7.11 hereof) or Acquiror's rights under
Section 10.7 hereof, the Company shall pay, or shall cause to be paid to,
Acquiror a Fee (the "Fee") of Fifteen Million Dollars ($15,000,000), if this
Agreement is (i) terminated either (A) by Acquiror under Section 9.1(b) as a
result of the Company's breach of its obligations under Sections 1.1, 1.2, 1.6,
2.3, 6.1, 6.2, 7.1, 7.3, 7.4, 7.5, 7.6, 7.10 or 7.11, (B) by the Company or
Acquiror under Section 9.1(e) and (ii) either (A) an Alternative Transaction (as
defined below) has been publicly announced and has not been withdrawn at the
time of such termination (in which event the Fee shall be paid simultaneously
with such termination) or (B) an Alternative Transaction is consummated on or
prior to the date that is one (1) year after the date of this Agreement (in
which event the Fee shall be paid simultaneously with such consummation);
provided, however, that payment of such Fee shall be deemed to satisfy in full
all of the liabilities and obligations of the Company under this Agreement. As
used herein, an "Alternative Transaction" shall mean any transaction or proposed
transaction or related series of transactions (including without limitation any
merger, consolidation, sale of assets or stock, tender offer or other
transaction) providing for the receipt by the Company and/or the holders of more
than fifty percent (50%) of its Common Stock of consideration equivalent to a
value in excess of Seventeen Dollars and Fifty Cents ($17.50) per share of
Common Stock.
SECTION 9.4. AMENDMENT.
This Agreement may be amended by the parties hereto by action taken by or
on behalf of their respective Boards of Directors at any time prior to the
Effective Time; provided, however, that, after approval of this Agreement and
the Merger by the stockholders of the Company, no amendment may be made which
would reduce the amount or change the type of consideration into which each
share of Common Stock shall be converted pursuant to this Agreement upon
consummation of the Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 9.5. WAIVER.
At any time prior to the Effective Time, the parties may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement and (c) waive compliance by the other party with any of the agreements
or conditions contained in this Agreement. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
The representations, warranties and agreements in this Agreement (and in
any certificate delivered in connection with the Closing) shall be deemed to be
conditions to the Merger and shall not survive the Effective Time or termination
of this Agreement, except for the agreements set forth in Articles I (the
Merger) and II (Conversion of Securities; Exchange of Certificates) and Sections
7.8 (Indemnification and Insurance) and 7.9 (Employee Benefits Matters), each of
which shall survive the Effective Time indefinitely, and Sections 7.2
(Confidentiality), 9.2 (Effect of Termination) and 9.3 (Expenses; Fee), each of
which shall survive termination of this Agreement indefinitely.
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SECTION 10.2. NOTICES.
All notices and other communications given or made pursuant hereto shall
be in writing and shall be deemed to have been duly given or made as of the date
delivered, mailed or transmitted, and shall be effective upon receipt, if
delivered personally, mailed by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like changes of address) or
sent by electronic transmission to the telecopier number specified below:
(a) If to Acquiror:
Price Communications Corporation
45 Rockefeller Plaza
Suite 3200
New York, New York 10020
Telecopier No.: (212) 397-3755
Attention: Robert Price
With a copy (which shall not constitute notice) to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036-8299
Telecopier No.: (212) 969-2900
Attention: Peter G. Samuels, Esq.
(b) If to the Company:
Palmer Wireless, Inc.
12800 University Drive
Fort Myers, Florida 33014
Telecopier No.: (914) 433-8213
Attention: Pat Meehan, Esq.
With a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, DC 20004
Telecopier No.: (202) 637-5910
Attention: David B.H. Martin, Jr., Esq.
SECTION 10.3. CERTAIN DEFINITIONS.
For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person;
(b) "beneficial owner" means with respect to any shares of Common Stock a
person who shall be deemed to be the beneficial owner of such shares (i) which
such person or any of its affiliates or associates beneficially owns, directly
or indirectly, (ii) which such person or any of its affiliates or associates (as
such term is defined in Rule 12b-2 of the Exchange Act) has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (B) the right
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to vote pursuant to any agreement, arrangement or understanding, (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding voting or disposing of any
such shares or (iv) pursuant to Section 13(d) of the Exchange Act and any rules
or regulations promulgated thereunder;
(c) "business day" shall mean any day other than a day on which banks in
the State of Florida are authorized or obligated to be closed;
(d) "control" (including the terms "controlled by" and "under common
control with") means, other than for purposes of the Communications Act, the
possession, directly or indirectly or as trustee or executor, of the power to
direct or cause the direction of the management or policies of a person, whether
through the ownership of stock or as trustee or executor, by contract or credit
arrangement or otherwise; and
(e) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in Section
13(d) of the Exchange Act).
SECTION 10.4. HEADINGS.
The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
SECTION 10.5. SEVERABILITY.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 10.6. ENTIRE AGREEMENT.
This Agreement (together with the Exhibits, the Schedules and the other
documents delivered pursuant hereto) and the Confidentiality Agreement
constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein, are not intended to confer upon any other person any
rights or remedies hereunder.
SECTION 10.7. SPECIFIC PERFORMANCE.
The transactions contemplated by this Agreement are unique. Accordingly,
each of the parties acknowledges and agrees that, in addition to all other
remedies to which it may be entitled, each of the parties hereto is entitled to
a decree of specific performance, provided such party is not in material default
hereunder.
SECTION 10.8. ASSIGNMENT.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other party.
Subject to the preceding sentence, this Agreement shall be
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binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
SECTION 10.9. THIRD PARTY BENEFICIARIES.
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement except for (a) the
Indemnified Parties under Section 7.8, (b) the rights of the holders of Common
Stock to receive the Merger Consideration payable in the Merger pursuant to
Article II, and (c) the rights of the individuals listed on Schedule 7.9 under
Section 7.9.
SECTION 10.10. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law.
SECTION 10.11. COUNTERPARTS.
This Agreement may be executed and delivered in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this AGREEMENT AND
PLAN OF MERGER to be executed and delivered as of the date first written above.
PRICE COMMUNICATIONS CORPORATION
By: /s/ ROBERT PRICE
----------------------------------
Name: Robert Price
----------------------------
Title: President
---------------------------
PRICE COMMUNICATIONS CELLULAR MERGER
CORP.
By: /s/ ROBERT PRICE
----------------------------------
Name: Robert Price
----------------------------
Title: President
---------------------------
PALMER WIRELESS, INC.
By: /s/ WILLIAM J. RYAN
----------------------------------
William J. Ryan
President and Chief Executive
Officer
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APPENDIX B
Goldman, Sachs & Co. Fairness Opinion
PERSONAL AND CONFIDENTIAL
August 13, 1997
Board of Directors
Palmer Wireless, Inc.
12800 University Drive
Fort Myers, FL 33907-5333
Ladies and Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Class A Common Stock, par value $.01 per share (the "Class
A Common Stock") and Class B Common Stock, par value $.01 per share,
(collectively, the "Shares"), of Palmer Wireless, Inc. (the "Company") of the
$17.50 in cash to be received by such holders (the "Consideration") pursuant to
the Agreement and Plan of Merger dated as of May 22, 1997 among Price
Communications Corporation ("Buyer"), Price Communications Cellular Merger
Corp., a wholly-owned subsidiary of Buyer, and the Company (the "Agreement").
You have also informed us that (i) Buyer intends to commence an exchange offer
(the "Exchange Offer") pursuant to which Buyer will offer, for each share of
Class A Common Stock that is exchanged in the Exchange Offer, shares of Buyer's
common stock with a market value of $18.00, (ii) the Exchange Offer will be
limited to up to that number of shares of Class A Common Stock that can be
exchanged for 10,000,000 shares of Buyer's common stock, and (iii) the Exchange
Offer will be conditioned upon several items, including the approval of Buyer's
shareholders. It is understood that you have not requested that we render, and
we are not rendering, any opinion as to the fairness to the holders of the
Shares of the proposed consideration to be received in the Exchange Offer, if
any.
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation 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 are familiar with
the Company having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Agreement. We are
also familiar with the Company having provided certain investment banking
services to the Company from time to time, including acting as managing
underwriter of public offerings of the Class A Common Stock in March, 1995 and
June, 1996.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Voting Agreement among Palmer Communications, Inc. and Buyer;
Annual Reports to Stockholders and Annual Reports on Form 10-K of the Company
for the two years ended December 31, 1996; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q and certain other communications
from the Company to its stockholders; and certain internal financial analyses
and forecasts for the Company prepared by its management. We also have held
discussions with members of the senior management of the Company regarding its
past and current business operations, financial condition and future prospects
of the Company. In addition, we have reviewed the reported price and trading
activity for the Class A Common Stock, compared certain financial and stock
market information for the Company with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the wireless industry
specifically and in other industries generally and performed such other studies
and analyses as we considered appropriate.
<PAGE> 80
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and completeness
for purposes of rendering this opinion. In addition, we have not made an
independent evaluation or appraisal of the assets and liabilities of the
Company. Our advisory services and the opinion expressed herein are provided for
the information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the
Agreement and such opinion does not constitute a recommendation as to how any
holder of Shares should vote with respect to such transaction.
Based upon and subject to the foregoing, and based upon such other matters as we
consider relevant, it is our opinion of that as of the date hereof, the
Consideration is fair to the holders of the Shares.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
- - - - --------------------------------------
(GOLDMAN, SACHS & CO.)
<PAGE> 81
APPENDIX B
Goldman, Sachs & Co. Fairness Opinion
PERSONAL AND CONFIDENTIAL
August 13, 1997
Board of Directors
Palmer Wireless, Inc.
12800 University Drive
Fort Myers, FL 33907-5333
Ladies and Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Class A Common Stock, par value $.01 per share (the "Class
A Common Stock") and Class B Common Stock, par value $.01 per share
(collectively, the "Shares"), of Palmer Wireless, Inc. (the "Company") of the
$17.50 in cash to be received by such holders (the "Consideration") pursuant to
the Agreement and Plan of Merger dated as of May 22, 1997 among Price
Communications Corporation ("Buyer"), Price Communications Cellular Merger
Corp., a wholly-owned subsidiary of Buyer, and the Company (the "Agreement").
You have also informed us that (i) Buyer intends to commence an exchange offer
(the "Exchange Offer") pursuant to which Buyer will offer, for each share of
Class A Common Stock that is exchanged in the Exchange Offer, shares of Buyer's
common stock with a market value of $18.00, (ii) the Exchange Offer will be
limited to up to that number of shares of Class A Common Stock that can be
exchanged for 10,000,000 shares of Buyer's common stock, and (iii) the Exchange
Offer will be conditioned upon several items, including the approval of Buyer's
shareholders. It is understood that you have not requested that we render, and
we are not rendering, any opinion as to the fairness to the holders of the
shares of the Class A Common Stock of the proposed consideration to be received
in the Exchange Offer, if any.
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation 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 are familiar with
the Company having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Agreement. We are
also familiar with the Company having provided certain investment banking
services to the Company from time to time, including acting as managing
underwriter of public offerings of the Class A Common Stock in March, 1995 and
June, 1996.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Voting Agreement among Palmer Communications, Inc. and Buyer;
Annual Reports to Stockholders and Annual Reports on Form 10-K of the Company
for the two years ended December 31, 1996; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q and certain other communications
from the Company to its stockholders; and certain internal financial analyses
and forecasts for the Company prepared by its management. We also have held
discussions with members of the senior management of the Company regarding its
past and current business operations, financial condition and future prospects
of the Company. In addition, we have reviewed the reported price and trading
activity for the Class A Common Stock, compared certain financial and stock
market information for the Company with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the wireless industry
specifically and in other industries generally and performed such other studies
and analyses as we considered appropriate.
<PAGE> 82
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and completeness
for purposes of rendering this opinion. In addition, we have not made an
independent evaluation or appraisal of the assets and liabilities of the
Company. Our advisory services and the opinion expressed herein are provided for
the information and assistance of the Board of Directors of the Company in
connection with its consideration of the transaction contemplated by the
Agreement and such opinion does not constitute a recommendation as to how any
holder of Shares should vote with respect to such transaction.
Based upon and subject to the foregoing, and based upon such other matters as we
consider relevant, it is our opinion of that as of the date hereof, the
Consideration is fair to the holders of the Shares.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
- - - - --------------------------------------
(GOLDMAN, SACHS & CO.)
<PAGE> 83
APPENDIX C
Voting Agreement
THIS VOTING AGREEMENT (this "Agreement") is entered into as of May 23,
1997, by and between PRICE COMMUNICATIONS CORPORATION, a New York corporation
("Acquiror"), and PALMER COMMUNICATIONS INCORPORATED, a Delaware corporation
("PCI").
WHEREAS, PCI is the record and beneficial owner of all of the issued and
outstanding shares of Class B Common Stock, par value $.01 per share, of Palmer
Wireless, Inc., a Delaware corporation (the "Company");
WHEREAS, Acquiror, Price Communications Cellular Merger Corp., a Delaware
corporation and a wholly-owned subsidiary of Acquiror ("Merger Sub"), and the
Company have entered into an Agreement and Plan of Merger (the "Merger
Agreement") dated as of the date hereof, which provides, among other things, for
the merger (the "Merger") of Merger Sub with and into the Company, with the
result that the surviving corporation will become a wholly-owned subsidiary of
Acquiror; and
WHEREAS, to induce Acquiror to enter into the Merger Agreement and to
effect the Merger, PCI has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DISPOSITION OF SHARES
PCI agrees that it will not sell, transfer, pledge, assign or otherwise
encumber or dispose of, or enter into any contract, option or other agreement
with respect to, the sale, transfer, pledge, assignment or other encumbrance or
disposition of, any shares of common stock of the Company now owned or hereafter
acquired beneficially or of record by PCI, including, without limitation,
dispositions through dividends or liquidating or other distributions of such
common stock to stockholders of PCI, except for the conversion of any such
shares in accordance with the terms of the Merger. PCI agrees that it will not
convert any shares of Class B Common Stock of the Company into shares of Class A
Common Stock of the Company.
SECTION 2. VOTING
PCI agrees to vote all of the shares of common stock of the Company now
owned or hereafter acquired beneficially or of record by PCI (a) in favor of the
Merger and the adoption of the Merger Agreement and the transactions
contemplated thereby (including any amendments or modifications of the terms
thereof approved by the board of directors of the Company and by Acquiror) in
connection with any meeting of, or solicitation of consents from, the
stockholders of the Company at which or in connection with which the Merger and
the Merger Agreement are submitted for the consideration and vote of the
stockholders of the Company; (b) against approval or adoption of any
extraordinary corporate transaction (other than the Merger, the Merger Agreement
or the transactions contemplated thereby) including, without limitation, any
transaction involving: (i) the sale or transfer of all or substantially all of
the common stock of the Company, whether by merger, consolidation or other
business combination; (ii) a sale or transfer of all or substantially all of the
assets of the Company and its subsidiaries, (iii) a reorganization,
recapitalization or liquidation of the Company and its subsidiaries, or (iv) any
charter or bylaw amendment creating any new class of securities of the Company
or otherwise affecting the rights of any class of security as currently in
effect; (c) against approval or adoption of resolutions which would have the
effect of preventing, materially delaying or otherwise materially frustrating
<PAGE> 84
consummation of the Merger or otherwise preventing or materially delaying the
Company from performing its obligations under the Merger Agreement; and (d)
against any action which would constitute a material breach of any provision of
the Merger Agreement. To the extent inconsistent with the foregoing provisions
of this Section 2, PCI hereby revokes any and all previous proxies with respect
to the shares of common stock of the Company owned beneficially or of record by
PCI. PCI hereby waives any rights of appraisal or rights to dissent from the
Merger that it may have.
SECTION 3. GRANT OF OPTION
(a) PCI hereby irrevocably grants to Acquiror an option (the
"Option") to purchase all (but not less than all) of the common stock now owned
or hereafter acquired beneficially or of record by PCI (the "Option Shares") at
a cash exercise price of Seventeen Dollars and Fifty Cents ($17.50) per share
(the "Exercise Price"), as adjusted upon the declaration of any stock splits,
dividends, recapitalizations or other distributions or changes affecting the
Option Shares.
(b) During the period prior to the termination of this Agreement,
as long as neither Acquiror nor Merger Sub is in material breach of any
agreements or covenants contained in the Merger Agreement or this Agreement, the
Option may be exercised by Acquiror, in whole (but not in part), at any time
upon written notice to PCI but only upon the occurrence of (and during the three
(3) month period following) the breach by PCI of its obligations under Section 2
of this Agreement.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PCI
PCI represents and warrants to Acquiror as follows:
(a) PCI has the necessary corporate power and authority to enter
into this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by PCI and the consummation by PCI of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of PCI are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by PCI and, assuming the due authorization,
execution and delivery by Acquiror, constitutes a legal, valid and binding
obligation of PCI, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and by the application of general
principles of equity.
(b) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated will not conflict with or
violate any law, regulation, court order, judgment or decree applicable to PCI
or by which the property of PCI is bound or affected, or conflict with or result
in any breach of or constitute a default under any contract or agreement to
which PCI is a party or by which PCI or its properties are bound or affected,
which conflict, violation, breach or default would adversely affect PCI's
ability to perform its obligations under this Agreement.
(c) Seventeen million two hundred ninety-three thousand five
hundred seventy-eight (17,293,578) shares of Class B Common Stock, par value
$.01 per share, of the Company (the "Shares") are the only shares of voting
stock owned beneficially or of record by PCI and PCI holds no options, warrants,
or other rights to acquire shares of any class of capital stock of the Company.
PCI has the sole power respecting voting and transfer of the Shares. The Shares
and the certificates representing such Shares are now, and at all times during
the term hereof will be, owned beneficially and of record by PCI, free and clear
of all liens, claims, security interests, proxies, options, warrants or other
rights, voting trusts or agreements, understandings or
<PAGE> 85
arrangements or any other encumbrances whatsoever, except for any such
encumbrances or proxies arising hereunder.
SECTION 5. FURTHER ASSURANCES
PCI shall execute and deliver such additional instruments and other
documents and shall take such further actions as may be reasonably necessary to
effectuate, carry out and comply with all of its obligations under this
Agreement. Without limiting the generality of the foregoing, none of the parties
hereto shall enter into any agreement or arrangement (or alter, amend or
terminate any existing agreement or arrangement) or transaction if such action
would materially impair or materially interfere with the ability of any party to
effectuate, carry out and comply with all of the terms of this Agreement.
SECTION 6. SPECIFIC PERFORMANCE
PCI acknowledges and agrees that Acquiror would be irreparably damaged in
the event any of the provisions of this Agreement were not performed by PCI in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that Acquiror shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof and thereof in any court of
the United States or any state hereof having jurisdiction, in addition to any
other remedy to which Acquiror may be entitled at law or equity. PCI hereby
waives any objection to the imposition of such relief or to the posting of a
bond in connection therewith.
SECTION 7. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE PRINCIPLE OF
CONFLICTS OF LAW.
SECTION 8. PARTIES IN INTEREST
This Agreement shall be binding upon PCI and its successors and assigns.
Subject to the preceding sentence hereof, this Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person or persons any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
SECTION 9. AMENDMENT
This Agreement shall not be amended, altered or modified except by an
instrument in writing duly executed and delivered on behalf of each of the
parties hereto.
SECTION 10. NOTICES
All notices required to be given hereunder shall be deemed given if
mailed, first class, postage prepaid, to the respective party at its address as
set out in the following:
If to PCI:
Palmer Communications Incorporated
1535 Linden Street
Suite 201
Des Moines, Iowa 50309
Attention: Gordon McCollum,
Tax Manager
Telecopy No.: (515) 246-8584
<PAGE> 86
If to Acquiror:
Price Communications Corporation
45 Rockefeller Plaza
Suite 3200
New York, New York 10020
Attention: Robert Price
Telecopy No.: (212) 397-3755
With a copy (which shall not constitute notice) to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036-8299
Attention: Peter G. Samuels, Esq.
Telecopy No.: (212) 969-2900
SECTION 11. ENTIRE AGREEMENT; ASSIGNMENT
This Agreement (a) constitutes the entire agreement between the parties
hereby pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties and (b) shall not be assigned by operation of law or
otherwise, except that this Agreement shall be binding upon PCI and its
successors and assigns.
SECTION 12. HEADINGS
Section headings are included solely for convenience and are not
considered to be part of this Agreement and are not intended to be an accurate
description of the contents thereof.
SECTION 13. COUNTERPARTS
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement, and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
SECTION 14. TERMINATION
This Agreement and the Option hereunder shall terminate on the earlier to
occur of (a) the date on which the Merger is consummated or (b) the date on
which the Merger Agreement is terminated; provided, however, that the provisions
of Sections 1 and 3 hereof shall survive the termination of this Agreement under
clause (b) for the three (3) month period specified in Section 3(b) hereof if
Acquiror shall have the right to exercise the Option as of the date of such
termination; provided, further, however, that nothing herein shall relieve any
party for any breach of this Agreement if this Agreement is terminated pursuant
to clause (b) above.
<PAGE> 87
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Voting Agreement, or have caused this Voting Agreement to be duly executed
and delivered on their behalf as of the date first above written.
PRICE COMMUNICATIONS CORPORATION
By: /s/ ROBERT PRICE
----------------------------------
Name: Robert Price
---------------------------
Title: President
---------------------------
PALMER COMMUNICATIONS INCORPORATED
By: /s/ GORDON MCCOLLUM
----------------------------------
Name: Gordon McCollum
---------------------------
Title: Vice-President
---------------------------
<PAGE> 88
APPENDIX D
Section 262 of 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 sec. 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of his shares of stock
under the circumstances described in subsections (b) and (c) of this section. As
used in this section, the word "stockholder" means a holder of record of stock
in a stock corporation and also a member of record of a nonstock corporation;
the words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class
or series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to sec. 251 (other than a merger effected pursuant to
subsection (g) of Section 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to sec.sec.
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this paragraph;
or
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.
<PAGE> 89
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under sec. 253 of this title is not owned
by the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 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 twenty 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 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
<PAGE> 90
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 his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service
of a copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the Register
in Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the
<PAGE> 91
proceeding. Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
of Chancery, if such is required, may participate fully in all proceedings until
it is finally determined that he is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of 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 his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
<PAGE> 92
APPENDIX E
Price Communications' Report on Form 10-K for the Fiscal Year Ended December 31,
1996
<PAGE> 93
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-8309.
PRICE COMMUNICATIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
NEW YORK 13-2991700
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
45 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10020
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 757-5600
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- - - - --------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCK, PAR VALUE $.01 PER SHARE AMERICAN STOCK EXCHANGE
BOSTON STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12 CHICAGO STOCK EXCHANGE
(g) OF THE ACT: NONE. PACIFIC STOCK EXCHANGE
</TABLE>
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under its Plan
of Reorganization as confirmed by the court.
Yes X No _
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to the
filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to the Form 10-K. [X]
AGGREGATE MARKET VALUE OF THE VOTING STOCK
HELD BY NON-AFFILIATES OF THE COMPANY
Aggregate market value of the Common Stock held by non-affiliates of the
Company, based on the last sale price on the American Stock Exchange ("AMEX") on
February 21, 1997 ($9 as reported in the Wall Street Journal): approximately
$39.7 million.
The number of shares outstanding of the Company's common stock as of
February 19, 1997 was 7,207,114.
================================================================================
<PAGE> 94
PART I
ITEM 1. BUSINESS.
GENERAL
The Company has historically been a nationwide communications company.
Until consummation of their sale in March and February 1996, the Company owned
an ABC affiliate, WHTM-TV (which was acquired by the Company during 1994),
serving Harrisburg/Lancaster/Lebanon/York, Pennsylvania and three NBC affiliated
television stations, KSNF-TV, serving Joplin, Missouri/ Pittsburg, Kansas;
KJAC-TV, serving Beaumont/Port Arthur, Texas; and KFDX-TV, serving Wichita
Falls, Texas/Lawton, Oklahoma (see "Recent Developments"), respectively. Prior
to 1995 the Company owned a number of television, radio, newspaper and other
media and related properties which were disposed of pursuant to the Company's
long-standing policy of buying and selling media properties at times deemed
advantageous by the Company's Board of Directors. The Company intends to
continue to investigate and pursue potential media and other acquisitions such
as television and radio properties and, possibly, outdoor advertising and
newspapers.
The Company's business strategy is to acquire communications properties at
prices it considers attractive, finance such properties on terms satisfactory to
it, manage such properties in accordance with its operating strategy and dispose
of them if and when the Company determines such disposition to be in its best
interest. See "Recent Developments" regarding sales of properties since the
beginning of 1995. For the foregoing reasons, the results of the Company's
historical operations are not comparable to or indicative of results in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The Company was organized in New York in 1979 and began active operations
in 1981. Its principal executive offices are located at 45 Rockefeller Plaza,
New York, New York 10020, and its telephone number is (212) 757-5600. References
to the "Company" or "Price" in this report include Price Communications
Corporation and its subsidiaries, unless the context otherwise indicates.
RECENT DEVELOPMENTS
On March 1, 1996, the Company sold substantially all of the assets, except
cash but including accounts receivable together with certain liabilities of its
ABC affiliate serving the Harrisburg-York-Lebanon-Lancaster, Pennsylvania
television market for approximately $115 million in cash to Allbritton
Communications Company. The Company recognized a pre-tax gain of approximately
$65.6 million from this transaction.
On February 2, 1996, the Company sold substantially all of the assets,
except cash and accounts receivable, together with certain liabilities, of its
three NBC affiliates, KJAC-TV, Beaumont/Port Arthur, Texas; KFDX-TV, Wichita
Falls, Texas/Lawton, Oklahoma and KSNF-TV, Joplin, Missouri/Pittsburg, Kansas
for approximately $40.7 million in cash. The stations were sold to US Broadcast
Group, a newly organized acquirer of television properties. The Company
recognized a pre-tax gain of approximately $29.9 million from this transaction.
Prior to 1995, the Company had written off its investment in Fairmont
Communications Corporation ("Fairmont"), with the result that the Company's
carrying value in such investment was zero. During 1994, the Company entered
into a settlement agreement with the various parties to the Fairmont bankruptcy
proceedings although the exact amount was uncertain until 1995. The Company
received during 1995 and 1996 cash payments totaling approximately $7.9 million
and $62.5 thousand respectively, as a result of sales of properties by Fairmont.
The Company has significant liquid assets on hand to invest in
communications properties and possibly in other companies that its Board of
Directors decides to be in the best interests of its shareholders. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." In that connection, during
December, 1995, the Company invested approximately $8.4 million in warrants to
acquire approximately 1.8 million
I-1
<PAGE> 95
shares of Class B Common Stock of PriCellular Corporation ("PriCellular"), a
publicly held cellular telephone company of which Mr. Price is President.
During 1996, the Company purchased a total of 1,726,250 shares of
PriCellular Class A Common Stock for approximately $13.1 million. The Company's
Board of Directors will continue to investigate investments for the Company that
it believes provide opportunities for significant returns to shareholders,
including possible additional investments in PriCellular.
Due to the developments described above, the Company's historical results
of operation should not be regarded as indicative of its future results.
ACQUISITION STRATEGY
The Company has significant funds available for acquisition and investment
purposes. See "Business -- Recent Developments." The Company continues to
actively review potential acquisitions and investments. Among the possible
acquisitions or investments which may be considered by the Company are: (i)
subject to the availability of such properties at prices deemed prudent by the
Company, making acquisitions of radio and television properties; (ii) exploring
related media activities, such as newspapers, outdoor advertising companies and
publishing enterprises; (iii) investing funds in media and media related
securities; (iv) making additional investments in PriCellular Corporation either
through the purchase of PriCellular securities or a business combination with
PriCellular; and (v) other acquisition and investment opportunities which may
present themselves from time to time.
To finance its acquisitions and to provide funds for other purposes, the
Company may consider using a variety of sources in addition to its cash on hand,
including borrowings from banks and other institutional lenders, the proceeds of
debt sold to the public, seller financing, convertible preferred stock and
common stock issued by the Company or its subsidiaries. Historically, the
Company often acquired properties through newly organized subsidiaries, based on
the credit of the properties being acquired or by borrowing or issuing
securities at the parent level.
FEDERAL REGULATION OF BROADCASTING
Television and radio broadcasting (as well as some other potential
communications investments of the Company) are subject to the jurisdiction of
the FCC under the Communications Act of 1934, as amended ("Communications Act").
On February 8, 1996, President Clinton signed into law the Telecommunications
Act of 1996 (the "New Act"), which amends substantially the Communications Act.
The Communications Act, among other things, prohibits the assignment of a
broadcast license or the transfer of control of a corporation holding a license
without the prior approval of the FCC. Because many provisions of the New Act
require regulatory actions by the FCC that have not yet occurred, the Company
cannot predict the effect of any such new legislation or amendments on the
Company. The businesses in which the Company may engage in the future may be
subject to a greater or lesser degree of government regulation depending on the
nature of such businesses.
EMPLOYEES
As of December 31, 1996, the Company employed 4 full time persons at its
corporate headquarters in New York.
ITEM 2. PROPERTIES.
The Company leases office space for its headquarters in New York City. (See
Note 15 of the Notes to Consolidated Financial Statements for information on
minimum lease payments of the Company and its subsidiaries for the next five
years.)
ITEM 3. LEGAL PROCEEDINGS.
None.
I-2
<PAGE> 96
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
a) Market for Common Stock
The Company's Common Stock is listed for trading on the American Stock
Exchange ("AMEX") under the ticker symbol "PR". The range of high and low last
sale prices for the Company's Common Stock on the AMEX as adjusted to reflect
its April, 1995 5 for 4 stock split, and rounded to the nearest eighth for each
of the four quarters of 1996 and 1995, as reported by the AMEX was:
<TABLE>
<CAPTION>
1996 1995
------------- --------------
QUARTER HIGH LOW HIGH LOW
----------------------------------------------------- ---- ---- ---- -----
<S> <C> <C> <C> <C>
First................................................ 8 5/8 7 15/16 6 1/4 4 7/8
Second............................................... 9 3/16 7 7/8 7 11/16 5 5/16
Third................................................ 8 3/8 7 1/4 9 6 7/8
Fourth............................................... 7 15/16 6 7/8 8 3/4 7 1/2
</TABLE>
The high and low last sale prices for the Company's Common Stock on the
AMEX for February 21, 1997 as reported by the AMEX were $9 and $8 1/2,
respectively. The Company's Common Stock has been afforded unlisted trading
privileges on the Pacific Stock Exchange under the ticker symbol "PR.P", on the
Chicago Stock Exchange under the ticker symbol "PR.M" and on the Boston Stock
Exchange under the ticker symbol "PR.B".
b) Holders
On January 31, 1997, there were approximately 410 holders of record of the
Company's Common Stock. The Company estimates that brokerage firms hold Common
Stock in street name for approximately 1,700 persons.
c) Dividends
The Company, to date, has paid no cash dividends on its Common Stock. The
Board of Directors will determine future dividend policy based on the Company's
earnings, financial condition, capital requirements and other circumstances. It
is not anticipated that dividends will be paid on its Common Stock in the
foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth certain selected consolidated financial data
with respect to the Company for each of the five years in the period ended
December 31, 1996, derived from audited consolidated financial statements of the
Company and Notes thereto. On December 30, 1992, the Company's consensual Plan
of Reorganization became effective. A vertical black line has been placed to
separate pre-organization consolidated operating statement items from the
post-reorganization consolidated operating statement items since they are not
prepared on a comparable basis.
I-3
<PAGE> 97
CONSOLIDATED OPERATING STATEMENT ITEMS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31(2)
-----------------------------------------------------
PREDECESSOR
REORGANIZED COMPANY COMPANY
--------------------------------------- -----------
1996 1995 1994(1) 1993 1992
-------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Revenue............................... $ 2,962 $29,155 $ 24,039 $22,790 $ 53,957
Operating Expenses........................ 2,233 16,685 14,962 16,335 39,567
Corporate Expenses........................ 2,373 2,687 4,475 3,649 4,973
Other (Income) Expense -- Net............. (98,372) (7,280) (16,245) 539 (35)
Interest Expense.......................... 216 2,099 813 1,485 17,768
Amortization of Debt Discount and Deferred
Debt Expense............................ -- 460 646 766 1,004
Depreciation and Amortization............. 467 3,459 3,312 2,343 4,873
Unrealized Noncash (Recovery) Loss on
Marketable Securities(3)................ 794 166 -- 146 (146)
Share of Loss of Partially Owned
Companies............................... -- -- -- 1,118 2,934
-------- ------- -------- ------- ---------
Income (Loss) Before Reorganization Items,
Income Taxes, and Extraordinary Items... 95,250 10,879 16,076 (3,591) (16,981)
Reorganization Items...................... -- -- -- -- (5,983)
-------- ------- -------- ------- ---------
Income (Loss) Before Income Taxes and
Extraordinary Items..................... 95,250 10,879 16,076 (3,591) (22,964)
Income Tax (Expense) Benefits............. (24,583) 247 (1,652) (124) (499)
-------- ------- -------- ------- ---------
Income (Loss) Before Extraordinary Items.. 70,667 11,126 14,424 (3,715) (23,463)
Extraordinary Items (Net of Income Taxes):
Gain on Early Extinguishments of Debt... -- -- -- 2,010 --
Gain on Forgiveness of Debt and Partial
Sale of Subsidiary................... -- -- -- -- 312,678
-------- ------- -------- ------- ---------
Net Income (Loss)....................... $ 70,667 $11,126 $ 14,424 $(1,705) $ 289,215
======== ======= ======== ======= =========
Per Share Amounts (4):
Income (Loss) Before Extraordinary
Items................................ $ 7.45 $ 1.06 $ 1.15 $ (0.25)
Extraordinary Items..................... -- -- -- 0.14
-------- ------- -------- -------
Net Income (Loss)....................... $ 7.45 $ 1.06 $ 1.15 $ (0.11)
======== ======= ======== =======
</TABLE>
- - - - ---------------
(1) Reflects results of operations of WHTM-TV since its acquisition during
September 1994 through December 1994 and the results of the properties
disposed of through their respective dates of sale. See notes to 3 and 4 to
Consolidated Financial Statements.
(2) Due to the dispositions discussed under "Business -- Recent Developments,"
the acquisition and dispositions during 1994, the borrowings incurred to
effect such acquisition, the consummation of the Plan of Reorganization and
the adoption of Fresh Start Reporting, the Company's historical results
should not be regarded as indicative of its future results.
(3) See Note 2 of Notes to Consolidated Financial Statements.
(4) Per share amounts for the Predecessor Company are neither comparable nor
meaningful due to the forgiveness of debt, partial sale of subsidiary,
issuance of new common stock and adoption of Fresh Start Reporting. All per
share amounts prior to 1995 have been restated to reflect the April, 1995 5
for 4 stock split.
I-4
<PAGE> 98
CONSOLIDATED BALANCE SHEET ITEMS
(IN THOUSANDS, INCLUDING NOTES)
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-------------------------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total Current Assets................... $ 96,605 $10,047 $ 9,093 $ 8,925 $28,494
Total Assets........................... 115,888 95,985 90,852 37,272 74,327
Total Current Liabilities(1)........... 7,109 36,309 9,076 3,292 11,373
Long-Term Debt(2)...................... -- -- 21,310 3,200 22,100
Shareholders' Equity................... 108,779 40,876 39,079 30,705 40,646
</TABLE>
- - - - ---------------
(1) Includes $28,000 of a note payable to Bank of Montreal which was repaid upon
the sale of three television stations on February 2, 1996. See
"Business -- Recent Developments."
(2) Net of unamortized original issue discount of $8,705 as of December 31,
1992.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT
OF OPERATIONS
The Company reorganized and emerged from bankruptcy proceedings on December
30, 1992 and adopted Fresh Start Reporting in accordance with the guidelines
established by the American Institute of Certified Public Accountants in
Statement of Position 90-7. Under Fresh Start Reporting, assets and liabilities
were recorded at their estimated fair market value and the historical deficit
was eliminated.
Due to the acquisition and dispositions discussed under
"Business -- General" and "Recent Developments," the borrowings incurred to
effect the acquisition, the retirement of the Company's Secured Notes, the
consummation of the Plan of Reorganization and adoption of Fresh Start
Accounting, the Company's historical results of operations should not be
regarded as indicative of its future results. The following discussion should be
read in conjunction with the Consolidated Financial Statements and the Notes
thereto.
RESULTS OF OPERATIONS -- GENERAL
The comparability of results for future periods will be affected by
dispositions during 1996, (see Notes 3 and 4 of Notes to Consolidated Financial
Statements) and by the nature and timing of any future acquisitions or
dispositions. The Company currently has disposed of all of its operating
properties. Consequently, the Company will have no operating revenues and the
Company's future revenues will be derived from the investment of its funds and
from operating businesses which may be acquired by the Company. Future
acquisitions could substantially increase the Company's operating expenses,
depreciation and amortization charges and, if additional financing is required,
interest expense, as well as increasing revenues. For these reasons, the results
of the Company's historical operations may not be comparable from period to
period or indicative of results in the future.
1996 COMPARED TO 1995
The Company's net revenue, operating expenses, depreciation and
amortization, and interest expense for the year ended December 31, 1996 are not
comparable to the year ended December 31, 1995 due to the disposition of all the
Company's television properties during the first quarter of 1996 and the
subsequent retirement of all the Company's long-term debt. During 1996, revenue
decreased to only $3.5 million from $34.4 million while for the same periods
operating expenses decreased to $2.2 million from approximately $16.7 million.
Interest expense and depreciation and amortization expense decreased to $217,000
and $470,000 from $2.1 million and $3.5 million, respectively. All of the
above-mentioned items decreased as a result of the sales of all the Company's
operating properties. The sale of such properties resulted in approximately a
$95.0
I-5
<PAGE> 99
million pretax gain which was the primary reason for the Company's net income of
$70.7 million for the year ended December 31, 1996 compared to $11.1 million in
1995.
The Company had net income per share of $7.45 as opposed to $1.06 for the
year ended December 31, 1995.
1995 COMPARED TO 1994
The Company's net revenue, operating expenses, depreciation and
amortization, and interest expense for the year ended December 31, 1995 are not
comparable to the year ended December 31, 1994 due to the acquisition of WHTM-TV
and the borrowings under the Amended Line of Credit to effect such acquisition,
and the dispositions of the Company's radio properties and other assets (see
Notes 3 and 4 of Notes to Consolidated Financial Statements). During 1995, net
revenue increased by approximately 21% to $29.2 million from $24.0 million. This
increase was primarily due to the acquisition of WHTM-TV the results of which
were included in the Company's results for a full year as opposed to only three
months in 1994. Operating expenses of the Company increased overall to $16.7
million in 1995 from $15.0 million in 1994 due to the acquisition of WHTM-TV
which was owned for the full year. Depreciation and amortization expense rose to
$3.5 million in 1995 from $3.3 million in 1994 primarily as a result of the
amortization of intangibles associated with the acquisition of WHTM-TV, offset
by a reduction in the expense due to properties sold in 1994.
The Company recognized net income of approximately $11.1 million in 1995,
as compared to $14.4 million in 1994 primarily as a result of the recovery on
the Fairmont Notes of approximately $7.9 million in 1995. Net income in 1994 was
$14.4 million primarily due to the net gains on the sale of its radio properties
of $17.2 million. Additionally, interest expense was $2.1 million in 1995 as
opposed to $.8 million in 1994 as a result of the acquisition of WHTM-TV in
September 1994 and the related borrowings under the Amended Line of Credit.
The Company had net income per share of $1.06 in 1995, as opposed to $1.15
in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company had approximately $83.4 million in cash and cash equivalents
and net working capital of $89.8 million at December 31, 1996.
If the Company's acquisition strategy (see "Business -- Acquisition
Strategy") is successful the Company may require substantial capital to finance
it. The Company has significant liquid assets on hand for such purposes.
Additionally, the Company may use a variety of sources including the proceeds of
debt sold to the public, additional borrowings from banks and other
institutional leaders, seller financing, convertible preferred stock and common
stock issued at the parent company or subsidiary level. There can be no
assurance that the Company will be successful in obtaining funds from those
sources.
The Company's sources of funds to serve its debt and meet its other
obligations historically have been provided by its liquid assets, cash flow from
its operating and investment activities, proceeds from the sale of properties
and proceeds from loans and financings.
In March, 1995, the Company's Board of Directors authorized the repurchase
by the Company of up to 1.3 million shares of its Common Stock in addition to
previous authorizations. The Company is authorized to make such purchases from
time to time in the market or in privately negotiated transactions. During the
year ended December 31, 1996, the Company repurchased approximately 644,000
shares pursuant to that authorization.
During the months of January and February, 1997, the Company repurchased
approximately 1.9 million shares for a total of approximately $18.1 million,
including a block of approximately 1,000,000 shares from an institutional
investor in a private transaction for approximately
I-6
<PAGE> 100
$10.6 million. During February, 1997, the Company's Board of Directors
authorized the purchase of up to 2 million additional shares of the Company's
Common Stock in addition to previous purchases.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Price Communications Corporation and Subsidiaries Consolidated Financial
Statements are set forth on the following pages of this Part II.
------------------------
INDEX TO FINANCIAL STATEMENTS
------------------------
PRICE COMMUNICATIONS CORPORATION SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Auditors' Reports..................................................................... F-1
Consolidated Balance Sheets at December 31, 1996 and 1995............................. F-3
Consolidated Statements of Operations for Years ended December 31, 1996, 1995 and
1994................................................................................ F-4
Consolidated Statements of Cash Flows for Years ended December 31, 1996, 1995 and
1994................................................................................ F-5
Consolidated Statements of Shareholders' Equity for Years ended December 31, 1996,
1995 and 1994....................................................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
<TABLE>
<S> <C>
Not applicable.
Schedule I -- Condensed Financial Information of Registrant -- as of December 31, 1996
and for the years ended December 31, 1995 and 1994.................................. F-19
Schedule II -- Valuation and Qualifications Accounts, for the years ended December 31,
1996, 1995 and 1994................................................................. F-22
</TABLE>
I-7
<PAGE> 101
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Price Communications Corporation:
We have audited the accompanying consolidated balance sheets of Price
Communications Corporation and subsidiaries (a New York corporation) as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, shareholders' equity and cash flows for the years then ended. These
consolidated financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Price Communications
Corporation and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the accompanying
index are presented for purposes of complying with the Securities and Exchange
Commissions rules and are not a required part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
New York, New York
February 24, 1997
F-1
<PAGE> 102
[KPMG PEAT MARWICK LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Price Communications Corporation:
We have audited the accompanying consolidated statements of operations, cash
flows, and shareholders' equity of Price Communications Corporation and
subsidiaries for the year ended December 31, 1994. In connection with our audit
of the consolidated financial statements, we have also audited the related
financial statement schedules as listed in Part IV, Item 14(a). These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Price Communications Corporation and subsidiaries for the year ended December
31, 1994 in conformity with generally accepted accounting principles. Also in
our opinion, the related financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole present
fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
--------------------------------------
KPMG Peat Marwick LLP
New York, New York
January 20, 1995
F-2
<PAGE> 103
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................... $ 83,356,748 $ 1,206,557
Investment securities (Note 2):
Trading securities........................................... 4,045,628 237,975
Available-for-sale securities................................ 8,694,966 --
Accounts receivable, net of allowance for doubtful accounts
of $473,579 in 1996 and $294,554 in 1995.................. 488,882 6,096,446
Film broadcast rights........................................ -- 1,764,468
Prepaid expenses and other current assets.................... 18,672 741,307
------------ -----------
Total current assets...................................... 96,604,896 10,046,753
------------ -----------
Property and equipment, at cost less accumulated depreciation
(Note 7)..................................................... 159,000 11,308,808
Broadcast licenses and other intangibles, less accumulated
amortization of $2,559,354 in 1995 (Note 2).................. -- 65,434,705
Film broadcast rights.......................................... -- 231,225
Long-term investments (Note 6)................................. 18,204,429 8,350,000
Deferred tax asset (Note 10)................................... 350,000 --
Notes receivable (Note 5)...................................... 540,000 540,000
Other assets................................................... 29,500 73,907
------------ -----------
Total assets......................................... 115,887,825 $95,985,398
------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses........................ $ 2,755,497 $ 3,197,471
Accrued interest............................................. -- 510,119
Current portion of long-term debt (Note 9)................... -- 28,000,000
Deferred tax liability (Note 10)............................. 1,042,862 --
Other current liabilities (Note 8)........................... 3,310,774 4,601,409
------------ -----------
Total current liabilities................................. 7,109,133 36,308,999
------------ -----------
Deferred tax effect of basis difference arising on acquisition
(Note 10).................................................... -- 17,971,028
Other liabilities (Note 8)..................................... -- 829,689
Commitments and contingencies (Note 15)
Shareholders' equity (Notes 13 and 14):
Preferred Stock, par value $.01 per share; authorized
20,000,000, no shares outstanding......................... -- --
Common Stock, par value $.01 per share; authorized 40,000,000
shares; outstanding 9,038,808 shares in 1996 and 9,579,842
shares in 1995............................................ 90,388 95,798
Additional paid-in capital................................... 12,240,133 16,935,009
Unrealized gain on marketable equity securities, net of tax
effect (Note 2)........................................... 1,936,743 --
Retained earnings............................................ 94,511,428 23,844,875
------------ -----------
Total shareholders' equity................................ 108,778,692 40,875,682
------------ -----------
Total liabilities and shareholders' equity........... $115,887,825 $95,985,398
============ ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-3
<PAGE> 104
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenue.......................................... $ 3,491,441 $34,377,543 $28,053,341
Agency and representatives' commissions.......... 529,577 5,222,273 4,014,209
------------ ------------ ------------
Net revenue............................ 2,961,864 29,155,270 24,039,132
------------ ------------ ------------
Operating expenses............................... 2,233,347 16,684,608 14,961,399
Corporate expenses............................... 2,373,045 2,687,064 4,474,787
Other income, net (Notes 4, 5 and 11)............ (98,372,359) (7,280,215) (16,244,568)
Interest expense................................. 216,389 2,099,365 813,493
Amortization of debt discount and deferred debt
expense........................................ -- 460,000 645,835
Depreciation and amortization.................... 467,413 3,459,320 3,312,049
Realized loss on marketable securities, net...... 793,641 166,211 --
------------ ------------ ------------
Income before income taxes....................... 95,250,388 10,878,917 16,076,137
Income tax (expense) benefit (Note 10)........... (24,583,835) 247,000 (1,652,588)
------------ ------------ ------------
Net income............................. $70,666,553 $11,125,917 $14,423,549
============ ============ ============
Net income per share (Note 2).................... $ 7.45 $ 1.06 $ 1.15
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-4
<PAGE> 105
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income................................................ $ 70,666,553 $ 11,125,917 $ 14,423,549
------------ ------------ ------------
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Items not affecting cash
Amortization of debt discount and deferred debt
expense............................................ -- 100,000 645,835
Depreciation and amortization......................... 467,413 3,459,320 3,312,049
Loss on disposition of equipment...................... -- -- 47,529
Loss on mark-down of long-term investment, net of tax
effect............................................. 650,000 -- --
Change in assets and liabilities, net of effects of
reorganization-
Decrease (increase) in net accounts receivable........ 3,191,494 (1,022,996) 307,979
Decrease in prepaid expenses and other assets......... 392,243 83,180 1,581,117
Decrease in film broadcast rights..................... 333,800 1,862,277 536,910
Decrease in goodwill.................................. -- 295,477 --
(Decrease) increase in accounts payable and accrued
expenses........................................... (936,802) (405,263) 1,563,455
(Decrease) increase in accrued interest payable, net
of forgiveness..................................... (510,219) 510,219 (1,023,932)
Increase (decrease) in other liabilities.............. 402,825 (2,267,942) 1,013,375
Reclassification of transactions to investing and
financing activities-
Gain on sale of properties, net....................... (94,998,417) -- (17,219,231)
Loss on purchase of common stock...................... -- 1,185,662 --
Gain on sale of trading securities.................... (2,121,897) -- --
Loss on sale of trading securities.................... 2,915,538 166,211 --
Purchase of trading securities, net................... (4,601,295) -- --
(Recovery) reserve on notes receivable, net........... -- (7,884,884) 737,500
------------ ------------ ------------
Total adjustments.................................. (94,815,217) (3,918,839) (8,497,414)
------------ ------------ ------------
Net cash (used in) provided by operating
activities....................................... (24,148,664) 7,207,078 5,926,135
------------ ------------ ------------
Cash Flows from Investing Activities:
Sale of businesses and equipment, net of cash retained.... 155,706,330 -- 32,451,283
Investment in businesses, net of cash acquired............ -- -- (50,270,793)
Capital expenditures...................................... (137,399) (1,469,505) (751,965)
Purchase of available-for-sale securities and long-term
investments............................................. (16,569,790) (10,567,300) --
Proceeds from sale of marketable securities............... -- 1,813,115 --
Proceeds from (disbursements of) notes receivable, net.... -- 8,202,384 (390,000)
------------ ------------ ------------
Net cash provided by (used in) investing
activities....................................... 138,999,141 (2,021,306) (18,961,475)
------------ ------------ ------------
Cash Flows from Financing Activities:
Short-term borrowings..................................... -- 1,000,000 --
Payment of short-term borrowings.......................... -- (1,000,000) --
Repurchases and payments of long-term debt................ (28,000,000) -- --
Payment of line of credit origination fee................. -- (100,000) (475,000)
Borrowings under line of credit agreements................ -- 6,360,000 45,000,000
Repayments under line of credit agreements................ -- (860,000) (25,700,000)
Repurchase of Company common stock........................ (5,102,742) (10,659,200) (6,271,064)
Stock options exercised................................... 402,456 143,975 222,312
------------ ------------ ------------
Net cash (used in) provided by financing
activities....................................... (32,700,286) (5,115,225) 12,776,248
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents.... 82,150,191 70,547 (259,092)
Cash and Cash Equivalents, beginning of year................ 1,206,557 1,136,010 1,395,102
------------ ------------ ------------
Cash and Cash Equivalents, end of year...................... $ 83,356,748 $ 1,206,557 $ 1,136,010
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-5
<PAGE> 106
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED GAIN
ON MARKETABLE
COMMON STOCK EQUITY
--------------------- ADDITIONAL SECURITIES,
NUMBER PAID-IN NET OF RETAINED
OF SHARES VALUE CAPITAL TAX EFFECT EARNINGS TOTAL
---------- -------- ----------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993.................. 12,354,646 $123,546 $32,285,576 $ -- $(1,704,591) $ 30,704,531
Net Income............ -- -- -- -- 14,423,549 14,423,549
Purchase and
retirement of common
stock............... (1,245,115) (12,451) (6,258,613) -- -- (6,271,064)
Stock options
exercised........... 104,079 1,041 221,271 -- -- 222,312
---------- ----------- ----------- ----------- ------------
Balance, December 31,
1994.................. 11,213,610 112,136 26,248,234 -- 12,718,958 39,079,328
Net income............ -- -- -- -- 11,125,917 11,125,917
Purchase and
retirement of common
stock............... (1,691,028) (16,910) (9,456,628) -- -- (9,473,538)
Stock options
exercised........... 57,260 572 143,403 -- -- 143,975
---------- ----------- ----------- ----------- ------------
Balance, December 31,
1995.................. 9,579,842 95,798 16,935,009 -- 23,844,875 40,875,682
Net Income............ -- -- -- -- 70,666,553 70,666,553
Unrealized gain on
marketable equity
securities, net of
tax effect.......... -- -- -- 1,936,743 -- 1,936,743
Purchase and
retirement of common
stock............... (643,700) (6,437) (5,096,305) -- -- (5,102,742)
Stock options
exercised........... 102,666 1,027 401,429 -- -- 402,456
---------- ----------- ----------- ----------- ------------
Balance, December 31,
1996.................. 9,038,808 $ 90,388 $12,240,133 $ 1,936,743 $94,511,428 $108,778,692
---------- ----------- ----------- ----------- ------------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-6
<PAGE> 107
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. OPERATIONS
Price Communications Corporation ("Price" or the "Company") is a nationwide
communications company. Until consummation of their sale in March and February
1996, the Company owned an ABC affiliate, WHTM-TV (which was acquired by the
Company during 1994) (See Note 3), serving Harrisburg/Lancaster/Lebanon/York,
Pennsylvania; and three NBC affiliated television stations, KSNF-TV, serving
Joplin, Missouri/Pittsburg, Kansas; KJAC-TV, serving Beaumont/Port Arthur,
Texas; and KFDX-TV, serving Wichita Falls, Texas/Lawton, Oklahoma (see Note 4),
respectively. Prior to 1995 the Company owned a number of television, radio,
newspaper and other media and related properties which were disposed of pursuant
to the Company's long-standing policy of buying and selling media properties at
times deemed advantageous by the Company's Board of Directors. The Company
intends to continue to investigate and pursue potential media and other
acquisitions such as television and radio properties and, possibly, outdoor
advertising and newspaper properties.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Price and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated in the consolidated financial statements.
Certain prior year amounts have been reclassified to conform with current
year presentation.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments, including
Treasury bills, purchased with maturities of three months or less at the time of
purchase to be cash equivalents.
Investment Securities
The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS No.
115") effective January 1, 1994. At December 31, 1996, the Company's Investment
Securities were in marketable equity securities, and classified as "Trading
Securities" as well as "Available-for-Sale Securities" under the provisions of
SFAS No. 115. At December 31, 1995, the Company's Investment Securities were in
marketable equity securities and classified as Trading Securities. Unrealized
holding gains and losses for Available-for-Sale Securities are excluded from
earnings and reported, net of taxes, as a separate component of shareholders'
equity. Net unrealized holding gains and losses for Trading Securities are
included in net income.
Trading Securities are carried at fair value which approximates cost.
Available-for-Sale Securities are shown at fair value, which is based on quoted
market prices for these investments.
F-7
<PAGE> 108
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property and Equipment
Property and equipment are recorded at cost. Depreciation and amortization
are computed using the straight-line method over estimated useful lives, as
follows:
Buildings -- 15 to 25 years
Broadcasting equipment -- 10 to 12 years
Leasehold improvements -- the life of the underlying lease
Furniture and fixtures -- 3 to 10 years
Transportation equipment -- 3 years
Broadcast Licenses and Other Intangibles
Excess of purchase price over the fair value of net assets acquired
includes FCC licenses, station call letters, and goodwill. These assets are
integral determinants of a communications property's economic value and have
long and productive lives. The Company amortized such assets over a 40-year life
commencing from the original date of acquisition.
Deferred expenses associated with debt instruments were amortized under the
straight-line method over the respective life of such debt instruments. Debt
discounts were amortized using the effective interest method.
Film Broadcast Rights
The cost of film broadcast rights is stated at the lower of cost or
estimated net realizable value. The total cost of the rights is recorded as an
asset and a liability when the program becomes available for broadcast. The cost
of film broadcast rights is charged to operations on the basis of the estimated
number of showings or, if unlimited showings are permitted, over the terms of
the broadcast license agreements. The current portion of film broadcast rights
represent those rights that will be amortized in the succeeding year.
Amortization of film broadcast rights included in operating expenses amounted to
approximately $333,800, $1,831,300, and $1,077,000 for the years ended December
31, 1996, 1995, and 1994, respectively.
Revenue Recognition
Advertising revenue is recognized as income when the advertisements are
broadcast.
Revenue from barter transactions (advertising provided in exchange for
goods and services) is recognized as income when advertisements are broadcast,
and merchandise or services received are charged to expense when received or
used.
Credit Risk
The Company provides an allowance for doubtful accounts based on reviews of
its customers' accounts. Included in operating expenses is bad debt expense of
approximately $179,000, $84,000, and $319,000 for the years ended December 31,
1996, 1995, and 1994, respectively.
Per Share Data
Net income per share is based on net income for the period divided by the
weighted average number of shares of common stock and common stock equivalents
outstanding, which were approximately 9.5, 10.4, and 12.4 million shares for
1996, 1995, and 1994, respectively. All presentations of shares outstanding and
amounts for 1995 and 1994 have been restated to reflect the five-for-four common
stock split in April, 1995 (Note 13).
F-8
<PAGE> 109
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Fair Market Value of Stock Options
During 1996, Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation" ("SFAS 123") became effective. SFAS
123 requires all companies to change what they disclose about their employee
stock-based compensation plans. This statement requires that companies either
(1) record, as compensation expense, the fair market value, as defined, of stock
options issued to employees, or (2) if the company elects to not record the fair
market value of stock options granted as compensation expense, to disclose the
pro forma impact on net income and earnings per share as if such compensation
expense was recorded. The Company has elected to adopt the disclosure
requirements.
The impact of adopting these disclosure requirements was immaterial to the
Company in 1995 and 1996.
Income Taxes
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"). Under the asset and liability method of SFAS 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
3. ACQUISITION OF WHTM-TV
On September 16, 1994, the Company acquired all of the outstanding shares
of the corporation which owns all of the assets of WHTM-TV, the ABC affiliate
serving the Harrisburg-York-Lancaster-Lebanon, Pennsylvania television market
for approximately $47 million plus a working capital adjustment of approximately
$4 million. The acquisition was accounted for under the purchase method, and
accordingly, the operating results of WHTM-TV have been included in the
consolidated operating results since the date of acquisition. Funds for the
acquisition were provided by cash on hand and a credit facility from the Bank of
Montreal ("BMO") of $45 million (Note 9), which was reduced to $22.5 million
upon the sale of the Company's radio properties in West Palm Beach during
October of 1994 (Note 4). The acquisition resulted in intangible assets,
primarily broadcast licenses of approximately $44.2 million and goodwill of
approximately $18.6 million, both of which were being amortized over a forty
year period.
4. DISPOSITIONS
In February 1994, the Company sold its outdoor advertising business for a
total of $875,000 in cash and notes receivable (Note 5). This disposition
resulted in a pretax loss of $350,000.
In April 1994, the Company sold substantially all of the assets of its
radio properties, WWKB-AM and WKSE-FM in Buffalo, New York, for $5 million in
cash. The Company realized a pretax gain of approximately $3.2 million on this
transaction.
In May 1994, the Company sold all of the stock of Eimar Realty Corporation,
its then wholly owned subsidiary, which held a building in Nashville, Tennessee,
to TLM Corporation, a former subsidiary of the Company. The purchase price was
$815,000 including a note from the purchaser of $540,000 (Note 5). The Company's
pretax gain on the transaction was deminimis.
F-9
<PAGE> 110
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In October 1994, the Company sold substantially all of the assets, together
with certain liabilities of radio stations WBZT-AM and WIRK-FM, West Palm Beach,
Florida, for approximately $23 million in cash. The Company realized a pretax
gain of approximately $13.5 million on this transaction. The net proceeds were
used to retire $22.5 million under the BMO credit facility (Note 9).
In October 1994, the Company sold its building in Red Bank, New Jersey for
$1.7 million in cash. The Company realized a deminimis gain on the sale.
In November 1994, the Company sold substantially all of the assets of radio
stations WOWO-AM and WOWO-FM in Fort Wayne and Huntington, Indiana,
respectively, for $2.3 million in cash. The Company recognized a pretax gain on
the sale of approximately $.8 million.
On February 2, 1996, the Company sold substantially all of the assets,
except cash and accounts receivable, together with certain liabilities, of its
three NBC affiliates, for approximately $40.7 million in cash. Of the sale
proceeds, approximately $28.7 million was used to repay the principal and
interest due under the BMO term loan agreement. The Company recognized a pre-tax
gain of approximately $29.4 million.
On March 1, 1996, the Company sold substantially all of the assets except
cash and accounts receivable, together with certain liabilities of WHTM-TV, its
ABC affiliate serving the Harrisburg-Lancaster-Lebanon-York, Pennsylvania,
television market, for $115 million in cash to Allbritton Communications
Company. The Company recognized a pre-tax gain of approximately $65.6 million.
The gains and losses on the dispositions outlined above have been included
in other (income) expense, net on the Company's statement of operations.
5. NOTES RECEIVABLE
Investments in notes receivable include the following:
During 1996, the Company loaned $1,000,000 to the Hamilton Group LLC
("Hamilton") in the form of a Promissory Note bearing interest at the rate of 6%
and payable on December 31, 1999. The maturity date is extendible at the Maker's
option until December 31, 2001. A Director of the Company is a participant in
Hamilton.
In 1995 the Company received a $655,000 payment on a note receivable
originating from the sale of its outdoor advertising business in 1994. During
1994, the Company set up a reserve of $337,500 against this note receivable.
Since this note receivable was collected in full, the previously established
reserve was reversed and treated as income and included in other (income)
expense, net on the Company's consolidated statement of operations.
During 1994, in connection with the sale of Eimar Realty Corporation, the
Company received a note from the buyer, TLM Corporation (a former subsidiary of
the Company) (Note 4), in the amount of $540,000. The note bears interest at the
rate of 5% per annum, payable quarterly, with principal payable on May 20, 1998.
In connection with the sale in 1987 of seven radio stations to Fairmont
Communications Corporation ("Fairmont") for an aggregate sale price of $120
million, the Company loaned $50 million to Fairmont (the "Fairmont Notes") and
acquired a 27% equity interest in Fairmont. The Fairmont Notes were issued in
three series of 12 1/2% increasing rate subordinated notes due in
F-10
<PAGE> 111
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1992, extendible at Fairmont's option to 1994. Interest on the notes was payable
quarterly in cash or additional notes at Fairmont's election.
During 1992, Fairmont filed for voluntary relief under Chapter 11 of the
U.S. Bankruptcy Code. At that time the Company ceased to record additional notes
related to interest paid in kind since it was not entitled to interest after
that date under the Bankruptcy Code.
During 1993, the United States Bankruptcy Court for the Southern District
of New York confirmed the Chapter 11 Plan of Reorganization (the "Fairmont
Plan") for Fairmont and its subsidiaries. Essentially, the Fairmont Plan
provided for the orderly liquidation of the assets of Fairmont and its
subsidiaries, and the distribution of the proceeds derived therefrom according
to the relative priorities of the parties asserting interests therein. In 1996
and 1995, the Company received net cash payments totaling approximately $62.5
thousand and $7.9 million from the proceeds of the liquidation of Fairmont,
respectively. This amount has been treated as income and included in other
(income) expense, net on the Company's consolidated statement of operations.
6. INVESTMENT IN PARTIALLY OWNED COMPANIES
On December 21, 1995, the Company acquired warrants for $8,350,000 to
purchase 1,819,610 shares of PriCellular Corporation's ("PriCellular") Class B
Common Stock. The exercise price at December 31, 1996 was approximately $4.77
per share of Class B Common Stock, and escalates over the next three years to
$6.29. During 1996, the Company purchased 1,726,250 shares of PriCellular Class
A Common Stock for approximately $13.1 million.
The President of PriCellular is the President of the Company.
7. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1996 1995
-------- -----------
<S> <C> <C>
Land............................................... $ -- $ 685,000
Buildings.......................................... -- 2,403,409
Broadcasting equipment............................. -- 10,783,560
Leasehold improvements............................. 257,236 119,836
Furniture and fixtures............................. -- 551,332
Transportation equipment........................... -- 596,829
-------- -----------
257,236 15,139,966
Less -- Accumulated depreciation and
amortization..................................... (98,236) (3,831,158)
-------- -----------
Net property and equipment......................... $159,000 $11,308,808
======== ===========
</TABLE>
F-11
<PAGE> 112
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. OTHER LIABILITIES
Other liabilities consist of:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Liability for broadcast rights.................... $ -- $2,722,343
Income and franchise taxes payable................ 3,310,774 1,461,995
Other............................................. -- 1,246,760
---------- ----------
3,310,774 5,431,098
Less -- Amounts due currently..................... 3,310,774 4,601,409
---------- ----------
$ -- $ 829,689
========== ==========
</TABLE>
9. LONG-TERM DEBT
Long-term debt consists of the following notes payable by wholly-owned
subsidiaries of the Company at December 31, 1995:
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Atlantic Broadcasting Corporation, Federal Broadcasting
Corporation, Southeast Texas Broadcasting Corporation and
Tri-State Broadcasting Corporation:
Note payable to BMO under term loan agreement................ $28,000,000
-----------
Total debt........................................... 28,000,000
Less -- Amount due currently................................... 28,000,000
-----------
Total long-term debt................................. $ --
===========
</TABLE>
On December 12, 1995, the Company entered into an amended line of credit
agreement
("Credit Agreement") with The Bank of Montreal ("BMO"). The Credit Agreement
created a line of credit for $28 million. Borrowings under the Credit Agreement
were subject to base interest at the BMO base rate, as defined, plus a maximum
of .75% and were secured by the assets of the subsidiaries. Additionally, there
was a commitment fee of .5% on the unused portion of the Credit Agreement. On
December 31, 1995, the effective interest rate was 8.5%.
On February 2, 1996, the Company sold its three NBC affiliates and used a
portion of the proceeds to pay $28 million plus interest to BMO to terminate the
Credit Agreement.
F-12
<PAGE> 113
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. INCOME TAXES
Provision (benefit) for income taxes is approximately:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------
1996 1995 1994
----------- --------- ----------
<S> <C> <C> <C>
Current:
Federal........................... $13,673,000 $ -- $ 300,000
State and local................... 10,219,000 447,000 1,489,000
----------- --------- ----------
23,892,000 447,000 1,789,000
----------- --------- ----------
Deferred:
Federal........................... 692,000 (560,000) (97,000)
State and local................... -- (134,000) (39,000)
----------- --------- ----------
692,000 (694,000) (136,000)
----------- --------- ----------
Tax provision (benefit)............. $24,584,000 $(247,000) $1,653,000
=========== ========= ==========
</TABLE>
For the years ended December 31, 1996 and 1995, the provision for income
taxes differs from the amount computed by applying the federal income tax rate
(35%) because of the effect of the following items:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Tax at federal income tax
rate.......................... $ 33,338,000 $ 3,808,000 $ 5,627,000
State taxes, net of federal
income tax benefit............ 7,487,000 291,000 942,000
Benefits of utilization of
operating loss
carryforwards................. (33,729,000) (4,975,000) (5,120,000)
Amortization of goodwill and
other intangibles............. 117,000 217,000 309,000
Basis difference and Goodwill on
sold Properties............... 17,088,000 -- --
Other........................... 283,000 412,000 (105,000)
------------ ----------- -----------
$ 24,584,000 $ (247,000) $ 1,653,000
============ =========== ===========
</TABLE>
F-13
<PAGE> 114
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company had, as of December 31, 1996 and 1995, deferred tax assets of
$516,000 and $34,295,000 which were subject to a valuation allowance of
approximately $166,000 and $31,925,000, respectively. The allowance has been
recognized to offset the related tax asset due to the uncertainty of the
realization of benefit of such amount. These deferred tax assets and liabilities
consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1996 1995
---------- -----------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance for doubtful
accounts.................................................... $ 166,000 $ 100,000
Notes from and investment in partially owned companies......... -- --
Minimum tax credit carryforward................................ -- 642,000
Capital loss carryforwards..................................... -- 10,681,000
Net operating loss carryforwards............................... -- 22,406,000
Investment tax credit carryforwards............................ -- 100,000
Notes receivable, principally due to reserves.................. -- 136,000
Reserve on long-term investments............................... 350,000 --
Other.......................................................... -- 230,000
---------- -----------
516,000 34,295,000
---------- -----------
Deferred tax liabilities:........................................
Unrealized gain on available-for-sale securities times the
estimated tax rate of 35%................................... 1,043,000 --
Property and equipment, principally due to differences in
depreciation and the effect of Fresh Start Reporting........ -- 2,370,000
Intangible asset FCC license................................... -- 17,971,000
---------- -----------
$1,043,000 $20,341,000
========== ===========
</TABLE>
11. OTHER INCOME, NET
Other income, net, consists of:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------
1996 1995 1994
------------ ----------- ------------
<S> <C> <C> <C>
Gains on sales of properties,
net.............................. $(94,998,417) $ -- $(17,219,231)
Interest income.................... (4,583,297) -- (201,896)
Loss on disposition of equipment... -- -- 47,529
(Recovery) reserve for losses on
notes receivable, net (Note 5)... (62,500) (7,884,884) 737,500
Loss on write-down of long-term
investment....................... 1,000,000 -- --
Loss on purchase of common stock
(Note 13)........................ -- 1,185,662 --
Other, net......................... 271,855 (580,993) 391,530
------------ ----------- ------------
$(98,372,359) $(7,280,215) $(16,244,568)
============ =========== ============
</TABLE>
F-14
<PAGE> 115
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. SEGMENT DATA
The Company's business operations were previously classified into two
segments: Television and Radio Broadcasting and Other. The Company sold its
radio stations and outdoor advertising business during 1994 and accordingly
operated in only one segment in 1996 and 1995. The segment data for 1994 is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------
BROADCASTING
------------------------
TELEVISION RADIO OTHER CONSOLIDATED
----------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Net revenue................ $16,756,288 $7,233,424 $ 49,420 $24,039,132
Operating expenses......... 9,651,752 5,250,629 59,018 14,961,399
Depreciation and
amortization............. 2,464,785 577,430 269,834 3,312,049
----------- ---------- --------- -----------
Operating income (loss)*... $ 4,639,751 $1,405,365 $(279,432) $ 5,765,684
=========== ========== ========= ===========
</TABLE>
- - - - ---------------
* Operating income (loss) is before corporate expenses, other income-net,
interest expense, amortization of debt discount and deferred debt expense,
share of loss of partially owned companies, reorganization items, income taxes
and extraordinary items.
13. SHAREHOLDERS' EQUITY
The Company currently has outstanding warrants on its common stock
exercisable for approximately 124,000 shares at an exercise price of $4.23 per
share during the five-year period ending September 30, 1998.
In October 1994, the Company's Board of Directors enacted a Stockholders'
Rights Plan (the "Plan") designed to protect the interests of the Company's
shareholders in the event of a potential takeover for a price which does not
reflect the Company's full value or which is conducted in a manner or on terms
not approved by the Board as being in the best interests of the Company and its
shareholders. The Board has declared a dividend distribution of One Common Stock
Purchase Right on each outstanding share of Common Stock of the Company. The
Rights provide, in substance, that should any person or group acquire 20% or
more of the Company's Common Stock, each Right, other than Rights held by the
acquiring person or group, would entitle its holder to purchase a specified
number of Price Communications Corporation common shares for 50% of their then
current market value. In addition, the Rights may be exercised at the holders
option, at a purchase price of $22.50 per share at any time prior to the
termination of the Plan. Unless a 20% acquisition has occurred, the Rights may
be redeemed by the Company at any time prior to the termination date of the
Plan.
On February 10, 1994, the Company's Board of Directors authorized the
repurchase by the Company of up to 2,500,000 shares of its Common Stock. The
Company is authorized to make such purchases from time to time in the market or
in privately negotiated transactions when it is legally permissible to do so or
believed to be in the best interests of its shareholders. During the year ended
December 31, 1994, the Company repurchased and retired approximately 1,245,000
shares pursuant to that authorization.
On February 1, 1995, Price purchased 1,077,875 shares of its common stock
from S.A.C. Capital Management, L.P. for approximately $6.6 million. This
transaction was approved by the Company's Board of Directors. The Company paid a
premium over the daily quoted market price
F-15
<PAGE> 116
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of approximately $1.2 million that is recorded as other (income) expense on the
Company's consolidated statement of operations.
In March 1995, at the Company's Annual Meeting, the shareholders authorized
the creation of 20 million shares of undesignated Preferred Stock for
acquisitions and other purposes. No preferred stock had been issued as of
December 31, 1996.
On April 8, 1995, the Company's Board of Directors approved a five-for-four
stock split of the Company's Common Stock to shareholders of record as of the
close of business on March 27, 1995. The Company issued approximately 2 million
shares of Common Stock. The stated par value of each share was not changed from
$.01. All presentations of shares outstanding and amounts per share in years
prior to 1995 have been restated to reflect the 1995 stock split.
In March 1995, the Company's Board of Directors authorized the purchase of
up to 1.3 million shares of its Common Stock in the open market or in privately
negotiated transactions when it is legally permissible to do so or believed to
be in the best interest of Price's shareholders, in addition to previous
authorizations. Approximately 644,000 and 1.7 million shares were purchased and
retired in 1996 and 1995, respectively, under this new authorization and
previous authorizations.
14. STOCK OPTION PLAN
The Company has a long-term incentive plan, (the "1992 Long Term Incentive
Plan") which provides for granting incentive stock options, as defined under
current tax law, and other stock-based incentives to key employees and officers.
The maximum number of shares of the Company that are subject to awards granted
under the 1992 Long Term Incentive Plan is 1,250,000. The exercise of such
options, other than those granted on December 10, 1992, will be exercisable at a
price not less than the fair market value on the date of the grant, for a period
up to ten years.
The following table sets forth information with respect to the Company's
stock options for the years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDER OPTION
------------------- OPTION
1996 1995 PRICE RANGE
------- ------- ------------
<S> <C> <C> <C>
Exercised................................ 102,666 57,260 $ 2.15
Canceled................................. 39,094 -- 2.15 - 3.00
Granted.................................. 22,000 145,750 3.00 - 7.88
Outstanding.............................. 704,750 824,510 2.15 - 7.88
Reserved for issuance.................... 240,759 262,759
</TABLE>
The above has been restated to reflect the April, 1995 five-for-four common
stock split.
15. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and litigation in the ordinary
course of business. In the opinion of legal counsel and management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial condition.
The Company has an employment agreement with Robert Price covering base
salary and incentive compensation. The agreement is for a term of three years
commencing October 1994, at a base salary of $300,000 and is extendible for
periods of three years at the Company's option. Cash performance bonuses and
stock option awards are determined solely at the discretion of the Board of
Directors or the Stock Option Committee, respectively.
F-16
<PAGE> 117
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company and its subsidiaries lease a variety of assets used in their
operations, including office space. Renewal options are available in the
majority of leases. The following is a schedule of the Company's minimum rental
commitment for operating leases of real and personal property for each of the
five years subsequent to 1996 and in the aggregate:
<TABLE>
<CAPTION>
OPERATING
LEASES
--------
<S> <C>
Year:
1997.................................... $268,009
1998.................................... 268,009
1999.................................... 268,009
2000.................................... 281,905
2001.................................... 281,905
Thereafter.............................. 536,810
</TABLE>
Rental expense, net of sublease income, for operating leases was
approximately $158,000, $187,250 and $312,000 for the years ended December 31,
1996, 1995, and 1994, respectively.
16. SUBSEQUENT EVENTS
In January and February 1997, the Company purchased 50,000 shares of
Pericellular's Class A Common Stock for approximately $478,000.
In January and February 1997, the Company repurchased 1.9 million shares of
its Common Stock in the open market and in privately negotiated transactions for
approximately $18.1 million.
17. SUPPLEMENTAL CASH FLOW INFORMATION
The following is supplemental disclosure cash flow information for the
years ended December 31, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Cash paid for:
Income taxes paid, net of refunds.... $23,275,000 $ 339,862 $ 240,102
Interest paid........................ 712,855 1,534,245 813,493
Non-cash operating activities:
Trade/barter revenue................. -- 1,439,760 1,117,218
Trade/barter expense................. -- 1,439,760 962,356
</TABLE>
F-17
<PAGE> 118
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
ASSETS:
Cash and cash equivalents...................................................... $ 979,817
Short-term investment.......................................................... 237,975
Prepaid expenses and other current assets...................................... 346,075
-----------
Total current assets................................................. 1,563,867
Investments in and receivables from subsidiaries*.............................. 33,877,001
Property and equipment, net.................................................... 70,553
Long-term investment........................................................... 8,350,000
-----------
$43,861,421
===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable and accrued expenses.......................................... 1,799,879
Other current liabilities...................................................... 1,185,860
-----------
Total current liabilities............................................ 2,985,739
Shareholders' equity........................................................... 40,875,682
-----------
$43,861,421
===========
</TABLE>
- - - - ---------------
* Eliminated in consolidation
F-18
<PAGE> 119
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994
----------- ------------
<S> <C> <C>
Corporate expenses............................................. $ 2,710,307 $ 4,474,787
Other (income) expense, net.................................... (6,836,333) 615,608
Interest expense............................................... -- 9,731
Depreciation and amortization.................................. 31,024 77,051
Realized loss on marketable securities......................... 166,211 --
Earnings of unconsolidated subsidiaries........................ (7,223,406) (19,978,726)
----------- ------------
Income before income taxes........................... 11,152,197 14,801,549
Income tax expense............................................. (26,280) (378,000)
----------- ------------
Net income........................................... $11,125,917 $ 14,423,549
=========== ============
</TABLE>
F-19
<PAGE> 120
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ 11,125,917 $ 14,423,549
------------ ------------
Adjustments to reconcile net income to cash used in operating
activities:
Items not affecting cash:
Depreciation and amortization............................ 31,024 77,051
Reserve on note receivable............................... -- 400,000
Earnings of unconsolidated subsidiaries.................. (7,223,406) (19,978,726)
Change in assets and liabilities, net of effects of
reorganization:
(Increase) decrease in prepaid expenses and other
assets................................................. (174,688) 2,150,932
(Decrease) increase in accounts payable and accrued
expenses............................................... (189,637) 1,103,917
Increase in other liabilities, net of forgiveness........ 525,451 139,504
Reclassification of transactions to investing and financing
activities:
Loss on purchase of common stock......................... 1,185,662 --
Loss on sale of securities, net.......................... 166,211 --
Recovery on note receivable.............................. (7,547,384) --
------------ ------------
Total adjustments................................... (13,226,767) (16,107,322)
------------ ------------
Net cash used in operating activities............... (2,100,850) (1,683,773)
------------ ------------
Cash flows from investing activities:
Cash received from subsidiaries*............................ 14,030,247 8,004,863
Purchases of marketable securities and PriCellular
Warrants................................................. (10,567,300) --
Proceeds from sales of marketable securities and mutual
funds.................................................... 1,813,115 --
Capital expenditures........................................ (4,837) (7,098)
Proceeds from (disbursement of) notes receivable............ 7,547,384 (400,000)
------------ ------------
Net cash provided by investing activities........... 12,818,609 7,597,765
------------ ------------
Cash flows from financing activities:
Short-term borrowings....................................... 1,000,000 --
Payment of short-term borrowings............................ (1,000,000) --
Purchase of common stock.................................... (10,659,201) (6,271,064)
Proceeds from stock options exercised....................... 143,975 222,312
------------ ------------
Net cash used in financing activities............... (10,515,226) (6,048,752)
------------ ------------
Net increase (decrease) in cash and cash equivalents.......... 202,533 (134,760)
Cash and cash equivalents at beginning of year................ 777,284 912,044
------------ ------------
Cash and cash equivalents at end of year...................... $ 979,817 $ 777,284
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes, net of refunds............................. $ 339,862 $ 240,102
============ ============
Interest............................................ $ 1,534,245 $ 813,493
============ ============
</TABLE>
- - - - ---------------
* Eliminated in consolidation
F-20
<PAGE> 121
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 1996, 1995 AND 1994
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING OF CHARGED TO BALANCE AT
DESCRIPTION PERIOD EXPENSES DEDUCTIONS(a) END OF PERIOD
- - - - ----------------------------------------- ------------ ---------- ------------- -------------
<S> <C> <C> <C> <C>
For the year ended December 31, 1996:
Allowance for doubtful accounts........ $294,554 $179,025 $ -- $ 473,579
For the year ended December 31, 1995:
Allowance for doubtful accounts........ $395,012 $ 83,775 $(184,233) $ 294,554
For the year ended December 31, 1994:
Allowance for doubtful accounts........ $487,576 $319,204 $(411,768)(b) $ 395,012
</TABLE>
- - - - ---------------
(a) Amounts written off as uncollectible and payments.
(b) Includes adjustments for the disposition and acquisition of properties.
F-21
<PAGE> 122
PART III
The information called for by Items 10, 11, 12 and 13 is incorporated
herein by reference from the following portions of the definitive proxy
statement to be filed by the Company in connection with its 1996 Meeting of
Shareholders.
<TABLE>
<CAPTION>
ITEM INCORPORATED FROM
-------------------------------------- --------------------------------------
<S> <C> <C> <C>
ITEM 10. -- Directors and Executive Officers of "Directors and Executive Officers"
the Company
ITEM 11. -- Executive Compensation "Executive Compensation" and "Related
Transactions"
ITEM 12. -- Security Ownership of Certain "Principal Shareholders" and "Security
Beneficial Owners and Management Ownership of Management"
ITEM 13. -- Certain Relationships and Related "Executive Compensation" and "Related
Transactions Transactions"
</TABLE>
III-1
<PAGE> 123
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) and (2) List of financial statements and financial statement
schedules:
Independent Auditors' Reports
Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Operations for Years ended December 31, 1996,
1995 and 1994
Consolidated Statements of Shareholders' Equity for Years ended December
31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Years ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
I. Condensed Financial Information of Registrant
II. Valuation and Qualifying Accounts
(Schedules other than those listed are omitted for the reason that they are
not required or are not applicable or the required information is shown in the
financial statements or notes thereto.)
(3) Exhibits
See Exhibit Index at page E-1, which is incorporated herein by reference.
(b) Reports on Form 8-K.
None.
IV-1
<PAGE> 124
SIGNATURES
Pursuant to the requirements of Section 13 and 15 (d) of the Securities and
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PRICE COMMUNICATIONS CORPORATION
By /s/ ROBERT PRICE
------------------------------------
Robert Price, President
Dated: March 1, 1997
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated. Each person whose
signature appears below hereby authorizes and appoints Robert Price as his
attorney-in-fact to sign and file in his behalf individually and in each
capacity stated below any and all amendments to this Annual Report.
<TABLE>
<S> <C>
Dated: March 1, 1997 By /s/ ROBERT PRICE
--------------------------------------------------------------
Robert Price, Director and President
(Principal Executive Officer,
Financial Officer and Accounting Officer)
Dated: March 1, 1997 By /s/ GEORGE H. CADGENE
--------------------------------------------------------------
George H. Cadgene, Director
Dated: March 1, 1997 By /s/ ROBERT F. ELLSWORTH
--------------------------------------------------------------
Robert F. Ellsworth, Director
Dated: March 1, 1997 By /s/ KIM I. PRESSMAN
--------------------------------------------------------------
Kim I. Pressman, Director
</TABLE>
<PAGE> 125
APPENDIX F
Price Communications' Quarterly Report on Form 10-Q for the Fiscal Quarter Ended
March 31, 1997
<PAGE> 126
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-Q
------------------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------------
COMMISSION FILE NUMBER 1-8309
------------------------
PRICE COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NEW YORK 13-2991700
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
45 ROCKEFELLER PLAZA, SUITE 3201, NEW YORK, NEW YORK 10020
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(212) 757-5600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by sections 12, 13 or 15(d) of the Securities
Exchange Act subsequent to the distribution of securities under the plan
confirmed by the court. Yes X No __
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
7,281,334 shares of Common Stock, par value $.01 per share, outstanding as
of May 12, 1997.
================================================================================
<PAGE> 127
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 1997
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at March 31, 1997 and December 31, 1996... I-1
Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 1997 and 1996......................................... I-2
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1997 and 1996......................................... I-3
Notes to Consolidated Financial Statements............................ I-4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................................................. I-6
PART II. OTHER INFORMATION..................................................... II-1
SIGNATURES............................................................................II-2
</TABLE>
<PAGE> 128
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
Assets
CURRENT ASSETS:
Cash and cash equivalents.................................... $41,202,174 $ 83,356,748
Investment securities:
Trading securities........................................ 4,789,761 4,045,628
Available-for-sale securities............................. 20,656,608 8,694,966
Securities fair value adjustment.......................... (985,349) --
Accounts receivable, net of allowance for doubtful accounts 79,367 488,882
of $0 in 1997 and $473,579 in 1996........................
Prepaid expenses and other current assets.................... 17,486 18,672
----------- ------------
Total current assets...................................... 65,760,047 96,604,896
----------- ------------
PROPERTY AND EQUIPMENT, AT COST LESS ACCUMULATED 146,472 159,000
DEPRECIATION.................................................
LONG-TERM INVESTMENTS.......................................... 23,947,207 18,204,429
DEFERRED TAX ASSET............................................. 580,331 350,000
NOTES RECEIVABLE............................................... 540,000 540,000
OTHER ASSETS................................................... 29,500 29,500
----------- ------------
Total assets.............................................. $91,003,557 $115,887,825
=========== ============
Liabilities and Shareholders' Equity
CURRENT LIABILITIES:
Accounts payable and accrued expenses........................ $ 2,028,537 $ 2,755,497
Deferred tax liability....................................... -- 1,042,862
Other current liabilities.................................... 3,265,793 3,310,774
----------- ------------
Total current liabilities................................. 5,294,330 7,109,133
SHAREHOLDERS' EQUITY:
Preferred Stock, par value $.01 per share; authorized
20,000,000, no shares outstanding
Common Stock, par value $.01 per share; authorized 40,000,000 68,618 90,388
shares; outstanding 6,861,814 shares in 1997 and 9,038,808
shares in 1996............................................
Additional paid-in capital................................... (8,615,249) 12,240,133
Unrealized gain (loss) on marketable equity securities, net (427,757) 1,936,743
of tax effect.............................................
Retained earnings............................................ 94,683,615 94,511,428
----------- ------------
Total shareholders' equity................................ 85,709,227 108,778,692
----------- ------------
Total liabilities and shareholders' equity................ $91,003,557 $115,887,825
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements
I-1
<PAGE> 129
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31,
--------------------------
1997 1996
----------- ------------
<S> <C> <C>
Revenue.......................................................... $ -- $ 3,491,441
Agency and representatives' commissions.......................... -- 529,577
----------- ------------
Net revenue............................................ -- 2,961,864
----------- ------------
Operating expenses............................................... -- 2,131,801
Corporate expenses............................................... 908,888 727,109
Other income, net................................................ (1,111,251) (426,918)
Gain on sale of media properties................................. -- (95,451,878)
Interest expense................................................. 17,648 212,376
Depreciation and amortization.................................... 12,528 430,409
----------- ------------
(172,187) (92,377,101)
----------- ------------
Income before income taxes....................................... 172,187 95,338,965
Income tax expense............................................... -- 25,021,067
----------- ------------
Net income....................................................... $ 172,187 $ 70,317,898
=========== ============
Income per share................................................. $ .02 $ 7.08
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements
I-2
<PAGE> 130
PRICE COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net cash provided by operating activities.................... $ 135,736 $ 25,602,315
Cash flows provided by (used in) investing activities:
Purchase of marketable securities.......................... (9,539,996) --
Sale of marketable securities.............................. 5,348,618 --
Proceeds from sale of media properties..................... -- 156,007,011
Gains on sale of media properties.......................... -- (71,662,104)
Purchase of available-for-sale securities and long-term
investments............................................. (22,580,667) --
Sale of available-for-sale securities and long-term
investments............................................. 5,358,887 --
Long-term investment in equity securities.................. -- (2,000,000)
Capital expenditures....................................... -- (100,619)
------------ ------------
Net cash provided by (used in) investing activities.......... (21,413,158) 82,244,288
------------ ------------
Cash flows used in financing activities:
Repayment of long-term debt................................ -- (28,000,000)
Purchase of Company common stock........................... (20,877,152) (903,009)
Proceeds from stock options exercised...................... -- 271,405
------------ ------------
Net cash used in financing activities........................ (20,877,152) (28,631,604)
------------ ------------
Net increase (decrease) in cash and cash equivalents......... (42,154,574) 79,214,999
Cash and cash equivalents at beginning of quarter............ 83,356,748 1,206,557
------------ ------------
Cash and cash equivalents at end of quarter.................. $ 41,202,174 $ 80,421,556
============ ============
Supplemental information:
Income taxes paid, net of refunds............................ $ 53,289 $ 1,901,500
============ ============
Interest paid................................................ $ 17,648 $ 712,855
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
I-3
<PAGE> 131
PRICE COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Price
Communications Corporation (the "Company" or "Price") and its subsidiaries. All
significant intercompany items and transactions have been eliminated.
The consolidated financial statements have been prepared by the Company
without audit, in accordance with rules and regulations of the Securities and
Exchange Commission. In the opinion of management, the statements reflect all
adjustments necessary for a fair presentation of the results for the interim
periods. All such adjustments are of a normal, recurring nature. The results of
operations for any interim period are not necessarily indicative of the results
for a full year.
2. PER SHARE DATA
Primary income per common share is based on income for the period divided
by the weighted average number of shares of common stock and common stock
equivalents outstanding, which was 7,851,606 and 9,931,015 for the quarter ended
March 31, 1997 and 1996, respectively.
3. REPURCHASE OF COMMON STOCK
During the quarter ended March 31, 1997, the Company repurchased
approximately 2,177,000 shares of its common stock at an average price of $9.59
per share.
4. SUBSEQUENT EVENTS
On April 21, 1997, Robert Price, President of the Company, exercised
625,000 employee stock options with an exercise price of $3 per share.
In May 1997, the Company's Board of Directors and Compensation Committee
authorized the issuance to Mr. Price of approximately 728,000 shares of the
Company's newly authorized Series A Preferred Stock ("Preferred Stock"), in
respect of which, in the event of (i) a merger of the Company, the sale or
exchange of all or substantially all of the Company's assets or the occurrence
of any other transaction or event as a result of which the holders of Common
Stock receive at least $22.00 per share or (ii) the acquisition of more than 50%
of the voting power of the securities of the Company then outstanding by any
person, entity or group, provided the market value of the Common Stock of the
Company at such time is at least $22.00 per share (the amount per share received
by holders of Common Stock or the market price per share of Common Stock
described above being referred to as the "Transaction Price"), Mr. Price would
receive a payment per each share of the Preferred Stock equal to the sum of 25%
of the excess of the Transaction Price per share (up to $32.00) over $9.125 (the
closing sales price of the Company's Common Stock on the day preceding the
authorization of the Preferred Stock), 50% of the excess of the Transaction
Price per share (up to $42.00) over $32.00, 100% of the excess of the
Transaction Price per share (up to $52.00) over $42.00, and 125% of the excess
of the Transaction Price per share over $52.00. Each share of Preferred Stock is
entitled to one vote per share, and to receive dividends and liquidation
distributions (other than in a transaction resulting in a payment as described
above) at the rate of 1% of the dividends and liquidation distributions payable
with respect to a share of Common Stock.
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<PAGE> 132
PRICE COMMUNICATIONS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUD)
The shares of Preferred Stock will be repurchased by the Company in the
event of Mr. Price's death or termination of employment prior to a transaction
resulting in a payment as aforesaid, as follows:
(i) If his employment with the company terminates because of death or
disability or termination by the Company not for cause, or his retirement
subsequent to the Company's Common Stock trading for an average of at least
$22.00 per share over a period of 10 consecutive trading days, the Company
will repurchase the Preferred Stock at its then fair market value, as
determined by appraisal.
(ii) If his employment terminates for any reason except as aforesaid,
the Company will repurchase the Preferred Stock at the lower of the price
paid by him for such stock or its then fair market value, as determined by
appraisal.
The foregoing provisions with respect to the Preferred Stock are subject to
appropriate adjustment in the event of a stock split, stock dividend or similar
event affecting the Company's Common Stock.
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I-5
<PAGE> 133
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
References to the "Company" or "Price" in this report include Price
Communications Corporation and its subsidiaries, unless the context otherwise
indicates.
RESULTS OF OPERATIONS
The Company did not have any results from operations during the first
quarter of 1997, since the company sold its television stations during 1996.
Other income for the three months ended March 31, 1997 principally includes
recoveries on accounts and notes receivable of approximately $449,000 and
interest income of $919,000. These revenues were partially offset by an
unrealized loss on marketable securities of approximately $327,000.
The Company's per share income was $0.02 for the quarter ended March 31,
1997, as compared to income of $7.08 for the first quarter of 1996. The 1996 net
income resulted primarily from gains on the sale of the Company's television
stations.
LIQUIDITY AND CAPITAL RESOURCES
The Company had approximately $41.2 million and $83.4 million in cash and
cash equivalents at March 31, 1997, and December 31, 1996, respectively. The
Company has net working capital of approximately $60.5 million at March 31,
1997. The Company has no long-term debt outstanding as of March 31, 1997.
The Company is actively reviewing potential acquisitions and investments.
Among the possible acquisitions or investments which may be considered by the
Company are: (i) subject to the availability of such properties at prices deemed
prudent by the Company, making acquisitions of radio and television properties;
(ii) exploring related media activities, such as newspapers, outdoor advertising
companies and publishing enterprises; (iii) investing funds in media and
media-related securities; and (iv) other acquisition and investment
opportunities which may present themselves from time to time.
In February 1997, the Company's Board of Directors authorized the
repurchase by the Company of up to 2,000,000 shares of its Common Stock. The
Company is authorized to make such purchases from time to time in the market or
privately negotiated transactions. During the three months ended March 31, 1997,
the Company repurchased approximately 1,164,000 shares pursuant to that and a
prior authorization, and repurchased approximately 1,013,000 shares from an
institutional investor in a separately authorized purchase.
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I-6
<PAGE> 134
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on March 27, 1997.
The Board of Directors was re-elected in its entirety by a vote of no fewer than
54.6% of shares available to vote cast in favor of any single candidate with
none voting against and no more than 32% withheld from voting from any single
candidate.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
II-1
<PAGE> 135
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PRICE COMMUNICATIONS CORPORATION
Dated: May 13, 1997 By: /s/ ROBERT PRICE
--------------------------------------
Robert Price
President and
Chief Financial Officer
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<PAGE> 136
<TABLE>
<S> <C>
REVOCABLE PROXY THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF
PALMER WIRELESS, INC. DIRECTORS FOR USE ONLY AT THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 10, 1997, AND AT ANY ADJOURNMENT
THEREOF.
</TABLE>
The undersigned, being a stockholder of Palmer Wireless, Inc. (the "Company"),
hereby appoints William J. Ryan and Robert G. Engelhardt, or either of them,
attorneys and proxies of the undersigned, with full power of substitution and
with authority in each of them to act in the absence of the other, to vote and
act for the undersigned at the Special Meeting of Stockholders of the Company to
be held on September 10, 1997, at 9:00 a.m. at the Company's headquarters, 12800
University Drive, Fort Myers, Florida, and at any adjournment thereof, in
respect of all shares of the Class A common stock or Class B common stock of the
Company which the undersigned may be entitled to vote, on the following matter:
1. Approval of an Agreement and Plan of Merger, dated as of May 23, 1997, by and
among the Company, Price Communications Corporation ("Price Communications")
and a wholly owned subsidiary of Price Communications ("Merger Sub"),
pursuant to which Price Communications would acquire the Company by means of
a merger of the Company and Merger Sub.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, on any other matters that may properly come before the
meeting, or any adjournments thereof.
(Continued and to be dated and signed on reverse side.)
<PAGE> 137
(continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. HOWEVER, IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.
The undersigned hereby acknowledges prior receipt of a copy of the Notice of
Special Meeting of Stockholders and proxy statement dated August 13, 1997, and
hereby revokes any proxy or proxies heretofore given. This Proxy may be revoked
at any time before it is voted by delivering to the Secretary of the Company
either a written revocation of proxy or a duly executed proxy bearing a later
date, or by appearing at the Special Meeting and voting in person.
If you receive more than one proxy card, please sign and return all cards in the
accompanying envelope.
[ ] I PLAN TO ATTEND THE SEPTEMBER 10, 1997 SPECIAL STOCKHOLDERS MEETING
Dated: 1997.
---------------------,
--------------------------------
Signature of Stockholder or
Authorized Representative
--------------------------------
Signature of Stockholder or
Authorized Representative
Please date and sign exactly as
your name appears on this proxy.
Each executor, administrator,
trustee, guardian,
attorney-in-fact and other
fiduciary should sign and
indicate his or her full title.
In the case of stock ownership
in the name of two or more
persons, both persons should
sign.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY. IT IS IMPORTANT
WHETHER YOU OWN FEW OR MANY SHARES.
