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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
PRICE ENTERPRISES, INC.
(Name Of Issuer)
PRICE ENTERPRISES, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.0001 PER SHARE
(Title of Class of Securities)
741444 202
(CUSIP Number of Class of Securities)
JACK MCGRORY
PRICE ENTERPRISES, INC.
4649 MORENA BOULEVARD
SAN DIEGO, CALIFORNIA 92117
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of the Person(s) Filing Statement)
COPY TO:
SCOTT N. WOLFE, ESQ.
ROBERT E. BURWELL, ESQ.
LATHAM & WATKINS
701 B STREET, SUITE 2100
SAN DIEGO, CALIFORNIA 92101
(619) 236-1234
SEPTEMBER 17, 1998
(Date Tender Offer First Published,
Sent or Given to Security Holders)
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CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
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$55,000,000 $11,000
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* For the purpose of calculating the filing fee only, this amount is based
on the purchase of 10,000,000 shares of Common Stock, par value $.0001
per share, of Price Enterprises, Inc. at $5.50 per share.
** The amount of the filing fee equals 1/50th of one percent (1%) of the
value of the securities to be acquired.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
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Amount Previously Paid: Not applicable. Filing party: Not applicable.
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Form or Registration No.: Not applicable. Date Filed: Not applicable.
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This Issuer Tender Offer Statement on Schedule 13E-4 (this "Schedule
13E-4") relates to the offer by Price Enterprises, Inc., a Maryland
corporation (the "Company" or the "Issuer"), to purchase up to 10,000,000
shares of its common stock, par value $.0001 per share (constituting
approximately 42.1% of the shares outstanding on September 9, 1998), at $5.50
per share (the "Purchase Price"), net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated September 17, 1998 (the "Offer to Purchase") and in the
related Letter of Transmittal (which, as amended or supplemented from time to
time, together constitute the "Offer"), and is intended to satisfy the
reporting requirements of Section 13(e) of the Securities and Exchange Act of
1934, as amended. Copies of the Offer to Purchase and the related Letter of
Transmittal are filed with this Schedule 13E-4 as Exhibits (a)(1) and (a)(2)
hereto, respectively.
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is Price Enterprises, Inc., a Maryland
corporation, and the address of its principal executive office is 4649 Morena
Boulevard, San Diego, California 92117.
(b) The title of the securities which are the subject of the Offer
is the Company's common stock, par value $.0001 per share (the "Shares"), and
the Offer is for up to 10,000,000 shares at $5.50 per Share, net to the
seller in cash, without interest thereon. The Offer is being made to all
holders of Shares, including officers, directors and affiliates of the
Company. The Company has been advised that none of its directors or executive
officers intends to tender any Shares pursuant to the Offer, except that
Murray Galinson, a director, has advised the Company that the Galinson
Charitable Remainder Unit Trust, of which he is the trustee, intends to
tender 5,000 Shares in the Offer. In addition, the Price Family Charitable
Trust, of which Sol Price, a significant stockholder and the father of Robert
E. Price who is Chairman of the Company's Board of Directors, is a trustee,
intends to tender 3,000,000 of the 4,545,170 Shares held by it in the Offer.
The information set forth in the "Introduction" to the Offer to Purchase and
in "THE OFFER--Section 1" and "--Section 10" of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in the "Introduction" to the Offer to
Purchase and in "THE OFFER--Section 7" of the Offer to Purchase is
incorporated herein by reference.
(d) This statement is being filed by the Issuer.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in the "Introduction" to the
Offer to Purchase and in "THE OFFER--Section 8" of the Offer to Purchase is
incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
The information set forth in the "Introduction" to the Offer to
Purchase and in "THE OFFER--Section 2" of the Offer to Purchase is
incorporated herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in "THE OFFER--Section 10" of the Offer to
Purchase is incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERTAKINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES.
The information set forth in "THE OFFER--Section 10" of the Offer
to Purchase is incorporated herein by reference.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in "THE OFFER--Section 15" of the Offer
to Purchase is incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The information set forth in "THE OFFER--Section 9" of the
Offer to Purchase is incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
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(a) Not applicable.
(b) The information set forth in "THE OFFER--Section 12" of the
Offer to Purchase is incorporated herein by reference.
(c) The information set forth in "THE OFFER--Section 11" of the
Offer to Purchase is incorporated herein by reference.
(d) Not applicable.
(e) The information set forth in the entire Offer to Purchase and
the related Letter of Transmittal is incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) Letter to stockholders from Jack McGrory, President and Chief
Executive Officer of the Company, dated September 17, 1998.
(a)(7) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(8) Press Release dated September 16, 1998.
(b)(1) Revolving Credit Agreement dated as of March 31, 1998 among
the Company, Union Bank of Switzerland and Union Bank of
Switzerland, as Agent (incorporated by reference to Exhibit
10.3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998).
(b)(2) Amendment No. 1 to Revolving Credit Agreement dated as of
August 27, 1998 among the Company, Union Bank of
Switzerland and Union Bank of Switzerland, as Agent .
(b)(3) Letter Agreement dated as of September 15, 1998 by and
between the Company and Morgan Guaranty Trust Company of New
York.
(c)(1) Guaranty and Pledge Agreement dated as of September 15, 1998
among Sol Price, Helen Price and The Sol & Helen Price Trust
and Morgan Guaranty Trust Company of New York.
(c)(2) Purchase and Sale Agreement.*
(c)(3) Promissory Note Secured by Pledge of Stock.*
(c)(4) Stock Pledge and Security Agreement. *
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
_____________________________
* Includes schedule showing parties to and terms of transactions using same
form of agreement.
3
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
Dated: September 17, 1998 PRICE ENTERPRISES, INC.
By: /s/ JACK MCGRORY
Name: Jack McGrory
Title: President and Chief
Executive Officer
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EXHIBIT INDEX
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<CAPTION>
Exhibit
Number Description
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(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) Letter to stockholders from Jack McGrory, President and Chief
Executive Officer of the Company, dated September 17, 1998.
(a)(7) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(8) Press Release dated September 16, 1998.
(b)(1) Revolving Credit Agreement dated as of March 31, 1998 among the
Company, Union Bank of Switzerland and Union Bank of Switzerland,
as Agent (incorporated by reference to Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998).
(b)(2) Amendment No. 1 to Revolving Credit Agreement dated as of
August 27, 1998 among the Company, Union Bank of Switzerland
and Union Bank of Switzerland, as Agent .
(b)(3) Letter Agreement dated as of September 15, 1998 by and between
the Company and Morgan Guaranty Trust Company of New York.
(c)(1) Guaranty and Pledge Agreement dated as of September 15, 1998
among Sol Price, Helen Price and The Sol & Helen Price Trust and
Morgan Guaranty Trust Company of New York.
(c)(2) Purchase and Sale Agreement.*
(c)(3) Promissory Note Secured by Pledge of Stock.*
(c)(4) Stock Pledge and Security Agreement.*
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
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* Includes schedule showing parties to and terms of transactions using some
form of agreement.
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PRICE ENTERPRISES, INC.
OFFER TO PURCHASE FOR CASH UP TO
10,000,000 SHARES OF ITS COMMON STOCK
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THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, OCTOBER 15, 1998, UNLESS THE OFFER IS
EXTENDED.
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PRICE ENTERPRISES, INC., A MARYLAND CORPORATION (THE "COMPANY"), HEREBY
OFFERS TO PURCHASE FROM ITS STOCKHOLDERS UP TO 10,000,000 SHARES OF ITS COMMON
STOCK, PAR VALUE $.0001 PER SHARE (THE "SHARES") (CONSTITUTING APPROXIMATELY
42.1% OF THE SHARES OUTSTANDING ON SEPTEMBER 9, 1998), AT $5.50 PER SHARE (THE
"PURCHASE PRICE"), NET TO THE SELLER IN CASH, WITHOUT INTEREST THEREON, UPON THE
TERMS AND SUBJECT TO THE CONDITIONS SET FORTH HEREIN AND IN THE RELATED LETTER
OF TRANSMITTAL (WHICH, AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME, TOGETHER
CONSTITUTE THE "OFFER").
THE OFFER IS CONDITIONED UPON THERE BEING VALIDLY TENDERED AND NOT PROPERLY
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A MINIMUM OF 5,000,000 SHARES,
WHICH NUMBER CONSTITUTES APPROXIMATELY 21.0% OF THE SHARES OUTSTANDING ON
SEPTEMBER 9, 1998. FOR OTHER CONDITIONS TO THE OFFER, SEE "THE OFFER--SECTION
6."
THE BOARD OF DIRECTORS OF THE COMPANY CONSIDERED THE EFFECTS OF THE OFFER
AND THE BORROWINGS NECESSARY TO FINANCE THE OFFER, INCLUDING, AMONG OTHER
THINGS, THE ABILITY OF THE COMPANY TO OPERATE ON A GOING FORWARD BASIS WITH
ADDITIONAL INDEBTEDNESS, AND HAS UNANIMOUSLY DETERMINED THAT THE OFFER IS FAIR
TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND HAS
APPROVED THE MAKING OF THE OFFER AND THE TRANSACTIONS CONTEMPLATED THEREBY.
STOCKHOLDERS SHOULD NOTE THAT THE PURCHASE PRICE ($5.50 PER SHARE)
REPRESENTS A SIGNIFICANT PREMIUM OVER THE CLOSING SALE PRICE OF THE SHARES
($4 5/16 PER SHARE) AS REPORTED ON THE NASDAQ NATIONAL MARKET SYSTEM ON
SEPTEMBER 15, 1998, THE DAY PRIOR TO THE ANNOUNCEMENT OF THE OFFER. THE MARKET
PRICE OF THE SHARES FOLLOWING CONSUMMATION OF THE OFFER MAY BE LOWER THAN THE
PURCHASE PRICE. ACCORDINGLY, ANY SHARES NOT TENDERED PURSUANT TO THE OFFER AND
ANY TENDERED SHARES NOT ACCEPTED FOR PAYMENT BY REASON OF PRORATION OR
OTHERWISE, MAY HAVE A MARKET PRICE FOLLOWING CONSUMMATION OF THE OFFER THAT IS
LOWER THAN THE PURCHASE PRICE. IF MORE THAN 10,000,000 SHARES ARE TENDERED, THE
COMPANY WILL PURCHASE SHARES PRO RATA BASED ON THE RATIO OF THE NUMBER OF SHARES
PROPERLY TENDERED AND NOT PROPERLY WITHDRAWN BY EACH STOCKHOLDER (OTHER THAN ODD
LOT HOLDERS) TO THE TOTAL NUMBER OF SHARES PROPERLY TENDERED AND NOT PROPERLY
WITHDRAWN BY ALL STOCKHOLDERS (OTHER THAN ODD LOT HOLDERS). ACCORDINGLY, EACH
STOCKHOLDER MAY WISH TO CONSIDER THE POSSIBILITY THAT THE COMPANY WILL PURCHASE
ONLY A PORTION OF THE SHARES TENDERED BY SUCH STOCKHOLDER WHEN DETERMINING THE
NUMBER OF SHARES TO TENDER, IF ANY.
THE SHARES ARE LISTED AND TRADED ON THE NASDAQ STOCK MARKET, INC. NATIONAL
MARKET ("NASDAQ") UNDER THE SYMBOL "PREN." ON SEPTEMBER 15, 1998, THE LAST FULL
TRADING DAY PRIOR TO THE ANNOUNCEMENT OF THE OFFER, THE CLOSING PER SHARE SALES
PRICE AS REPORTED ON NASDAQ WAS $4 5/16. STOCKHOLDERS ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS FOR THE SHARES. SEE "THE OFFER--SECTION 7".
IMPORTANT
Any stockholder wishing to tender all or any part of such stockholder's
Shares should either (a) complete and sign a Letter of Transmittal (or a
manually signed facsimile thereof) in accordance with
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the instructions in the Letter of Transmittal and mail or deliver such Letter of
Transmittal, together with any required signature guarantee, and any other
required documents to ChaseMellon Shareholder Services, L.L.C. (the
"Depositary"), and mail or deliver the certificates for such Shares to the
Depositary (together with any other documents required by the Letter of
Transmittal) or tender such Shares pursuant to the procedure for book-entry
transfer set forth in "The Offer--Section 3," or (b) request a broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
such stockholder. Holders of Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee should contact such person if
they desire to tender their Shares. Any stockholder who desires to tender Shares
and whose certificates for such Shares are not immediately available or cannot
be delivered to the Depositary or who cannot comply with the procedure for
book-entry transfer or whose other required documents cannot be delivered to the
Depositary, in any case, by the expiration of the Offer must tender such Shares
pursuant to the guaranteed delivery procedure set forth in "The Offer--Section
3."
TO PROPERLY TENDER SHARES, STOCKHOLDERS MUST VALIDLY COMPLETE THE LETTER OF
TRANSMITTAL.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to the Information Agent at the address and telephone number set
forth on the back cover of this Offer to Purchase.
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH
THE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE RELATED LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, ANY SUCH RECOMMENDATION OR ANY SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY.
September 17, 1998
2
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SUMMARY
This general summary is solely for the convenience of the Company's
stockholders and is qualified in its entirety by reference to the full text and
more specific details set forth in this Offer to Purchase.
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Purchase Price.................... $5.50 per Share, net to the seller in cash.
Number of Shares to be
Purchased....................... Up to 10,000,000 Shares. The Offer is conditioned upon
there being validly tendered and not properly withdrawn
prior to the expiration of the Offer a minimum of
5,000,000 Shares.
How to Tender Shares.............. See "THE OFFER--Section 3." Contact the Information
Agent or consult your broker for assistance.
Brokerage Commissions............. None for registered stockholders who tender their Shares
directly to the Depositary. Stockholders holding Shares
through brokers or banks are urged to consult the
brokers or banks to determine whether transaction costs
are applicable if stockholders tender Shares through the
brokers or banks and not directly to the Depositary.
Stock Transfer Tax................ None, if payment is made to the registered holder of
Shares.
Expiration and Proration Dates.... Thursday, October 15, 1998, at 12:00 Midnight, New York
City time, unless the Offer is extended by the Company.
Payment Date...................... As soon as practicable after the Expiration Date.
Position of the Company and its
Board of Directors.............. Neither the Company nor its Board of Directors makes any
recommendation to stockholders as to whether to tender
or refrain from tendering their Shares. Each stockholder
must make the decision whether to tender Shares and, if
so, how many Shares to tender. The Company has been
advised that none of its directors or executive officers
intends to tender any Shares pursuant to the Offer,
except that Murray Galinson, a director, has advised the
Company that the Galinson Charitable Remainder Unit
Trust, of which he is the trustee, intends to tender
5,000 Shares in the Offer. Sol Price, a significant
stockholder of the Company and the father of Robert E.
Price, the Chairman of the Company's Board of Directors,
beneficially owns 5,004,510 Shares through certain
entities (the "Price Entities"). One of such entities,
the Price Family Charitable Trust, of which Sol Price is
a trustee, intends to tender 3,000,000 of the 4,545,170
Shares held by it in the Offer. The Company has been
advised that none of the other Price Entities intends to
tender Shares in the Offer. Following the Offer, Sol
Price and Robert E. Price will continue to beneficially
own at least (depending on proration) 4,631,628 shares,
or 33.7%, of the Company's Common Stock and 9,816,708
shares, or 41.3% of the Company's 8 3/4% Series A
Cumulative Redeemable Preferred Stock. See "REASONS FOR
THE OFFER--Certain Effects of the Offer."
</TABLE>
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Withdrawal Rights................. Tendered Shares may be withdrawn at any time prior to
12:00 Midnight, New York City time, on Thursday, October
15, 1998, unless the Offer is extended by the Company,
and, unless previously purchased, after 12:00 Midnight,
New York City time, on Thursday, November 12, 1998. See
"THE OFFER-- Section 4."
Odd Lots.......................... There will be no proration of Shares tendered by any
stockholder owning beneficially or of record less than
100 Shares as of the close of business on September 16,
1998 and as of the Expiration Date if the stockholder
tenders all Shares owned by the stockholder prior to the
Expiration Date and completes the section entitled "Odd
Lots" in the Letter of Transmittal. See "THE
OFFER--Section 1."
</TABLE>
4
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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<C> <S> <C>
INTRODUCTION................................................................................................. 7
REASONS FOR THE OFFER........................................................................................ 9
THE OFFER.................................................................................................... 14
1. Number of Shares; Proration....................................................................... 14
2. Purpose of the Offer; Certain Effects of the Offer................................................ 16
3. Procedures for Tendering Shares................................................................... 18
4. Withdrawal Rights................................................................................. 21
5. Purchase of Shares and Payment of Purchase Price.................................................. 22
6. Certain Conditions of the Offer................................................................... 23
7. Price Range of Shares; Dividends.................................................................. 24
8. Source and Amount of Funds........................................................................ 25
9. Certain Information Concerning the Company........................................................ 26
10. Interest of Directors and Officers and Principal Stockholders; Transactions and Arrangements
Concerning Shares............................................................................... 34
11. Effects of the Offer on the Market for Shares; Registration Under the Exchange Act................ 36
12. Certain Legal Matters; Regulatory Approvals....................................................... 36
13. Certain United States Federal Income Tax Consequences............................................. 36
14. Extension of the Offer; Termination; Amendment.................................................... 38
15. Fees and Expenses................................................................................. 39
16. Miscellaneous..................................................................................... 39
</TABLE>
CERTAIN SECTIONS OF THIS OFFER TO PURCHASE INCLUDING, BUT NOT LIMITED TO,
SECTION 2 ENTITLED "PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER" AND
SECTION 9 ENTITLED "CERTAIN INFORMATION CONCERNING THE COMPANY," CONTAIN CERTAIN
"FORWARD LOOKING STATEMENTS" AS SUCH TERM IS USED UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. THE COMPANY'S PERFORMANCE MAY BE AFFECTED BY MANY
UNCERTAINTIES THAT EXIST IN THE COMPANY'S OPERATIONS AND BUSINESS ENVIRONMENT
THAT MAY CAUSE ACTUAL PERFORMANCE TO DIFFER MATERIALLY FROM PERFORMANCE
SUGGESTED BY ANY FORWARD LOOKING STATEMENTS.
REAL PROPERTY INVESTMENTS ARE SUBJECT TO VARYING DEGREES OF RISK. THE
ECONOMIC PERFORMANCE AND VALUES OF REAL ESTATE CAN BE AFFECTED BY MANY FACTORS,
INCLUDING CHANGES IN THE NATIONAL, REGIONAL AND LOCAL ECONOMIC CLIMATES, LOCAL
CONDITIONS SUCH AS AN OVERSUPPLY OF SPACE OR A REDUCTION IN DEMAND FOR REAL
ESTATE IN THE AREA, THE ATTRACTIVENESS OF THE PROPERTIES TO TENANTS, COMPETITION
FROM OTHER AVAILABLE SPACE, THE ABILITY OF THE OWNER TO PROVIDE ADEQUATE
MAINTENANCE AND INSURANCE, AND INCREASED OPERATING COSTS. IN RECENT YEARS, THERE
HAS BEEN A PROLIFERATION OF NEW RETAILERS AND A GROWING CONSUMER PREFERENCE FOR
VALUE-ORIENTED SHOPPING ALTERNATIVES THAT HAVE, AMONG OTHER FACTORS, HEIGHTENED
COMPETITIVE PRESSURES. IN CERTAIN AREAS OF THE COUNTRY, THERE MAY ALSO BE AN
OVERSUPPLY OF RETAIL SPACE. AS A CONSEQUENCE, MANY COMPANIES IN ALL SECTORS OF
THE RETAILING INDUSTRY HAVE ENCOUNTERED SIGNIFICANT FINANCIAL DIFFICULTIES. A
SUBSTANTIAL PORTION OF THE COMPANY'S INCOME IS DERIVED FROM RENTAL REVENUES FROM
RETAILERS IN COMMUNITY SHOPPING CENTERS AND POWER CENTERS. ACCORDINGLY, NO
ASSURANCE CAN BE GIVEN THAT THE COMPANY'S FINANCIAL RESULTS WILL NOT BE
ADVERSELY AFFECTED BY THESE DEVELOPMENTS IN THE
5
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RETAIL INDUSTRY. THE COMPANY'S PERFORMANCE MAY ALSO BE AFFECTED BY OTHER RISKS
AND UNCERTAINTIES THAT MAY CAUSE ACTUAL PERFORMANCE TO DIFFER MATERIALLY FROM
ANY FORWARD-LOOKING STATEMENTS, INCLUDING BUT NOT LIMITED TO THE FOLLOWING: THE
COMPANY'S DEPENDENCE ON RENTAL INCOME FROM REAL PROPERTY; THE ILLIQUIDITY OF
REAL ESTATE INVESTMENTS; THE RISK OF BANKRUPTCY OF MAJOR TENANTS; THE COMPANY'S
RELIANCE ON MAJOR TENANTS; CONTROL OF THE COMPANY BY DIRECTORS AND EXECUTIVE
OFFICERS, WHICH COULD DISCOURAGE ACQUISITION OF THE COMPANY'S COMMON STOCK BY
POTENTIAL INVESTORS; THE TRADING PRICE OF THE COMPANY'S COMMON STOCK;
COMPETITION FOR ACQUISITION OF REAL ESTATE; THE RISK OF THE IMPOSITION OF
LIABILITY FOR COSTS OF COMPLIANCE WITH VARIOUS FEDERAL, STATE AND LOCAL
ENVIRONMENTAL REGULATIONS; AND TAXATION OF THE COMPANY, WHICH IS CURRENTLY BASED
ON ITS STATUS AS A REAL ESTATE INVESTMENT TRUST.
6
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TO THE HOLDERS OF COMMON STOCK OF PRICE ENTERPRISES, INC.:
INTRODUCTION
Price Enterprises, Inc., a Maryland corporation (the "Company"), invites its
stockholders to tender shares of its Common Stock, par value $.0001 per share
(the "Shares"), to the Company at $5.50 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
herein and in the related Letter of Transmittal (which, as amended or
supplemented from time to time, together constitute the "Offer").
THE OFFER IS CONDITIONED UPON THERE BEING VALIDLY TENDERED AND NOT PROPERLY
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A MINIMUM OF 5,000,000 SHARES,
WHICH NUMBER CONSTITUTES APPROXIMATELY 21.0% OF THE SHARES OUTSTANDING ON
SEPTEMBER 9, 1998. FOR OTHER CONDITIONS TO THE OFFER, SEE "THE OFFER--SECTION
6."
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
STOCKHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES.
EACH STOCKHOLDER MUST MAKE THE DECISION WHETHER TO TENDER SHARES AND, IF SO, HOW
MANY SHARES TO TENDER.
Upon the terms and subject to the conditions of the Offer, if at the
Expiration Date a minimum of 5,000,000 Shares (or a maximum of 10,000,000
Shares) are properly tendered and not properly withdrawn, the Company will buy
Shares first from all Odd Lot Holders (as defined in Section 1) who properly
tender all their Shares and then on a pro rata basis from all other stockholders
who properly tender Shares (and do not properly withdraw them prior to the
expiration of the Offer). See "THE OFFER--Section 1."
The Purchase Price will be paid net to the tendering stockholder in cash,
without interest thereon, for all Shares purchased. Tendering stockholders who
hold Shares in their own name and who tender their Shares directly to the
Depositary will not be obligated to pay brokerage commissions, solicitation fees
or, subject to Instruction 6 of the Letter of Transmittal, stock transfer taxes
on the purchase of Shares by the Company pursuant to the Offer. Stockholders
holding Shares through brokers or banks are urged to consult the brokers or
banks to determine whether transaction costs are applicable if stockholders
tender Shares through the brokers or banks and not directly to the Depositary.
HOWEVER, ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE, SIGN
AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 THAT IS INCLUDED AS PART OF
THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED UNITED STATES FEDERAL
INCOME TAX BACKUP WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE TO THE
TENDERING STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE "THE
OFFER--SECTION 3." The Company will pay all fees and expenses of ChaseMellon
Shareholder Services, L.L.C. (the "Depositary") and MacKenzie Partners, Inc.
(the "Information Agent") incurred in connection with the Offer. See "THE
OFFER--Section 15."
The Board of Directors has determined that the Company's financial condition
and outlook and current market conditions, including recent trading prices of
Shares, make this a favorable time to repurchase a significant portion of the
outstanding Shares. In the view of the Board of Directors, the Offer represents
an attractive transaction for the Company that should benefit the Company and
its remaining stockholders over the long term. In particular, the Board of
Directors believes that the purchase of Shares at this time is consistent with
the Company's long term corporate goal of seeking to increase stockholder value.
The Offer provides stockholders who are considering a sale of all or a
portion of their Shares with the opportunity to sell their Shares to the Company
for $5.50 per Share, and, subject to the terms and conditions of the Offer, to
sell those Shares without, where Shares are tendered by the registered owner
thereof directly to the Depositary, the usual transaction costs associated with
open market sales. In
7
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addition, the Offer gives stockholders the opportunity to sell at a price
greater than the market price prevailing prior to the announcement of the Offer.
The Offer also allows stockholders to sell a portion of their Shares while
retaining a continuing equity interest in the Company.
Stockholders who determine not to accept the Offer will realize a
proportionate increase in their relative equity interest in the Company, and
thus in the Company's future earnings and assets, subject to the Company's right
to issue additional Shares and other equity securities in the future. In
determining whether to tender Shares pursuant to the Offer, stockholders should
consider the possibility that they may be able to sell their Shares in the
future on Nasdaq or otherwise, including in connection with a sale of the
Company, at a net price higher than the Purchase Price. See "THE OFFER--Section
2." The Company can give no assurance, however, as to the price at which a
stockholder may be able to sell non-tendered Shares in the future. In fact,
stockholders should note that the Purchase Price ($5.50 per Share) represents a
significant premium over the closing sale price of the Shares ($4 5/16 per
Share) as reported on September 15, 1998, the day prior to the announcement of
the Offer. The market price of the Shares following consummation of the Offer
may be lower than the Purchase Price. If more than 10,000,000 shares are
tendered, the Company will purchase shares pro rata based on the ratio of the
number of shares properly tendered and not properly withdrawn by each
stockholder (other than odd lot holders) to the total number of shares properly
tendered and not properly withdrawn by all stockholders (other than odd lot
holders). Accordingly, each stockholder may wish to consider the possibility
that the Company will purchase only a portion of the shares tendered by such
stockholder when determining the number of shares to tender, if any.
As of September 9, 1998, the Company had 23,758,282 issued and outstanding
Shares and had reserved 672,867 Shares for issuance upon exercise of outstanding
stock options ("Options") under the Company's 1995 Combined Stock Grant and
Stock Option Plan, as amended, and its 1995 Directors Option Plan, as amended
(together, the "Option Plans"). The 10,000,000 Shares that the Company is
offering to purchase pursuant to the Offer represent approximately 42.1% of the
Company's Shares outstanding on September 9, 1998 (approximately 40.9% assuming
exercise of all outstanding Options). The Shares are listed and traded on Nasdaq
under the symbol "PREN." On September 15, 1998, the last full trading day prior
to the announcement of the Offer, the closing per Share sales price as reported
on Nasdaq was $4 5/16. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE SHARES. See "THE OFFER--Section 7."
THE BOARD OF DIRECTORS OF THE COMPANY CONSIDERED THE EFFECTS OF THE OFFER
AND THE BORROWINGS NECESSARY TO FINANCE THE OFFER, INCLUDING, AMONG OTHER
THINGS, THE ABILITY OF THE COMPANY TO OPERATE ON A GOING FORWARD BASIS WITH
ADDITIONAL INDEBTEDNESS, AND HAS UNANIMOUSLY DETERMINED THAT THE OFFER IS FAIR
TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND HAS
APPROVED THE MAKING OF THE OFFER AND THE TRANSACTIONS CONTEMPLATED THEREBY.
STOCKHOLDERS SHOULD NOTE THAT THE PURCHASE PRICE ($5.50 PER SHARE)
REPRESENTS A SIGNIFICANT PREMIUM OVER THE CLOSING SALE PRICE OF THE SHARES
($4 5/16 PER SHARE) AS REPORTED ON NASDAQ ON SEPTEMBER 15, 1998, THE DAY PRIOR
TO THE ANNOUNCEMENT OF THE OFFER. THE MARKET PRICE OF THE SHARES FOLLOWING
CONSUMMATION OF THE OFFER MAY BE LOWER THAN THE PURCHASE PRICE. ACCORDINGLY, ANY
SHARES NOT TENDERED PURSUANT TO THE OFFER AND ANY TENDERED SHARES NOT ACCEPTED
FOR PAYMENT BY REASON OF PRORATION OR OTHERWISE MAY HAVE A MARKET PRICE
FOLLOWING CONSUMMATION OF THE OFFER THAT IS LOWER THAN THE PURCHASE PRICE. IF
MORE THAN 10,000,000 SHARES ARE TENDERED, THE COMPANY WILL PURCHASE SHARES PRO
RATA BASED ON THE RATIO OF THE NUMBER OF SHARES PROPERLY TENDERED AND NOT
PROPERLY WITHDRAWN BY EACH STOCKHOLDER (OTHER THAN ODD LOT HOLDERS) TO THE TOTAL
NUMBER
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OF SHARES PROPERLY TENDERED AND NOT PROPERLY WITHDRAWN BY ALL STOCKHOLDERS
(OTHER THAN ODD LOT HOLDERS). ACCORDINGLY, EACH STOCKHOLDER MAY WISH TO CONSIDER
THE POSSIBILITY THAT THE COMPANY WILL PURCHASE ONLY A PORTION OF THE SHARES
TENDERED BY SUCH STOCKHOLDER WHEN DETERMINING THE NUMBER OF SHARES TO TENDER, IF
ANY.
The Company is making the Offer to provide stockholders the opportunity to
realize value on a significant portion of their investment in the Company in the
near term, while retaining a continuing equity interest in the Company. Although
the Company will, on a going forward basis, have a greater amount of
indebtedness than has recently been the case, the Board of Directors of the
Company believes that the level of indebtedness resulting from the borrowings
necessary to fund the Offer is acceptable and that the Company will have
sufficient additional borrowing capacity to execute its business strategy.
The Company will fund the purchase of Shares pursuant to the Offer and for
the payment of related fees and expenses from borrowings under (i) a new $50
million credit facility from Morgan Guaranty Trust Company of New York (the "New
Credit Facility") and (ii) the Company's existing credit facility with Union
Bank of Switzerland ("UBS") (the "UBS Credit Facility"). For a description of
the terms and conditions of the New Credit Facility and the UBS Credit Facility,
see "THE OFFER--Section 8."
The Company has been advised that none of its directors or executive
officers intends to tender any Shares pursuant to the Offer, except that Murray
Galinson, a director, has advised the Company that the Galinson Charitable
Remainder Unit Trust, of which he is the trustee, intends to tender 5,000 Shares
in the Offer. Sol Price, a significant stockholder of the Company and the father
of Robert E. Price, the Chairman of the Company's Board of Directors,
beneficially owns 5,004,510 Shares through certain entities (the "Price
Entities"). One of such entities, the Price Family Charitable Trust, of which
Sol Price is a trustee, intends to tender 3,000,000 of the 4,545,170 Shares held
by it in the Offer. The Company has been advised that none of the other Price
Entities intends to tender Shares in the Offer. Following the Offer, Sol Price
and Robert Price will continue to beneficially own at least (depending on
proration) 4,631,628 shares, or 33.7%, of the Company's Common Stock and
9,816,708 shares, or 41.3%, of the Company's 8 3/4% Series A Cumulative
Redeemable Preferred Stock ("Series A Preferred Stock").
REASONS FOR THE OFFER
PURPOSE OF THE OFFER
In the ongoing process of formulating the Company's business and financial
plans, members of the Company's Board of Directors and management regularly
reassess the Company's long term prospects in light of anticipated general
economic and business conditions and management's forecasts for the Company's
business.
The Board of Directors has determined that the Company's financial condition
and outlook and current market conditions, including the recent trading prices
of its Common Stock, make this a favorable time to repurchase a significant
portion of the outstanding shares of the Company's Common Stock. In the view of
the Board of Directors, the Offer represents an attractive transaction for the
Company that should benefit the Company and its remaining stockholders over the
long term. In particular, the Board of Directors believes that the repurchase of
the Shares at this time is consistent with the Company's long term goal of
seeking to increase stockholder value.
The Company is making the Offer to provide stockholders the opportunity to
realize value on a significant portion of their investment in the Company in the
near term, while retaining a continuing equity interest in the Company. Although
the Company will, on a going forward basis, have a greater amount of
indebtedness than has recently been the case, the Board of Directors of the
Company believes that the level of indebtedness resulting from the borrowings
necessary to fund the Offer is acceptable and that the Company will have
sufficient additional borrowing capacity to execute its business strategy.
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CERTAIN EFFECTS OF THE OFFER
Implementation of the Offer will have a substantial impact upon the Company,
which may affect the value of an investment in the Shares after the consummation
of the Offer, including the effects described below. The following discussion
contains forward-looking statements which involve risks and uncertainties. The
Company's actual results may differ materially from the results discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, the matters discussed below as well as the factors
described in the Company's Transition Report on Form 10-K for the period ended
December 31, 1997.
The reduction in the number of the Shares outstanding as a result of the
consummation of the Offer will proportionately increase the per Share interest
represented by the remaining Shares in the Company. Accordingly, stockholders
should also be aware that, after the consummation of the Offer, future increases
and declines in earnings will be greater on a per Share basis due to a smaller
number of outstanding Shares. Moreover, consummation of the Offer and the
borrowing of the funds necessary to make the Offer under the New Credit Facility
and the UBS Credit Facility will result in the Company having a greater amount
of indebtedness than historically has been the case. After giving pro forma
effect to the Offer and the borrowing of the $55.2 million necessary to make the
Offer, at June 30, 1998, the Company would have had total indebtedness of $84.1
million and stockholders' equity would have been $350.1 million. See "THE
OFFER--Section 8" and "--Section 10."
In addition, the additional indebtedness will have a negative effect on the
Company's net income. For the six month period ended June 30, 1998, the
Company's net income on a pro forma basis as adjusted to give effect to the
Offer, the borrowing of the funds necessary to make the Offer under the New
Credit Facility and the UBS Credit Facility and the acquisitions of two
significant real properties in May 1998 would have been $14.1 million compared
to the historical net income of $15.5 million for such period. Pro forma net
interest expense would have been $2.2 million for the six month period ended
June 30, 1998 as compared to net interest income of $240,000 for the same period
on an historical basis. Pro forma net interest expense is based on Company
estimates of additional debt related to the Offer as well as two acquisitions in
May 1998 using average interest rates under the New Credit Facility and the UBS
Credit Facility for the periods reported. See "THE OFFER--Section 9."
The Company's increased indebtedness could have important consequences to
holders of Shares, including but not limited to the following: (i) the Company's
ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired in the
future; (ii) a substantial portion of the Company's cash flow from operations
must be dedicated to the payment of principal and interest on its indebtedness,
thereby reducing the funds available to the Company for its operations and other
purposes, including capital expenditures; (iii) the Company may be hindered in
its ability to adjust rapidly to changing market conditions; and (iv) the
Company's increased indebtedness could make it more vulnerable in the event of a
downturn in general economic conditions or its business or changing market
conditions. In addition, the Company's ability to repay or to refinance its
obligations with respect to its indebtedness will depend on its future financial
and operating performance, which, in turn, will be subject to a number of
factors, many of which are beyond the Company's control, including, but not
limited to, competition for acquisition of real estate and the Company's
dependence on rental income from real property. If the Company's cash flow and
capital resources are insufficient to fund its debt service obligations and pay
dividends on its 8 3/4% Series A Cumulative Redeemable Preferred Stock ("Series
A Preferred Stock"), the Company may be forced to reduce or delay capital
expenditures, sell assets, seek to obtain additional equity capital, or
refinance or restructure its debt. Although the Company expects that payment of
the stated dividends on the Series A Preferred Stock will be sufficient during
the next twelve months for the Company to comply with the requirement that real
estate investment trusts ("REITs") distribute at least 95% of REIT taxable
income to stockholders, the Company will pay dividends on its Common Stock to
the extent necessary to comply with such REIT requirements. See "THE
OFFER--Section 7." These factors may have a material adverse effect on the
marketability, price and future value of the Shares.
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As common equity securities of the Company, the Shares rank below all debt
claims and the $16.00 per share liquidation preference of the Series A Preferred
Stock in the event of the insolvency or bankruptcy of the Company. As of
September 14, 1998, 23,758,282 shares of Series A Preferred Stock were
outstanding. The Company issued the Series A Preferred Stock pursuant to a pro
rata distribution on August 17, 1998 of one share of Series A Preferred Stock on
each share of Common Stock outstanding on July 30, 1998. The Board of Directors
decided to distribute the Series A Preferred Stock in June 1998 after it
compared the Company's equity capitalization to that of a growing number of
REITs that had issued shares of non-convertible preferred stock with a stated
dividend rate. The Board of Directors evaluated the merits of dividing its then
current equity capitalization, which consisted solely of common stock, into two
classes of equity securities, common stock and preferred stock. Following such
evaluation, the Board of Directors determined that such a division of its equity
would be in the best interests of the Company and its stockholders.
STATE STATUTES. Under the Maryland General Corporation Law (the "MGCL"), a
corporation may not purchase its own shares of capital stock when, after giving
effect to such purchase, the corporation would be unable to pay indebtedness of
the corporation as the indebtedness becomes due in the usual course of business.
The Board of Directors of the Company believes that the purchase of Shares
pursuant to this Offer is permissible under the MGCL. See "--Purpose of the
Offer," and "THE OFFER--Section 6," "--Section 8" and "--Section 10."
If a court in a lawsuit by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy, were to find that, at the time the
Company purchased Shares pursuant to the Offer, (i) the Company incurred the
debt under the New Credit Facility and the UBS Credit Facility or purchased the
Shares with the intent of hindering, delaying or defrauding current or future
creditors or (ii)(a) the Company received less than reasonably equivalent value
or fair consideration in connection with the repurchase of Shares pursuant to
the Offer and (b) the Company (1) was insolvent or was rendered insolvent by
reason of the Offer and such repurchase, including the incurrence of the
indebtedness related thereto, (2) was engaged in a business or transaction for
which its assets constituted unreasonably small capital, (3) intended to incur,
or believed that it would incur obligations beyond its ability to pay as such
obligations matures (as the foregoing terms are defined in or interpreted under
the applicable fraudulent conveyance statutes) or (4) was a defendant in an
action for money damages, or had a judgment for money damages docketed against
it (if, in either case, after final judgment the judgment is unsatisfied), such
court could determine to invalidate the Company's purchase of the Shares
pursuant to the Offer and require that such stockholders return the Purchase
Price for their Shares to the Company or that the Company establish a fund with
such amounts for the benefit of its creditors. The measure of insolvency for
purposes of the foregoing will vary depending upon the law of the jurisdiction
which is being applied. Generally, however, the Company would be considered
insolvent if the fair value of the Company's assets is less than the amount of
the Company's total debts and liabilities or if the Company has incurred debt
beyond its ability to repay such debt as it matures. The Board of Directors
believes that the Company will not be insolvent following the consummation of
the Offer and the borrowing of the funds necessary to make the Offer under the
New Credit Facility and the UBS Credit Facility. See "--Purpose of the Offer"
and "THE OFFER--Section 8."
CERTAIN BUSINESS RISKS. There are certain risks associated with the
Company's business, including, in particular, the competition for acquisition of
real estate and the Company's dependence on rental income from real property.
Following the implementation of the Offer and the borrowing of the funds
necessary to make the Offer under the New Credit Facility and the UBS Credit
Facility, the increased indebtedness of the Company will render it more
difficult for the Company to respond to these risks. Moreover, the reduction in
the number of the Shares outstanding will proportionately increase the per Share
interest represented by the remaining Shares in the Company and accordingly, any
future declines in earnings will be greater on a per Share basis due to a
smaller number of outstanding Shares.
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<PAGE>
CERTAIN ANTI-TAKEOVER EFFECTS. Robert E. Price, who is Chairman of the
Board of Directors, and Sol Price, a significant stockholder of the Company and
the father of Robert E. Price, beneficially owned as of August 28, 1998 an
aggregate of 7,631,628 shares, or 32.1%, of the outstanding Common Stock of the
Company. Although the Price Family Charitable Trust, of which Sol Price is a
trustee, has advised the Company that it intends to tender 3,000,000 Shares in
the Offer, the Prices will continue to beneficially own at least (depending on
proration) 33.7% of the Company's Common Stock. The Prices also beneficially own
41.3% of the Company's Series A Preferred Stock. The level of the Prices'
beneficial ownership may have the effect of discouraging certain persons from
purchasing Shares in circumstances that would provide stockholders an
opportunity to sell some or all of their Shares at a premium over prevailing
market prices. In addition, this factor would tend to insulate current
management against the possibility of removal in the event of a takeover bid. In
its review and approval of the Offer and the borrowing of the funds necessary to
make the Offer under the New Credit Facility and the UBS Credit Facility, the
Board of Directors considered this factor, including the Company's increased
vulnerability to unfair takeover tactics resulting from its reduced market
capitalization following the consummation of the Offer.
Notwithstanding the above, the Company believes that the consummation of the
Offer will not restrict its ability to negotiate and consummate any sale, merger
or other business combination involving all or part of the Company which the
Board of Directors considers to be fair and in the best interests of
stockholders. Additionally, the Company does not believe that the consummation
of the Offer will deprive it of the flexibility to evaluate and respond to a
proposal for such a transaction.
NO ASSURANCE AS TO FUTURE SHARE PRICE. The Offer provides stockholders with
the opportunity to sell a significant portion of their Shares to the Company at
a premium over current market prices while also permitting them the opportunity
to retain a continuing equity interest in the Company. The reduction in the
number of the Shares outstanding as a result of the consummation of the Offer
will proportionately increase the per Share interest represented by the
remaining Shares in the Company. Accordingly, stockholders should also be aware
that, after the consummation of the Offer, future increases and declines in
earnings will be greater on a per Share basis due to a smaller number of
outstanding Shares. In addition, stockholders should note that the Purchase
Price ($5.50 per Share) represents a significant premium over the closing sale
price of the Shares ($4 5/16 per Share) as reported on September 15, 1998, the
day prior to the announcement of the Offer. The market price of the Shares
following consummation of the Offer may be lower than the Purchase Price.
Accordingly, any Shares not tendered pursuant to the Offer and any tendered
Shares not accepted for payment by reason of proration or otherwise, may have a
market price following consummation of the Offer that is lower than the Purchase
Price. If more than 10,000,000 shares are tendered, the Company will purchase
shares pro rata based on the ratio of the number of shares properly tendered and
not properly withdrawn by each stockholder (other than odd lot holders) to the
total number of shares properly tendered and not properly withdrawn by all
stockholders (other than odd lot holders). Accordingly, each stockholder may
wish to consider the possibility that the Company will purchase only a portion
of the shares tendered by such stockholder when determining the number of shares
to tender, if any.
The Company has no present intention of acquiring Shares in addition to the
Shares purchased pursuant to the Offer. However, the Company reserves the right
to purchase additional Shares on the open market in the future, through public
tenders or otherwise, in amounts and at times not now determinable and at prices
that could be higher or lower than the Purchase Price. Any possible future
purchases by the Company will depend on many factors, including the market price
of the Shares, the Company's business and financial position, the results of the
Offer, the terms of its outstanding debt and preferred stock, and general
economic and market conditions.
Shares the Company repurchases pursuant to the Offer will resume the status
of authorized but unissued shares. As such, the Shares acquired by the Company
would be available for issuance by the Company upon authorization by its Board
of Directors, generally without the prior approval of the Company's
stockholders, except in connection with certain transactions for which
stockholder approval is
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<PAGE>
required under applicable general corporation law and Nasdaq requirements. The
Company has no immediate plans to reissue any Shares purchased in the Offer.
For a discussion of the effects of the Offer on the market for the Shares,
see "THE OFFER-- Section 11."
The Company has been advised that none of its directors or executive
officers intends to tender any Shares pursuant to the Offer, except that Murray
Galinson, a director, has advised the Company that the Galinson Charitable
Remainder Unit Trust, of which he is the trustee, intends to tender 5,000 Shares
in the Offer. Sol Price, a significant stockholder of the Company and the father
of Robert E. Price, the Chairman of the Company's Board of Directors,
beneficially owns 5,004,510 Shares through certain entities (the "Price
Entities"). One of such entities, the Price Family Charitable Trust, of which
Sol Price is a trustee, intends to tender 3,000,000 of the 4,545,170 Shares held
by it in the Offer. The Company has been advised that none of the other Price
Entities intends to tender Shares in the Offer. Following the Offer, Sol Price
and Robert E. Price will continue to beneficially own at least (depending on
proration) 4,631,628 shares, or 33.7%, of the Company's Common Stock and
9,816,708 shares, or 41.3% of the Company's Series A Preferred Stock.
POSITION OF THE BOARD OF DIRECTORS
The Board of Directors, in reaching its determination that the Offer is fair
to, and in the best interests of, the Company and its stockholders and prior to
voting unanimously to approve the making of the Offer and the transactions
contemplated thereby, considered, among other things, the purposes and potential
effects of the Offer and the borrowing of the funds necessary to make the Offer
under the New Credit Facility and the UBS Credit Facility, including the
aggregate amount payable to stockholders upon consummation of the Offer, the
anticipated short-term and long-term impact on the Company and, in particular,
the ability of the Company to finance its current and projected operating and
capital requirements and to implement its business plan going forward and the
effect of the Offer on the trading price of the Shares and in the near and
longer term. The Board of Directors also considered the available alternatives
to the Offer, including determining not to pursue any transaction at this time.
The Board of Directors also considered that the Offer is being made available to
all stockholders on an equal basis and that stockholders will be able to retain
their equity interest in the Company. See "--Certain Effects of the Offer."
The Board of Directors of the Company has approved the Offer. However,
neither the Company nor its Board of Directors makes any recommendation to
stockholders as to whether to tender or refrain from tendering their Shares.
Each stockholder must make the decision whether to tender such stockholder's
Shares and, if so, how many Shares to tender. The Company has been advised that
none of its directors or executive officers intends to tender any Shares
pursuant to the Offer, except that Murray Galinson, a director, has advised the
Company that the Galinson Charitable Remainder Unit Trust, of which he is the
trustee, intends to tender 5,000 Shares in the Offer.
STOCKHOLDERS SHOULD NOTE THAT THE PURCHASE PRICE ($5.50 PER SHARE)
REPRESENTS A SIGNIFICANT PREMIUM OVER THE CLOSING SALE PRICE OF THE SHARES
($4 5/16 PER SHARE) AS REPORTED ON NASDAQ ON SEPTEMBER 15, 1998, THE DAY PRIOR
TO THE ANNOUNCEMENT OF THE OFFER. THE MARKET PRICE OF THE SHARES FOLLOWING
CONSUMMATION OF THE OFFER MAY BE LOWER THAN THE PURCHASE PRICE. ACCORDINGLY, ANY
SHARES NOT TENDERED PURSUANT TO THE OFFER AND ANY TENDERED SHARES NOT ACCEPTED
FOR PAYMENT BY REASON OF PRORATION OR OTHERWISE, MAY HAVE A MARKET PRICE
FOLLOWING CONSUMMATION OF THE OFFER THAT IS LOWER THAN THE PURCHASE PRICE. IF
MORE THAN 10,000,000 SHARES ARE TENDERED, THE COMPANY WILL PURCHASE SHARES PRO
RATA BASED ON THE RATIO OF THE NUMBER OF SHARES PROPERLY TENDERED AND NOT
PROPERLY WITHDRAWN BY EACH STOCKHOLDER (OTHER THAN ODD LOT HOLDERS) TO THE TOTAL
NUMBER
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OF SHARES PROPERLY TENDERED AND NOT PROPERLY WITHDRAWN BY ALL STOCKHOLDERS
(OTHER THAN ODD LOT HOLDERS). ACCORDINGLY, EACH STOCKHOLDER MAY WISH TO CONSIDER
THE POSSIBILITY THAT THE COMPANY WILL PURCHASE ONLY A PORTION OF THE SHARES
TENDERED BY SUCH STOCKHOLDER WHEN DETERMINING THE NUMBER OF SHARES TO TENDER, IF
ANY.
THE OFFER
1. NUMBER OF SHARES; PRORATION.
Upon the terms and subject to the conditions of the Offer, the Company will
purchase that number of Shares up to 10,000,000 that are properly tendered (and
not properly withdrawn in accordance with Section 4) prior to the Expiration
Date (as defined below) for $5.50 per Share, net to the seller in cash, without
interest thereon. The Offer is conditioned upon there being validly tendered and
not properly withdrawn prior to the expiration of the Offer a minimum of
5,000,000 Shares, which number constitutes approximately 21.0% of the Shares
outstanding on September 9, 1998.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Thursday, October 15, 1998 unless and until the Company, in its sole discretion,
shall have extended the period of time during which the Offer will remain open,
in which event the term "Expiration Date" shall refer to the latest time and
date at which the Offer, as so extended by the Company, shall expire. See
"--Section 14" for a description of the Company's right to extend, delay,
terminate or amend the Offer. The Company reserves the right to purchase more
than 10,000,000 Shares pursuant to the Offer. In accordance with applicable
regulations of the Securities and Exchange Commission (the "Commission"), the
Company may purchase pursuant to the Offer an additional amount of Shares not to
exceed 2% of the outstanding Shares without amending or extending the Offer. See
"--Section 14." In the event of an over-subscription of the Offer as described
below, Shares tendered prior to the Expiration Date will be subject to
proration, except for Odd Lots (as defined below). The proration period also
expires on the Expiration Date. If (i) the Company increases or decreases the
price to be paid for Shares or the Company increases the number of Shares being
sought in the Offer and such increase in the number of Shares being sought
exceeds 2% of the outstanding Shares, or the Company decreases the number of
Shares being sought, and (ii) the Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from,
and including, the date that notice of such increase or decrease is first
published, sent or given in the manner specified in Section 14, the Offer will
be extended until the expiration of such period of ten business days.
THE OFFER IS CONDITIONED UPON THERE BEING VALIDLY TENDERED AND NOT PROPERLY
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A MINIMUM OF 5,000,000 SHARES,
WHICH NUMBER CONSTITUTES APPROXIMATELY 21.0% OF THE SHARES OUTSTANDING ON
SEPTEMBER 9, 1998. FOR OTHER CONDITIONS TO THE OFFER, SEE "--SECTION 6."
The Company will pay the Purchase Price for all Shares properly tendered
pursuant to the Offer and not properly withdrawn, upon the terms and subject to
the conditions of the Offer, including the proration provisions. All Shares
tendered and not purchased pursuant to the Offer, including Shares not purchased
because of proration, will be returned to the tendering stockholders at the
Company's expense as promptly as practicable following the Expiration Date.
Any public announcement made pursuant to the Offer will be disseminated
promptly to stockholders in a manner reasonably designed to inform stockholders
of such change. Without limiting the manner in which the Company may choose to
make a public announcement, except as required by applicable law, the Company
shall have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release on the PR Newswire.
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If the number of Shares properly tendered and not properly withdrawn prior
to the Expiration Date is more than or equal to 5,000,000 Shares and less than
or equal to 10,000,000, the Company will, upon the terms and subject to the
conditions of the Offer, purchase all Shares so tendered at the Purchase Price.
PRIORITY OF PURCHASES. Upon the terms and subject to the conditions of the
Offer, if more than 10,000,000 Shares (or such greater number of Shares as the
Company may elect to purchase) have been properly tendered and not properly
withdrawn prior to the Expiration Date, the Company will purchase properly
tendered Shares on the basis set forth below:
(a) FIRST, all Shares properly tendered and not properly withdrawn prior
to the Expiration Date by any Odd Lot Holder (as defined below) who:
(1) tenders all Shares owned beneficially or of record by such Odd
Lot Holder (tenders of less than all the Shares owned by such Odd Lot
Holder will not qualify for this preference); and
(2) completes the section entitled "Odd Lots" in the Letter of
Transmittal and, if applicable, in the Notice of Guaranteed Delivery; and
(b) SECOND, after the purchase of all of the foregoing Shares, all other
Shares properly tendered and not properly withdrawn prior to the Expiration
Date, on a pro rata basis (with appropriate adjustments to avoid purchases
of fractional Shares), as described below.
ODD LOTS. For purposes of the Offer, the term "Odd Lots" shall mean all
Shares properly tendered prior to the Expiration Date and not properly withdrawn
by any person (an "Odd Lot Holder") who owned beneficially or of record as of
the close of business on September 16, 1998 and who continue to own beneficially
or of record as of the Expiration Date, an aggregate of fewer than 100 Shares
and so certified in the appropriate place on the Letter of Transmittal and, if
applicable, on the Notice of Guaranteed Delivery. In order to qualify for this
preference, an Odd Lot Holder must tender all Shares owned by the Odd Lot Holder
in accordance with the procedures described in Section 3. As set forth above,
Odd Lots will be accepted for payment before proration, if any, of the purchase
of other tendered Shares. This preference is not available to partial tenders or
to beneficial or record holders of an aggregate of 100 or more Shares, even if
these holders have separate accounts or certificates representing fewer than 100
Shares. By accepting the Offer, an Odd Lot Holder who holds Shares in its name
and tenders its Shares directly to the Depositary would not only avoid the
payment of brokerage commissions, but also would avoid any applicable odd lot
discounts in a sale of the holder's Shares. Any stockholder wishing to tender
all of such stockholder's Shares pursuant to the Offer should complete the
section entitled "Odd Lots" in the Letter of Transmittal and, if applicable, in
the Notice of Guaranteed Delivery.
The Company also reserves the right, but will not be obligated, to purchase
all Shares duly tendered by any stockholder who tenders any Shares beneficially
owned and who, as a result of proration, would then beneficially own an
aggregate of fewer than 100 Shares. If the Company exercises this right, it will
increase the number of Shares that it is offering to purchase in the Offer by
the number of Shares purchased through the exercise of such right.
PRORATION. In the event that proration of tendered Shares is required, the
Company will determine the proration factor as soon as practicable following the
Expiration Date. Proration for each stockholder tendering Shares, other than Odd
Lot Holders, shall be based on the ratio of the number of Shares properly
tendered and not properly withdrawn by such stockholder to the total number of
Shares properly tendered and not properly withdrawn by all stockholders, other
than Odd Lot Holders. Because of the difficulty in determining the number of
Shares properly tendered (including Shares tendered by guaranteed delivery
procedures, as described in Section 3) and not properly withdrawn, and because
of the Odd Lot procedure, the Company does not expect that it will be able to
announce the final proration factor or
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commence payment for any Shares purchased pursuant to the Offer until
approximately five business days after the Expiration Date. The preliminary
results of any proration will be announced by press release as promptly as
practicable after the Expiration Date. Stockholders may obtain preliminary
proration information from the Information Agent and may be able to obtain such
information from their brokers.
As described in Section 13, the number of Shares that the Company will
purchase from a stockholder pursuant to the Offer may affect the United States
federal income tax consequences to the stockholder of the purchase and,
therefore, may be relevant to a stockholder's decision whether or not to tender
Shares. The Letter of Transmittal affords each tendering stockholder the
opportunity to designate the order of priority in which Shares tendered are to
be purchased in the event of proration.
This Offer to Purchase and the related Letter of Transmittal will be mailed
to stockholders who were record holders of Shares as of September 16, 1998 and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the Company's stockholder list or, if
applicable, who are listed as participants in a clearing agency's security
position listing for subsequent transmittal to beneficial owners of Shares.
2. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER.
The Board of Directors has determined that the Company's financial condition
and outlook and current market conditions, including the recent trading prices
of its Common Stock, make this a favorable time to repurchase a significant
portion of the outstanding shares of the Company's Common Stock. In the view of
the Board of Directors, the Offer represents an attractive transaction for the
Company that should benefit the Company and its remaining stockholders over the
long term. In particular, the Board of Directors believes that the repurchase of
the Shares at this time is consistent with the Company's long term goal of
seeking to increase stockholder value.
The Offer also provides stockholders who are considering a sale of all or a
portion of their Shares with the opportunity to realize value on a significant
portion of their investment in the Company and to sell such Shares for cash
without, where Shares are tendered by the registered owner directly to the
Depositary, the usual transaction costs associated with open market sales. In
addition, Odd Lot Holders who hold Shares in their names and tender their Shares
directly to the Depositary and whose Shares are purchased pursuant to the Offer
not only will avoid the payment of brokerage commissions but also will avoid any
applicable odd lot discounts payable on a sale of their Shares in a Nasdaq
transaction. The Offer also allows stockholders to sell a portion of their
Shares while retaining a continuing equity interest in the Company.
Stockholders who determine not to accept the Offer will realize a
proportionate increase in their relative equity interests in the Company, and
thus in the Company's future earnings and assets, subject to the Company's right
to issue additional Shares and other equity securities in the future.
Stockholders may be able to sell non-tendered Shares in the future on Nasdaq or
otherwise, including in connection with a sale of the Company, at a net price
higher than the Purchase Price. The Company can give no assurance, however, as
to the price at which a stockholder may be able to sell Shares in the future. In
fact, stockholders should note that the Purchase Price ($5.50 per Share)
represents a significant premium over the closing sale price of the Shares
($4 5/16 per Share) as reported on September 15, 1998, the day prior to the
announcement of the Offer. The market price of the Shares following consummation
of the Offer may be lower than the Purchase Price. Accordingly, any Shares not
tendered pursuant to the Offer and any tendered Shares not accepted for payment
by reason of proration or otherwise, may have a market price following
consummation of the Offer that is lower than the Purchase Price. If more than
10,000,000 shares are tendered, the Company will purchase shares pro rata based
on the ratio of the number of shares properly tendered and not properly
withdrawn by each stockholder (other than odd lot holders) to the total number
of shares properly tendered and not properly withdrawn by all stockholders
(other than odd lot holders). Accordingly, each stockholder may wish to consider
the possibility that the Company will
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purchase only a portion of the shares tendered by such stockholder when
determining the number of shares to tender, if any.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
STOCKHOLDERS AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING THEIR SHARES AND
NEITHER HAS AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION. STOCKHOLDERS ARE
URGED TO EVALUATE CAREFULLY ALL INFORMATION IN THE OFFER, CONSULT WITH THEIR OWN
INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN DECISIONS WHETHER TO TENDER
SHARES AND, IF SO, HOW MANY SHARES TO TENDER. THE COMPANY HAS BEEN ADVISED THAT
NONE OF ITS DIRECTORS OR EXECUTIVE OFFICERS INTENDS TO TENDER ANY SHARES
PURSUANT TO THE OFFER, EXCEPT THAT MURRAY GALINSON, A DIRECTOR, HAS ADVISED THE
COMPANY THAT THE GALINSON CHARITABLE REMAINDER UNIT TRUST, OF WHICH HE IS THE
TRUSTEE, INTENDS TO TENDER 5,000 SHARES IN THE OFFER. SOL PRICE, A SIGNIFICANT
STOCKHOLDER OF THE COMPANY AND THE FATHER OF ROBERT E. PRICE, THE CHAIRMAN OF
THE COMPANY'S BOARD OF DIRECTORS, BENEFICIALLY OWNS 5,004,510 SHARES THROUGH
CERTAIN ENTITIES (THE "PRICE ENTITIES"). ONE OF SUCH ENTITIES, THE PRICE FAMILY
CHARITABLE TRUST, OF WHICH SOL PRICE IS A TRUSTEE, INTENDS TO TENDER 3,000,000
OF THE 4,545,170 SHARES HELD BY IT IN THE OFFER. THE COMPANY HAS BEEN ADVISED
THAT NONE OF THE OTHER PRICE ENTITIES INTENDS TO TENDER SHARES IN THE OFFER.
FOLLOWING THE OFFER, SOL PRICE AND ROBERT E. PRICE WILL CONTINUE TO BENEFICIALLY
OWN AT LEAST (DEPENDING ON PRORATION) 4,631,628 SHARES, OR 33.7%, OF THE
COMPANY'S COMMON STOCK AND 9,816,708 SHARES, OR 41.3%, OF THE SERIES A PREFERRED
STOCK. SEE "--SECTION 10."
The Company may in the future purchase additional Shares on the open market,
in private transactions, through tender offers or otherwise, subject to the
approval of the Board of Directors. Future purchases may be on the same terms or
on terms which are more or less favorable to stockholders than the terms of the
Offer. However, Rule 13e-4 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), prohibits the Company and its affiliates from purchasing
any Shares, other than pursuant to the Offer, until at least ten business days
after the Expiration Date. Any possible future purchases by the Company will
depend on many factors, including the market price of the Shares, the results of
the Offer, the Company's business and financial position and general economic
and market conditions.
Shares the Company acquires pursuant to the Offer will resume the status of
authorized but unissued shares and will be available for the Company to issue
without further stockholder action (except as required by applicable law or the
rules applicable to companies with shares traded on Nasdaq or any other
securities exchange on which the Shares may be listed) for purposes including,
but not limited to, the acquisition of other businesses, the raising of
additional capital for use in the Company's business and the satisfaction of
obligations under existing or future employee benefit plans. The Company has no
current plans for the issuance of Shares repurchased pursuant to the Offer by
the Company.
Except as disclosed in this Offer to Purchase, the Company currently has no
plans or proposals that relate to or would result in (a) the acquisition by any
person of additional securities of the Company or the disposition of securities
of the Company; (b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries;
(c) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries; (d) any change in the present Board of Directors or management
of the Company; (e) any material change in the present dividend rate or policy,
or indebtedness or capitalization of the Company; (f) any other material change
in the Company's corporate structure or business; (g) any change in the
Company's Certificate of Incorporation or By-Laws
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or other actions which may impede the acquisition of control of the Company by
any person; (h) a class of equity security of the Company being delisted from a
national securities exchange or ceasing to be authorized for quotation in an
inter-dealer quotation system of a registered national securities association;
(i) a class of equity security of the Company becoming eligible for termination
of registration pursuant to Section 12(g)(4) of the Exchange Act; or (j) the
suspension of the Company's obligation to file reports pursuant to Section 15(d)
of the Exchange Act.
3. PROCEDURES FOR TENDERING SHARES.
PROPER TENDER OF SHARES. For Shares to be tendered properly pursuant to the
Offer, (a) the certificates for such Shares (or confirmation of receipt of such
Shares pursuant to the procedure for book-entry transfer set forth below),
together with a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof), including any required signature guarantees,
and any other documents required by the Letter of Transmittal, must be received
prior to 12:00 Midnight, New York City time, on the Expiration Date by the
Depositary at its address set forth on the back cover of this Offer to Purchase,
or (b) the tendering stockholder must comply with the guaranteed delivery
procedure set forth below.
ODD LOT HOLDERS WHO TENDER ALL SHARES MUST COMPLETE THE SECTION CAPTIONED
"ODD LOTS" IN THE LETTER OF TRANSMITTAL AND, IF APPLICABLE, IN THE NOTICE OF
GUARANTEED DELIVERY, TO QUALIFY FOR THE PREFERENTIAL TREATMENT AVAILABLE TO ODD
LOT HOLDERS AS SET FORTH IN SECTION 1.
STOCKHOLDERS WHO HOLD SHARES THROUGH BROKERS OR BANKS ARE URGED TO CONSULT
THE BROKERS OR BANKS TO DETERMINE WHETHER TRANSACTION COSTS ARE APPLICABLE IF
STOCKHOLDERS TENDER SHARES THROUGH THE BROKERS OR BANKS AND NOT DIRECTLY TO THE
DEPOSITARY.
SIGNATURE GUARANTEES AND METHOD OF DELIVERY. No signature guarantee is
required: (i) if the Letter of Transmittal is signed by the registered holder of
the Shares (which term, for purposes of this Section 3, shall include any
participant in The Depository Trust Company (the "Book-Entry Transfer Facility")
whose name appears on a security position listing as the owner of the Shares)
tendered therewith and such holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal; or (ii) if Shares are tendered for
the account of a bank, broker, dealer, credit union, savings association or
other entity which is a member in good standing of the Securities Transfer
Agents Medallion Program or a bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934,
as amended (each of the foregoing constituting an "Eligible Institution"). See
"Instruction 1 of the Letter of Transmittal." If a certificate for Shares is
registered in the name of a person other than the person executing a Letter of
Transmittal, or if payment is to be made, or Shares not purchased or tendered
are to be issued, to a person other than the registered holder, then the
certificate must be endorsed or accompanied by an appropriate stock power, in
either case, signed exactly as the name of the registered holder appears on the
certificate, with the signature guaranteed by an Eligible Institution.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of
certificates for such Shares (or a timely confirmation of the book-entry
transfer of the Shares into the Depositary's account at the Book-Entry Transfer
Facility as described above), a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) and any other documents
required by the Letter of Transmittal. THE METHOD OF DELIVERY OF ALL DOCUMENTS,
INCLUDING CERTIFICATES FOR SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS, IS AT THE ELECTION AND
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RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, THEN REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
BOOK-ENTRY DELIVERY. The Depositary will establish an account with respect
to the Shares for purposes of the Offer at the Book-Entry Transfer Facility
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of the Shares by causing the
Book-Entry Transfer Facility to transfer Shares into the Depositary's account in
accordance with the Book-Entry Transfer Facility's procedures for transfer.
Although delivery of Shares may be effected through a book-entry transfer into
the Depositary's account at the Book-Entry Transfer Facility, either (i) a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) with any required signature guarantees and any other required
documents must, in any case, be transmitted to and received by the Depositary at
its address set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or (ii) the guaranteed delivery procedure described below must
be followed. DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED
DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
UNITED STATES FEDERAL INCOME TAX BACKUP WITHHOLDING. Under the United
States federal income tax backup withholding rules, unless an exemption applies
under the applicable law and regulations, 31% of the gross proceeds payable to a
stockholder or other payee pursuant to the Offer must be withheld and remitted
to the United States Internal Revenue Service ("IRS"), unless the stockholder or
other payee provides its taxpayer identification number (employer identification
number or social security number) to the Depositary (as payor) and certifies
under penalties of perjury that such number is correct. Therefore, each
tendering stockholder should complete and sign the Substitute Form W-9 included
as part of the Letter of Transmittal so as to provide the information and
certification necessary to avoid backup withholding. If the Depositary is not
provided with the correct taxpayer identification number, the United States
Holder (as defined in Section 13 herein) also may be subject to a penalty
imposed by the IRS. If withholding results in an overpayment of taxes, a refund
may be obtained. Certain "exempt recipients" (including, among others, all
corporations and certain Non-United States Holders (as defined in Section 13
herein)) are not subject to these backup withholding and information reporting
requirements. In order for a Non-United States Holder to qualify as an exempt
recipient, that stockholder must submit an IRS Form W-8 or a Substitute Form
W-8, signed under penalties of perjury, attesting to that stockholder's exempt
status. Such statements can be obtained from the Depositary. See "Instruction 13
of the Letter of Transmittal."
TO PREVENT UNITED STATES FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31%
OF THE GROSS PAYMENTS MADE TO STOCKHOLDERS FOR SHARES PURCHASED PURSUANT TO THE
OFFER, EACH STOCKHOLDER WHO DOES NOT OTHERWISE ESTABLISH AN EXEMPTION FROM SUCH
BACKUP WITHHOLDING MUST PROVIDE THE DEPOSITARY WITH THE STOCKHOLDER'S CORRECT
TAXPAYER IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY
COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED AS PART OF THE LETTER OF
TRANSMITTAL.
For a discussion of certain United States federal income tax consequences to
tendering stockholders, see "--Section 13."
WITHHOLDING FOR NON-UNITED STATES HOLDERS. Even if a Non-United States
Holder has provided the required certification to avoid backup withholding, the
Depositary will withhold United States federal income taxes equal to 30% of the
gross payments payable to a Non-United States Holder or his agent unless the
Depositary determines that a reduced rate of withholding is available (E.G.,
pursuant to a tax treaty) or that an exemption from withholding is applicable
(E.G., because the gross proceeds are effectively connected with the conduct of
a trade or business within the United States). In order to obtain a reduced rate
of withholding pursuant to a tax treaty, a Non-United States Holder must deliver
to the Depositary
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before the payment a properly completed and executed IRS Form 1001. In order to
obtain an exemption from withholding on the grounds that the gross proceeds paid
pursuant to the Offer are effectively connected with the conduct of a trade or
business within the United States, a Non-United States Holder must deliver to
the Depositary a properly completed and executed IRS Form 4224. The Depositary
will determine a stockholder's status as a Non-United States Holder and
eligibility for a reduced rate of, or exemption from, withholding by reference
to any outstanding certificates or statements concerning eligibility for a
reduced rate of, or exemption from, withholding (e.g., IRS Form 1001 or IRS Form
4224) unless facts and circumstances indicate that such reliance is not
warranted. A Non-United States Holder may be eligible to obtain a refund of all
or a portion of any tax withheld if such Non-United States Holder meets those
tests described in Section 13 that would characterize the exchange as a sale (as
opposed to a dividend) or is otherwise able to establish that no tax or a
reduced amount of tax is due.
NON-UNITED STATES HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX WITHHOLDING,
INCLUDING ELIGIBILITY FOR A WITHHOLDING TAX REDUCTION OR EXEMPTION, AND THE
REFUND PROCEDURE.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and the stockholder's Share certificates are not immediately available
or cannot be delivered to the Depositary prior to the Expiration Date (or the
procedure for book-entry transfer cannot be completed on a timely basis) or if
time will not permit all required documents to reach the Depositary prior to the
Expiration Date, the Shares may nevertheless be tendered, provided that all of
the following conditions are satisfied:
(a) the tender is made by or through an Eligible Institution;
(b) the Depositary receives by hand, mail, overnight courier, telegram
or facsimile transmission, on or prior to the Expiration Date, a properly
completed and duly executed Notice of Guaranteed Delivery substantially in
the form the Company has provided with this Offer to Purchase, including
(where required) a signature guarantee by an Eligible Institution in the
form set forth in such Notice of Guaranteed Delivery; and
(c) the certificates for all tendered Shares, in proper form for
transfer (or confirmation of book-entry transfer of such Shares into the
Depositary's account at the Book-Entry Transfer Facility), together with a
properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) and any required signature guarantees or other
documents required by the Letter of Transmittal, are received by the
Depositary within three Nasdaq trading days after the date of receipt by the
Depositary of the Notice of Guaranteed Delivery.
RETURN OF TENDERED SHARES. If any tendered Shares are not purchased, or if
less than all Shares evidenced by a stockholder's certificates are tendered,
certificates for unpurchased Shares will be returned as promptly as practicable
after the expiration or termination of the Offer or, in the case of Shares
tendered by book-entry transfer at the Book-Entry Transfer Facility, the Shares
will be credited to the appropriate account maintained by the tendering
stockholder at the Book-Entry Transfer Facility, in each case without expense to
the stockholder.
COMPANY STOCK OPTION PLANS. The Company is not offering, as part of the
Offer, to purchase any options ("Options") outstanding under the Company's Stock
Option Plans and tenders of Options will not be accepted. Holders of Options who
wish to participate in the Offer may either (i) comply with the procedure for
guaranteed delivery set forth above without having to exercise their Options
until after the results of the Offer are known (provided, however, that an
Option holder will not be required to make the requisite tender through an
Eligible Institution and may personally execute and deliver the Notice of
Guaranteed Delivery) or (ii) exercise their Options and purchase Shares of the
Company's common stock and then tender the Shares pursuant to the Offer,
provided that, in the case of either (i) or (ii), any exercise of an Option and
tender of Shares is in accordance with the terms of the Option Plans and the
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Options. In no event are any Options to be delivered to the Depositary in
connection with a tender of Shares hereunder. An exercise of an Option cannot be
revoked even if Shares received upon the exercise and tendered in the Offer are
not purchased in the Offer for any reason.
DETERMINATION OF VALIDITY; REJECTION OF SHARES; WAIVER OF DEFECTS; NO
OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the number of Shares
to be accepted, the price to be paid for Shares to be accepted and the validity,
form, eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by the Company, in its sole discretion, and
its determination shall be final and binding on all parties. The Company
reserves the absolute right to reject any or all tenders of any Shares that it
determines are not in proper form or the acceptance for payment of or payment
for which may, in the opinion of the Company's counsel, be unlawful. The Company
also reserves the absolute right to waive any of the conditions of the Offer or
any defect or irregularity in any tender with respect to any particular Shares
or any particular stockholder and the Company's interpretation of the terms of
the Offer will be final and binding on all parties. No tender of Shares will be
deemed to have been properly made until all defects or irregularities have been
cured by the tendering stockholder or waived by the Company. None of the
Company, the Depositary, the Information Agent or any other person shall be
obligated to give notice of any defects or irregularities in tenders, nor shall
any of them incur any liability for failure to give any notice.
TENDERING STOCKHOLDER'S REPRESENTATION AND WARRANTY; COMPANY'S ACCEPTANCE
CONSTITUTES AN AGREEMENT. A tender of Shares pursuant to any of the procedures
described above will constitute the tendering stockholder's acceptance of the
terms and conditions of the Offer, as well as the tendering stockholder's
representation and warranty to the Company that (a) the stockholder has a net
long position in the Shares or equivalent securities at least equal to the
Shares tendered within the meaning of Rule 14e-4 promulgated by the Commission
under the Exchange Act and (b) the tender of Shares complies with Rule 14e-4. It
is a violation of Rule 14e-4 for a person, directly or indirectly, to tender
Shares for that person's own account unless, at the time of tender and at the
end of the proration period or period during which Shares are accepted by lot
(including any extensions thereof), the person so tendering (i) has a net long
position equal to or greater than the amount of (x) Shares tendered or (y) other
securities convertible into or exchangeable or exercisable for the Shares
tendered and will acquire the Shares for tender by conversion, exchange or
exercise and (ii) will deliver or cause to be delivered the Shares in accordance
with the terms of the Offer. Rule 14e-4 provides a similar restriction
applicable to the tender or guarantee of a tender on behalf of another person.
The Company's acceptance for payment of Shares tendered pursuant to the Offer
will constitute a binding agreement between the tendering stockholder and the
Company upon the terms and conditions of the Offer.
CERTIFICATES FOR SHARES, TOGETHER WITH A PROPERLY COMPLETED LETTER OF
TRANSMITTAL AND ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL, MUST
BE DELIVERED TO THE DEPOSITARY AND NOT TO THE COMPANY. ANY SUCH DOCUMENTS
DELIVERED TO THE COMPANY WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE
WILL NOT BE DEEMED TO BE PROPERLY TENDERED.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares pursuant
to the Offer are irrevocable. Shares tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by the Company pursuant to the Offer, may also be withdrawn
at any time after 12:00 Midnight, New York City time, on Thursday, November 12,
1998.
For a withdrawal to be effective, a notice of withdrawal must be in written,
telegraphic, telex or facsimile transmission form and must be received in a
timely manner by the Depositary at its address set forth on the back cover of
this Offer to Purchase. Any such notice of withdrawal must specify the name of
the tendering stockholder, the number of Shares to be withdrawn and the name of
the registered holder of
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such Shares. If the certificates for Shares to be withdrawn have been delivered
or otherwise identified to the Depositary, then, prior to the release of such
certificates, the tendering stockholder must also submit the serial numbers
shown on the particular certificates for Shares to be withdrawn and the
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
Institution (except in the case of Shares tendered for the account of an
Eligible Institution). If Shares have been tendered pursuant to the procedure
for book-entry transfer set forth in Section 3, the notice of withdrawal also
must specify the name and the number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Shares and must otherwise comply with
such Book-Entry Transfer Facility's procedures. All questions as to the form and
validity (including the time of receipt) of any notice of withdrawal will be
determined by the Company, in its sole discretion, which determination shall be
final and binding. None of the Company, the Depositary, the Information Agent or
any other person shall be obligated to give notice of any defects or
irregularities in any notice of withdrawal nor shall any of them incur liability
for failure to give any notice.
Withdrawals may not be rescinded and any Shares properly withdrawn will
thereafter be deemed not properly tendered for purposes of the Offer unless the
withdrawn Shares are properly re-tendered prior to the Expiration Date by
following one of the procedures described in Section 3.
If the Company extends the Offer, is delayed in its purchase of Shares or is
unable to purchase Shares pursuant to the Offer for any reason, then, without
prejudice to the Company's rights under the Offer, the Depositary may, subject
to applicable law, retain tendered Shares on behalf of the Company, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in this Section 4.
5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE.
Upon the terms and subject to the conditions of the Offer, as promptly as
practicable following the Expiration Date, the Company will purchase and pay at
the Purchase Price for up to 10,000,000 of the Shares properly tendered and not
properly withdrawn prior to the Expiration Date, taking into account the number
of Shares so tendered. In addition, the Company reserves the right, in its sole
discretion and subject to applicable law, to delay acceptance for payment of or
payment for Shares in order to comply, in whole or in part, with any applicable
law, government regulation or any other condition contained herein. See
"--Section 6." For purposes of the Offer, the Company will be deemed to have
accepted for payment (and thereby purchased) Shares that are properly tendered
and not properly withdrawn (subject to the proration provisions of the Offer)
only when, as and if it gives oral or written notice to the Depositary of its
acceptance of the Shares for payment pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer, promptly
following the Expiration Date, the Company will pay for Shares purchased
pursuant to the Offer by depositing the aggregate Purchase Price therefor with
the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payment from the Company and transmitting payment to the
tendering stockholders.
In the event of proration, the Company will determine the proration factor
and pay for those tendered Shares accepted for payment as soon as practicable
after the Expiration Date; however, the Company does not expect to be able to
announce the final results of any proration and commence payment for Shares
purchased until approximately five business days after the Expiration Date.
Certificates for all Shares tendered and not purchased due to proration will be
returned (or, in the case of Shares tendered by book-entry transfer, will be
credited to the account maintained with the Book-Entry Transfer Facility by the
participant therein who so delivered the Shares) to the tendering stockholder at
the Company's expense as promptly as practicable after the Expiration Date or
termination of the Offer without expense to the tendering stockholders. UNDER NO
CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE BE PAID BY THE COMPANY BY
REASON OF ANY DELAY IN MAKING PAYMENT. In addition, if certain events occur, the
Company may not be obligated to purchase Shares pursuant to the Offer. See
"--Section 6."
22
<PAGE>
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer. If, however, payment
of the Purchase Price is to be made to, or (in the circumstances permitted by
the Offer) if unpurchased Shares are to be registered in the name of, any person
other than the registered holder, or if tendered certificates are registered in
the name of any person other than the person signing the Letter of Transmittal,
the amount of all stock transfer taxes, if any (whether imposed on the
registered holder or the other person), payable on account of the transfer to
the person will be deducted from the Purchase Price unless satisfactory evidence
of the payment of the stock transfer taxes, or exemption therefrom, is
submitted. See "Instruction 6 of the Letter of Transmittal."
ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY, SIGN
AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 INCLUDED WITH THE LETTER OF
TRANSMITTAL MAY BE SUBJECT TO REQUIRED FEDERAL INCOME TAX BACKUP WITHHOLDING OF
31% OF THE GROSS PROCEEDS PAID TO THE STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE
OFFER. SEE "--SECTION 3." ALSO SEE "--SECTION 3" REGARDING UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES FOR NON-UNITED STATES HOLDERS.
6. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, the Company will not be
required to accept for payment, purchase or pay for any Shares tendered, and may
terminate or amend the Offer or may postpone the acceptance for payment of, or
the purchase of and the payment for Shares tendered, subject to Rule 13e-4(f)
under the Exchange Act, if at any time on or after September 17, 1998 and prior
to the Expiration Date any of the following events shall have occurred (or shall
have been determined by the Company to have occurred) that, in the Company's
reasonable judgment and regardless of the circumstances giving rise thereto
(including any action or omission to act by the Company), makes it inadvisable
to proceed with the Offer or with acceptance for payment:
(a) there shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or
administrative agency, authority or tribunal or any other person, domestic
or foreign, before any court, authority, agency or tribunal that directly or
indirectly (i) challenges the making of the Offer, the acquisition of some
or all of the Shares pursuant to the Offer or otherwise relates in any
manner to the Offer, or (ii) in the Company's reasonable judgment, could
materially and adversely affect the business, condition (financial or
other), income, operations or prospects of the Company and its subsidiaries,
taken as a whole, or otherwise materially impair in any way the contemplated
future conduct of the business of the Company or any of its subsidiaries or
materially impair the contemplated benefits of the Offer to the Company;
(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the Offer or the Company or
any of its subsidiaries, by any court or any authority, agency or tribunal
that, in the Company's reasonable judgment, would or might directly or
indirectly (i) make the acceptance for payment of, or payment for, some or
all of the Shares illegal or otherwise restrict or prohibit consummation of
the Offer, (ii) delay or restrict the ability of the Company, or render the
Company unable, to accept for payment or pay for some or all of the Shares,
(iii) materially impair the contemplated benefits of the Offer to the
Company or (iv) materially and adversely affect the business, condition
(financial or otherwise), income, operations or prospects of the Company and
its subsidiaries, taken as a whole, or otherwise materially impair in any
way the contemplated future conduct of the business of the Company or any of
its subsidiaries;
(c) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market, (ii) the declaration of
23
<PAGE>
a banking moratorium or any suspension of payments in respect of banks in
the United States, (iii) the commencement of a war, armed hostilities or
other international or national calamity directly or indirectly involving
the United States, (iv) any limitation (whether or not mandatory) by any
governmental, regulatory or administrative agency or authority on, or any
event that, in the Company's reasonable judgment, might affect, the
extension of credit by banks or other lending institutions in the United
States, (v) any significant decrease in the market price of the Shares or
any change in the general political, market, economic or financial
conditions in the United States or abroad that could, in the reasonable
judgment of the Company, have a material adverse effect on the Company's
business, operations or prospects or the trading in the Shares, (vi) in the
case of any of the foregoing existing at the time of the commencement of the
Offer, a material acceleration or worsening thereof or (vii) any decline in
either the Dow Jones Industrial Average or the Standard and Poor's Index of
500 Industrial Companies by an amount in excess of 10% measured from the
close of business on September 16, 1998;
(d) a tender or exchange offer for any or all of the Shares (other than
the Offer), or any merger, business combination or other similar transaction
with or involving the Company or any subsidiary, shall have been proposed,
announced or made by any person;
(e) (i) any entity, "group" (as that term is used in Section 13(d)(3) of
the Exchange Act) or person shall have acquired or proposed to acquire
beneficial ownership of more than 5% of the outstanding Shares (other than
any such person, entity or group who has filed a Schedule 13D or Schedule
13G with the Commission on or before September 17, 1998), (ii) any such
entity, group or person who has filed a Schedule 13D or Schedule 13G with
the Commission on or before the Expiration Date shall have acquired or
proposed to acquire beneficial ownership of an additional 2% or more of the
outstanding Shares or (iii) any person, entity or group shall have filed a
Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, or made a public announcement
reflecting an intent to acquire the Company or any of its subsidiaries or
any of their respective assets or securities other than in connection with a
transaction authorized by the Board of Directors of the Company;
(f) any change or changes shall have occurred in the business, financial
condition, assets, income, operations, prospects or stock ownership of the
Company or its subsidiaries that, in the Company's reasonable judgment, is
or may be material to the Company or its subsidiaries; or
(g) the Company determines that the consummation of the offer and the
purchase of the Shares may cause the Shares to be delisted from Nasdaq or to
be eligible for deregistration under the Exchange Act.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances (including any action or
omission by the Company) giving rise to any such condition, and may be waived by
the Company, in whole or in part, at any time and from time to time in its
reasonable discretion. The Company's failure at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time. Any determination by the Company concerning the events
described above will be final and binding.
7. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are listed and traded on Nasdaq. On August 17, 1998, the Company
made a pro rata distribution to its stockholders of one share of Series A
Preferred Stock for each share of Common Stock outstanding on July 30, 1998. The
distribution of the Series A Preferred Stock, which is separately traded on
Nasdaq, had an immediate negative impact on the trading price of the Common
Stock. On the first day of trading of the Series A Preferred Stock, the closing
sale price of the Series A Preferred Stock was $14 7/8 and the closing sale
price of the Common Stock was $4 3/8.
24
<PAGE>
The following table sets forth, for the fiscal quarters indicated, (i) the
high and low per Share sales prices on Nasdaq as compiled from published
financial sources, (ii) the high and low per Share sales prices adjusted to
reflect the distribution of the Series A Preferred Stock, assuming a price per
share of $14 7/8 for the Series A Preferred Stock, which was the closing sale
price on the first day of trading of the Series A Preferred Stock; and (iii) the
cash dividends paid, or to be paid, per Share in each of such fiscal quarters.
<TABLE>
<CAPTION>
AS ADJUSTED
------------------
HIGH LOW HIGH LOW DIVIDENDS
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
1996:
$
1st Quarter........................... $16 1/8 $15 $ 1 1/4 1/8 $--
2nd Quarter........................... 16 1/2 15 1/4 1 5/8 3/8 --
3rd Quarter........................... 16 1/2 14 3/4 1 5/8 -- --
4th Quarter........................... 17 5/8 16 2 3/4 1 1/8 .30
1997:
1st Quarter........................... 19 16 3/4 4 1/8 1 7/8 .30
2nd Quarter........................... 19 5/8 17 3/8 4 3/4 2 1/2 .30
3rd Quarter........................... 23 17 5/8 8 1/8 2 3/4 .30
4th Quarter........................... 19 3/8 17 1/8 4 1/2 2 1/4 .35
1998:
1st Quarter........................... 20 1/4 18 5 3/8 3 1/8 .35
2nd Quarter........................... 19 1/2 17 3/8 4 5/8 2 1/2 .35
3rd Quarter (through September 15,
1998)............................... 19 1/4 2 1/4(1) 4 3/8 2 1/4 .35
</TABLE>
- ------------------------
(1) Reflects a sale made in the first hour of trading following the distribution
of the Series A Preferred Stock.
On September 15, 1998, the last full trading day prior to the announcement
of the Offer, the closing per Share sale price as reported on Nasdaq was
$4 5/16. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
SHARES.
8. SOURCE AND AMOUNT OF FUNDS.
Assuming the Company purchases 10,000,000 Shares pursuant to the Offer at
the Purchase Price, the Company expects the maximum aggregate cost, including
all fees and expenses applicable to the Offer, to be approximately $55,150,000.
The Company has obtained a $50 million credit facility (the "New Credit
Facility") with Morgan Guaranty Trust Company of New York ("MGTC"). The New
Credit Facility has a term of 12 months and bears interest at either (i) the
rate of interest publicly announced by MGTC from time to time as its Prime Rate
or (ii) LIBOR plus 30 basis points. Sol Price, Helen Price (who is Sol Price's
wife) and the Sol & Helen Price Trust (the "Trust") have entered into a Guaranty
and Pledge Agreement dated as of September 15, 1998 (the "Guaranty") pursuant to
which they have jointly and severally agreed to guaranty the Company's
obligations under the New Credit Facility and the Trust has agreed to grant MGTC
a continuing security interest in U.S Treasury Notes having a value greater than
the amount outstanding under the New Credit Facility to secure their obligations
under the Guaranty. As of September 16, 1998, no amounts were outstanding under
the New Credit Facility.
The Company also has an existing unsecured revolving credit facility with
UBS, which recently was amended (the "UBS Credit Facility"). The UBS Credit
Facility now provides for a maximum principal amount of $50 million and has a
term expiring December 31, 1998. The UBS Credit Facility bears interest at LIBOR
plus 80 basis points at the Company's current leverage ratio and will bear
interest at LIBOR plus 90 basis points at the Company's expected leverage ratio
following consummation of the Offer and related transactions. As of September
16, 1998, the Company had approximately $35 million outstanding on its credit
facility with UBS.
25
<PAGE>
The Company intends to obtain permanent financing, which may be secured by
mortgages on certain of the Company's real properties, prior to December 31,
1998 to refinance the UBS Credit Facility. The Company has not yet determined
whether it will seek to refinance the New Credit Facility at the same time it
refinances the UBS Credit Facility.
9. CERTAIN INFORMATION CONCERNING THE COMPANY.
GENERAL. The Company was incorporated in the State of Delaware in 1994 and
reincorporated in Maryland in January 1998 following its decision to elect REIT
status. The Company's principal executive office is located at 4649 Morena
Blvd., San Diego, CA 92117.
The Company's principal business is acquiring, developing, operating,
managing and leasing real property. The Company's current portfolio is
substantially comprised of commercial rental properties including shopping
centers and "power centers" leased to major retail tenants such as Costco, The
Sports Authority, The Home Depot, Kmart, Marshalls, PetsMart and Borders Books.
As of June 30, 1998, the Company owned 31 real estate properties and held one
property pursuant to a 22-year ground lease, which have an aggregate net book
value of $407.6 million. Approximately 59% of annual minimum rents are derived
from tenants with investment grade credit ratings.
The Company's business strategy is to continue to enhance the value and
operating income of the Company's portfolio by, among other things, completing
the development and leasing of existing properties and acquiring new investment
properties. In making new real estate investments, the Company intends to
continue to place emphasis on acquiring well-located income-producing commercial
properties, principally occupied by credit rated tenants in the western and
northeastern United States, with attractive yields and potential for increases
in income and capital appreciation. The Company also may take advantage of
attractive investments in other geographic areas and product types in order to
enhance stockholder value. The Company also may participate in public-private
partnerships to acquire and develop or redevelop properties in major cities. In
addition, the Company will from time to time consider the disposition or
exchange of existing investments in order to improve its investment portfolio or
increase its funds from operations. The Company's management continuously
reviews the Company's properties and attempts to develop appropriate programs to
renovate and modernize its properties in order to improve funds from operations
and property values. The Company's investment and portfolio management objective
is to maximize funds from operations and distributions to stockholders. The
Company also currently owns and operates a self storage business, "Price Self
Storage," with two facilities open in San Diego, California. The Company has
decided to expand the self storage business on a limited basis.
The Company provides property management directly for all of its properties.
Self-management enables the Company to more closely control leasing and property
management. Internal property management also provides the Company opportunities
for operating efficiencies by enabling it to acquire additional properties
without proportionate increases in property management expenses. The Company's
property management program is implemented by property management and leasing
professionals located in offices in San Diego, California, Fairfax, Virginia and
White Plains, New York.
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION. Set forth below is
certain selected historical and pro forma financial information with respect to
the Company. Historical financial information for the four-month period ended
December 31, 1997 and the year ended August 31, 1997 was derived from the
audited financial statements contained in the Company's Transition Report on
Form 10-K for the four months ended December 31, 1997 (the "Company's 1997
Transition Report") and historical financial information for the quarter ended
June 30, 1998 was derived from the unaudited financial statements contained in
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998
(the "Company's 1998 Second Quarter Report"), each of which is hereby
incorporated herein by reference, and other information and data contained in
the Company's 1997 Transition Report and the Company's 1998 Second Quarter
Report. More comprehensive financial information is included in such reports and
the
26
<PAGE>
historical information below is qualified in its entirety by reference to such
reports and all of the financial statements and related notes contained therein,
copies of which may be obtained as set forth below under the caption "Additional
Information."
The pro forma information on the results of operations for the year ended
August 31, 1997, the four month period ended December 31, 1997 and the six month
period ended June 30, 1998, assumes that at the beginning of each period shown,
the Company borrowed $55,150,000 at an average interest rate of LIBOR plus 36
basis points to purchase 10,000,000 Shares pursuant to the Offer at the Purchase
Price and to pay the related fees and expenses of the Offer. Other pro forma
adjustments include revenue and expenses associated with acquisitions of two
properties in May 1998 as well as dividends on the Company's 8 3/4% Series A
Cumulative Redeemable Preferred Stock ("Series A Preferred Stock"). The
assumptions on which the pro forma financial information is based are further
described in the Notes to Selected Historical and Pro Forma Financial
Information. Each period presented should be treated as a stand-alone period.
The pro forma information of the Company is unaudited and does not purport to be
indicative of the results that would actually have been attained had the
purchase of the Shares pursuant to the Offer been completed at the dates
indicated or the results that may be obtained in the future.
27
<PAGE>
PRICE ENTERPRISES, INC.
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT SHARE AMOUNTS, PER SHARE AMOUNTS AND RATIOS)
(UNAUDITED)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------------------------------------------
JUNE 30, 1998
----------------------------------------------------- JUNE 30, 1997
TRANSACTION OTHER -------------
HISTORICAL ADJUSTMENTS ADJUSTMENTS(3) PRO FORMA HISTORICAL
----------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Rental revenues................................ $ 29,773 $ -- $ 2,236 $ 32,009 $ 28,172
Expenses
Operating and maintenance.................... 3,503 -- 324 3,827 4,182
Property taxes............................... 4,162 -- 101 4,263 3,822
Depreciation and amortization................ 5,352 -- 693 6,045 4,912
General and administrative................... 1,512 100(1) -- 1,612 2,693
----------- ----------- -------------- ----------- -------------
Total expenses............................. 14,529 100 1,118 15,747 15,609
----------- ----------- -------------- ----------- -------------
Operating income............................... 15,244 (100) 1,118 16,262 12,563
Interest and other
Interest (expense) income, net............... 240 (1,654)(2) (737) (2,211) 4,157
Loss on sale of real estate and investments,
net........................................ -- -- -- -- (473)
----------- ----------- -------------- ----------- -------------
Total interest and other................... 240 (1,654) (797) (2,211) 3,684
----------- ----------- -------------- ----------- -------------
Income before provision for income taxes....... 15,484 (1,754) 321 14,051 16,247
Provision for income taxes..................... -- -- -- -- 6,663
----------- ----------- -------------- ----------- -------------
Income from continuing operations.............. 15,484 (1,754) 321 14,051 9,584
Discontinued operations
Net loss from operations of discontinued
merchandising segment...................... -- -- -- -- (1,085)
----------- ----------- -------------- ----------- -------------
Net income..................................... $ 15,484 $ (1,754) $ 321 $ 14,051 $ 8,499
----------- ----------- -------------- ----------- -------------
----------- ----------- -------------- ----------- -------------
Less: Preferred dividends...................... -- -- (16,631) (16,631) --
----------- ----------- -------------- ----------- -------------
----------- ----------- -------------- ----------- -------------
Income (loss) attributable to Common
stockholders................................. $ 15,484 $ (1,754) $ (16,310) $ (2,580) $ 8,499
----------- ----------- -------------- ----------- -------------
----------- ----------- -------------- ----------- -------------
Income (loss) per share of Common Stock from
continuing operations-- basic and diluted.... $ 0.65 $ (0.19)(4) $ 0.41
----------- ----------- -------------
----------- ----------- -------------
Income (loss) per share of Common Stock--basic
and diluted.................................. $ 0.65 $ (0.19)(4) $ 0.36
----------- ----------- -------------
----------- ----------- -------------
Weighted average number of Common shares
outstanding--basic........................... 23,747 13,747 23,341
Weighted average number of
Common shares outstanding
--assuming dilution.......................... 23,837 13,837 23,341
Ratio of earnings to fixed charges............. 45.2 6.1 -- (5)
</TABLE>
See Notes to Selected Historical and Pro Forma Financial Information.
28
<PAGE>
PRICE ENTERPRISES, INC.
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT SHARE AMOUNTS, PER SHARE AMOUNTS AND RATIOS)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOUR MONTHS ENDED
------------------------------------------------------------------------
DECEMBER 31, 1997
-----------------------------------------------------
TRANSACTION OTHER
HISTORICAL ADJUSTMENTS ADJUSTMENTS(3)
----------- ----------- -------------- DECEMBER 31, 1996
-----------------
PRO FORMA HISTORICAL
----------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Rental revenues........................... $ 18,170 $ -- $ 2,111 $ 20,281 $ 18,941
Expenses
Operating and maintenance............... 2,392 -- 260 2,652 3,037
Property taxes.......................... 2,361 -- 98 2,459 2,789
Depreciation and amortization........... 3,326 -- 663 3,989 3,299
General and administrative.............. 1,046 100(1) -- 1,146 1,638
----------- ----------- -------------- ----------- -------
Total expenses........................ 9,125 100 1,021 10,246 10,763
----------- ----------- -------------- ----------- -------
Operating income.......................... 9,045 (100) 1,090 10,035 8,178
Interest and other
Interest (expense) income, net.......... 833 (1,114)(2) (716) (997) 2,615
Gain on sale of real estate and
investments, net...................... -- -- -- -- 2,071
----------- ----------- -------------- ----------- -------
Total interest and other.............. 833 (1,114) (716) (997) 4,686
----------- ----------- -------------- ----------- -------
Income before provision for income taxes.. 9,878 (1,214) 374 9,038 12,864
Provision for income taxes................ (7,630) -- -- (7,630) 5,274
----------- ----------- -------------- ----------- -------
Income from continuing operations......... 17,508 (1,214) 374 16,668 7,590
Discontinued operations
Net loss from operations of discontinued
merchandising segment................. -- -- -- -- (3,235)
----------- ----------- -------------- ----------- -------
Net income................................ $ 17,508 $ (1,214) $ 374 $ 16,668 $ 4,355
----------- ----------- -------------- ----------- -------
----------- ----------- -------------- ----------- -------
Less: Preferred dividends................. -- -- (11,166) (11,166) --
----------- ----------- -------------- ----------- -------
Income attributable to Common
stockholders............................ $ 17,508 $ (1,214) $ (10,792) $ 5,502 $ 4,355
----------- ----------- -------------- ----------- -------
----------- ----------- -------------- ----------- -------
Income per share of Common Stock from
continuing operations................... $ 0.74 $ 0.40(4) $ 0.33
----------- ----------- -------
----------- ----------- -------
Income per share of Common Stock.......... $ 0.74 $ 0.40(4) $ 0.19
----------- ----------- -------
----------- ----------- -------
Income per share of Common Stock from
continuing operations--assuming
dilution................................ $ 0.73 $ 0.40(4) $ 0.32
----------- ----------- -------
----------- ----------- -------
Income per share of Common Stock--
assuming dilution....................... $ 0.73 $ 0.40(4) $ 0.18
----------- ----------- -------
----------- ----------- -------
Weighted average number of Common shares
outstanding--basic...................... 23,675 13,675 23,298
Weighted average number of
Common shares outstanding
--assuming dilution..................... 23,919 13,919 23,620
Ratio of earnings to fixed charges........ -- (5) 5.9 85.0
</TABLE>
See Notes to Selected Historical and Pro Forma Financial Information.
29
<PAGE>
PRICE ENTERPRISES, INC.
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT SHARE AMOUNTS, PER SHARE AMOUNTS AND RATIOS)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------------------------------------------
AUGUST 31, 1997
----------------------------------------------------- AUGUST 31, 1996
TRANSACTION OTHER ---------------
HISTORICAL ADJUSTMENTS ADJUSTMENTS(3) HISTORICAL
----------- ----------- -------------- PRO FORMA ---------------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Rental revenues.............................. $ 56,838 $ -- $ 6,332 $ 63,170 $ 56,221
Expenses
Operating and maintenance.................. 9,105 -- 779 9,884 9,591
Property taxes............................. 7,882 -- 293 8,175 8,380
Depreciation and amortization.............. 9,860 -- 1,990 11,850 10,071
General and administrative................. 5,569 100(1) -- 5,669 5,350
Provision for asset impairments............ 2,000 -- -- 2,000 17,000
----------- ----------- -------------- ----------- -------
Total expenses........................... 34,416 100 3,062 37,578 50,392
----------- ----------- -------------- ----------- -------
Operating income............................. 22,422 (100) 3,270 25,592 5,829
Interest and other
Interest (expense) income, net............. 8,033 (3,259)(2) (2,118) 2,656 7,442
Loss on sale of real estate and
investments, net......................... 1,893 -- -- 1,893 864
----------- ----------- -------------- ----------- -------
Total interest and other................. 9,926 (3,259) (2,118) 4,549 8,306
----------- ----------- -------------- ----------- -------
Income before provision for income taxes..... 32,348 (3,359) 1,152 30,141 14,135
Provision for income taxes................... 13,263 (1,377) 472 12,358 5,795
----------- ----------- -------------- ----------- -------
Income from continuing operations.......... 19,085 (1,982) 680 17,783 8,340
Discontinued operations
Net loss from operations of discontinued
merchandising segment.................... (4,860) -- -- (4,860) (8,250)
----------- ----------- -------------- ----------- -------
Net income................................... $ 14,225 $ (1,982) $ 680 $ 12,923 $ 90
----------- ----------- -------------- ----------- -------
----------- ----------- -------------- ----------- -------
Less: Preferred dividends.................... -- -- (33,262) (33,262) --
----------- ----------- -------------- ----------- -------
Income (loss) attributable to Common
stockholders............................... $ 14,225 $ (1,982) $ (32,582) $ (20,339) $ 90
----------- ----------- -------------- ----------- -------
----------- ----------- -------------- ----------- -------
Income (loss) per share of Common Stock from
continuing operations--basic and diluted... $ 0.82 $ (1.16)(4) $ 0.36
----------- ----------- -------
----------- ----------- -------
Income (loss) per share of Common
Stock--basic and diluted................... $ 0.61 $ (1.52)(4) $ 0.00
----------- ----------- -------
----------- ----------- -------
Weighted average number of
Common shares outstanding
--basic and diluted........................ 23,354 13,354 23,380
Ratio of earnings to fixed charges........... 173.9 6.4 16.7
</TABLE>
See Notes to Selected Historical and Pro Forma Financial Information.
30
<PAGE>
PRICE ENTERPRISES, INC.
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(1) Reflects the estimated fees and expenses, including legal fees, printing and
mailing expenses, depositary fees and other, to be incurred by the Company
related to the Offer transaction.
(2) Reflects the estimated interest expense on $55,150,000 of debt incurred on
the Offer transaction at an average interest rate for the period.
(3) Other pro forma adjustments include revenue and expenses associated with
acquisitions of two properties in May 1998 as well as dividends on the
Series A Preferred Stock that was distributed in August 1998.
(4) The significant reduction in income per share of Common Stock from the
historical results to the pro forma results is primarily a result of the pro
forma adjustment for dividends which would have been paid to holders of the
Series A Preferred Stock had it been outstanding at the beginning of each
period presented. The Series A Preferred Stock actually was distributed on
August 17, 1998. The pro forma calculation of income per share of Common
Stock also reflects the reduction of shares of Common Stock outstanding by
10 million shares as a result of the Offer.
(5) The Company had no fixed charges during the period presented.
31
<PAGE>
PRICE ENTERPRISES, INC.
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
------------------------------------ -----------------
HISTORICAL ADJUSTMENTS HISTORICAL
---------- ----------- PRO FORMA -----------------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Assets
Real estate assets, net............................. $ 407,590 $ -- $ 407,590 $ 353,056
Other assets........................................ 30,275 -- 30,275 55,422
---------- ----------- ----------- --------
Total assets........................................ $ 437,865 $ -- $ 437,865 $ 408,478
---------- ----------- ----------- --------
---------- ----------- ----------- --------
Liabilities and Stockholders' Equity
Line of credit...................................... $ 20,000 $ 55,150(1) $ 75,150 $ --
Notes payable....................................... 8,943 -- 8,943 --
Other liabilities................................... 3,716 3,716 1,854
Stockholders' equity................................ 405,206 (55,150)(1) 350,056 406,624
---------- ----------- ----------- --------
Total liabilities and stockholders' equity............ $ 437,865 $ -- $ 437,865 $ 408,478
---------- ----------- ----------- --------
---------- ----------- ----------- --------
Book value per share of Common Stock.................. $ 17.06 $ (0.24)(2) $ 17.41
</TABLE>
- ------------------------
(1) To show effect of additional debt and reduction of stockholders' equity due
to purchase of 10,000,000 shares at $5.50 per share, including estimated
fees and expenses of the Offer.
(2) Reflects the reduction of stockholders' equity by the carrying value of the
Series A Preferred Stock, assuming a price per share of $14 7/8, the closing
sale price on the first day of trading of the Series A Preferred Stock, and
shows effect of the repurchase of 10 million Shares.
32
<PAGE>
PRICE ENTERPRISES, INC.
SELECTED HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------
JUNE 30, 1998 JUNE 30, 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
Operating activities................................................................ $ 15, 484 $ 8,499
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization..................................................... 5,352 4,912
Deferred rents.................................................................... (1,247) (943)
Deferred income taxes............................................................. -- (743)
Loss on sale of real estate and investments, net.................................. -- 473
Changes in operating assets and liabilities:
Accounts receivable and other assets.............................................. 210 6,387
Leasing costs..................................................................... (187) (83)
Accounts payable and other liabilities............................................ 1,862 (2,091)
Net assets of discontinued segment................................................ -- 4,203
------------- -------------
Net cash flows provided by operating activities..................................... 21,474 20,614
Investing activities
Additions to real estate assets................................................... (50,683) (1,602)
Proceeds from sale of real estate assets.......................................... -- 11,801
Payments of notes receivable...................................................... -- 42,405
Net investing activities of discontinued segment.................................. -- (6,605)
------------- -------------
Net cash flows (used in) provided by investing activities........................... (50,683) 45,999
Financing activities
Advances to revolving line of credit.............................................. 20,000 --
Dividends paid.................................................................... (16,622) (14,003)
Proceeds from exercise of stock options including tax benefits.................... 270 620
------------- -------------
Net cash flows provided by (used in) financing activities........................... 3,648 (13,383)
------------- -------------
Net (decrease) increase in cash..................................................... (25,561) 53,230
Cash and cash equivalents at beginning of period.................................... 27,003 35,831
------------- -------------
Cash and cash equivalents at end of period.......................................... $ 1,442 $ 89,061
------------- -------------
------------- -------------
Supplemental cash flow information:
Cash paid for interest............................................................ $ 117 $ --
Cash paid for income taxes........................................................ -- 2,086
Supplemental schedule of noncash operating and financing activities:
Assumption of note payable to acquire real estate assets.......................... 8,943 --
Adjustment of special dividend--distribution of PriceSmart........................ 550 --
</TABLE>
33
<PAGE>
ADDITIONAL INFORMATION. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports and other information with the Commission relating to its business,
financial condition and other matters. Information, as of particular dates,
concerning the Company's directors and officers, their remuneration, options
granted to them, the principal holders of the Company's securities and any
material interest of such persons in transactions with the Company is required
to be disclosed in proxy statements distributed to the Company's stockholders
and filed with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 2120, Washington,
D.C. 20549; at its regional offices located at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, New York, New York
10048. Copies of such material may also be obtained by mail, upon payment of the
Commission's customary charges, from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Commission also maintains a web site on the Internet at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
10. INTEREST OF DIRECTORS AND OFFICERS AND PRINCIPAL STOCKHOLDERS; TRANSACTIONS
AND ARRANGEMENTS CONCERNING SHARES.
As of September 9, 1998, the Company had 23,758,282 issued and outstanding
Shares and had reserved 672,867 Shares for issuance upon exercise of outstanding
stock options ("Options") under the Company's 1995 Combined Stock Grant and
Stock Option Plan, as amended, and its 1995 Directors Option Plan, as amended
(together, the "Option Plans"). The 10,000,000 Shares that the Company is
offering to purchase pursuant to the Offer represent approximately 42.1% of the
Company's Shares outstanding on September 9, 1998 (approximately 40.9% assuming
exercise of all outstanding Options).
As of September 9, 1998, the Company's directors and executive officers as a
group (8 persons) beneficially owned an aggregate of 3,347,317 Shares
representing approximately 14.1% of the outstanding Shares, assuming the
exercise by such persons of their Options exercisable within 60 days after
September 9, 1998. The Company has been advised that none of its directors or
executive officers intends to tender any Shares pursuant to the Offer, except
that Murray Galinson, a director, has advised the Company that the Galinson
Charitable Remainder Unit Trust, of which he is the trustee, intends to tender
5,000 Shares in the Offer. Following the Offer, the Company's directors and
executive officers as a group will continue to beneficially own at least
(depending on proration) 3,342,317 Shares, or 24.3%, of the Company's Common
Stock. Sol Price, a significant stockholder of the Company and the father of
Robert E. Price, the Chairman of the Company's Board of Directors, beneficially
owns 5,004,510 Shares through certain entities (the "Price Entities"). One of
such entities, the Price Family Charitable Trust, of which Sol Price is a
trustee, intends to tender 3,000,000 of the 4,545,170 Shares held by it in the
Offer. The Company has been advised that none of the other Price Entities
intends to tender Shares in the Offer. Following the Offer, Sol Price and Robert
E. Price will continue to beneficially own at least (depending on proration)
4,631,628 shares, or 33.7%, of the Company's Common Stock and 9,816,708 shares,
or 41.3% of the Company's Series A Preferred Stock.
As a result of their continued significant beneficial ownership of the
Company's stock, Sol Price and Robert E. Price will effectively control the
outcome of all matters submitted to the Company's stockholders for approval,
including the election of directors. In addition, such ownership could
discourage acquisition of Common Stock of the Company by potential investors,
and could have an anti-takeover effect, possibly depressing the trading price of
Common Stock of the Company.
Except as described below, based on the Company's records and on information
provided to the Company by its directors, executive officers and subsidiaries,
neither the Company, nor any associate or subsidiary of the Company nor, to the
best of the Company's knowledge, any of the directors or executive
34
<PAGE>
officers of the Company, nor any associates of any of the foregoing, has
effected any transactions involving the Shares during the 40 business days prior
to the date hereof.
On August 21, 1998, the Price Family Charitable Fund, of which Sol Price,
Robert E. Price and James F. Cahill are directors, made a gift of a total of
1,947,500 shares of the Company's Common Stock to two charitable organizations.
On September 8, 1998, the Price Family Charitable Fund, made a gift of an
additional 107,580 shares of Common Stock to one charitable organization. James
F. Cahill is a director of the Company.
Except as described below, neither the Company nor, to the best of the
Company's knowledge, any of its affiliates, directors or executive officers, is
a party to any contract, arrangement, understanding or relationship with any
other person relating, directly or indirectly, to the Offer with respect to any
securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties against loss or the giving or withholding
of proxies, consents or authorizations.
In May 1998, certain of the executive officers and directors of the Company
purchased shares from certain of the Price Entities. Each purchaser paid cash in
the amount of $3.00 per share and delivered a promissory note in the amount of
$17.50 per share to the appropriate Price Entity. Each promissory note is a
non-recourse note due May 15, 2002 and bears interest at 8% per annum, payable
quarterly. Each promissory note is secured by a pledge of the purchased shares
(the "Pledged Shares") as follows:
(a) Paul A. Peterson, a director of the Company, pledged 50,000 shares owned
by Peterson & Price, A Professional Corporation, Profit Sharing
Plan--Trust B to the Price Family Charitable Trust pursuant to a Stock
Pledge and Security Agreement dated May 15, 1998 to secure a promissory
note in principal amount of $875,000. In addition, White & Robinson, A
Professional Corporation, Profit Sharing Plan pledged 50,000 shares to
the Price Family Charitable Trust pursuant to a Stock Pledge and Security
Agreement dated May 15, 1998 to secure a promissory note in principal
amount of $875,000. Paul A. Peterson may be deemed to beneficially own
the shares held by White & Robinson, A Professional Corporation, Profit
Sharing Plan.
(b) James F. Cahill, a director of the Company, pledged 50,000 shares to the
Price Family Charitable Trust pursuant to a Stock Pledge and Security
Agreement dated May 15, 1998 to secure a promissory note in principal
amount of $875,000.
(c) Murray L. Galinson, a director of the Company, pledged 100,000 shares to
the Price Family Charitable Trust pursuant to a Stock Pledge and Security
Agreement dated May 15, 1998 to secure a promissory note in principal
amount of $1,750,000.
(d) Jack McGrory, President, Chief Executive Officer and a director of the
Company, pledged 10,000 shares to the Price Charitable Remainder Trust
pursuant to a Stock Pledge and Security Agreement dated May 15, 1998 to
secure a promissory note in principal amount of $175,000.
(e) Anne L. Evans, a director of the Company, pledged 20,000 shares to the
Price Charitable Remainder Trust pursuant to a Stock Pledge and Security
Agreement dated May 21, 1998 to secure a promissory note in principal
amount of $350,000.
Pursuant to the terms of the Stock Pledge and Security Agreements, the shares of
Series A Preferred Stock distributed on August 17, 1998 as a dividend on the
Pledged Shares automatically became subject to the pledge. Neither the Price
Family Charitable Trust nor the Price Charitable Remainder Trust has the right
to vote or dispose of the Pledged Shares (or the pledged shares of Series A
Preferred Stock) under any of the Stock Pledge Agreements prior to a default
under the applicable promissory note. No such default has occurred to date.
35
<PAGE>
Sol Price, Helen Price (who is Sol Price's wife) and the Sol & Helen Price
Trust (the "Trust") have entered into to a Guaranty and Pledge Agreement dated
as of September 15, 1998 (the "Guaranty") pursuant to which they have jointly
and severally agreed to guaranty the Company's obligations under the New Credit
Facility and the Trust has agreed to grant MGTC a continuing security interest
in U.S. Treasury Notes having a value greater than the amount outstanding under
the New Credit Facility to secure the guarantors' obligations under the
Guaranty.
11. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT.
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise be traded publicly and may reduce the
number of stockholders. Nonetheless, the Company anticipates that there will be
a sufficient number of Shares outstanding and publicly traded following
consummation of the Offer to ensure a continued trading market for the Shares.
Based upon published guidelines of Nasdaq, the Company does not believe that its
purchase of Shares pursuant to the Offer will cause the Company's remaining
Shares to be delisted from Nasdaq.
The Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit to their customers using such Shares as collateral. The Company
believes that, following the purchase of Shares pursuant to the Offer, the
Shares will continue to be "margin securities" for purposes of the Federal
Reserve Board's margin regulations.
The Shares are registered under the Exchange Act, which requires, among
other things, that the Company furnish certain information to its stockholders
and the Commission and comply with the Commission's proxy rules in connection
with meetings of the Company's stockholders. The Company believes that its
purchase of Shares pursuant to the Offer will not result in the Shares becoming
eligible for deregistration under the Exchange Act.
12. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
The Company is not aware of any license or regulatory permit that appears to
be material to the Company's business that might be adversely affected by the
Company's acquisition of Shares as contemplated herein or of any approval or
other action by any government or governmental, administrative or regulatory
authority or agency, domestic or foreign, that would be required for the
acquisition or ownership of Shares by the Company as contemplated herein. Should
any such approval or other action be required, the Company presently
contemplates that such approval or other action will be sought. The Company is
unable to predict whether it will be required to delay the acceptance for
payment of or payment for Shares tendered pursuant to the Offer pending the
outcome of any such matter. There can be no assurance that any such approval or
other action, if needed, would be obtained or would be obtained without
substantial conditions or that the failure to obtain any such approval or other
action might not result in adverse consequences to the Company's business. The
Company's obligations under the Offer to accept for payment and pay for Shares
is subject to certain conditions. See "--Section 6."
13. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
The following summary describes the principal United States federal income
tax consequences to United States Holders (as defined below) of an exchange of
Shares pursuant to the Offer. Those stockholders who do not participate in the
exchange should not incur any United States federal income tax liability from
the exchange. This summary is based upon the Internal Revenue Code of 1986, as
amended to the date hereof (the "Code"), existing United States Treasury
Regulations promulgated thereunder, published rulings, administrative
pronouncements and judicial decisions, changes to which could affect the tax
consequences described herein (possibly on a retroactive basis).
This summary addresses only Shares held as capital assets. It does not
address all of the tax consequences that may be relevant to particular
stockholders in light of their personal circumstances, or to
36
<PAGE>
certain types of stockholders (such as certain financial institutions, dealers
or traders in securities or commodities, insurance companies, Non-United States
Holders (as defined below), tax-exempt organizations or persons who hold Shares
as a position in a "straddle" or as part of a "hedging" or "conversion"
transaction or that have a functional currency other than the United States
dollar). This summary may not be applicable with respect to Shares acquired as
compensation (including Shares acquired upon the exercise of stock options or
which were or are subject to forfeiture restrictions). This summary also does
not address the state, local or foreign tax consequences of participating in the
Offer. EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S TAX ADVISOR AS TO THE
PARTICULAR CONSEQUENCES TO SUCH HOLDER OF PARTICIPATION IN THE OFFER.
A "United States Holder" is a holder of Shares that for United States
federal income tax purposes is (i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organized in or under the laws of
the United States or any State or division thereof (including the District of
Columbia), (iii) an estate the income of which is subject to United States
federal income taxation regardless of its source or (iv) a trust (a) the
administration over which a United States court can exercise primary supervision
and (b) all of the substantial decisions of which one or more United States
persons have the authority to control and certain other trusts considered United
States Holders for federal income tax purposes. A "Non-United States Holder" is
a holder of Shares other than a United States Holder.
An exchange of Shares for cash pursuant to the Offer by a United States
Holder will be a taxable transaction for federal income tax purposes. As a
consequence of the exchange, a United States Holder participating in the
exchange will, depending on such holder's particular circumstances, be treated
either as having sold Shares or as having received a dividend distribution from
the Company. In that regard, under Section 302 of the Code, a United States
Holder whose Shares are exchanged pursuant to the Offer will be treated as
having sold such Shares if the exchange (i) results in a "complete termination"
of all of such holder's equity interest in the Company, (ii) is a "substantially
disproportionate" redemption with respect to such holder or (iii) is "not
essentially equivalent to a dividend" with respect to such holder. In applying
each of the Section 302 tests, a United States Holder will be treated as owning
Shares actually or constructively owned by certain related individuals and
entities.
The receipt of cash by a stockholder will result in a "complete termination"
of the stockholder's interest if either (1) all of the stock of the Company that
is actually and constructively owned by the stockholder is transferred pursuant
to the Offer or (2) all of the stock of the Company actually owned by the
stockholder is sold pursuant to the Offer and the stockholder is eligible to
waive, and effectively waives, the attribution of stock of the Company
constructively owned by the stockholder in accordance with the procedures
described in the Code. An exchange of Shares will be "substantially
disproportionate" with respect to a United States Holder if the percentage of
the then outstanding Shares actually and constructively owned by such holder
immediately after the exchange of Shares (treating Shares exchanged pursuant to
the Offer as no longer outstanding) pursuant to the Offer is less than 80% of
the percentage of the Shares actually and constructively owned by such holder
immediately before the exchange (treating Shares exchanged pursuant to the Offer
as outstanding). A United States Holder will satisfy the "not essentially
equivalent to a dividend" test if the reduction in such holder's proportionate
interest in the Company constitutes a "meaningful reduction" given such holder's
particular facts and circumstances. The IRS has indicated in a published ruling
that even a minor reduction in the percentage interest of a stockholder whose
relative stock interest in a publicly held corporation is minimal and who
exercises no control over corporate affairs should constitute such a "meaningful
reduction."
If a United States Holder is treated as having sold Shares, such holder will
recognize gain or loss for federal income tax purposes, equal to the difference
between the amount of cash received and such holder's adjusted tax basis in the
Shares sold to the Company. Net capital gain of a non-corporate stockholder
ordinarily will be taxed at a 20% rate if such Shares have been held for more
than twelve months. In general, any loss recognized by a stockholder upon the
sale of Shares that have been held for six months or less (after applying
certain holding period rules) will be treated as a long term capital loss, to
the
37
<PAGE>
extent of capital gain dividends received by such stockholder from the Company
which were required to be treated as long term capital gain.
If a United States Holder who participates in the Offer is not treated as
having sold Shares, such holder will be treated as receiving a dividend to the
extent of such holder's ratable share of the Company's earnings and profits.
Such a dividend will be includable in the United States Holder's gross income as
ordinary income without reduction for the adjusted tax basis of the Shares
exchanged. In such event, the United States Holder's adjusted tax basis in its
Shares exchanged in the Offer generally will be added to such holder's adjusted
tax basis in the remaining Shares. A dividend received by a corporate United
States Holder will not be eligible for a dividends-received deduction, but may
be subject to the "extraordinary dividend" provisions of the Code. To the
extent, if any, that the cash received by a United States Holder exceeds the
Company's earnings and profits, it will be treated first as a tax-free return of
such United States Holder's tax basis in the Shares and thereafter as capital
gain.
See "--Section 3" with respect to the application of United States federal
income tax withholding to payments made to Non-United States Holders and the
backup withholding tax requirements.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY.
EACH STOCKHOLDER IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE
THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE OFFER, INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
14. EXTENSION OF THE OFFER; TERMINATION; AMENDMENT.
The Company expressly reserves the right, in its sole discretion, at any
time and from time to time, and regardless of whether or not any of the events
set forth in Section 6 shall have occurred or shall be deemed by the Company to
have occurred, to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and payment for, any Shares by giving
oral or written notice of such extension to the Depositary and making a public
announcement thereof. The Company also expressly reserves the right, in its sole
discretion, to terminate the Offer and not accept for payment or pay for any
Shares not theretofore accepted for payment or paid for or, subject to
applicable law, to postpone payment for Shares upon the occurrence of any of the
conditions specified in Section 6 hereof by giving oral or written notice of
such termination or postponement to the Depositary and making a public
announcement thereof. The Company's reservation of the right to delay payment
for Shares which it has accepted for payment is limited by Rule 13e-4(f)(5)
promulgated under the Exchange Act, which requires that the Company must pay the
consideration offered or return the Shares tendered promptly after termination
or withdrawal of a tender offer. Subject to compliance with applicable law, the
Company further reserves the right, in its sole discretion, and regardless of
whether any of the events set forth in Section 6 shall have occurred or shall be
deemed by the Company to have occurred, to amend the Offer in any respect
(including, without limitation, by decreasing or increasing the consideration
offered in the Offer to holders of Shares or by decreasing or increasing the
number of Shares being sought in the Offer). Amendments to the Offer may be made
at any time and from time to time effected by public announcement thereof, such
announcement, in the case of an extension, to be issued no later than 9:00 a.m.,
New York City time, on the next business day after the last previously scheduled
or announced Expiration Date. Any public announcement made pursuant to the Offer
will be disseminated promptly to stockholders in a manner reasonably designed to
inform stockholders of such change. Without limiting the manner in which the
Company may choose to make a public announcement, except as required by
applicable law, the Company shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by making a
release on the PR Newswire.
If the Company materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Company will extend the Offer to the extent required by
38
<PAGE>
Rules 13e-4(d)(2) and 13e-4(e)(2) promulgated under the Exchange Act. These
rules provide that the minimum period during which an offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer (other than a change in price or a change in percentage of securities
sought) will depend on the facts and circumstances, including the relative
materiality of such terms or information. If (i) the Company increases or
decreases the price to be paid for Shares or increases or decreases the number
of Shares being sought in the Offer and, in the event of an increase in the
number of Shares being sought, such increase exceeds 2% of the outstanding
Shares, and (ii) the Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and including, the
date that such notice of an increase or decrease is first published, sent or
given in the manner specified in this Section 14, the Offer will be extended
until the expiration of such period of ten business days. For the purposes of
the Offer, a "business day" means any day other than a Saturday, Sunday or
federal holiday and consists of the time period from 12:01 a.m. through 12:00
midnight, New York City time.
15. FEES AND EXPENSES.
The Company has retained MacKenzie Partners, Inc. to act as Information
Agent and ChaseMellon Shareholder Services, L.L.C. to act as Depositary in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, telephone, telegraph and personal interviews and may request brokers,
dealers and other nominee stockholders to forward materials relating to the
Offer to beneficial owners. The Information Agent and the Depositary will each
receive reasonable and customary compensation for their respective services,
will be reimbursed by the Company for certain reasonable out-of-pocket expenses
and will be indemnified against certain liabilities in connection with the
Offer, including certain liabilities under the federal securities laws.
No fees or commissions will be payable by the Company to brokers, dealers or
other persons (other than fees to the Information Agent as described above) for
soliciting tenders of Shares pursuant to the Offer. Stockholders holding Shares
through brokers or banks are urged to consult the brokers or banks to determine
whether transaction costs are applicable if stockholders tender Shares through
such brokers or banks and not directly to the Depositary. The Company, however,
upon request, will reimburse brokers, dealers and commercial banks for customary
mailing and handling expenses incurred by them in forwarding the Offer and
related materials to the beneficial owners of Shares held by them as a nominee
or in a fiduciary capacity. No broker, dealer, commercial bank or trust company
has been authorized to act as the agent of the Company, the Information Agent or
the Depositary for purposes of the Offer. The Company will pay or cause to be
paid all stock transfer taxes, if any, on its purchase of Shares except as
otherwise provided in "Instruction 6 in the Letter of Transmittal."
16. MISCELLANEOUS.
The Company is not aware of any jurisdiction where the making of the Offer
is not in compliance with applicable law. If the Company becomes aware of any
jurisdiction where the making of the Offer or the acceptance of Shares pursuant
thereto is not in compliance with any valid applicable law, the Company will
make a good faith effort to comply with the applicable law. If, after such good
faith effort, the Company cannot comply with the applicable law, the Offer will
not be made to (nor will tenders be accepted from or on behalf of) the holders
of Shares in such jurisdiction. In any jurisdiction the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on the Company's behalf by one or more
registered brokers or dealers licensed under the laws of the jurisdiction.
Pursuant to Rule 13e-4 of the General Rules and Regulations under the
Exchange Act, the Company has filed with the Commission the Schedule 13E-4 which
contains additional information with respect to the Offer. Such Schedule 13E-4,
including the exhibits and any amendments thereto, may be examined,
39
<PAGE>
and copies may be obtained, at the same places and in the same manner as is set
forth in Section 9 with respect to information concerning the Company.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY IN CONNECTION WITH THE OFFER OTHER THAN
THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
PRICE ENTERPRISES, INC.
September 17, 1998
40
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and certificates for Shares and any other
required documents should be sent or delivered by each stockholder or such
stockholder's broker, dealer, commercial bank, trust company or nominee to the
Depositary at one of its addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY HAND DELIVERY: BY OVERNIGHT DELIVERY: BY MAIL:
120 Broadway, 13th Floor 85 Challenger Road P.O. Box 3301
New York, New York 10271 Mail Drop--Reorg South Hackensack, New Jersey
Attn: Reorganization Dept. Ridgefield Park, New Jersey 07606
07660 Attn: Reorganization Dept.
Attn: Reorganization Dept.
FACSIMILE TRANSMISSION:
(201) 296-4293
CONFIRM RECEIPT OF FACSIMILE
BY TELEPHONE:
(201) 296-4860
</TABLE>
Any questions or requests for assistance or additional copies of the Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to the Information Agent at the telephone number and address set
forth below. Stockholders may also contact their broker, dealer, commercial
bank, trust company or nominee for assistance concerning the Offer. To confirm
delivery of Shares, stockholders are directed to contact the Depositary.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
156 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL-FREE (800) 322-2885
41
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
PRICE ENTERPRISES, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED SEPTEMBER 17, 1998
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON THURSDAY, OCTOBER 15, 1998, UNLESS THE OFFER IS
EXTENDED.
- --------------------------------------------------------------------------------
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY HAND DELIVERY: BY OVERNIGHT DELIVERY: BY MAIL:
120 Broadway, 13th Floor 85 Challenger Road P.O. Box 3301
New York, New York 10271 Ridgefield Park, New Jersey 07660 South Hackensack, New Jersey 07606
Attn: Reorganization Dept. Attn: Reorganization Dept. Attn: Reorganization Dept.
FACSIMILE TRANSMISSION:
(201) 296-4293
CONFIRM RECEIPT OF FACSIMILE BY TELEPHONE:
(201) 296-4860
</TABLE>
THIS LETTER OF TRANSMITTAL, INCLUDING THE ACCOMPANYING INSTRUCTIONS, SHOULD BE
READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
(ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF
NAME(S) AND ADDRESS(ES) OF SHARES EVIDENCED NUMBER OF
REGISTERED HOLDER(S) SHARE CERTIFICATE BY SHARE SHARES
(PLEASE FILL IN) NUMBERS* CERTIFICATE(S) TENDERED**
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
Total:
- ----------------------------------------------------------------------------------------------------------
Indicate in this box the order (by certificate number) in which Shares are to be purchased in event of
proration.***
Attach additional signed list if necessary. See Instruction 9.
1st: 2nd: 3rd: 4th: 5th:
- ----------------------------------------------------------------------------------------------------------
* DOES NOT need to be completed by stockholders tendering Shares by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by each certificate
delivered to the Depositary are being tendered hereby. See Instruction 4.
*** If you do not designate an order, in the event less than all Shares tendered are purchased due to
proration, Shares will be selected for purchase by the Depositary.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. DELIVERIES TO THE COMPANY
WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE WILL NOT CONSTITUTE VALID
DELIVERY. DELIVERIES TO THE BOOK-ENTRY TRANSFER FACILITY WILL NOT CONSTITUTE
VALID DELIVERY TO THE DEPOSITARY.
This Letter of Transmittal is to be completed only if (a) certificates
representing Shares (as defined below) are to be forwarded herewith, or (b) a
tender of Shares is to be made concurrently by book-entry transfer to the
account maintained by the Depositary at The Depository Trust Company
(hereinafter referred to as the "Book-Entry Transfer Facility") pursuant to "THE
OFFER--Section 3" of the Offer to Purchase (as defined below). Stockholders who
desire to tender Shares pursuant to the Offer (as defined below), but whose
Share certificates are not immediately available or who cannot deliver such
certificates and all other documents required by this Letter of Transmittal to
the Depositary on or prior to the Expiration Date (as defined in the Offer to
Purchase), or who cannot comply with the procedure for book-entry transfer on a
timely basis, may nevertheless tender their Shares pursuant to the guaranteed
delivery procedure set forth in "THE OFFER--Section 3" of the Offer to Purchase.
See Instruction 2.
/ / CHECK HERE IF ANY CERTIFICATE REPRESENTING SHARES TENDERED HEREBY HAS BEEN
LOST, STOLEN, DESTROYED OR MUTILATED. SEE INSTRUCTION 14.
- --------------------------------------------------------------------------------
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
AN ACCOUNT MAINTAINED BY THE DEPOSITARY AT THE BOOK-ENTRY TRANSFER FACILITY
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s): ___________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution that Guaranteed Delivery: ______________________________
Window Ticket Number (if any): _____________________________________________
- --------------------------------------------------------------------------------
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
To ChaseMellon Shareholder Services, L.L.C.:
The undersigned hereby tenders to Price Enterprises, Inc., a Maryland
corporation (the "Company"), the above-described shares of the Company's Common
Stock, par value $.0001 per share (the "Shares"), at a price of $5.50 per Share,
net to the seller in cash, without interest thereon, upon the terms and subject
to the conditions set forth in the Offer to Purchase dated September 17, 1998
(the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which, as amended or supplemented from time to time,
together constitute the "Offer").
Subject to, and effective upon, acceptance for payment of the Shares
tendered hereby in accordance with the terms and subject to the conditions of
the Offer (including, if the Offer is extended or amended, the terms and
conditions of such extension or amendment), the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Company all right, title and
interest in and to all Shares tendered hereby and orders the registration of all
such Shares if tendered by book-entry transfer and hereby irrevocably
constitutes and appoints the Depositary as the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares (with full
knowledge that the Depositary also acts as the agent of the Company) with
respect to such Shares, with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to: (a)
deliver certificate(s) representing such Shares or transfer ownership of such
Shares on the account books maintained by the Book-Entry Transfer Facility,
together, in either such case, with all accompanying evidences of transfer and
authenticity, to or upon the order of the Company upon receipt by the
Depositary, as the undersigned's agent, of the Purchase Price (as defined below)
with respect to such Shares; (b) present certificates for such Shares for
cancellation and transfer on the Company's books; and (c) receive all benefits
and otherwise exercise all rights of beneficial ownership of such Shares,
subject to the next paragraph, all in accordance with the terms and subject to
the conditions of the Offer.
The undersigned hereby covenants, represents and warrants to the Company
that:
(a) the undersigned has full power and authority to tender, sell, assign
and transfer the Shares tendered hereby and that when and to the extent the same
are accepted for payment by the Company, the Company will acquire good,
marketable and unencumbered title thereto, free and clear of all security
interests, liens, restrictions, charges, encumbrances, conditional sales
agreements or other obligations relating to the sale or transfer of such Shares,
and not subject to any adverse claims;
(b) the undersigned understands that tenders of Shares pursuant to any one
of the procedures described in "THE OFFER--Section 3" of the Offer to Purchase
and in the instructions hereto will constitute the undersigned's acceptance of
the terms and conditions of the Offer, including the undersigned's
representation and warranty that (i) the undersigned has a net long position in
the Shares or equivalent securities at least equal to the Shares tendered within
the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended
("Rule 14e-4"), and (ii) such tender of Shares complies with Rule 14e-4;
(c) the undersigned will, upon request, execute and deliver any additional
documents deemed by the Depositary or the Company to be necessary or desirable
to complete the sale, assignment and transfer of the Shares tendered hereby; and
(d) the undersigned has read, understands and agrees to all of the terms of
the Offer.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in "THE OFFER--Section 3" of the Offer to Purchase and
in the instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Offer. The undersigned acknowledges that no interest will be paid on the
Purchase Price for tendered Shares regardless of any extension of the Offer or
any delay in making such payment.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and legal
representatives of the undersigned. Except as stated in the Offer to Purchase,
this tender is irrevocable.
The name(s) and address(es) of the registered holder(s) should be printed,
if they are not already printed above, exactly as they appear on the
certificates representing Shares tendered hereby. The certificate numbers, the
number of Shares represented by such certificates and the number of Shares that
the undersigned wishes to tender, should be set forth in the appropriate boxes
above.
3
<PAGE>
The undersigned understands that the Company will, upon the terms and
subject to the conditions of the Offer, pay $5.50 per Share (the "Purchase
Price") for Shares properly tendered and not properly withdrawn prior to the
Expiration Date pursuant to the Offer, taking into account the number of Shares
so tendered. The undersigned understands that all Shares properly tendered prior
to the Expiration Date and not properly withdrawn will be purchased at the
Purchase Price, upon the terms and subject to the conditions of the Offer,
including its proration provisions, and that the Company will return all other
Shares not purchased pursuant to the Offer, including Shares not purchased
because of proration.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may
postpone the acceptance for payment of, or the payment for, Shares tendered or
may accept for payment fewer than all of the Shares tendered hereby. In any such
event, the undersigned understands that certificate(s) for any Shares not
tendered or not purchased will be returned to the undersigned at the address
indicated above, unless otherwise indicated under the box entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions" below.
The undersigned understands that acceptance of Shares by the Company for
payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
The check for the aggregate net Purchase Price for such of the Shares
tendered hereby as are purchased will be issued to the order of the undersigned
and mailed to the address indicated above, unless otherwise indicated under the
box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" below. The undersigned acknowledges that the Company has
no obligation, pursuant to the "Special Payment Instructions," to transfer any
Shares from the name of its registered holder(s) thereof, or to order the
registration or transfer of any Shares tendered by book-entry transfer, if the
Company does not purchase any of such Shares.
- ------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 9.)
To be completed ONLY if certificate(s) for Shares not tendered or not
purchased and/or any check for the Purchase Price are to be issued in the
name of someone other than the undersigned, or if Shares tendered hereby and
delivered by book-entry transfer which are not purchased are to be returned
by credit to an account at the Book-Entry Transfer Facility other than that
designated above.
Issue: / / Check / / Share Certificate(s) to:
Name: ______________________________________________________________________
(Please Print)
Address: ___________________________________________________________________
____________________________________________________________________________
(Zip Code)
____________________________________________________________________________
(Taxpayer Identification or Social Security Number)
(See Substitute Form W-9 attached)
/ / Credit Shares delivered by book-entry transfer and not purchased to the
account set forth below:
Account Number: ____________________________________________________________
- ------------------------------------------------
- ------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6, AND 9.)
To be completed ONLY if certificate(s) for Shares not tendered or not
purchased and/or any check for the Purchase Price is to be mailed or sent to
someone other than the undersigned, or to the undersigned at an address
other than that designated above.
Mail / / Check / / Share Certificate(s) to:
Name: ______________________________________________________________________
(Please Print)
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(Zip Code)
____________________________________________________________________________
(Taxpayer Identification or Social Security Number)
(See Substitute Form W-9 attached)
- ------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
ODD LOTS
(SEE INSTRUCTION 7.)
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning, beneficially or of record, as of the close of business on
September 16, 1998 and who continues to own, beneficially or of record, as
of the Expiration Date, an aggregate of fewer than 100 Shares. The
undersigned either (check one box):
/ / was the beneficial or record owner of, as of the close of business on
September 16, 1998, and continues to own beneficially or of record as
of the Expiration Date, an aggregate of fewer than 100 Shares, all of
which are being tendered; or
/ / is a broker, dealer, commercial bank, trust company, or other nominee
that (a) is tendering for the beneficial owner(s) thereof, Shares with
respect to which it is the record holder, and (b) believes, based upon
representations made to it by such beneficial owner(s), that each such
person was the beneficial or record owner of, as of the close of
business on September 16, 1998, and continues to own beneficially or
of record as of the Expiration Date, an aggregate of fewer than 100
Shares and is tendering all of such Shares.
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT
STOCKHOLDERS SIGN HERE
(PLEASE COMPLETE AND RETURN THE ATTACHED SUBSTITUTE FORM W-9)
(Must be signed by the registered holder(s) exactly as such holder(s)
name(s) appear(s) on certificate(s) for Shares or on a security position
listing or by person(s) authorized to become the registered holder(s)
thereof by certificates and documents transmitted with this Letter of
Transmittal. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or any other person
acting in a fiduciary or representative capacity, please set forth full
title and see Instruction 5.)
____________________________________________________________________________
____________________________________________________________________________
SIGNATURE(S) OF OWNER(S)
Dated: ___________________
Name(s): ___________________________________________________________________
(PLEASE PRINT)
Capacity (full title): _____________________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ____________________________________________
Taxpayer Identification or Social Security Number: _________________________
(SEE SUBSTITUTE FORM W-9)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5.)
Authorized Signature: ______________________________________________________
Name: ______________________________________________________________________
(PLEASE PRINT)
Title: _____________________________________________________________________
Name of Firm: ______________________________________________________________
Address: ___________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ____________________________________________
____________________________________________________________________________
Dated: ___________________
- --------------------------------------------------------------------------------
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered holder of the
Shares (which term, for purposes hereof, shall include any participant in the
Book-Entry Transfer Facility whose name appears on a security position listing
as the owner of such Shares) tendered hereby exactly as the name of such
registered holder appears on the certificate(s) for such Shares tendered with
this Letter of Transmittal and payment and delivery are to be made directly to
such owner unless such owner has completed either the box entitled "Special
Payment Instructions" or "Special Delivery Instructions" above; or
(b) such Shares are tendered for the account of a bank, broker, dealer,
credit union, savings association or other entity which is a member in good
standing of the Securities Transfer Agents Medallion Program or a bank, broker,
dealer, credit union, savings association or other entity which is an "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (each of the foregoing constituting
an "Eligible Institution").
In all other cases, an Eligible Institution must guarantee all signatures on
this Letter of Transmittal. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed only if certificates
for Shares are delivered with it to the Depositary (or such certificates will be
delivered pursuant to a Notice of Guaranteed Delivery previously sent to the
Depositary) or if a tender for Shares is being made concurrently pursuant to the
procedure for tender by book-entry transfer set forth in "THE OFFER-- Section 3"
of the Offer to Purchase. Certificates for all physically tendered Shares or
confirmation of a book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility of Shares tendered electronically, together in each
case with a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile hereof), and any other documents required by this
Letter of Transmittal, should be mailed or delivered to the Depositary at the
appropriate address set forth herein and must be delivered to the Depositary on
or before the Expiration Date. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER
FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Stockholders whose certificates are not immediately available or who cannot
deliver certificates for their Shares and all other required documents to the
Depositary before the Expiration Date, or whose Shares cannot be delivered on a
timely basis pursuant to the procedures for book-entry transfer, must, in any
such case, tender their Shares by or through any Eligible Institution by
properly completing and duly executing and delivering a Notice of Guaranteed
Delivery (or facsimile thereof) and by otherwise complying with the guaranteed
delivery procedure set forth in "THE OFFER--Section 3" of the Offer to Purchase.
Pursuant to such procedure, certificates for all physically tendered Shares or
book-entry confirmations, as the case may be, as well as a properly completed
and duly executed Letter of Transmittal (or manually signed facsimile hereof)
and all other documents required by this Letter of Transmittal, must be received
by the Depositary within three (3) Nasdaq Stock Market, Inc. National Market
trading days after receipt by the Depositary of such Notice of Guaranteed
Delivery, all as provided in "THE OFFER--Section 3" of the Offer to Purchase.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mail to the Depositary and must include a
signature guarantee by an Eligible Institution in the form set forth therein.
For Shares to be tendered validly pursuant to the guaranteed delivery procedure,
the Depositary must receive the Notice of Guaranteed Delivery on or before the
Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
The Company will not accept any alternative, conditional or contingent
tenders, nor will it purchase any fractional Shares, except as expressly
provided in the Offer to Purchase. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile hereof), waive any right to receive
any notice of the acceptance of their tender.
7
<PAGE>
3. INADEQUATE SPACE. If the space provided in the box entitled
"Description of Shares Tendered" above is inadequate, the certificate numbers
and/or the number of Shares should be listed on a separate signed schedule and
attached to this Letter of Transmittal.
4. PARTIAL TENDERS AND UNPURCHASED SHARES. (Not applicable to stockholders
who tender by book-entry transfer.) If fewer than all of the Shares evidenced by
any certificate are to be tendered, fill in the number of Shares that are to be
tendered in the column entitled "Number of Shares Tendered" in the box entitled
"Description of Shares Tendered" above. In such case, if any tendered Shares are
purchased, a new certificate for the remainder of the Shares (including any
Shares not purchased) evidenced by the old certificate(s) will be issued and
sent to the registered holder(s) thereof, unless otherwise specified in either
the box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" in this Letter of Transmittal, as soon as practicable
after the Expiration Date. Unless otherwise indicated, all Shares represented by
the certificate(s) set forth above and delivered to the Depositary will be
deemed to have been tendered.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered hereby, the signature(s) must correspond exactly with the
name(s) as written on the face of the certificate(s) without any change
whatsoever.
(b) If the Shares tendered hereby are registered in the names of two or
more joint holders, each such holder must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles hereof) as there are different
registrations of certificates.
(d) When this Letter of Transmittal is signed by the registered holder(s)
of the Shares tendered hereby, no endorsement(s) of certificate(s) representing
such Shares or separate stock power(s) are required unless payment is to be made
or the certificate(s) for Shares not tendered or not purchased are to be issued
to a person other than the registered holder(s) thereof. SIGNATURE(S) ON SUCH
CERTIFICATE(S) MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION. If this Letter of
Transmittal is signed by a person other than the registered holder(s) of the
certificate(s) listed, or if payment is to be made or certificate(s) for Shares
not tendered or not purchased are to be issued to a person other than the
registered holder(s) thereof, such certificate(s) must be endorsed or
accompanied by appropriate stock power(s), in either case signed exactly as the
name(s) of the registered holder(s) appears on the certificate(s), and the
signature(s) on such certificate(s) or stock power(s) must be guaranteed by an
Eligible Institution. See Instruction 1.
(e) If this Letter of Transmittal or any certificate(s) or stock power(s)
are signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or any other person acting in a fiduciary or
representative capacity, such person should so indicate when signing this Letter
of Transmittal and must submit proper evidence satisfactory to the Company of
his or her authority so to act.
6. STOCK TRANSFER TAXES. Except as provided in this Instruction 6, no
stock transfer tax stamps or funds to cover such stamps need accompany this
Letter of Transmittal. The Company will pay any stock transfer taxes payable on
the transfer to it of Shares purchased pursuant to the Offer. If, however,
either (a) payment of the Purchase Price for Shares tendered hereby and accepted
for purchase is to be made to any person other than the registered holder(s); or
(b) Shares not tendered or not accepted for purchase are to be registered in the
name(s) of any person(s) other than the registered holder(s); or (c)
certificate(s) representing tendered Shares are registered in the name(s) of any
person(s) other than the person(s) signing this Letter of Transmittal, then the
Depositary will deduct from such Purchase Price the amount of any stock transfer
taxes (whether imposed on the registered holder(s), such other person(s) or
otherwise) payable on account of the transfer to such person, unless
satisfactory evidence of the payment of such taxes or any exemption therefrom is
submitted.
7. ODD LOTS. As described in "THE OFFER--Section 1" of the Offer to
Purchase, if the Company is to purchase fewer than all Shares tendered before
the Expiration Date and not properly withdrawn, the Shares purchased first will
consist of all Shares properly tendered by any stockholder who owned,
beneficially or of record, as of the close of business on September 16, 1998 and
as of the Expiration Date, an aggregate of fewer than 100 Shares, and who
tenders all of such holder's Shares (an "Odd Lot Holder"). This preference will
not be available unless the box captioned "Odd Lots" is completed.
8
<PAGE>
8. ORDER OF PURCHASE IN EVENT OF PRORATION. As described in "THE
OFFER--Section 1" of the Offer to Purchase, stockholders may designate the order
in which their Shares are to be purchased in the event of proration. The order
of purchase may have an effect on the federal income tax treatment of the
Purchase Price for the Shares purchased. See "THE OFFER--Section 1" and
"--Section 13" of the Offer to Purchase.
9. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificate(s) for Shares
not tendered or not purchased and/or check(s) are to be issued in the name of a
person other than the signer of this Letter of Transmittal or if such
certificates and/or checks are to be sent to someone other than the person
signing this Letter of Transmittal or to the signer at a different address, the
box entitled "Special Payment Instructions" and/or the box entitled "Special
Delivery Instructions" on this Letter of Transmittal should be completed as
applicable and signatures must be guaranteed as described in Instruction 1.
10. IRREGULARITIES. All questions as to the number of Shares to be
accepted, the price to be paid therefor and the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Company in its sole discretion, which determination
shall be final and binding on all parties. The Company reserves the absolute
right to reject any or all tenders of Shares it determines not to be in proper
form or the acceptance of which or payment for which may, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Offer or any defect or irregularity in any
tender with respect to any particular Shares or any particular stockholder, and
the Company's interpretation of the terms of the Offer (including these
Instructions) will be final and binding on all parties. No tender of Shares will
be deemed to be properly made until all defects and irregularities have been
cured by the tendering stockholder or waived by the Company. Unless waived, any
defects or irregularities in connection with tenders must be cured within such
time as the Company shall determine. None of the Company, the Depositary, the
Information Agent (as defined in the Offer to Purchase) or any other person is
or will be obligated to give notice of any defects or irregularities in tenders
and none of them will incur any liability for failure to give any such notice.
11. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to, or additional copies of the
Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery
and other related materials may be obtained from the Information Agent at the
address and telephone number set forth on the back cover of the Offer to
Purchase or from brokers, dealers, commercial banks or trust companies.
12. TAX IDENTIFICATION NUMBER AND BACKUP WITHHOLDING. Federal income tax
law generally requires that a stockholder whose tendered Shares are accepted for
purchase, or such stockholder's assignee (in either case, the "Payee"), provide
the Depositary with such Payee's correct Taxpayer Identification Number ("TIN"),
which, in the case of a Payee who is an individual, is such Payee's social
security number. If the Depositary is not provided with the correct TIN or an
adequate basis for an exemption, such Payee may be subject to a $50 penalty
imposed by the Internal Revenue Service and backup withholding in an amount
equal to 31% of the gross proceeds received pursuant to the Offer. If
withholding results in an overpayment of taxes, a refund may be obtained.
To prevent backup withholding, each Payee must provide such Payee's correct
TIN by completing the Substitute Form W-9 set forth herein, certifying that the
TIN provided is correct (or that such Payee is awaiting a TIN) and that (i) the
Payee is exempt from backup withholding, (ii) the Payee has not been notified by
the Internal Revenue Service that such Payee is subject to backup withholding as
a result of a failure to report all interest or dividends, or (iii) the Internal
Revenue Service has notified the Payee that such Payee is no longer subject to
backup withholding.
If the Payee does not have a TIN, such Payee should (i) consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for instructions on applying for a TIN, (ii) write "Applied For" in the
space provided in Part 1 of the Substitute Form W-9, and (iii) sign and date the
Substitute Form W-9 and the Certificate of Awaiting Taxpayer Identification
Number set forth herein. If the Payee does not provide such Payee's TIN to the
Depositary within sixty (60) days, backup withholding will begin and continue
until such Payee furnishes such Payee's TIN to the Depositary. Note that writing
"Applied For" on the Substitute Form W-9 means that the Payee has already
applied for a TIN or that such Payee intends to apply for one in the near
future.
If Shares are held in more than one name or are not in the name of the
actual owner, consult the W-9 Guidelines for information on which TIN to report.
Exempt Payees (including, among others, all corporations and certain foreign
individuals) are not subject to backup withholding and reporting requirements.
To prevent possible erroneous backup withholding, an exempt Payee should write
"Exempt" in Part 2 of Substitute Form W-9. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions. In order for a nonresident alien or foreign
9
<PAGE>
entity to qualify as exempt, such person must submit a completed Form W-8
Certificate of Foreign Status, signed under penalty of perjury attesting to such
exempt status. Such form may be obtained from the Depositary.
13. WITHHOLDING ON NON-UNITED STATES HOLDER. Even if a Non-United States
Holder (as defined below) has provided the required certification to avoid
backup withholding, the Depositary will withhold United States federal income
taxes equal to 30% of the gross payments payable to a Non-United States Holder
or such holder's agent unless the Depositary determines that a reduced rate of
withholding is available (E.G., pursuant to a tax treaty) or that an exemption
from withholding is applicable (E.G., because such gross proceeds are
effectively connected with the conduct of a trade or business within the United
States). For this purpose, a "Non-United States Holder" is any stockholder that
for United States federal income tax purposes is not (i) a citizen or resident
of the United States, (ii) a corporation or partnership created or organized in
or under the laws of the United States or any State or division thereof
(including the District of Columbia), (iii) an estate the income of which is
subject to United States federal income taxation regardless of the source of
such income, or (iv) a trust (a) the administration over which a United States
court can exercise primary supervision and (b) all of the substantial decisions
of which one or more United States persons have the authority to control.
Notwithstanding the foregoing, to the extent provided in United States Treasury
Regulations, certain trusts in existence on August 20, 1996, and treated as
United States persons prior to such date, that elect to continue to be treated
as United States persons also will not be Non-United States Holders. In order to
obtain a reduced rate of withholding pursuant to a tax treaty, a Non-United
States Holder must deliver to the Depositary before the payment a properly
completed and executed IRS Form 1001. In order to obtain an exemption from
withholding on the grounds that the gross proceeds paid pursuant to the Offer
are effectively connected with the conduct of a trade or business within the
United States, a Non-United States Holder must deliver to the Depositary a
properly completed and executed IRS Form 4224. The Depositary will determine a
stockholder's status as a Non-United States Holder and eligibility for a reduced
rate of, or an exemption from, withholding by reference to outstanding
certificates or statements concerning eligibility for a reduced rate of, or
exemption from, withholding (e.g., IRS Form 1001 or IRS Form 4224) unless facts
and circumstances indicate that such reliance is not warranted. A Non-United
States Holder may be eligible to obtain a refund of all or a portion of any tax
withheld if such Non-United States Holder meets those tests described in "THE
OFFER--Section 13" of the Offer to Purchase that would characterize the exchange
as a sale (as opposed to a dividend) or is otherwise able to establish that no
tax or a reduced amount of tax is due.
NON-UNITED STATES HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX WITHHOLDING,
INCLUDING ELIGIBILITY FOR A WITHHOLDING TAX REDUCTION OR EXEMPTION, AND THE
REFUND PROCEDURE.
14. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES. If any
certificate(s) representing Shares has been lost, stolen, destroyed or
mutilated, the stockholder should promptly notify the Depositary by checking the
box set forth above and indicating the number of Shares so lost, stolen,
destroyed or mutilated. Such stockholder will then be instructed by the
Depositary as to the steps that must be taken in order to replace the
certificate. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, stolen, destroyed or
mutilated certificates have been followed. Stockholders may contact the
Depositary at (800) 777-3674 (toll free) to expedite such process.
THIS LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND DULY EXECUTED (OR
MANUALLY SIGNED FACSIMILE HEREOF), TOGETHER WITH CERTIFICATES REPRESENTING
SHARES BEING TENDERED OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS, OR A NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED PRIOR
TO 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THE EXPIRATION DATE. STOCKHOLDERS ARE
ENCOURAGED TO RETURN A COMPLETED SUBSTITUTE FORM W-9 WITH THIS LETTER OF
TRANSMITTAL.
10
<PAGE>
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------------------------------------------------
PAYER: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
- ---------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1--Taxpayer Identification TIN:
FORM W-9 Number-- for all accounts, Social Security Number
enter taxpayer identification or Employer Identification
number in the box at right and Number
certify by signing and dating (If awaiting TIN, write
below. "Applied For")
Department of the Note: If the account is in more
Treasury, Internal than one name, see the chart in
Revenue Service the enclosed GUIDELINES to
determine which number to give
the payer.
-----------------------------------------------------------------
PAYER'S REQUEST FOR TAXPAYER PART 2--For payees exempt from backup withholding, please write
IDENTIFICATION NUMBER ("TIN") "EXEMPT" here(see the enclosed GUIDELINES):
- ---------------------------------------------------------------------------------------------------
PART 3--CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT (1) The number shown on this
form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to
me), and (2) I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am
subject to backup withholding as a result of a failure to report all interest or dividends or (c)
the IRS has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS
that you are currently subject to backup withholding because of underreporting interest or
dividends on your tax return and you have not been notified by the IRS that you are no longer
subject to backup withholding. (Also see instructions in the enclosed GUIDELINES.)
- ---------------------------------------------------------------------------------------------------
SIGNATURE: DATE:
- ---------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING (OR WILL
SOON APPLY FOR) A TAXPAYER IDENTIFICATION NUMBER.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and that I mailed or delivered an application to
receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office (or I intend to mail
or deliver an application in the near future). I understand that,
notwithstanding the information I provided in Part III of the Substitute Form
W-9 above (and the fact that I have completed this Certificate of Awaiting
Taxpayer Identification Number), if I do not provide a taxpayer identification
number to the Depositary within sixty (60) days, the Depositary is required to
withhold 31% of all cash payments made to me thereafter until I provide a
number.
SIGNATURE: _____________________________ DATE: ____________________________
- --------------------------------------------------------------------------------
11
<PAGE>
THE INFORMATION AGENT FOR THE OFFER IS:
[MacKenzie Partners, Inc. Logo]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
Call Toll-Free (800) 322-2885
<PAGE>
PRICE ENTERPRISES, INC.
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) if certificates evidencing
shares of Common Stock, par value $.0001 per share (the "Shares"), of Price
Enterprises, Inc., a Maryland corporation (the "Company"), are not immediately
available, or if the procedure for book-entry transfer set forth in the Offer to
Purchase dated September 17, 1998 (the "Offer to Purchase") and the related
Letter of Transmittal (which, as amended or supplemented from time to time,
together constitute the "Offer") cannot be completed on a timely basis or time
will not permit all required documents, including a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof), to
reach the Depositary prior to the Expiration Date (as defined in the Offer to
Purchase).
This Notice of Guaranteed Delivery, properly completed and duly executed,
may be delivered by hand, mail or facsimile transmission to the Depositary. See
"THE OFFER--Section 3" of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY HAND DELIVERY: BY OVERNIGHT DELIVERY: BY MAIL:
120 Broadway, 13th 85 Challenger Road P.O. Box 3301
Floor Mail Drop--Reorg South Hackensack, New Jersey
New York, New York Ridgefield Park, New Jersey 07606
10271 07660 Attn: Reorganization Dept.
Attn: Reorganization Attn: Reorganization Dept.
Dept.
FACSIMILE TRANSMISSION:
(201) 296-4293
CONFIRM RECEIPT OF FACSIMILE BY TELEPHONE:
(201) 296-4860
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. DELIVERIES TO THE
COMPANY WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE WILL NOT
CONSTITUTE VALID DELIVERY. DELIVERIES TO THE BOOK-ENTRY TRANSFER FACILITY WILL
NOT CONSTITUTE VALID DELIVERY TO THE DEPOSITARY.
This Notice of Guaranteed Delivery form is not to be used to guarantee
signatures. If a signature on the Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Offer to Purchase)
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject to
the conditions set forth in the Offer to Purchase and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the number of Shares
specified below pursuant to the guaranteed delivery procedure set forth in "THE
OFFER--Section 3" of the Offer to Purchase.
----------------------------------------------------------------------------
ODD LOTS
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning beneficially or of record as of the close of business on
September 16, 1998 and who continues to own, beneficially or of record, as
of the Expiration Date, an aggregate of fewer than 100 Shares. The
undersigned either (check one box):
/ / was the beneficial or record owner of, as of the close of business on
September 16, 1998, and continues to own beneficially or of record as of
the Expiration Date, an aggregate of fewer than 100 Shares, all of which
are being tendered; or
/ / is a broker, dealer, commercial bank, trust company, or other nominee
that (a) is tendering for the beneficial owner(s) thereof, Shares with
respect to which it is the record holder, and (b) believes, based upon
representations made to it by such beneficial owner(s), that each such
person was the beneficial or record owner of, as of the close of business
on September 16, 1998, and continues to own beneficially or of record as
of the Expiration Date, an aggregate of fewer than 100 Shares and is
tendering all of such Shares.
- --------------------------------------------------------------------------------
2
<PAGE>
- -------------------------------------------
Signature(s): ______________________________________________________________
______________________________________
Name(s) of
Record Holder(s): __________________________________________________________
PLEASE TYPE OR PRINT
____________________________________________________________________________
____________________________________________________________________________
Certificates Nos.
(if available): ____________________________________________________________
____________________________________________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
ZIP CODE
Area Code and
Telephone No.: _____________________________________________________________
- -------------------------------------------
- -------------------------------------------
If Shares will be delivered by book-entry transfer, provide the following
information:
Account Number: ____________________________________________________________
Date: ______________________________________________________________________
- ------------------------------------------
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR A SIGNATURE GUARANTEE.)
THE UNDERSIGNED, A BANK, BROKER, DEALER, CREDIT UNION, SAVINGS ASSOCIATION
OR OTHER ENTITY WHICH IS A MEMBER IN GOOD STANDING OF THE SECURITIES TRANSFER
AGENTS MEDALLION PROGRAM OR A BANK, BROKER, DEALER, CREDIT UNION, SAVINGS
ASSOCIATION OR OTHER ENTITY WHICH IS AN "ELIGIBLE GUARANTOR INSTITUTION," AS
SUCH TERM IS DEFINED IN RULE 17AD-15 UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED (EACH OF THE FOREGOING CONSTITUTING AN "ELIGIBLE INSTITUTION"),
GUARANTEES THE DELIVERY TO THE DEPOSITARY OF THE SHARES TENDERED HEREBY, IN
PROPER FORM FOR TRANSFER, OR A CONFIRMATION THAT THE SHARES TENDERED HEREBY HAVE
BEEN DELIVERED PURSUANT TO THE PROCEDURE FOR BOOK-ENTRY TRANSFER SET FORTH IN
THE OFFER TO PURCHASE INTO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER
FACILITY, TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE THEREOF) AND ANY OTHER REQUIRED
DOCUMENTS, ALL WITHIN THREE (3) NASDAQ STOCK MARKET, INC. NATIONAL MARKET
TRADING DAYS OF THE DATE HEREOF.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates representing Shares to the Depositary within the time period set
forth herein. Failure to do so could result in a financial loss to such Eligible
Institution.
- -------------------------------------------
Name of Firm: ______________________________________________________________
Address: ___________________________________________________________________
ZIP CODE
Area Code and
Telephone No.: _____________________________________________________________
- -------------------------------------------
- -------------------------------------------
____________________________________________________________________________
AUTHORIZED SIGNATURE
Name: ______________________________________________________________________
PLEASE PRINT
Title: _____________________________________________________________________
Date: ______________________________________________________________________
- ------------------------------------------
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS FORM. CERTIFICATES FOR SHARES
SHOULD BE SENT WITH THE LETTER OF TRANSMITTAL.
4
<PAGE>
PRICE ENTERPRISES, INC.
OFFER TO PURCHASE
10,000,000 SHARES OF ITS COMMON STOCK
AT A PURCHASE PRICE OF $5.50 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON THURSDAY, OCTOBER 15, 1998, UNLESS THE OFFER IS EXTENDED.
September 17, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Price Enterprises, Inc., a Maryland corporation (the "Company"), today has
commenced an offer to purchase up to 10,000,000 shares (or such lesser number of
shares as are properly tendered, on the condition that a minimum of 5,000,000
shares are properly tendered) of its Common Stock, par value $.0001 per share
(the "Shares"), at a price of $5.50 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated September 17, 1998 (the "Offer to Purchase") and
in the related Letter of Transmittal (which, as amended or supplemented from
time to time, together constitute the "Offer").
The Company will pay, upon the terms and subject to the conditions of the
Offer, $5.50 per Share, net to the seller in cash, without interest thereon (the
"Purchase Price"), for Shares properly tendered pursuant to the Offer. All
Shares properly tendered prior to the Expiration Date (as defined in the Offer
to Purchase) and not properly withdrawn will be purchased at the Purchase Price,
upon the terms and subject to the conditions of the Offer, including the
proration provisions. Shares not purchased because of proration will be returned
at the Company's expense to the stockholders who tendered such Shares. The
Company reserves the right, in its sole discretion, to purchase more than
10,000,000 Shares pursuant to the Offer.
THE OFFER IS CONDITIONED ON A MINIMUM OF 5,000,000 SHARES BEING TENDERED.
THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS.
Upon the terms and subject to the conditions of the Offer, if at the
Expiration Date more than 10,000,000 Shares (or such greater number of Shares as
the Company may elect to purchase) are properly tendered and not properly
withdrawn, the Company will buy Shares first from any person (an "Odd Lot
Holder") who owned beneficially or of record as of the close of business on
September 16, 1998 and who continues to own beneficially or of record as of the
Expiration Date, an aggregate of fewer than 100 Shares and so certified in the
appropriate place on the Letter of Transmittal (and, if applicable, on a notice
of guaranteed delivery), who properly tendered all of his or her Shares, and
then on a pro rata basis from all other stockholders who properly tender Shares
at prices at or below the Purchase Price (and do not properly withdraw such
Shares prior to the Expiration Date).
For your information and for forwarding to those of your clients for whom
you hold Shares registered in your name or in the name of your nominee, we are
enclosing the following documents:
1. A letter to the stockholders of the Company dated September 17, 1998
from Jack McGrory, President and Chief Executive Officer of the Company;
2. The Letter of Transmittal for your use and for the information of
your clients (together with the accompanying Substitute Form W-9). Facsimile
copies of the Letter of Transmittal (with manual signatures) may be used to
tender Shares;
3. The Offer to Purchase dated September 17, 1998;
<PAGE>
4. The Notice of Guaranteed Delivery to be used to accept the Offer and
tender Shares pursuant to the Offer if none of the procedures for tendering
Shares set forth in the Offer to Purchase can be completed on a timely
basis;
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with an instruction form provided for obtaining such clients'
instructions with regard to the Offer;
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
7. A return envelope addressed to ChaseMellon Shareholder Services,
L.L.C., as Depositary for the Offer (the "Depositary").
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
THURSDAY, OCTOBER 15, 1998, UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or a manually signed facsimile thereof)
including any required signature guarantees and any other required documents
should be sent to the Depositary together with either certificate(s)
representing tendered Shares or timely confirmation of their book-entry
transfer, in accordance with the instructions set forth in the Offer to Purchase
and the related Letter of Transmittal.
Holders of Shares whose certificate(s) for such Shares are not immediately
available or who cannot deliver such certificate(s) and all other required
documents to the Depositary, or complete the procedures for book-entry transfer,
prior to the Expiration Date must tender their Shares according to the procedure
for guaranteed delivery set forth in "THE OFFER--Section 3" of the Offer to
Purchase.
No fees or commissions will be payable by the Company or any officer,
director, stockholder, agent or other representative of the Company to any
broker, dealer or other person for soliciting tenders of Shares pursuant to the
Offer. The Company will, however, upon request, reimburse you for customary
mailing and handling expenses incurred by you in forwarding any of the enclosed
materials to your clients whose Shares held by you as a nominee or in a
fiduciary capacity. The Company will pay or cause to be paid any stock transfer
taxes applicable to its purchase of Shares, except as otherwise provided in the
Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
MacKenzie Partners, Inc. as Information Agent, 156 Fifth Avenue, New York, New
York 10010, (212) 929-5500 (call collect) or call toll-free (800) 322-2885.
Requests for additional copies of the enclosed materials may be directed to the
Information Agent at their respective addresses and telephone numbers set forth
above.
Very truly yours,
[/S/ JACK MCGRORY]
Jack McGrory
President and Chief Executive Officer
Price Enterprises, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS AN AGENT OF THE COMPANY, THE INFORMATION AGENT OR THE
DEPOSITARY OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM
IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE
STATEMENTS CONTAINED THEREIN.
<PAGE>
PRICE ENTERPRISES, INC.
OFFER TO PURCHASE 10,000,000 SHARES
OF ITS COMMON STOCK AT $5.50 PER SHARE
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON THURSDAY, OCTOBER 15, 1998, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
September 17, 1998
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated September
17, 1998 (the "Offer to Purchase") and the related Letter of Transmittal (which,
as amended or supplemented from time to time, together constitute the "Offer")
in connection with the offer by Price Enterprises, Inc., a Maryland corporation
(the "Company"), to purchase up to 10,000,000 shares (or such lesser number of
shares as are properly tendered) of its Common Stock, par value $.0001 per share
(the "Shares"), at $5.50 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions of the Offer.
The Company will pay, upon the terms and subject to the conditions of the
Offer, $5.50 per Share, net to the seller in cash, without interest thereon (the
"Purchase Price"), for all Shares properly tendered pursuant to the Offer,
taking into account the number of Shares so tendered. All Shares properly
tendered prior to the Expiration Date (as defined in the Offer to Purchase), and
not properly withdrawn, will be purchased at the Purchase Price, upon the terms
and subject to the conditions of the Offer, including the proration provisions.
All Shares acquired in the Offer will be acquired at the Purchase Price. Shares
not purchased because of proration will be returned at the Company's expense to
the stockholders who tendered such Shares. The Offer is conditioned upon there
being properly tendered and not withdrawn prior to the Expiration Date 5,000,000
Shares. The Company reserves the right, in its sole discretion, to purchase more
than 10,000,000 Shares pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer, if at the
Expiration Date more than 10,000,000 Shares (or such greater number of Shares as
the Company may elect to purchase) are properly tendered and not properly
withdrawn, the Company will buy Shares first from any person (an "Odd Lot
Holder") who owned beneficially or of record as of the close of business on
September 16, 1998 and who continues to own beneficially or of record as of the
Expiration Date, an aggregate of fewer than 100 Shares and so certified in the
appropriate place on the Letter of Transmittal (and, if applicable, on a notice
of guaranteed delivery), who properly tenders all of his or her Shares and then
on a pro rata basis from all other stockholders who properly tender Shares (and
do not properly withdraw such Shares prior to the Expiration Date).
A TENDER OF YOUR SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD
THEREOF AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
YOUR SHARES HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to tender any or
all of the Shares held by us for your account, upon the terms and subject to the
conditions of the Offer.
Please note the following:
1. The Offer Price is $5.50 per Share. Shares may be tendered as
indicated in the attached Instruction Form, net to the seller in cash,
without interest thereon.
2. The priority in which Shares shall be purchased in the event of
proration may be designated.
3. The Offer is extended for up to 10,000,000 Shares (constituting
approximately 42.1% of the Shares presently outstanding). The Offer is
conditioned upon there being properly tendered and not
<PAGE>
properly withdrawn prior to the Expiration Date 5,000,000 Shares, which
number constitutes approximately 21.0% of the Shares outstanding on
September 9, 1998. For other conditions to the Offer, see "THE
OFFER--Section 6" of the Offer to Purchase
4. The Offer, proration period and withdrawal rights will expire at
12:00 Midnight, New York City time, on Thursday, October 15, 1998, unless
the Offer is extended.
5. The Board of Directors of the Company has approved the Offer.
However, neither the Company nor its Board of Directors makes any
recommendation to stockholders as to whether to tender or refrain from
tendering their Shares. Each stockholder must make the decision whether to
tender such stockholder's Shares and, if so, how many Shares to tender. The
Company has been advised that none of its directors or executive officers
intends to tender any Shares pursuant to the Offer, except that Murray
Galinson, a director, has advised the Company that the Galinson Charitable
Remainder Unit Trust, of which he is the trustee, intends to tender 5,000
Shares in the Offer. In addition, the Price Family Charitable Trust, of
which Sol Price, a significant stockholder and the father of Robert E. Price
who is Chairman of the Company's Board of Directors, is a trustee, intends
to tender 3,000,000 of the 4,545,170 Shares held by it in the Offer. See
"REASONS FOR THE OFFER--Certain Effects of the Offer."
6. The Purchase Price ($5.50 per Share) represents a significant
premium over the closing sale price of the shares ($4 5/16 per Share) as
reported on the Nasdaq National Market on September 15, 1998, the day prior
to announcement of the Offer. The market price of the Shares following the
consummation of the Offer may be lower than the Purchase Price. Accordingly,
any Shares not tendered pursuant to the Offer and any tendered Shares not
accepted for payment by reason of proration or otherwise, may have a market
price following consummation of the Offer that is lower than the Purchase
Price. If more than 10,000,000 shares are tendered, the Company will
purchase shares pro rata based on the ratio of the number of shares properly
tendered and not properly withdrawn by each stockholder (other than odd lot
holders) to the total number of shares properly tendered and not properly
withdrawn by all stockholders (other than odd lot holders). Accordingly,
each stockholder may wish to consider the possibility that the Company will
purchase only a portion of the shares tendered by such stockholder when
determining the number of shares to tender, if any.
7. Tendering stockholders will not be obligated to pay any brokerage
fees or commissions or solicitation fees to the Depositary, Information
Agent or the Company or, except as set forth in the Letter of Transmittal,
stock transfer taxes on the transfer of Shares pursuant to the Offer.
If (i) you owned beneficially or of record as of the close of business on
September 16, 1998 and continue to own beneficially or of record as of the
Expiration Date, an aggregate of fewer than 100 Shares; (ii) you instruct us to
tender on your behalf all such Shares prior to the Expiration Date; and (iii)
you complete the section entitled "Odd Lots" in the attached Instruction Form,
the Company, upon the terms and subject to the conditions of the Offer, will
accept all such Shares for purchase before proration, if any, of the purchase of
other Shares properly tendered.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the attached
Instruction Form. An envelope to return your Instruction Form to us is enclosed.
If you authorize us to tender your Shares, all such Shares will be tendered
unless otherwise indicated on the attached Instruction Form.
PLEASE FORWARD YOUR INSTRUCTION FORM TO US AS SOON AS POSSIBLE TO ALLOW US
AMPLE TIME TO TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE
OFFER.
2
<PAGE>
As described in the Offer to Purchase, if more than 10,000,000 Shares (or
such greater number of Shares as the Company may elect to purchase) have been
properly tendered and not properly withdrawn prior to the Expiration Date, the
Company will purchase tendered Shares on the basis set forth below:
1. FIRST, all Shares tendered and not withdrawn prior to the Expiration
Date by any Odd Lot Holder who:
(a) tenders all Shares owned beneficially or of record by such Odd
Lot Holder (tenders of less than all Shares owned by such Odd Lot Holder
will not qualify for this preference); and
(b) completes the box captioned "Odd Lots" on the Letter of
Transmittal and if applicable on the Notice of Guaranteed Delivery; and
2. SECOND, after purchase of all of the foregoing Shares, all other
Shares properly tendered and not properly withdrawn prior to the Expiration
Date, on a pro rata basis (with appropriate adjustments to avoid purchases
of fractional Shares) as described in the Offer to Purchase.
The Offer is being made solely pursuant to the Offer to Purchase and the
related Letter of Transmittal and is being made to all holders of Shares who
were record holders as of September 16, 1998. The Offer is not being made to,
nor will tenders be accepted from or on behalf of, holders of Shares residing in
any jurisdiction in which the making of the Offer or acceptance thereof would
not be in compliance with the securities laws of such jurisdiction.
3
<PAGE>
INSTRUCTION FORM
INSTRUCTIONS FOR TENDER OF SHARES OF PRICE ENTERPRISES, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated September 17, 1998 (the "Offer to Purchase") and the related
Letter of Transmittal (which, as amended or supplemented from time to time,
together constitute the "Offer") in connection with the offer by Price
Enterprises, Inc., a Maryland corporation (the "Company"), to purchase up to
10,000,000 shares of its Common Stock, par value $.0001 per share (the "Shares")
(or a minimum of 5,000,000 shares as are properly tendered), at $5.50 per Share,
net to the seller in cash, without interest thereon, upon the terms and subject
to the conditions of the Offer.
This will instruct you to tender to the Company, on (our) (my) behalf, the
number of Shares indicated below (or if no number is indicated below, all
Shares) which are beneficially owned by (us) (me) and registered in your name,
upon the terms and subject to the conditions of the Offer.
- --------------------------------------------------------------------------------
NUMBER OF SHARES TO BE TENDERED: _______________________________________ SHARES*
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ODD LOTS
/ / By checking this box the undersigned represents that the undersigned
owned beneficially or of record as of the close of business on September
16, 1998 and continues to own beneficially or of record as of the
Expiration Date, an aggregate of fewer than 100 Shares and is tendering
all of such Shares.
- --------------------------------------------------------------------------------
- ------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE OPTION AND RISK OF THE
TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
SIGN HERE:
________________________________________________________________________________
________________________________________________________________________________
Signature(s)
________________________________________________________________________________
________________________________________________________________________________
Print Name(s)
________________________________________________________________________________
________________________________________________________________________________
Address(es)
________________________________________________________________________________
Area Code and Telephone Number
________________________________________________________________________________
Taxpayer Identification or Social Security Number
4
<PAGE>
PRICE ENTERPRISES, INC.
4649 MORENA BLVD.
SAN DIEGO, CA 92117
September 17, 1998
Dear Stockholder:
On behalf of the Board of Directors Price Enterprises, Inc. (the "Company"),
I am pleased to inform you that the Company has commenced a tender offer (the
"Offer") to purchase up to 10,000,000 shares (constituting approximately 42.1%
of the shares presently outstanding) of its common stock at $5.50 per share (the
"Purchase Price"), net to the seller in cash, upon the terms and conditions set
forth in the enclosed Offer to Purchase and related Letter of Transmittal.
In arriving at its decision, the Board of Directors gave careful
consideration to a number of factors described in the enclosed Offer to
Purchase, which is an exhibit to the Company's Tender Offer Statement on
Schedule 13E-4 being filed today with the Securities and Exchange Commission.
The enclosed Offer to Purchase describes the Board of Directors' decision and
contains other important information relating to such decision.
The Board of Directors has determined that the Company's financial condition
and outlook and current market conditions, including the recent trading prices
of its shares, make this an excellent time to repurchase a significant portion
of the outstanding shares of the Company's common stock. In the view of the
Board of Directors, the Offer represents an attractive transaction for the
Company that should benefit the Company and its remaining stockholders over the
long term. In particular, the Board of Directors believes that the repurchase of
shares at this time is consistent with the Company's long term goal of seeking
to increase stockholder value.
The Offer provides stockholders who are considering a sale of all or a
portion of their shares with the opportunity to sell their shares to the Company
for $5.50 per share, and, subject to the terms and conditions of the Offer, to
sell those shares without the usual transaction costs associated with open
market sales where shares are tendered by the registered owner directly to the
depositary. In addition, the Offer gives stockholders the opportunity to sell at
a price greater than the market price prevailing prior to the announcement of
the Offer. The Offer also allows stockholders to sell a portion of their shares
while retaining a continuing equity interest in the Company.
Stockholders should note that the Purchase Price ($5.50 per share of Company
common stock outstanding (the "Shares")) represents a significant premium over
the closing sale price of the Shares ($4 5/16 per Share) as reported on the
Nasdaq National Market on September 15, 1998, the day prior to announcement of
the Offer. The market price of the Shares following consummation of the Offer
may be lower than the Purchase Price. Accordingly, any Shares not tendered
pursuant to the Offer and any tendered Shares not accepted for payment by reason
of proration or otherwise, may have a market price following consummation of the
Offer that is lower than the Purchase Price.
Also accompanying this letter is a Letter of Transmittal to be used for
tendering your Shares. The Offer to Purchase and Letter of Transmittal set forth
the terms and conditions of the Offer and provide instructions as to how to
tender your Shares. We urge you to read the enclosed materials carefully and
consider all factors set forth therein before making your decision with respect
to the Offer.
On behalf of the Board of Directors, management and employees of the
Company, I thank you for your continued support of our Company.
Very truly yours,
[/S/ JACK MCGRORY]
Jack McGrory
President and Chief Executive Officer
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.
PURPOSE OF FORM. -- A person who is required to file an information return
with the IRS must obtain your correct TIN to report income paid to you, real
estate transactions, mortgage interest you paid, the acquisition or
abandonment of secured property, or contributions you made to an IRA. Use
Form W-9 to furnish your correct TIN to the requester (the person asking you
to furnish your TIN) and, when applicable, (1) to certify that the TIN you
are furnishing is correct (or that you are waiting for a number to be
issued), (2) to certify that you are not subject to backup withholding, and
(3) to claim exemption from backup withholding if you are an exempt payee.
Furnishing your correct TIN and making the appropriate certifications will
prevent certain payments from being subject to backup withholding.
Note: IF A REQUESTER GIVES YOU A FORM OTHER THAN A W-9 TO REQUEST YOUR TIN,
YOU MUST USE THE REQUESTER'S FORM.
HOW TO OBTAIN A TIN. -- If you do not have a TIN, apply for one immediately.
To apply, get Form SS-5, Application for a Social Security Card (for
individuals), from your local office of the Social Security Administration,
or Form SS-4, Application for Employer Identification Number (for businesses
and all other entities), from your local IRS office.
To complete Form W-9 if you do not have a TIN, write "Applied for" in
the space for the TIN in Part I (or check box 2 of Substitute Form W-9), sign
and date the form, and give it to the requester. Generally, you must obtain a
TIN and furnish it to the requester by the time of payment. If the requester
does not receive your TIN by the time of payment, backup withholding, if
applicable, will begin and continue until you furnish your TIN to the
requester.
Note: WRITING "APPLIED FOR" (OR CHECKING BOX 2 OF THE SUBSTITUTE FORM W-9) ON
THE FORM MEANS THAT YOU HAVE ALREADY APPLIED FOR A TIN OR THAT YOU INTEND TO
APPLY FOR ONE IN THE NEAR FUTURE.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date the form, and give it to the requester.
WHAT IS BACKUP WITHHOLDING? -- Persons making certain payments to you after
1992 are required to withhold and pay to the IRS 31% of such payments under
certain conditions. This is called "backup withholding." Payments that could
be subject to backup withholding include interest, dividends, broker and
barter exchange transactions, rents, royalties, nonemployee compensation, and
certain payments from fishing boat operators, but do not include real estate
transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your
tax return, your payments will not be subject to backup withholding. Payments
you receive will be subject to backup withholding if:
(1) You do not furnish your TIN to the requester, or
(2) The IRS notifies the requester that you furnished an incorrect TIN, or
(3) You are notified by the IRS that you are subject to backup
withholding because you failed to report all your interest and dividends on
your tax return (for reportable interest and dividends only), or
(4) You do not certify to the requester that you are not subject to
backup withholding under 3 above (for reportable interest and dividend
accounts opened after 1983 only), or
(5) You do not certify your TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983, or
broker accounts considered inactive in 1983.
Except as explained in 5 above, other reportable payments are subject to
backup withholding only if 1 or 2 above applies. Certain payees and payments
are exempt from backup withholding and information reporting. See Payees and
Payments Exempt From Backup Withholding, below, and Exempt Payees and
Payments under Specific Instructions, below, if you are an exempt payee.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING -- The following is a list
of payees exempt from backup withholding and for which no information
reporting is required. For interest and dividends, all listed payees are
exempt except item (9). For broker transactions' payees listed in (1) through
(13) and a person registered under the Investment Advisers Act of 1940 who
regularly acts as a broker are exempt. Payments subject to reporting under
sections 6041 and 6041A are generally exempt from backup withholding only if
made to payees described in items (1) through (7), except a corporation that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (2) through (6) are exempt from backup
withholding for barter exchange transactions, patronage dividends, and
payments by certain fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an IRA or
a custodial account under section 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United
States or any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions,
agencies, or instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the
United States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or
listed in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section
4947.
Payments of dividends and patronage dividends generally not subject to
backup withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident partner.
- - Payments of patronage dividends not paid in money.
- - Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include
the following:
- - Payments of interest on obligations issued bye individuals.
Note: YOU MAY BE SUBJECT TO BACKUP WITHHOLDING IF THIS INTEREST IS $600 OR
MORE AND IS PAID IN THE COURSE OF THE PAYER'S TRADE OR BUSINESS AND YOU HAVE
NOT PROVIDED YOU CORRECT TIN TO THE PAYER.
- - Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
- - Payments described in section 6049(b) (5) to nonresident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Mortgage interest paid by you.
Payments that are not subject to information reporting are also not
subject to backup withholding. For details, see sections 6041, 6041A(a),
6042, 6044, 6045, 6049, 6050A and 6050N, and their regulations.
PENALTIES
FAILURE TO FURNISH TIN. -- If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless
your failure is due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis that results in no backup
withholding, your are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
MISUSE OF TINS. -- If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
<PAGE>
SPECIFIC INSTRUCTIONS
NAME. -- If you are an individual, you must generally provide the name shown
on your social security card. However, if you have changed your last name,
for instance, due to marriage, without informing the Social Security
Administration of the name change, please enter your first name, the last
name shown on your social security card, and your new last name.
If you are a sole proprietor, you must furnish your individual name and
either your SSN or EIN. You may also enter business name or "doing business
as" name on the business name line. Enter your name(s) as shown on your
social security card and/or as it was used to apply for your EIN on Form SS-4.
SIGNING THE CERTIFICATION.
(1) INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND
BROKER ACCOUNTANTS CONSIDERED ACTIVE DURING 1983. -- You are required to
furnish your correct TIN, but your are not required to sign the certification.
(2) INTEREST, DIVIDEND, BROKER AND BARTER EXCHANGE ACCOUNTS OPENED AFTER 1983
AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983. -- You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester,
you must cross out item 2 in the certification before signing the form.
(3) REAL ESTATE TRANSACTIONS. -- You must sign the certification. You may
cross out item 2 of the certification.
(4) OTHER PAYMENTS. -- You are required to furnish your correct TIN, but you
are not required to sign the certification unless you have been notified of
an incorrect TIN. Other payments include payments made in the course of the
requester's trade or business for rents, royalties, goods (other than bills
for merchandise), medical and health care services, payments to a nonemployee
for services (including attorney and accounting fees), and payments to
certain fishing boat crew members.
(5) MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY, OR IRA CONTRIBUTIONS. -- You are required to furnish your correct
TIN, but you are not required to sign the certification.
(6) EXEMPT PAYEES AND PAYMENTS. -- If you are exempt from backup withholding
you should complete this form to avoid possible erroneous backup withholding.
Enter your correct TIN in Part I, write "EXEMPT" in the block in Part II, and
sign and date the form. If you are a nonresident alien or foreign entity not
subject to backup withholding, give the requester a complete Form W-8,
Certificate of Foreign Status.
(7) TIN "APPLIED FOR." -- Follow the instructions under How To Obtain a TIN,
on page 1, and sign and date this form.
SIGNATURE. -- For a joint account, only the person whose TIN is shown in
Part I should sign.
PRIVACY ACT NOTICE. -- Section 6109 requires you to furnish your correct TIN
to persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid,
the acquisition or abandonment of secured property, or contributions you made
to an IRA. The IRS uses the numbers for identification purposes and to help
verify the accuracy of your tax return. You must provide your TIN whether or
not you are required to file a tax return. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a TIN to a payer. Certain penalties may also apply.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
<TABLE>
<CAPTION>
- ------------------------------------------------------- -----------------------------------------------------------------
GIVE NAME AND
FOR THIS TYPE OF ACCOUNT GIVE NAME AND FOR THIS TYPE OF ACCOUNT EMPLOYER
SOCIAL SECURITY IDENTIFICATION
NUMBER OF: NUMBER OF:
- ------------------------------------------------------- -----------------------------------------------------------------
<S> <C> <C> <C>
1. Individual The individual 6. A valid trust, estate, or Legal entity(4)
2. Two or more individuals The actual owner of the pension trust
(joint account) account, or, if combined 7. Corporate The organization
funds, the first 8. Association, club, The organization
individual on the religious, charitable
account(1) educational, or other
3. Custodian account of a The minor(2) tax-exempt organization
minor (Uniform Gift to 9. Partnership The partnership
Minors Act) 10. A broker or registered The broker or nominee
4. a. The usual revocable The grantor-trustee(1) nominee
savings trust (grantor 11. Accountant with the The public entity
is also trustee) Department of
b. The so-called trust The actual owner(1) Agriculture in the name
account that is not a of a public entity (such
legal or valid trust as a state or local
under state law government, school
5. Sole proprietorship The owner(3) district or prison) that
receives agriculture
program payments
- ------------------------------------------------------- -----------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's Social Security Number.
(3) Show your individual name. You may also enter your business name. You may
use your Social Security Number or Employer Identification Number.
(4) List first and circle the name of the legal trust, estate or pension
trust. (Do not furnish the TIN of the personal representative or trustee
unless the legal entity itself is not designated in the account title.)
Note: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL
BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
2
<PAGE>
PRICE ENTERPRISES, INC. ANNOUNCES ITS INTENTION
TO COMMENCE A SELF TENDER OFFER TO PURCHASE UP TO
10 MILLION SHARES OF ITS COMMON STOCK AT $5.50 PER SHARE
SAN DIEGO, California, September 16, 1998/PR Newswire/ -- Price Enterprises,
Inc. (Nasdaq: PREN) announced today that it intends to commence a self tender
offer to purchase up to 10 million shares (or approximately 42.1%) of its
outstanding common stock at a price of $5.50 per share (the "Offer"). The
Offer will commence upon the filing of Schedule 13E-4 with the Securities and
Exchange Commission and the mailing of an Offer to Purchase to stockholders
tomorrow. The proration period and withdrawal rights will expire on October
15, 1998, unless extended.
The Board of Directors has determined that the Company's financial condition,
outlook and current market conditions, including recent trading prices of its
shares, make this a favorable time to repurchase a significant portion of the
outstanding shares of the Company's common stock. In the view of the Board of
Directors, the Offer represents an attractive transaction for the Company
that should benefit the Company and its remaining stockholders over the long
term. In particular, the Board of Directors believes that the repurchase of
shares at this time is consistent with the Company's long term goal of
seeking to increase stockholder value.
The Offer provides stockholders with the opportunity to sell their shares to
the Company for $5.50 per share, and subject to the terms and conditions of
the Offer, to sell those shares without the usual transaction costs
associated with open market sales if they tender directly to ChaseMellon
Shareholder Services, L.L.C., the depositary for the Offer. In addition, the
Offer gives stockholders the opportunity to sell at a price greater than the
market price prevailing prior to the announcement of the Offer. The Offer
also allows stockholders to sell a portion of their shares while retaining a
continuing equity interest in the Company with their remaining common shares.
Price Enterprises, Inc. is operating as a real estate investment trust whose
principal business is to acquire, develop, operate, manage and lease real
property. The Company's current real estate portfolio consists of 31
commercial properties located primarily in the West and Northeast and which
are principally leased to major retail tenants.
This Press release contains forward-looking statements that are subject to
risks and uncertainties that might cause actual results to differ from those
foreseen, including the competition for acquisition of real estate and the
Company's dependence on rental income from real property as well as the other
risks detailed in the Company's SEC reports, including the report on Form 10-K
filed on March 27, 1998.
- -0- CONTACT: Jack McGrory, President, (619) 581-4973 or MacKenzie Partners,
Inc., Information Agent, (800) 322-2885/
<PAGE>
UBS AG, NEW YORK BRANCH
299 Park Avenue
New York, New York 10171
August 27, 1998
Price Enterprises, Inc.
4621 Morena Boulevard
San Diego, California 92117
Attention: Mr. Gary Nielsen
----------------
Re: Revolving Credit Agreement between you and us dated as of
March 31, 1998 (the "Loan Agreement"; capitalized terms
used herein without definition shall have the meanings
ascribed to them in the Loan Agreement)
---------------------------------------------------------
Dear Sirs:
In connection with your pending issuance of preferred stock, you have
requested certain changes in the provisions of the Loan Agreement. This is to
confirm the agreement between you and us that the Loan Agreement shall be
amended, effective as of the date hereof, as follows:
1. In Section 1.01:
(a) In the definition of the term "Loan Commitment", the
figure "$75,000,000" is amended to "$60,000,000".
(b) In the definition of the term "Maturity Date", the date
"March 30, 2001" is amended to "December 31, 1998".
2. In Section 8.07, the figure "1.80" is amended to "1.20".
3. Sections 2.02, 12.16 and 12.17 shall be deleted and of no
further force or effect. References in other provisions of the Loan Agreement
to "Bid Rate Loans", "Bid Rate Quote Request", "Bid Rate Loan Note", "Bid
Borrowing Limit", "LIBOR Bid Margin", "LIBOR Bid Rate", "Invitation for Bid
Rate Quotes" or "Designating Lender" may be disregarded.
<PAGE>
4. The last sentence of the first paragraph of Section 2.03
shall be deleted and replaced by the following:
"Notwithstanding anything to the contrary contained herein,
the Bank(s) shall not be obligated to make an advance of the Loans
after August 5, 1998 such that the aggregate outstanding principal
amount of the Loans exceeds $50,000,000 except for an advance that
shall be used solely for the purpose of paying costs incurred in
connection with the purchase by Borrower of Lake Montclair Shopping
Center."
Except as modified hereby, the Loan Agreement and other Loan
Documents shall remain unchanged and in full force and effect.
2
<PAGE>
Kindly acknowledge your agreement with the foregoing by signing and
returning the enclosed copy of this letter.
Very truly yours,
UBS AG, New York Branch
(as successor to Union Bank of Switzerland
(New York Branch)),
as Bank and as Administrative Agent
By /s/ TIFFANIE M. FISHER
--------------------------------------
Name: TIFFANIE M. FISHER
Title: Director
By /s/ JEFFREY W. WALD
--------------------------------------
Name: JEFFREY W. WALD
Title: EXECUTIVE DIRECTOR
Agreement acknowledged this
31st day of August, 1998.
PRICE ENTERPRISES, INC.,
Attest: a Maryland corporation
By /s/ GARY W. NIELSEN By /s/ JACK MCGRORY [SEAL]
------------------------ --------------------------------
Name: JACK MCGRORY
Title: CFO
3
<PAGE>
As of September 15, 1998
Price Enterprises, Inc.
4649 Morena Boulevard
San Diego, California 92117
Dear Sirs:
Morgan Guaranty Trust Company of New York (the "Bank") is pleased to
confirm its commitment to make loans to Price Enterprises, Inc., a Maryland
corporation (the "Borrower"), from time to time during the period from the date
hereof to and including September 10, 1999 (the "Termination Date"), in an
aggregate principal amount not to exceed at any one time outstanding U.S.
$50,000,000 (the "Commitment"), as such amount may be reduced pursuant to
Section 6 hereof, on the terms and conditions set forth below. The Loans (as
hereinafter defined) shall bear interest at either the Bank's Prime Rate, as
defined in Section 3 hereof ("Prime Rate Loans"), or at the Eurodollar Rate, as
defined in Section 3 hereof ("Eurodollar Loans"), on a revolving basis. The
term "Loan" or "Loans" shall refer to Prime Rate Loans or Eurodollar Loans or
both, as the context may require.
Section 1. LOANS. (a) The Borrower may from time to time, during the
period from the date hereof to and including the Termination Date, borrow,
partially or wholly prepay its outstanding Loans, and reborrow, subject to all
of the limitations, terms and conditions hereof; provided, however that the
total outstanding Loans hereunder shall at no time exceed the Commitment. The
Borrower shall give the Bank prior written notice not later than 10:00 a.m. (New
York City time) on (i) the date of each Prime Rate Loan and (ii) the third
Business Day before each Eurodollar Loan, in each case specifying the date
thereof (which shall be a Business Day), the amount thereof (which shall be at
least U.S. $250,000 in the case of Eurodollar Loans and $25,000 in the case of
Prime Rate Loans), the type of Loan and the duration of the Interest Period (as
defined in Section 4 hereof) therefor. As used herein, the term "Business Day"
means any day other than a Saturday or Sunday on which commercial banks in New
York City are open for business and, in the case of Eurodollar Loans, on which
commercial banks are open for international business (including dealings in U.S.
dollar deposits) in London.
(b) Subject to the fulfillment of the conditions specified in Section 12
hereof, not later than 11:00 a.m. (New York City
<PAGE>
2
time) on the date of any Loan, the Bank will make the amount of such Loan
available to the Borrower in immediately available funds at the Bank's Domestic
Lending Office (as defined below).
(c) The Loans shall be evidenced by a promissory note substantially in the
form of Exhibit A hereto (the "Note"), payable to the Bank for the account of
its Applicable Lending Office. The "Applicable Lending Office" means (i) with
respect to Prime Rate Loans, the Domestic Lending Office specified on the
signature page hereof or such other office as the Bank may designate as its
Domestic Lending Office from time to time (the "Domestic Lending Office"), and
(ii) with respect to Eurodollar Loans, the Eurodollar Lending Office specified
on the signature page hereof or such other office as the Bank may designate as
its Eurodollar Lending Office from time to time (the "Eurodollar Lending
Office").
Section 2. MATURITY OF LOANS. The Borrower shall repay to the Bank the
unpaid principal amount of each Loan in full on the last day of the Interest
Period applicable to such Loan, PROVIDED that, subject to the provisions hereof,
the Bank shall contemporaneously therewith make a new Loan to the Borrower in
the amount of such repayment.
Section 3. INTEREST. (a) Each Prime Rate Loan shall bear interest
payable on the last day of each Interest Period at a rate per annum (the "Prime
Rate") for each day equal to the rate of interest publicly announced by the Bank
in New York City from time to time as its Prime Rate (the "Prime Rate").
(b) Each Eurodollar Loan shall bear interest for each day during the
Interest Period at a rate per annum (the "Eurodollar Rate") equal to 3/10 of 1%
above the Adjusted Eurodollar Rate (as defined below) for such day, payable on
the last day of each Interest Period and, if such Interest Period is longer than
three months, at intervals of three months after the first day thereof. The
"Adjusted Eurodollar Rate" applicable to any Interest Period means a rate per
annum equal to the quotient obtained (rounded upwards, if necessary, to the next
higher 1/100 of 1%) by dividing (i) the applicable London Interbank Offered Rate
(as defined below) by (ii) 1.00 minus the Eurodollar Reserve Percentage (as
defined below). The "London Interbank Offered Rate" applicable to any Interest
Period means the rate per annum at which deposits in U.S. dollars are offered to
the London office of the Bank in the London interbank market at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period in an amount approximately equal to the principal amount of the
Eurodollar Loans to which such Interest Period applies and with a maturity
comparable to such Interest Period. The "Eurodollar Reserve
<PAGE>
3
Percentage" means for any day that percentage (expressed as a decimal) which is
in effect on such day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement for a member bank of the Federal Reserve System in New York City
with deposits exceeding five billion U.S. dollars in respect of "Eurocurrency
liabilities" (or in respect of any other category of liabilities which includes
deposits by reference to which the interest rate on Eurodollar Loans is
determined or any other category of extensions of credit or other assets which
includes loans by a non-United States office of the Bank to United States
residents).
(c) Any overdue payments of principal of and interest on any Loan shall
bear interest, payable on demand, for each day until paid at a fluctuating rate
per annum equal to the sum of 2% plus the Prime Rate in effect on such day.
Section 4. INTEREST PERIODS. "Interest Period" means, with respect to
each Loan, the period commencing on the date of such Loan and ending (a) 30 days
thereafter, in the case of a Prime Rate Loan, or (b) one, three or six months
thereafter as the Borrower may elect, in the case of a Eurodollar Loan; PROVIDED
that (i) any Interest Period which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business Day unless, in
the case of a Eurodollar Loan, such Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Business Day; (ii) any Interest Period for a Eurodollar Loan which begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the month at the end of such Interest Period)
shall end on the last Business Day of a calendar month; (iii) any Interest
Period which would otherwise end after the Termination Date shall end on the
Termination Date (but if any such Interest Period for a Loan would be less than
30 days, such Loan shall be a Prime Rate Loan) and (iv) if the Bank shall not
have received notice from the Borrower to the contrary at least three Business
Days prior to the end of an expiring Interest Period, the Borrower shall be
deemed to have requested to select an Interest Period of the same type and with
a duration of that then ending or, if shorter, ending on the Termination Date as
specified in clause (iii) of this Section 4.
Section 5. PAYMENTS. All payments of principal of and interest on the
Note, the Loans and of the commitment fee shall be made not later than 11:00
a.m. (New York City time) on the day when due in U.S. dollars in immediately
available funds to the Bank at its Domestic Lending Office. Interest on the
Loans bearing interest at the Prime Rate shall be computed on a basis
<PAGE>
4
of a year of 365 (or 366) days and paid for actual days elapsed. All other
interest and fees shall be computed on the basis of a year of 360 days and paid
for actual days elapsed.
Section 6. REDUCTIONS OF COMMITMENT; TERMINATION OF COMMITMENT;
PREPAYMENT. (a) The Borrower shall have the right to terminate the Commitment
in whole or in part from time to time on not less than three Business Days'
prior written notice to the Bank by an amount of at least U.S. $250,000 or the
balance of the Commitment, whichever is less.
(b) The Commitment shall terminate on the Termination Date and any Loans
then outstanding (together with accrued interest thereon) shall be due and
payable on such date.
(c) Subject in the case of any Eurodollar Loan to Section 10, the Borrower
may upon at least three Business Days' notice to the Bank prepay without penalty
any Loan in whole or in part from time to time on not less than two Business
Days' prior written notice to the Bank in an amount of at least U.S. $250,000 or
the balance of such Loan, whichever is less.
Section 7. COMMITMENT FEE. The Borrower shall pay to the Bank a
commitment fee at the rate of 1/8 of 1% per annum on the unused amount of the
Commitment. Such fee shall accrue from the date hereof and shall be payable
quarterly in arrears to but excluding the Termination Date (or earlier date of
termination of the Commitment in its entirety).
Section 8. INCREASED COST AND REDUCED RETURN. (a) If on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Bank (or its Applicable Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall impose, modify or deem
applicable any reserve (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
with respect to any Eurodollar Loan any such requirement included in an
applicable Eurodollar Reserve Percentage), special deposit, insurance assessment
or similar requirement against assets of, deposits with or for the account of,
or credit extended by, the Bank (or its Applicable Lending Office) or shall
impose on the Bank (or its Applicable Lending Office) or on the London interbank
market any other condition affecting its Eurodollar Loans, its Note or its
obligation to make Eurodollar Loans, and the result of any of
<PAGE>
5
the foregoing is to increase the cost to the Bank (or its Applicable Lending
Office) of making or maintaining any Eurodollar Loan, or to reduce the amount of
any sum received or receivable by the Bank (or its Applicable Lending Office)
under this Agreement or under its Note with respect thereto, by an amount
reasonably deemed by the Bank to be material, then, within 15 days after demand
by the Bank, the Borrower shall pay to the Bank such additional amount or
amounts as will compensate the Bank for such increased cost or reduction.
(b) If the Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on the capital of the Bank (or any person or entity
controlling the Bank (its "Parent")) as a consequence of the Bank's obligations
hereunder to a level below that which the Bank (or its Parent) could have
achieved but for such adoption, change or compliance (taking into consideration
the Bank's policies with respect to capital adequacy) by an amount reasonably
deemed by the Bank to be material, then from time to time, within 15 days after
demand by the Bank, the Borrower shall pay to the Bank (or its Parent) such
additional amount or amounts as will compensate the Bank for such reduction.
(c) The Bank will promptly notify the Borrower of any event of which it
has knowledge, occurring after the date hereof, which will entitle the Bank to
compensation pursuant to this Section and will designate a different Applicable
Lending Office if such designation will avoid the need for, or reduce the amount
of, such compensation and will not in the reasonable judgement of the Bank be
otherwise disadvantageous to the Bank. A certificate of the Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive so long as made on a
reasonable basis. In determining such amount, the Bank may use any reasonable
averaging and attribution methods.
Section 9. ILLEGALITY. If it shall become unlawful for the Bank to
continue to fund or maintain any Eurodollar Loans or to make such Loans
hereunder, then upon receipt of notice to such effect by the Borrower from the
Bank, the Bank's obligation to make Eurodollar Loans hereunder shall be
suspended until the Bank notifies the Borrower that the circumstances causing
such suspension no longer exist and the Borrower shall repay all
<PAGE>
6
Eurodollar Loans in full on either the last day of the Interest Period
applicable to such Eurodollar Loans if the Bank may lawfully continue to
maintain and fund such Eurodollar Loans to such day or immediately if the Bank
may not lawfully continue to fund and maintain such Eurodollar Loans to such
day, whereupon the Bank shall make a Prime Rate Loan to the Borrower in the
amount of such prepayment.
Section 10. FUNDING LOSSES. If the Borrower makes any payment of
principal with respect to a Eurodollar Loan on any day other than the last day
of an Interest Period therefor, or if the Borrower fails to borrow a Eurodollar
Loan after notice has been given to the Bank pursuant to Section 1 or Section 6
hereof, the Borrower shall reimburse the Bank on demand for any resulting loss
or expense incurred by it including, without limitation, any loss incurred in
obtaining, liquidating or employing deposits from third parties, PROVIDED that
the Bank shall have delivered to the Borrower a certificate as to the amount of
such loss, which certificate shall be conclusive in the absence of manifest
error.
Section 11. REPRESENTATIONS. The Borrower hereby represents and warrants
to the Bank that (a) the Borrower is a duly organized and existing Maryland
corporation and is duly authorized to enter into and perform this Agreement, to
borrow hereunder, and to deliver the Note, all of which will constitute valid
and enforceable obligations of the Borrower except to the extent such
enforcement may be limited by applicable bankruptcy, insolvency, and other
similar laws affecting creditors' rights generally, (b) none of the making of
this Agreement, the borrowings hereunder, the execution and delivery of the Note
or the performance by the Borrower of its obligations hereunder or thereunder
will violate any provision of law or any agreement, indenture, note or other
instrument binding upon the Borrower or its Charter or By-Laws or give cause for
acceleration of any indebtedness of the Borrower, (c) no authority from or
approval by any governmental body, commission or agency that has not been
obtained is required in connection with the making or validity of this Agreement
and the execution and delivery of the Note or borrowings under this Agreement,
(d) the balance sheet of the Borrower as of June 30, 1998, heretofore furnished
to the Bank, is complete and correct and fairly presents the financial condition
of the Borrower as at such date and since such date there has been no material
adverse change in the financial condition, business, operations or prospects of
the Borrower and its subsidiaries, taken as a whole, from that reflected in said
balance sheet; notwithstanding the forgoing representation, the Bank hereby
acknowledges and consents to the Borrower's issuance of approximately 23.7
million shares of 8 3/4% Cumulative Preferred Stock on August 17, 1998, (e)
there are no actions,
<PAGE>
7
suits or proceedings pending against or, to the knowledge of the Borrower,
threatened against or affecting, the Borrower or any of its subsidiaries, in any
court or before or by any governmental department, agency or instrumentality, an
adverse decision in which could materially and adversely affect the financial
condition, business, operations or prospects of the Borrower or the ability of
the Borrower to perform its obligations under this Agreement or the Note, and
(f) the Borrower and each subsidiary is in compliance in all material respects
with (i) all applicable laws, ordinances, rules, regulations, and requirements
of governmental authorities (including, without limitation, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and the rules and
regulations thereunder and (ii) except as set forth on Exhibit D attached hereto
all federal, state and local statutes, laws, regulations or other governmental
restrictions relating to environmental protection, hazardous substances or the
clean-up or other remediation thereof) except where the necessity of compliance
therewith is being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been established or non-compliance with
the same could not reasonably be expected to materially and adversely affect the
financial condition, business, operations or prospects of the Borrower and its
subsidiaries taken as a whole.
Section 12. CONDITIONS OF LENDING. The obligation of the Bank to make its
initial Loan is subject to the conditions precedent that the Bank shall have
received on or before the day of such Loan the following documents, each dated
such day, in form and substance satisfactory to the Bank: (a) the Note duly
executed by the Borrower, (b) certified copies of the resolutions of the Board
of Directors of the Borrower approving this Agreement and the Note, and all
documents evidencing other necessary corporate or other action or necessary
governmental or other approvals with respect to this Agreement and the Note, (c)
a certificate of the Secretary or an Assistant Secretary of the Borrower
certifying names and true signatures of the officers of the Borrower duly
authorized to sign this Agreement and the Note and the other documents to be
delivered hereunder, (d) opinions of counsel substantially in the form of
Exhibits B-1, B-2 and B-3 hereto, (e) a guaranty (the "Guaranty") in the form of
Exhibit C hereto duly executed by each of Sol Price, Helen Price and The Sol and
Helen Price Trust (each, a "Guarantor" and collectively, the "Guarantors") and
(f), a facility fee in the amount of $10,000. The obligation of the Bank to
make each Loan hereunder (including the initial Loan) is subject to the
conditions precedent that (a) immediately after the making of such Loan, no
Event of Default (as defined in Section 14 hereof) or any event or condition
which with the giving of notice or lapse of time, or both, would become an Event
of Default (a "Default") shall
<PAGE>
8
have occurred and be continuing, (b) the representations and warranties
contained in this Agreement and the Guaranty are true on and as of the date of
such Loan with the same force and effect as if made on and as of such date.
Section 13. COVENANTS. So long as the Commitment hereunder shall be in
effect or the Note is outstanding, unless compliance shall have been waived in
writing by the Bank, the Borrower agrees that:
(a) The Borrower will deliver to the Bank (i) as soon as available and in
any event within 45 days after the end the first three quarters and within
ninety days after the end of the final quarter of each calendar year, a
consolidated balance sheet of the Borrower and its consolidated subsidiaries as
at the end of such quarter and the related consolidated statements of income and
retained earnings and changes in cash flow of the Borrower and its consolidated
subsidiaries for such quarter and for the portion of the Borrower's fiscal year
ended at the end of such quarter; (ii) within five days after any executive
officer of the Borrower obtains knowledge of any Default, if such Default is
then continuing, a certificate of the chief financial officer or the chief
accounting officer of the Borrower setting forth the details thereof and the
action which the Borrower is taking or proposes to take with respect thereto;
and (iii) from time to time such additional information regarding the financial
position or business of the Borrower and its subsidiaries as the Bank may
reasonably request.
(b) The Borrower will continue, and will cause each subsidiary to
continue, to engage in business of the same general type as now conducted by the
Borrower and its subsidiaries, and will preserve, renew and keep in full force
and effect, and will cause each subsidiary to preserve, renew and keep in full
force and effect its corporate existence and its rights, privileges and
franchises necessary or desirable in the normal conduct of business except to
the extent that the failure to do so could not be reasonably be expected to
materially and adversely affect the prospects of the Borrower and its
subsidiaries taken as a whole.
(c) The Borrower will comply, and will cause each subsidiary to comply, in
all material respects with (i) all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities (including, without
limitation, ERISA and the rules and regulations thereunder and (ii) all federal,
state and local statutes, laws, regulations or other governmental restrictions
relating to environmental protection, hazardous substances or the clean-up or
other remediation thereof) except where the necessity of compliance
<PAGE>
9
therewith is contested in good faith by appropriate proceedings and with respect
to which adequate reserves have been established or non-compliance with the same
could not reasonably be expected to materially and adversely affect the
financial condition, business, operations or prospects of the Borrower and its
subsidiaries taken as a whole.
(d) The Borrower will promptly give notice in writing to the Bank of all
litigation, arbitral proceedings and regulatory proceedings affecting it or its
property, except litigation or proceedings which, if adversely determined, could
not materially and adversely affect its financial conditions.
Section 14. EVENTS OF DEFAULT. If any of the following events ("Events of
Default") shall occur and be continuing: (a) the Borrower shall fail to make
payment when due of any principal on any Loan when due hereunder or fail to pay
any interest or fee within five days of the due date thereof; or (b) any
representation or warranty made by the Borrower in this Agreement or by a
Guarantor in the Guaranty shall prove to have been incorrect in any material
respect when made; or (c) the Borrower shall fail to observe or perform any
covenant contained in Section 13(b) hereof or a Guarantor shall fail to perform
any covenant contained in the Guaranty; or (d) the Borrower shall continue to
fail to observe or perform any other covenant contained herein after having
received not less than 30 days' notice from the Bank of its Default with regard
thereto; or (e) any event or condition shall occur which results in the
acceleration of the maturity of any Debt of the Borrower or any of its
subsidiaries or any Guarantor; or (f) the Borrower or any of its subsidiaries or
any Guarantor shall become insolvent (however such insolvency may be evidenced)
or proceedings are instituted by or against the Borrower or any of its
subsidiaries or any Guarantor under the United States Bankruptcy Code or under
any bankruptcy, reorganization or insolvency law or other law for the relief of
debtors; or (g) the Borrower or any other member of a controlled group (the
"Controlled Group") of corporations and all trades or businesses under common
control which, together with the Borrower, are treated as a single employer
under Section 414 of the Internal Revenue Code of 1986, as amended and any
successor statute thereto shall fail to pay when due any amount or amounts which
it shall have become liable to pay to the Pension Benefit Guaranty Corporation
(or any successor thereto) (the "PBGC") or to an employee pension benefit plan
(a "Plan") covered by Title IV of ERISA, or any notice of intent to terminate a
Plan shall be filed by a member of the Controlled Group and/or any plan
administrator, or the PBGC shall institute proceedings under Title IV of ERISA
to terminate, to impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or to cause a trustee to
<PAGE>
10
be appointed to administer any Plan, or a condition shall exist which would
entitle the PBGC to obtain a decree adjudicating that a Plan must be terminated
if such event or conditions, if any, could in the reasonable opinion of Bank
subject the Borrower to any tax, penalty, or other liability to a Plan, the PBGC
or otherwise (or any combination thereof) which in the aggregate exceeds or may
exceed $50,000; or (h) judgments or orders for the payment of money in excess of
$500,000 shall be rendered against the Borrower or any Guarantor and such
judgments or orders shall remain unstayed for a period of 30 days;
THEN, in the case of any of the Events of Default specified above, the Bank may,
by written notice to the Borrower, terminate the Commitment and declare all
Loans outstanding hereunder to be forthwith due and payable, together with
accrued interest, whereupon the same shall become forthwith due and payable,
without demand, protest, presentment, notice of dishonor or any other notice or
demand whatsoever, all of which are hereby waived by the Borrower; PROVIDED that
in the case of the Event of Default specified in clause (f) above, without any
notice to the Borrower or any other act of the Bank, the Commitment shall
automatically be terminated and all Loans outstanding shall become forthwith due
and payable, together with accrued interest, without demand, protest,
presentment, notice of dishonor or any other notice or demand whatsoever, all of
which are hereby waived by the Borrower. As used herein, "Debt" of any person
or entity means at any date, without duplication, (i) all obligations of such
person or entity for borrowed money, including, without limitation,
reimbursement obligations related to letters of credit, (ii) all obligations of
such person or entity evidenced by bonds, debentures, notes or other similar
instruments, (iii) all obligations of such person or entity to pay the deferred
purchase price of property or services, except trade accounts payable arising in
the ordinary course of business, (iv) all obligations of such person or entity
as lessee which are capitalized in accordance with generally accepted accounting
principles, (v) all non-contingent and contingent obligations, (vi) all Debt of
others secured by a lien, mortgage, charge or encumbrance on any asset of such
person or entity, whether or not such Debt is assumed by such person or entity,
and (vii) all Debt of others guaranteed by such person or entity, PROVIDED, that
for the purposes hereof, no obligations shall be deemed to constitute "Debt"
unless they are in excess of $1,000,000 in principal amount.
Section 15. SUCCESSORS AND ASSIGNS; PARTICIPATIONS. (a) This Agreement
shall be binding upon the Borrower and its successors and assigns and is for the
benefit of the Bank and its successors and assigns, except that the Borrower may
not
<PAGE>
11
assign or otherwise transfer its rights or obligations under this Agreement or
the Note.
(b) The Bank may at any time sell, assign, transfer, grant participations
in, or otherwise dispose of all or any portion of the Loans or the Note or of
its right, title and interest therein or thereto or in or to this Agreement
(each a "Participation") to any other lending office or to any other entity (a
"Participant"). In the event of any such grant by the Bank of a participating
interest to a Participant, whether or not upon notice to the Borrower, the Bank
shall remain responsible for the performance of its obligations hereunder, and
the Borrower shall continue to deal solely and directly with the Bank in
connection with the Bank's rights and obligations under this Agreement. The
Borrower agrees that each Participant shall be entitled to the benefits of
Sections 8, 10 and 17 hereof to the extent of its Participation as if such
Participant were the Bank.
(c) The Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement, the Note and the Guaranty, and such
Assignee shall assume such rights and obligations, pursuant to an assignment and
assumption agreement executed by such Assignee and the Bank, with (and subject
to) the subscribed consent of the Borrower, which shall not be unreasonably
withheld; PROVIDED that if an Assignee is an affiliate of the Bank, no such
consent shall be required. Upon execution and delivery of such instrument and
payment by such Assignee to the Bank of an amount equal to the purchase price
agreed between the Bank and such Assignee, such Assignee shall be a Bank party
to this Agreement and shall have all the rights and obligations of a Bank with a
Commitment as set forth in such instrument of assumption, and the Bank shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any assignment pursuant to this subsection (c), the Bank and the Borrower
shall make appropriate arrangements so that, if required, a new Note is issued
to the Assignee.
(d) The Bank may at any time assign all or any portion of its rights under
this Agreement and the Note to a Federal Reserve Bank. No such assignment shall
release the Bank from its obligations hereunder.
Section 16. NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telex, facsimile
transmission or similar writing) and shall be given (a) if to the Bank, at the
address set forth on the signature pages hereof and (b) if to any other party,
to such party at its address, facsimile number or telex
<PAGE>
12
number set forth on the signature pages hereof, or at any other address,
facsimile number or telex number of which either party shall have notified the
other party in writing. All such notices shall be effective (i) when mailed, 72
hours after having been deposited in the mails, first class air mail postage
prepaid, or (ii) when given by telex, when transmitted by tested telex with
receipt of appropriate answerback, or (iii) when given by facsimile
transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received with receipt confirmed, or (iv) when
given by other means, when delivered to the appropriate address set forth above,
except that notices and communications to the Bank under Sections 1 and 6 hereof
shall not be effective until received by the Bank.
Section 17. MISCELLANEOUS; EXPENSES; INDEMNIFICATION. The provisions of
this Agreement may not be waived, modified or amended except by an instrument in
writing signed by the party to be charged with such waiver, modification or
amendment. No failure or delay on the part of the Bank in exercising any of its
powers or rights hereunder or under the Note, nor partial or single exercise
thereof, shall constitute a waiver thereof or shall preclude any other or future
exercise of any other power or right. The Borrower shall pay all reasonable
out-of-pocket expenses and internal charges of the Bank (including, without
duplication, reasonable fees and disbursements of counsel and time charges of
attorneys who may be employees of the Bank) in connection with this Agreement
(other than costs associated with the assignment or participation of Loans
pursuant to Sections 15(b), (c), and (d) hereof and costs in connection with the
preparation of this Agreement) and in connection with any Event of Default and
collection or other enforcement proceedings resulting therefrom. The Borrower
agrees to indemnify the Bank and hold the Bank harmless from and against any and
all liabilities, loss, damage, costs and expenses of any kind (including,
without limitation, the actual fees and disbursements of counsel for the Bank in
connection with any investigative, administrative or judicial proceeding,
whether or not the Bank shall be designated a party thereto) which may be
incurred by the Bank relating to or arising out of this Agreement or the Note or
the use of the proceeds of any Loan except to the extent such liabilities, loss,
damage, costs or expenses arise from the Bank's gross negligence or willful
misconduct.
Section 18. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. The Borrower hereby submits
to the nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State
<PAGE>
13
Court sitting in New York City for purposes of all legal proceedings arising out
of or relating to this Agreement or the transactions contemplated hereby. The
Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. The Borrower
and the Bank hereby irrevocably waive any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
If you are in agreement with the foregoing, please so indicate by signing
the enclosed copy of this letter in the space provided below and returning the
same to us.
Very truly yours,
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ ANNE W. HILLIARD
------------------------------------
Title: Vice President
Domestic Lending Office:
Morgan Guaranty Trust Company
of New York
60 Wall Street Branch
c/o J.P. Morgan Services Inc.
500 Stanton-Christiana Road
Loan Operations - 3rd Floor
Newark, Delaware 19713
Eurodollar Lending Office:
Nassau, Bahamas Office
c/o J.P. Morgan Services Inc.
500 Stanton-Christiana Road
Newark, Delaware 19713
With a copy to:
Morgan Guaranty Trust Company
of New York
333 South Hope Street, 35th Floor
Los Angeles, California 90071
Attention: Laura Porter
<PAGE>
GUARANTY AND PLEDGE AGREEMENT
GUARANTY AND PLEDGE AGREEMENT dated as of September 15, 1998 between SOL
PRICE, HELEN PRICE and THE SOL AND HELEN PRICE TRUST (the "Trust")
(individually, a "Guarantor" and collectively, the "Guarantors"), and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK (the "Bank").
WHEREAS, in order to induce the Bank to extend credit pursuant to the
provisions of a letter agreement (the "Letter Agreement") dated as of September
15, 1998, between the Bank and Price Enterprises, Inc. (the "Borrower"), and for
other consideration, the receipt and adequacy of which are acknowledged, the
Guarantors have jointly and severally agreed to guaranty the obligations of the
Borrower under the Letter Agreement and to grant a continuing security interest
in the Collateral (as hereinafter defined) to secure their obligations
hereunder;
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. The Guarantors, as primary obligors and not as sureties only, hereby
unconditionally guarantee the due and punctual payment (whether at stated
maturity, upon acceleration or otherwise) of any amounts arising out of or in
connection with the Letter Agreement and the note delivered thereunder (the
"Note"), including without limitation the obligation of the Borrower to pay all
fees, principal and interest payments due thereunder and under the Note and all
expenses of collection, counsel fees and other expenses incurred by the Bank in
connection with the enforcement of its rights under the Letter Agreement and the
Note (collectively, the "Guaranteed Obligations"). Upon any failure by the
Borrower to pay any of the Guaranteed Obligations, the Guarantors agree that
they will pay within 10 days of notice thereof, at the place and in the manner
specified in the Letter Agreement and the Note, such amounts which the Borrower
has failed to pay. This Guaranty is a guaranty of payment and not merely a
guaranty of collection.
2. The obligations of the Guarantors hereunder shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the
<PAGE>
2
Borrower or any other guarantor of any of the Guaranteed Obligations;
(ii) any release, exchange, non-perfection or invalidity of any
direct or indirect security for any of the Guaranteed Obligations;
(iii) any modification or amendment of or supplement to the Letter
Agreement or the Note;
(iv) any change in the existence (including its constitution, laws,
rules, regulations or powers), structure or ownership of the Borrower or
The Sol and Helen Price Trust, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting the Borrower or its
assets, a Guarantor or any other guarantor of any of the Guaranteed
Obligations;
(v) the existence of any claim, set-off or other rights which any
Guarantor may have at any time against any of the Borrower, the Bank or any
other corporation or person, whether in connection herewith or in
connection with any unrelated transaction; provided that nothing herein
shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against the
Borrower or any other guarantor for any reason of the Letter Agreement, the
Note or any other guaranty agreement, or any provision of applicable law or
regulation purporting to prohibit payment by the Borrower of amounts to be
paid by it under the Letter Agreement, the Note or any of the Guaranteed
Obligations or under any such guaranty agreement; or
(vii) any other act or omission to act or delay of any kind by the
Borrower, any other guarantor, the Bank or any other corporation or person
or any other circumstance whatsoever which might, but for the provisions of
this paragraph, constitute a legal or equitable discharge of the
Guarantors' obligations hereunder;
provided, however, the Bank shall not extend the Commitment (as defined in the
Letter Agreement) without the prior written consent of the Guarantors.
3. The Guarantors' obligations hereunder constitute a guarantee of
payment and not of collection merely and shall remain in full force and effect
until the Guaranteed Obligations shall have been paid in full in accordance with
the terms hereof and of the Letter Agreement and the Note. If at any time any
payment of any of the Guaranteed Obligations is rescinded or must be otherwise
restored or returned upon the insolvency, bankruptcy or reorganization of the
Borrower or otherwise, the Guarantors'
<PAGE>
3
obligations hereunder with respect to such payment shall be reinstated at such
time as though such payment had not been made.
4. The Guarantors irrevocably waive acceptance hereof, diligence,
presentment, demand, protest, notice of dishonor and any notice not provided for
herein, as well as any requirement that at any time any person exhaust any right
or take any action against the Borrower or its assets or any other guarantor or
person.
5. In the event that acceleration of the time for payment of any amount
payable by the Borrower under the Letter Agreement or the Note is stayed upon
the insolvency, bankruptcy or reorganization of the Borrower, all such amounts
otherwise subject to acceleration or required to be paid upon an early
termination pursuant to the terms of the Letter Agreement or the Note shall
nonetheless be payable by the Guarantors hereunder forthwith on demand by the
Bank.
6. The Trust has delivered to the Bank and hereby pledges to the Bank and
grants to the Bank a security interest in the property of the Trust described in
Rider A attached hereto and made a part hereof and any other property of the
Trust from time to time held by the Bank pursuant to this Agreement and all
proceeds thereof (collectively, the "Collateral") as security for its
obligations hereunder (collectively, the "Secured Obligations"); provided
however, that so long as no default hereunder or with regard to the Secured
Obligations shall exist, interest payments made on the Collateral shall not be
included within the definition of "Collateral".
7. The Trust relinquishes any right to be given notice of any kind to
which it might otherwise be entitled except for any notice required to be given
pursuant to the New York Uniform Commercial Code or as otherwise provided
herein. The Trust agrees that until the Guaranteed Obligations shall have been
paid and satisfied in full no portion of the Collateral will be withdrawn from
the Bank's custody without the Bank's consent unless the fair market value of
the remaining Collateral, as determined by the Bank in its sole discretion, (the
"Aggregate Collateral Value"), shall at least equal 105.2632% of the dollar
amount of the Guaranteed Obligations then existing. In the event that the
Aggregate Collateral Value shall at any time be less than 105.2632% the dollar
amount of the Guaranteed Obligations the Trust agrees to either (i) furnish to
the Bank additional United States Treasury Notes acceptable to the Bank as
Collateral, such Collateral to be held subject to a perfected first lien in
favor of the Bank and subject to the provisions hereof, (ii) repay a portion of
the Guaranteed Obligations so that such Collateral coverage percentage is once
again maintained or (iii) furnish to the Bank additional Collateral of a type
acceptable to the Bank together with such executed documentation as the Bank
shall require to evidence and perfect a first lien in favor of the Bank therein.
<PAGE>
4
8. The Guarantors represent and warrant as follows:
A. The Trust has good and marketable title to the Collateral and has
not created any lien against or other security interest in the Collateral
except pursuant to this Agreement;
B. Upon the execution of this Agreement by the Guarantors and the
delivery of the Collateral to the Bank the Collateral will be duly and
validly pledged to the Bank and the pledging thereof and Guaranty provided
for herein do not contravene or constitute a default under any provision of
applicable law or regulation or of any judgment, order, decree, agreement
or instrument binding on any Guarantor or result in the creation of any
lien upon any of the property or assets of any Guarantor other than the
security interest granted pursuant to this Agreement;
C. The Collateral is the property of the Trust and is not subject to
a proprietary interest or lien of any other person or entity;
D. This Agreement constitutes a valid and binding obligation of the
Guarantors that is enforceable in accordance with its terms except to the
extent such enforcement may be limited by applicable bankruptcy, insolvency
and other similar laws affecting creditors' rights generally and the
security interest in the Collateral created hereunder is valid under the
Uniform Commercial Code as in effect in the State of New York; and
E. No approval, consent or authorization of or filing or
registration with any governmental authority or body that has not been
obtained is necessary for the execution, delivery or performance by the
Guarantors of this Agreement or for the performance by the Guarantors of
any of the terms or conditions hereof.
9. The Guarantors agree to defend the Bank's right, title, lien and
security interest in and to the Collateral against the claims and demands of all
persons.
10. At any time and from time to time the Bank may cause all or any of the
Collateral to be transferred to or registered in its name or the name of its
nominee or nominees.
11. Until such time as a demand for payment of any amount due in
connection with the Secured Obligations has been made and remains unsatisfied,
the Trust shall have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to the Collateral, and the Bank shall,
upon receiving a written request from the Trust, deliver to the Trust such
proxies, powers of attorney, consents, ratifications and
<PAGE>
5
waivers in respect of any of such Collateral which is registered in the Bank's
name or that of its nominee as shall be specified in the request of the Trust
and in form and substance reasonably satisfactory to the Trust.
12. The Trust will, at its expense and in such manner and form as the Bank
may require, execute, deliver, file and record any specific assignment or other
paper and take any other action that may be reasonably necessary or desirable,
or that the Bank may request, in order to create, preserve, perfect or validate
any security interest or to enable the Bank to exercise and enforce its rights
hereunder with respect to any of the Collateral.
13. Upon the demand and nonpayment of any amount owed to the Bank in
connection with the Secured Obligations when due the Bank shall have the rights
and remedies provided in the Uniform Commercial Code in force in New York at the
date of execution of this Agreement and in addition to, or in modification of,
those rights and remedies, the Bank or its agents may, in its discretion, sell,
assign and deliver all or any part of the Collateral at any broker's board or
public or private sale without notice or advertisement, and bid and become
purchasers (free from any equity or right of redemption) at any public sale or
at any broker's board. The Trust agrees that the proceeds of the disposition of
the Collateral may be applied by the Bank to the satisfaction of the Guaranteed
Obligations in any order of preference which the Bank in its sole discretion
chooses and that the surplus, if any, shall be returned to the Trust.
14. The Bank shall have no duty with reference to the Collateral except to
use reasonable care in its custody and preservation, which shall not include any
steps necessary to preserve rights against prior parties nor the duty to send
notices, perform services, or take any action in connection with the management
of the Collateral. The Trust releases the Bank from any claims or causes of
action at any time arising out of or with respect to the Collateral or in
connection with any actions taken or omitted to be taken by the Bank with
respect thereto and the Trust hereby agrees to hold the Bank harmless from any
and all such claims and causes of action, except for claims and causes of action
arising out of the failure of the Bank to use reasonable care in the custody and
preservation of the Collateral.
15. Without limiting any rights or powers granted hereunder to the Bank
while no Event of Default has occurred and is continuing, upon the occurrence
and during the continuance of any Event of Default, the Bank is hereby appointed
the attorney-in-fact of the Trust for the purpose of carrying out the provisions
of this Agreement and taking any action and executing any instrument which any
party hereto may deem necessary or advisable to accomplish the purposes hereof.
Without limiting the generality of the foregoing, upon the occurrence and during
the
<PAGE>
6
continuance of an Event of Default the Bank shall have the right and power to
receive, endorse and collect all checks and other orders for the payment of
money made payable to the Trust representing any interest or dividends or other
distribution payable in respect of the Collateral or any part thereof and to
give full discharge for the same and to execute endorsements, assignments or
other instruments of conveyance or transfer with respect to all or any of the
Collateral. The powers of attorney granted pursuant hereto and all authority
hereby conferred are granted and conferred solely to protect the Bank's
interests in the Collateral and shall not impose any duty upon the
attorney-in-fact to exercise such powers. Such powers of attorney are coupled
with an interest, shall be irrevocable prior to the payment in full of the
Guaranteed Obligations and shall not be terminated prior thereto or affected by
any act of the Trust or by operation of law, including, but not limited to, the
dissolution, death, disability or incompetency of any person, the termination of
any trust, or the occurrence of any other event, and if the Trust or any other
person or entity should be dissolved or any other event should occur before the
payment in full of the Guaranteed Obligations, such attorney-in-fact shall
nevertheless be fully authorized to act under such powers of attorney as if such
dissolution, death, disability or incompetency or other event had not occurred
and regardless of notice thereof. The Bank agrees not to exercise such powers
of attorney except upon the demand and nonpayment when due or within any
applicable grace period of any amount owed in connection with the Guaranteed
Obligations.
16. The Guarantors shall pay all the reasonable expenses of the Bank,
including reasonable attorney's fees, incurred by the Bank in enforcing or
obtaining, or endeavoring to enforce or obtain, its rights and remedies
hereunder and the performance of the Guarantors' obligations hereunder.
17. The obligations created by this Agreement are for the benefit of the
Bank and its successors and assigns, and in the event of any assignment by a
Bank of any of the Guaranteed Obligations, the rights hereunder, to the extent
applicable to the Guaranteed Obligations so assigned, may be transferred with
the Guaranteed Obligations. This Agreement is binding on the Guarantors and
their successors, assigns, heirs and legal representatives.
18. Upon final payment in full of all of the Guaranteed Obligations to
the Bank the Trust shall be entitled to the return of all of the Collateral and
of all other property and cash which have not been used or applied toward the
payment of the Secured Obligations and will execute and deliver all termination
statements, certificates and other such documentation as shall be reasonably
requested by the Trust to effect the termination and release of the security
interest in the Collateral. Subject to Section 14 hereof, the assignment by the
Bank to the Trust of the Collateral and such other property shall be without
<PAGE>
7
representation or warranty of any nature whatsoever and wholly without recourse.
19. If any provision hereof is invalid and unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in favor of the Bank in
order to carry out the intentions of the parties hereto as nearly as may be
possible and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provisions in any other jurisdiction.
20. No failure or delay on the part of the Bank in exercising any of its
options, powers or rights, nor the partial or single exercise thereof shall
constitute a waiver thereof or shall preclude any other or further exercise of
any other option, power or right.
21. Subject to Section 2 hereof, the Guarantors authorize the Bank,
without notice or demand and without affecting its liability hereunder, from
time to time to (a) renew, compromise, extend, accelerate or otherwise change
the time for payment of, or otherwise change the terms of the Guaranteed
Obligations or any part thereof, including to increase or decrease the rate of
interest thereon; (b) take and hold additional security for the Guaranteed
Obligations and exchange, enforce, waive and release any such security; and (c)
apply such security and the Collateral and direct the order or manner of sale
thereof as the Bank in its discretion may determine. The Bank may without
notice assign this Agreement and the benefits hereof in whole or in part.
22. The Guarantors waive any right to require the Bank to (a) proceed
against the Borrower; (b) proceed against or exhaust any other security for the
Secured Obligations; or (c) pursue any other remedy in the Bank's power
whatsoever. The Guarantors waive any defense arising by reason of any
disability or other defense of the Borrower or by reason of the cessation from
any cause whatsoever of the liability of the Borrower with regard to the
Guaranteed Obligations. Until all Guaranteed Obligations shall have been paid
in full the Guarantors shall have no right of subrogation and waive any right to
enforce any remedy which the Bank now has or may hereafter have against
Borrower, and waive any benefit of, and any right to participate in any security
now or hereafter held by the Bank.
23. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAW OF THE STATE OF NEW YORK.
24. This Guaranty and Pledge Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute but one and the same instrument.
<PAGE>
8
25. THE OBLIGATIONS OF THE GUARANTORS HEREUNDER ARE JOINT AND SEVERAL.
26. So long as the Commitment under the Letter Agreement shall be in effect
or any Guaranteed Obligations shall remain unpaid, unless compliance shall have
been waived in writing by the Bank, the Guarantors agree that:
(i) they will furnish to the Bank (a) copies of their respective
financial statements in form satisfactory to the Bank on an annual basis
within 90 days after their year-end as determined for tax purposes, (b)
copies of all federal tax returns filed by them within 30 days of their
filing, (c) from time to time such additional information concerning their
financial position as the Bank may reasonably request and (d) notice of any
Default under the Letter Agreement or hereunder forthwith upon their
becoming aware thereof; and
(ii) the Trust will keep in full force and effect its existence as a
trust organized under the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE SOL AND HELEN PRICE TRUST
By: /s/ SOL PRICE
--------------------------------------
SOL PRICE, SOLE TRUSTEE
Address:
7979 Ivanhoe Avenue
Suite 520
La Jolla, California 92037
/s/ SOL PRICE
------------------------------------------
SOL PRICE, individually
Address:
7979 Ivanhoe Avenue
Suite 520
La Jolla, California 92037
<PAGE>
9
/S/ HELEN PRICE
------------------------------------------
HELEN PRICE, individually
Address:
7979 Ivanhoe Avenue
Suite 520
La Jolla, California 92037
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ ANNE W. HILLIARD
--------------------------------------
Title: Vice President
Address:
345 Park Avenue
New York, New York 10154-1002
Attn: John Halpin
with a copy to:
333 South Hope Street
35th Floor
Los Angeles, California 90071
Telecopier: 213-437-9305
Attn: Laura Porter
<PAGE>
EXHIBIT A
U.S. Treasury Notes selected by the Bank now and hereafter held in Custody
Account No. C88247 maintained by the Trust at the Bank and all Proceeds and
Products thereof (excluding interest payments on the foregoing so long as
no Event of Default under the Guaranty and Pledge Agreement, Letter
Agreement or Note shall exist)
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT dated May ____, 1998 is made by and between
________________("Seller") and ______________ ("Buyer") with reference to
the following facts:
RECITALS
Seller desires to sell to Buyer and Buyer desires to purchase from
Seller common shares of stock of Price Enterprises, Inc., a Maryland
corporation ("Shares").
NOW, THEREFORE, for and in consideration of the covenants and
agreements, herein contained and other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. AGREEMENT OF SALE AND PURCHASE.
Seller agrees to sell and Buyer agrees to purchase____________ Shares
pursuant to the terms and provisions of this Agreement.
SECTION 2. PURCHASE PRICE.
The purchase price for the Shares shall be _______________. The
Purchase Price shall be paid by Buyer on or before Closing by Buyer's
delivery to Seller of all of the following:
(1) A check payable to Dean Witter in the amount of __________.
(2) A Promissory Note Secured by Pledge of Stock ("Note") in the form set
forth in Exhibit "A" attached in the principal amount of _______________, fully
executed by Buyer, and
(3) A Stock Pledge and Security Agreement ("Pledge")in the form set forth
in Exhibit "B" attached, fully executed by Buyer.
SECTION 3. CLOSING.
The Closing shall take place on or before May 15, 1998 at the offices of
Seller, 7979 Ivanhoe, Suite 520, La Jolla, Ca. 92037 or such other time and
place as the parties may agree upon in writing.
The procedure for the Closing shall be as follows:
(i) Seller shall cause Buyer's check payable to Dean Witter to be
deposited in the Broker Account opened by Holder pursuant to the terms of the
Pledge.
<PAGE>
(ii) At Closing, upon receipt of the Shares into the Broker account,
Buyer authorizes Holder to transfer funds equal to the amount of Buyer's check
be transferred to Seller.
(iii) Seller agrees Buyer shall have the right to require Holder to
pay to Buyer excess funds, if any, in the account at Closing after all required
payments have been made to Seller.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER.
4.1 Share Ownership
That the Seller is the sole owner and holder of the Shares; Seller has not
previously conveyed to any other party any right, title or interest in the
Shares and no other person or entity has a claim to, or lien against, the
Shares.
4.2 Power and Authority
Seller has the requisite power and authority to enter into and carry out
the terms of this Agreement. All action required to be taken by Seller to
consummate and perform this Agreement has been taken, and no approval of any
other person or entity is necessary in order to permit Seller to consummate and
perform this agreement.
4.3 No Other Representations or Warranties.
Except as expressly set forth above, Seller makes no representations or
warranties relating to the Shares, Price Enterprises Inc. or its affairs and
Buyer agrees to purchase the Shares on an "AS IS" basis.
SECTION 5. NOTICES.
All notices pursuant to this Agreement shall be in writing and shall be
sufficient if delivered, sent or mailed registered or certified mail, postage
prepaid, or by personal delivery, as follows:
If to Buyer:
<PAGE>
If to Seller:
Sol Price, Trustee
The Price Charitable Remainder Trust
7979 Ivanhoe Avenue, Suite 520
La Jolla, Ca. 92307
SECTION 6. ATTORNEYS FEES.
If any legal action or any arbitration or other proceeding is brought for
the enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which they may be entitled.
SECTION 7. ARBITRATION.
Any controversy or claim arising out of, or relating to, this Agreement, or
the making, performance, or interpretation of it, shall be settled by
arbitration in San Diego, California under the commercial arbitration rules of
the American Arbitration Association then existing, and judgment on the
arbitration award may be entered in any court having jurisdiction over the
subject matter of the controversy.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE FOREGOING ARBITRATION CLAUSE
DECIDED BY A NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE
GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT
OR BY JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR
JUDICIAL RIGHTS TO DISCOVERY AND APPEAL UNLESS SUCH RIGHTS ARE SPECIFICALLY
INCLUDED IN THE ARBITRATION CLAUSE. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER
AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY.
We have read and understand the foregoing and agree to submit disputes
arising out of the matters included in the Arbitration Clause to neutral
arbitration.
_______________ ___________________
Sellers' initials Buyer's initials
<PAGE>
SECTION 8. NEGOTIATED AGREEMENT.
The terms and provisions of this Agreement represent the results of
negotiations between Buyer and Seller, neither of which have acted under any
duress or compulsion, whether legal, economic or otherwise. Consequently, the
terms and provisions of this Agreement shall be interpreted and construed in
accordance with their usual and customary meanings. The Seller and Buyer hereby
waive any application of any rule of law which would otherwise be applicable in
connection with the interpretation and construction of this Agreement including
without limitation, any rule of law to the effect that ambiguous or conflicting
terms or provisions contained in the executed draft of this Agreement shall be
interpreted or construed against the party whose attorney prepared the executed
draft or any earlier draft thereof.
SECTION 9. ADDITIONAL DOCUMENTS.
Each party agrees to execute such further and additional documents,
instruments and writings as may be necessary, proper, required, desirable or
convenient for the purpose of fully effectuating the terms and provisions of
this Agreement.
SECTION 10. ENTIRE AGREEMENT.
It is understood and agreed that all understandings and agreements
heretofore had between the parties are merged in this Agreement executed by the
parties hereto and all references and related documents executed in connection
therewith. Neither party has relied upon any statements or representations not
embodied in the aforementioned documents or this Agreement.
SECTION 11. MODIFICATION.
This Agreement may not be changed orally, but only by an agreement, in
writing, signed by the parties.
SECTION 12. GOVERNING LAW.
This Agreement shall be construed in accordance with, and governed by, the
laws of the state of California as applied to contracts that are executed and
performed entirely in California.
SECTION 13. AGREEMENT BINDING; NOT ASSIGNABLE.
This Agreement shall be binding upon the Buyer, its heirs, executors,
personal representatives and successors and shall inure to the benefit of, and
be enforceable by Seller and Seller's successors and assigns. This agreement may
not be assigned by Buyer and any attempt by Buyer to make an assignment shall
render the Agreement null and void.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first written above.
<PAGE>
SELLER
____________________________________
By Sol Price, Trustee
BUYER
<PAGE>
EXHIBIT (C)(2)
<TABLE>
<CAPTION>
- ------------------ -------------------------------------- ------------------------------------------- ---------------
NUMBER OF
DATE SELLER BUYER SHARES
- ------------------ -------------------------------------- ------------------------------------------- ---------------
<S> <C> <C> <C>
May 15, 1998 Price Family Charitable Trust Paul A. Peterson, Peterson & Price, A 50,000
Professional Corp., Profit Sharing Plan -
Trust B
- ------------------ -------------------------------------- ------------------------------------------- ---------------
May 15, 1998 Price Family Charitable Trust Jim Cahill 50,000
- ------------------ -------------------------------------- ------------------------------------------- ---------------
May 15, 1998 Price Family Charitable Trust White & Robinson, A Professional Corp., 50,000
Profit Sharing Plan
- ------------------ -------------------------------------- ------------------------------------------- ---------------
May 15, 1998 Price Family Charitable Trust Murray Galinson, President, Galinson 100,000
Holdings LLC
- ------------------ -------------------------------------- ------------------------------------------- ---------------
May 15, 1998 Price Charitable Remainder Trust Jack McGrory 10,000
- ------------------ -------------------------------------- ------------------------------------------- ---------------
May 21, 1998 Price Charitable Remainder Trust Anne Ledford Evans 20,000
- ------------------ -------------------------------------- ------------------------------------------- ---------------
</TABLE>
\<PAGE>
PROMISSORY NOTE SECURED
BY PLEDGE OF STOCK
San Diego, California
May 15, 1998
FOR VALUE RECEIVED, the undersigned, ______________ ("Borrower")
promises to pay to the order of ____________________ ("Lender") at 7979
Ivanhoe, Suite 520, La Jolla, CA. 92037, or at such other place as the holder
hereof may designate, in lawful money of the United States of America, the
principal sum of ___________ (the "Loan") together with interest thereon at
a rate and payable as set forth below.
1. RATE AND CALCULATION OF INTEREST.
The principal balance of the Loan outstanding from time to time
hereunder shall bear interest at eight per cent per annum (8%) (hereafter
referred to as the "Loan Rate"). Interest shall be computed on the basis of a
365-day year, on actual days elapsed. Interest only shall be payable
quarterly, in arrears, commencing September 1, 1998 and payable thereafter on
December 1, March 1, June 1 and September 1 of each year during the term of
the note.
2. TERM OF NOTE.
The outstanding principal balance of this Note, together with all
accrued and unpaid interest thereon and all other amounts due and unpaid
hereunder, shall be due and payable in full on May 15, 2002 ("Maturity Date").
3. SECURITY FOR REPAYMENT OF NOTE.
Repayment of this Note is secured by a Stock Pledge and Security
Agreement of even date herewith ("Pledge").
4. NONRECOURSE NOTE.
Borrower shall have no personal liability for any deficiency on this
note, and the only remedy available to the holder will be to collect under
the terms of the Pledge.
5. PREPAYMENT.
Borrower may from time to time during the term of this Note, partially
or wholly repay the Loan subject to all of the limitations, terms and
conditions of this Note without penalty. Any amounts prepaid under this Note
shall be applied first to the payment of interest and then to the payment of
principal.
<PAGE>
6. DEFAULT.
(A) The occurrence of any of the following events shall constitute
a "Default" and upon the expiration of any period of cure set forth below, or
if no such cure period is specified, shall constitute an "Event of Default"
under this Note.
(i) Borrower shall fail to pay when due any principal,
interest or other amounts payable under the Note, within three (3) Business
Days of the date any such payment is due;
(ii) Borrower shall become insolvent, or shall suffer or
consent to or apply for the appointment of a receiver, trustee, custodian or
liquidator of any of his property, or shall generally fail to pay his debts
as they become due, or shall make a general assignment for the benefit of
creditors; Borrower shall file a voluntary petition in bankruptcy or seek
reorganization, in order to effect a plan or other arrangement with creditors
or any other relief under Title 11 of the United States Code ("Bankruptcy
Code") or under any state or federal law granting relief to debtors, whether
now or hereafter in effect, or any involuntary petition or proceeding
pursuant to Bankruptcy Code or any other applicable state or federal law
relating to bankruptcy, reorganization or other relief for debtors is filed
or commenced against Borrower or Borrower shall file and answer admitting the
jurisdiction of the court and the material allegations of any involuntary
petition, or Borrower shall be adjudicated a bankrupt, or an order for relief
shall be entered by any court of competent jurisdiction under the Bankruptcy
Code or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors; or
(iii) The filing by the United States Internal Revenue Service
or any other governmental agency of any claim or action against Borrower's
assets unless such claim or action is being contested in good faith and
subject to the maintenance of adequate reserves for such purpose.
(B) Upon the occurrence of any Event of Default this Note shall be
in default, and the holder of this Note, at holder's option, may declare all
sums of principal and interest outstanding hereunder to be immediately due
and payable without presentment, demand, protest, or notice of dishonor, all
of which are expressly waived by Borrower.
(C) Failure to exercise the foregoing option shall not constitute a
waiver of the right to exercise the same at any subsequent time in respect to
the same event or any other event. The acceptance by Lender of any payment
hereunder which is less than payment in full of all amounts due and payable
at the time of such payment shall not constitute a waiver of the right to
exercise any of the foregoing options at that time or at any subsequent time
or nullify any prior exercise of any such option without the express consent
of Lender, except as and to the extent otherwise provided by Law.
7. MISCELLANEOUS.
(A) All payments on this Note are to be made or given to Lender at
the address set forth above, or to such other person or at such other place
as Lender from time to time directs by written notice to Borrower. Borrower
agrees to pay all costs and expenses, including reasonable
<PAGE>
attorneys' fees, expended or incurred by the holder in connection with the
enforcement of this Note, the collection of any sums due hereunder, any
actions for declaratory relief in any way related to this Note, or the
protection or preservation of any rights of the holder hereunder.
(B) Borrower waives any right of offset it now has or may hereafter
have against Lender and its successors and assigns, and agrees to make the
payments called for hereunder in accordance with the terms hereof. Borrower
further waives diligence, demand, presentation, protest, and notice of
non-payment, and the pleading of any statute of limitations as a defense
under this Note. Lender and all successors thereof shall have all the rights
of a holder in due course as provided in the California Uniform Commercial
Code and other laws of the State of California.
(C) Notwithstanding anything herein to the contrary, all payments
made on this Note shall, at the option of Lender, be applied first to the
payment of any costs due hereunder, then to the payment of accrued interest
then delinquent or otherwise due hereunder, and after all such charges and
interest have been paid, any remainder shall be applied to reduce the
principal balance hereof. Borrower waives the right to direct the
applications of any amounts paid under this Note.
(D) This Note shall not be modified or changed orally, but in each
instance, only by an instrument in writing signed by the party against which
enforcement of such change, modification or waiver is sought.
(E) It is agreed that time is of the essence as to every term,
condition, and provision of this Note.
(F) This Note shall be construed in accordance with the laws of the
State of California, (excluding conflict of law provisions), except to the
extent Lender has greater rights or remedies under Federal law, in which case
such choice of California law shall not be deemed to deprive Lender of such
rights and remedies as may be available under Federal law.
(G) All agreements between Borrower and Lender are expressly
limited so that in no contingency or event whatsoever, whether by reason or
advancement of the proceeds hereof, acceleration of maturity of the unpaid
balance hereof, or otherwise, shall the amount paid or agreed to be paid to
Lender for the use, forbearance or detention of the money to be advanced
hereunder exceed the highest lawful rate permissible under the applicable
usury laws. If, for any circumstances whatsoever, failure of any provision
hereof or any other agreement relating to this Note, at the time performance
of such provision shall be due, shall involve transcending the limit of
validity prescribed by law which a court of competent jurisdiction may deem
applicable hereto, then IPSO FACTO, the obligation to be fulfilled shall be
reduced to the limit of such validity, and if from any circumstance, Lender
shall ever receive as interest an amount which would exceed the highest
lawful rate, such amount which would be excessive interest shall be applied
to the reduction of the unpaid principal balance due hereunder as of the date
such amount is received or deemed to be received by Lender and not to the
payment of interest. This provision shall control every other provision of
all agreements between Borrower and Lender.
<PAGE>
(H) BORROWER WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON, UNDER
OR BY VIRTUE OF THIS NOTE OR ANY OTHER LOAN DOCUMENT AND WAIVES ANY RIGHT TO
REQUIRE LENDER AT ANY TIME TO PURSUE ANY REMEDY IN LENDER'S POWER WHATSOEVER.
IN WITNESS WHEREOF, this Note is executed by Borrower on the date
first-above written.
---------------------------------
<PAGE>
EXHIBIT (C)(3)
<TABLE>
<CAPTION>
- ------------------ -------------------------------------- ------------------------------------------- ------------------
DATE LENDER BORROWER LOAN AMOUNT
- ------------------ -------------------------------------- ------------------------------------------- ------------------
<S> <C> <C> <C>
May 15, 1998 Price Family Charitable Trust Paul A. Peterson, Peterson & Price, A $875,000
Professional Corp., Profit Sharing
Plan - Trust B
- ------------------ -------------------------------------- ------------------------------------------- ------------------
May 15, 1998 Price Family Charitable Trust Jim Cahill $875,000
- ------------------ -------------------------------------- ------------------------------------------- ------------------
May 15, 1998 Price Family Charitable Trust White & Robinson, A Professional $875,000
Corp., Profit Sharing Plan
- ------------------ -------------------------------------- ------------------------------------------- ------------------
May 15, 1998 Price Family Charitable Trust Murray Galinson, President, Galinson $1,750,000
Holdings LLC
- ------------------ -------------------------------------- ------------------------------------------- ------------------
May 15, 1998 Price Charitable Remainder Trust Jack McGrory $175,000
- ------------------ -------------------------------------- ------------------------------------------- ------------------
May 21, 1998 Price Charitable Remainder Trust Anne Ledford Evans $350,000
- ------------------ -------------------------------------- ------------------------------------------- ------------------
</TABLE>
<PAGE>
STOCK PLEDGE AND SECURITY AGREEMENT
THIS STOCK PLEDGE AND SECURITY AGREEMENT ("Agreement") effective as of
the fifteenth day of May, 1998 is entered into by and between ______________
("Borrower") and __________________________ ("Lender") and _______________
("Holder") with reference to the facts set forth below.
RECITALS
A. Borrower has executed a Purchase and Sale Agreement with Lender
("Purchase Agreement") and on the effective date of this Stock Pledge and
Security Agreement is purchasing from Lender, and will become the legal and
beneficial owner of ______________ shares of common stock of Price
Enterprises, Inc. a Maryland corporation, hereinafter called the "Pledged
Shares".
B. Borrower has executed a Promissory Note of even date herewith
("Note") in favor of Lender in the principal sum of _____________. Lender
has agreed to accept said Note in partial payment of the purchase price of
the Pledged Shares.
C. The execution of this Agreement is a condition precedent to the
obligation of Lender to accept the Note as partial payment of the purchase
price of the Pledged Shares.
NOW, THEREFORE, in consideration of the recitals and the agreement of
the parties contained herein and for other good and valuable consideration,
the receipt of which are hereby acknowledged, the parties hereby agree as
follows:
1. PLEDGE. Borrower hereby pledges and grants a first priority
security interest to Lender in all of its right, title, and interest in and
to the "Pledged Shares", and except as set forth herein, all renewals, voting
rights, substitutions, additions, replacements, dividends, earnings and
proceeds and products thereof, including without limitation whatever is
receivable or received when the foregoing is sold, collected, exchanged or
otherwise dispensed of, and all future earnings and interest paid or payable
thereon (collectively the "Securities").
2. BROKERAGE ACCOUNT AND POSSESSION OF STOCK. Borrower agrees
___________ ("Holder") shall open an account with Dean Witter at its office
located at 7979 Ivanhoe, Second Floor, La Jolla, Ca. 92037 in the name of
Holder, as Custodian for Buyer ("Broker account"). Upon Closing of the
Purchase Agreement , Borrower consents, and directs Seller to deposit the
Pledged Shares to the Broker Account. Buyer acknowledges and agrees that
under the terms of the Broker Account only the Holder shall be entitled to
give instructions regarding the assets held in the Broker Account and Buyer
shall have no ability to withdraw the Pledged Shares from the Account.
<PAGE>
3. OBLIGATIONS OF THE HOLDER TO BORROWER.
(a) Holder agrees to maintain the Brokerage Account as the
custodian of Buyer and to retain the Pledged Shares in the Broker Account
until either (i) this Pledge terminates under the provisions of Paragraph 5
or (ii) he receives written notice from Lender that an event of default under
the Note has occurred and Borrower has failed to cure said default within
five business days from date of occurrence.
(b) At any time prior to the Maturity Date of the Note, Borrower
shall have the right to direct Holder, and Holder shall be obligated at
Buyer's written direction, to sell the Securities and pay to Lender the
lesser of (i) the net proceeds of the sale or (ii) the full amount of the
Secured Obligations. Upon such sale of Securities and payment to Lender the
Note shall be deemed paid in full and Lender shall have no further right to
collect on the Note.
4. REPRESENTATIONS AND WARRANTIES. Borrower represents that as of the
effective date of this Pledge Agreement (A) Borrower is the owner of the
Securities and that Borrower has not otherwise assigned or transferred, and
agrees that Borrower shall not assign or transfer, absolutely or for
security, the Securities or any interest therein to any other person or
entity; (B) there are no outstanding options, warrants or other agreements
with respect to the Securities; (C) the Securities have been validly issued
and are fully paid and non-assessable, and the holder or holders thereof are
not and will not be subject to any personal liability; (D) any consent,
approval or authorization or designation or filing with any governmental
authority on the part of Borrower which is required in connection with the
pledge and security interest granted under this Agreement has been obtained
or effected; and (E) the execution and delivery of this Agreement by Borrower
will not result in a violation of any mortgage, indenture, material contract,
instrument, judgement, decree, order, statute, rule or regulation to which
Borrower is subject.
5. OBLIGATIONS SECURED. This pledge and security interest granted
hereunder secures the faithful performance and payment of all obligations of
Borrower to Lender now existing or hereafter existing or arising under the
Note, and all extensions, modifications, substitutions, replacements, and
renewals of any of the obligations set forth therein (collectively the
"Secured Obligations"). This pledge shall terminate only upon performance
and payment in full of all of the Secured Obligations, or upon the written
release of the Lender as the Lender shall give in its sole and absolute
discretion.
6. DEFAULT AND REMEDIES. Any breach of or event of default under the
Note or any failure to comply with any of the terms under this Agreement
shall be a default hereunder. Upon any default hereunder, Lender shall have
the right to exercise its remedies as a secured party with respect to the
Securities, including, without limitation, the right to debit all or any
portion of the Securities and apply amounts debited in Lender's sole and
absolute discretion (a) toward cure of the default; (b) to payment of
principal (whether or not otherwise accelerated), interest or any other
amount owing from Borrower to Lender, in such order as Lender may determine,
without curing the default; or (c) in such combination thereof as Lender may
determine. Lender shall in no event be required to use proceeds of the
Securities to cure a default.
<PAGE>
7. ADMINISTRATION OF SECURITIES. The provisions set forth below shall
govern the administration of the Securities:
(a) VOTING. Until there shall have occurred any default
hereunder, Borrower shall be entitled to vote or consent with respect to the
Securities in any manner not inconsistent with this Agreement, to the extent
the Securities carry any rights of voting or consent. Holder hereby grants
to Borrower a proxy to vote the securities which proxy shall be automatically
revoked upon the occurrence of any default hereunder. Holder agrees to
deliver to Borrower such further evidence of the grant of such proxy as
Borrower may request from time to time.
(b) DISTRIBUTIONS. Until there shall have occurred any default
hereunder, Borrower shall be entitled to receive, free and clear of this
pledge agreement, any and all cash dividends paid on the Pledged Shares.
Borrower shall not, however, be entitled to receive any stock dividends or
other distributions of stock, paid on the Pledged Shares. Until there shall
have occurred an Event of Default hereunder, Holder agrees to cause to be
distributed to Borrower all cash dividends paid on the Pledged Shares. Any
stock dividends or stock distributed on the Pledged Shares shall be retained
by Holder in the Broker Account as additional security and shall become part
of the Securities.
(c) FURTHER DOCUMENTS. Borrower will forthwith upon request by
Lender and in confirmation of the security interest hereby created, execute
and deliver to Lender such further assignments, transfers, assurances,
instruments, notices and agreements in form and substance as the Lender shall
reasonably request.
(d) REMEDIES. In addition to any rights and remedies otherwise
available in law or in equity, and in addition to the other provisions of
this Agreement, and any other documents or instruments delivered or to be
delivered in connection herewith or therewith, or any document or instrument
now in existence, or which may hereafter be made, with respect to any of the
Secured Obligations, the provisions set forth below shall, to the extent
permitted by applicable law, govern Lender's rights to realize on the
Securities upon a default hereunder.
(e) CONDUCT OF SALE.
(i) Any sale of the Pledged Securities shall be made through
Holder. Holder shall not make any sale or other disposition, unless the terms
thereof shall be satisfactory to Lender in its sole and absolute discretion.
(ii) Upon giving written notice of default to Holder pursuant to
the terms of Section 3 of this Agreement, Lender may direct Holder to sell as
many of the Pledged Shares as are required to produce net funds sufficient to
pay Lender the full amount of the Secured Obligations and to transfer the
proceeds of such sale to Lender. Holder shall be obligated to carry out the
instructions given to him by Lender.
(iii) Once Lender has been paid the full amount of the Secured
Obligations, Holder shall pay any funds remaining in the Broker Account to
Borrower and close the Broker Account.
<PAGE>
(f) SALE OR DISPOSITION. Upon any sale or disposition, Holder
shall have the right to deliver, assign, and transfer to the purchaser
thereof the Securities so sold or disposed of. Each purchaser at any such
sale or other disposition shall hold the Securities free from any claim or
right of whatever kind, including any equity or right of redemption of the
Borrower. The Borrower specifically waives all rights of redemption, stay or
appraisal which it has or may hereafter have under any rule of law or statute
now existing or hereafter adopted.
(g) ATTORNEY-IN-FACT. Lender or its designee is hereby appointed
attorney-in-fact for Borrower for the purpose of carrying out the provisions
of this Agreement and taking any action in executing any instrument which
Lender reasonably may deem necessary and advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and one coupled
with an interest.
8. MISCELLANEOUS.
(a) TERMINATION. This Agreement shall terminate upon Borrower's
payment in full and the performance of the Secured Obligations. Upon such
termination, Lender and Holder shall return any of the securities their
respective possession that were not sold or otherwise disposed of to satisfy
the Secured Obligations.
(b) DEAN WITTER NOT A PARTY TO THE AGREEMENT. Dean Witter is
providing account services only and is not a party to this Agreement.
(c) SUCCESSOR TO HOLDER. Holder may resign at any time by giving
written notice of his resignation to Lender and Borrower at least thirty (30)
days prior to the effective date of the resignation. In the event Holder
resigns or becomes otherwise unable to perform his duties, a successor holder
shall be appointed by Lender subject to the approval of Borrower. Lender and
Borrower agree that Dean Witter shall be authorized to transfer the Broker
Account to the successor holder upon presentation of written instructions
signed by both Lender and Borrower. Prior to any transfer of the account to
the successor holder, the successor holder shall execute a counterpart of
this agreement.
(d) INDEMNIFICATION OF HOLDER AND LENDER. Borrower indemnifies
Holder and Lender against, and holds them harmless from, all losses,
damages, liabilities, claims, causes of action, judgments, court costs,
attorneys' fees and other reasonable expenses which either may suffer or
incur other than from the negligence or willful misconduct of Holder or
Lender (i) by reason of this Agreement or (ii) by reason of the execution of
this Agreement or in performance of any act required or permitted hereunder
or by law, or (iii) as a result of any failure of Borrower to perform
Borrower's obligations under this Agreement or the Note. Borrower's duty to
indemnify Holder and Lender shall survive the termination of this Agreement.
(e) AGREEMENT BINDING. This Agreement shall be binding upon
Borrower and Borrower's heirs, executors, personal representatives and
successors, and shall inure to the benefit of, and be enforceable by, Lender
and Lender's successors and assigns. Borrower hereby represents and warrants
to Lender that it has full legal authority to enter into this Agreement, to
pledge the
<PAGE>
Securities and to carry out the provisions hereof and no consent or approval
from any other person or entity is necessary to enter into this agreement or
carry out its terms.
(f) SEVERABILITY. If any provision of this Agreement shall be
deemed or held to be invalid or unenforceable for any reason, such provision
shall be adjusted, if possible, rather than voided, so as to achieve the
intent of the parties to the fullest extent possible. In any event such
provision shall be severable from, and shall not be construed to have any
effect on, the remaining provisions of this Agreement, which shall continue
in full force and effect.
(g) GOVERNING LAW; JURISDICTION. This Agreement shall be governed
by and construed in accordance with the laws of the State of California
applicable to contracts, between residents thereof, to be wholly performed
within the State of California. Borrower hereby irrevocably consents to the
jurisdiction of the Courts of the State of California located in San Diego
County and of any Federal Court located in San Diego County, California in
connection with any action or proceeding arising out of or relating to this
Agreement.
(h) RIGHTS CUMULATIVE; NO WAIVER. Lender's options, powers,
rights, privileges, and immunities specified herein or arising hereunder are
in addition to, and not exclusive of, those otherwise created or existing now
or at any time, whether by contract, by statute or by rule of law. Lender
shall not, by any act, delay, omission or otherwise, be deemed to have
modified, discharged or waived any of Lender's options, powers, or rights in
respect of this Agreement, and no modification, discharge or waiver of any
such option, power, or right shall be valid unless set forth in writing
signed by Lender or Lender's authorized agent, and then only to the extent
therein set forth. A waiver by Lender of any right or remedy hereunder on
any one occasion shall be effective only in the specific instance and for the
specific purpose for which given, and shall not be construed as a bar to any
right or remedy that Lender would otherwise have on any other occasion.
(i) ENTIRE AGREEMENT. This Agreement contains the entire
agreement between Borrower and Lender with respect to the Securities, and
supersedes all prior communications relating thereto, including, without
limitation, all oral statements or representations. No supplement to or
modification of this Agreement shall be binding unless executed in writing by
Borrower and Lender.
(j) COSTS OF ENFORCEMENT. Borrower shall upon demand pay to
Lender the amount of any and all reasonable expenses, including the
reasonable fees and disbursements of counsel and/or any experts and agents,
that Lender may incur in connection with (a) the administration of this
Agreement, (b) the exercise or enforcement of any of the rights of Lender
hereunder (including the defense of any claims or counterclaims asserted
against Lender arising out of this Agreement or the transactions contemplated
hereby) or under any judgment awarded to Lender in respect of its rights
hereunder (which obligation shall be severable from the remainder of this
Agreement and shall survive the entry of any such judgment), or (c) the
failure by Borrower to perform or observe any of the provisions hereof. The
foregoing shall include any and all expenses and fees incurred by Lender in
connection with a bankruptcy, reorganization, receivership, or similar
debtor-relief proceeding by or affecting Borrower or the Securities.
<PAGE>
(k) NOTICES. All notices, demands and other communications
required or permitted hereunder shall be in writing, addressed to the parties
at the following addresses:
Lender:
Sol Price, Trustee
C/O Price Entities
7979 Ivanhoe Suite 520
La Jolla, CA 92037
Borrower:
Holder:
7979 Ivanhoe Suite 520
La Jolla, CA. 92037
or to such other address as may be designated from time to time by notice to the
other parties in the manner set forth herein. All such communications shall be
deemed effective (a) upon actual delivery if delivered by personal delivery or
certified postage prepaid mail, (b) three business days following deposit, first
class postage prepaid, with the United States Mail, or (c) on the next business
day after timely and proper deposit with an overnight air courier with request
for next business day delivery.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed by the parties set forth
below as of the date first-above written.
BORROWER
LENDER
------------------------------------
SOL PRICE, TRUSTEE
HOLDER
------------------------------------
<PAGE>
EXHIBIT (C)(4)
<TABLE>
<CAPTION>
- --------------- ---------------------------------- ------------------------------------ ----------- -------------- --------------
NUMBER OF
DATE LENDER BORROWER SHARES HOLDER LOAN AMOUNT
- --------------- ---------------------------------- ------------------------------------ ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
May 15, 1998 Price Family Charitable Trust Paul A. Peterson, Peterson & Price, 50,000 Jim Cahill $875,000
A Professional Corp., Profit
Sharing Plan - Trust B
- --------------- ---------------------------------- ------------------------------------ ----------- -------------- --------------
May 15, 1998 Price Family Charitable Trust Jim Cahill 50,000 Jackie Horton $875,000
- --------------- ---------------------------------- ------------------------------------ ----------- -------------- --------------
May 15, 1998 Price Family Charitable Trust White & Robinson, A Professional 50,000 Jim Cahill $875,000
Corp., Profit Sharing Plan
- --------------- ---------------------------------- ------------------------------------ ----------- -------------- --------------
May 15, 1998 Price Family Charitable Trust Murray Galinson, President, 100,000 Jim Cahill $1,750,000
Galinson Holdings LLC
- --------------- ---------------------------------- ------------------------------------ ----------- -------------- --------------
May 15, 1998 Price Charitable Remainder Trust Jack McGrory 10,000 Jim Cahill $175,000
- --------------- ---------------------------------- ------------------------------------ ----------- -------------- --------------
May 21, 1998 Price Charitable Remainder Trust Anne Ledford Evans 20,000 Jim Cahill $350,000
- --------------- ---------------------------------- ------------------------------------ ----------- -------------- --------------
</TABLE>
