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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-K/A
AMENDMENT NO. 1
TO
---------------
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
For the Fiscal Year Ended December 31, 1997
or
___ Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _________ to _________
Commission File Number: 1-13526
PRICELLULAR CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 22-3043811
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
711 Westchester Avenue
White Plains, New York 10604
(914) 422-0800
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
---------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------------- ---------------------------
Class A Common Stock, par American Stock Exchange
value $0.01 per share
---------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ ] No[X]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best knowledge of the registrant, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment of this Form 10-K. [ ]
The aggregate market value of the voting stock held by
non-affiliates of the registrant as of March 6, 1998 was approximately
$213,037,000.
The number of shares outstanding of each class of the
registrant's common stock, as of March 6, 1998, was 21,824,566 shares of Class
A Common Stock and 13,134,275 shares of Class B Common Stock.
Documents incorporated by reference: None.
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Table of Contents
Part III.
Item 10 Directors and Executive Officers of the Registrant..............2
Item 11 Executive Compensation..........................................5
Item 12 Security Ownership of Certain Beneficial Owners and Management..7
Item 13 Certain Relationships and Related Transactions.................11
Signatures.....................................................15
The undersigned registrant hereby amends the following items of its Annual
Report on Form 10-K filed March 24, 1998.
PART III
Item 10 Directors and Officers of the Registrant.
Directors
Robert Price has been a Director since 1990. He served as
President and Assistant Treasurer of the Company from 1990 through May 1997.
Robert Price concurrently serves as the Chief Executive Officer and President
of Price Communications ("Price Communications") since 1979. Mr. Price, an
attorney, is a former General Partner of Lazard Freres & Co. He has served as
an Assistant United States Attorney, practiced law in New York and served as
Deputy Mayor of New York City. After leaving public office, Robert Price
became Executive Vice President of The Dreyfus Corporation and an Investment
Officer of The Dreyfus Fund. In 1972 he joined Lazard Freres & Co. Robert
Price has served as a Director of Holly Sugar Corporation, Atlantic States
Industries, The Dreyfus Corporation, Graphic Scanning Corp. and Lane Bryant,
Inc., and is currently a member of The Council on Foreign Relations. Robert
Price serves as the Representative of The Majority Leader and President Pro Tem
of the New York Senate and on the Board of Directors of the Municipal
Assistance Corporation for the City of New York. Robert Price also was
appointed by Governor George Pataki of New York to, and served, a seven year
term as a Member of the Board of Trustees of the City University of New York.
Robert Price is also a Director and President of TLM Corporation. Robert Price
was elected to the Company's Board of Directors as a nominee of the Price
family pursuant to a stockholders agreement among the principal stockholders
of the Company (the "Stockholders Agreement"). Robert Price is the father of
Steven Price.
Steven Price has been the Chief Executive Officer and President
of the Company since May 1997. He has served as Chief Operating Officer and
Executive Vice President of the Company since April 1997, and as a Director
since September 1996. Mr. Price has also been the Chief Executive Officer and
President of PriCellular Wireless Corporation, the Company's principal
operating subsidiary, since April 1997. From December 1994 to April 1997, he
was a Senior Vice President of the Company. Prior thereto, he was Director of
Business Development of the Company since April 1993. From 1990 to 1993, Mr.
Price was an attorney with Davis Polk & Wardwell. Prior thereto, Mr. Price was
appointed by President Bush to serve in the U.S. State Department as Special
Assistant to the Chief U.S. Nuclear Arms Negotiator and worked in the mergers
and acquisitions department of Goldman, Sachs & Co. Mr. Price graduated magna
cum laude from Brown University, where he was elected to Phi Beta Kappa, and
has a J.D. degree from Columbia University. Steven Price is the son of Robert
Price. Steven Price was elected to the Company's Board of Directors as a
nominee of the Price family pursuant to the Stockholders Agreement.
Kim I. Pressman has been an Executive Vice President of the
Company since April 1997, and a Director and Secretary since 1990. Ms.
Pressman served as a Vice President of the Company from 1990 to April 1997, and
as the Treasurer from 1990 until December 1994. Ms. Pressman is a certified
public accountant and is a graduate of Indiana University and holds an M.B.A.
from New York University. Since 1990, she has served as Executive Vice
President of Price Communications and is currently also a Director. Prior to
joining Price Communications in 1984, Ms. Pressman was employed for three
years by Peat, Marwick, Mitchell & Co., a national certified public accounting
firm, and for more than three years thereafter was Supervisor, Accounting
Policies for International Paper Company and then Manager, Accounting
Operations for Corinthian Broadcasting Division of Dun & Bradstreet Company, a
large group owner of broadcasting stations. Ms. Pressman is the Chairman and a
Vice President and Treasurer of TLM Corporation. Ms. Pressman was elected to
the Company's Board of Directors as a nominee of the Price family pursuant to
the Stockholders Agreement.
Brion B. Applegate has been a Director of the Company since
June 1994. He is a founder and general partner of Spectrum Equity Investors,
L.P. ("Spectrum"), a venture capital fund specializing in communications and
telecommunications investments. Prior thereto, he was a general partner of
funds managed by Burr, Egan, Deleage & Co. Mr. Applegate serves on the board
of several private communications entities. Mr. Applegate originally was
elected to the Company's Board of Directors as Spectrum's nominee pursuant to
the Stockholders Agreement. An affiliate of Spectrum, Spectrum Equity
Investors II, L.P., is one of the founding stockholders of American Cellular
Corporation ("ACC"); the Company has signed an Agreement and Plan of Merger
dated as of March 6, 1998 with ACC, pursuant to which ACC will merge with and
into the Company. See Item 13, "Certain Relationships and Related
Transactions--Merger with American Cellular Corporation."
Scott M. Sperling has been a Director of the Company since
February 1996. Mr. Sperling is a Managing Director of the Thomas H. Lee
Company and a General Partner of its affiliated Equity Funds. Prior to this
position, he served for ten years as the Managing Partner of the Aeneas Group
Inc., the affiliate of the Harvard Management Company, responsible for all
private capital market investments, including venture capital, company buyouts
and real estate. From 1981-1984, Mr. Sperling was a Senior Consultant with the
Boston Consulting Group, Inc. He holds an M.B.A. from Harvard Business School
and a B.S. from Purdue University. He is a Director of Beacon Properties,
Inc., Softkey International, KAI Inc., Livent, Inc. and several private
companies. Mr. Sperling is also a member of the corporation for the Brigham
and Womens Hospital and Medical Center and is the director of several
charitable organizations. Mr. Sperling was elected to the Company's Board of
Directors as a nominee of The Thomas H. Lee Company pursuant to the
Stockholders Agreement.
Scott I. Anderson has been a Director of the Company since
April 1997. Mr. Anderson served as Senior Vice President-Acquisitions and
Development of AT&T Wireless Services, Inc., formerly McCaw Cellular
Communications, Inc. ("AT&T Wireless/McCaw'") from 1991 to March 1997. Prior
thereto, he served as Vice President-Law of AT&T Wireless since 1988.
Previously, Mr. Anderson served on the Company's Board of Directors from April
1995 to August 1996 as AT&T Wireless/McCaw's nominee pursuant to the
Stockholders Agreement. Mr. Anderson served as an advisor to the Board of
Directors from August 1996 to April 1997.
Committees of the Board -- Board Meetings
The Board of Directors held seven meetings, the Audit Committee
held no meetings, the Compensation and Stock Option Committee held two
meetings and the Executive Committee held seven meetings in 1997. All of the
Directors attended at least 75% of the meetings of the Board and the
respective Committees of the Board of which they are members.
The Board of Directors has the following standing committees:
Audit Committee
The Audit Committee recommends the annual engagement of
auditors, with whom the Audit Committee will review the scope of audit and
non-audit assignments, related fees, the accounting principles used in
financial reporting, internal financial auditing procedures and the adequacy
of internal control procedures. The Company anticipates that additional
directors will be appointed to the Audit Committee as soon as practicable to
ensure that a majority of the Audit Committee members are independent
directors.
The members of the Audit Committee are Ms. Pressman and Messrs.
Applegate and Sperling.
Compensation and Stock Option Committee
The Compensation and Stock Option Committee reviews and
approves the remuneration arrangements for the officers and directors of the
Company and reviews and recommends new executive compensation or stock plans
in which the officers and/or directors are eligible to participate, including
the granting of stock options.
The members of the Compensation and Stock Option Committee are
Messrs. Anderson, Applegate and Sperling.
Executive Committee
The by-laws of the Company provide for the establishment of an
Executive Committee, which the Board of Directors has established. The by-laws
provide that the Executive Committee shall consist of three members, one of
which shall be designated by each of the Price family, AT&T Wireless/McCaw and
Thomas H. Lee Equity Fund III, L.P. (the "THL Equity Fund") except during any
period in which there is a significant overlap between the PCS licensed areas
directly or indirectly owned, operated or controlled by, or attributed to AT&T
Wireless/McCaw, or any affiliate of either and the cellular geographic service
areas directly or indirectly owned, operated or controlled by, or attributed
to, the Company or any affiliate thereof, in which case it shall consist of
two members, one of which shall be designated by each of the Price family and
THL Equity Fund.
The affirmative vote of the Executive Committee of the Company
with no members voting against will be required to designate any class or
series of Preferred Stock or incur any indebtedness other than trade
indebtedness incurred in the ordinary course of the Company's business and
other than indebtedness not in excess of $1,000,000. The right of AT&T
Wireless/McCaw and the THL Equity Fund to nominate a member to the Executive
Committee shall terminate (a) with respect to AT&T Wireless/McCaw on the
earlier to occur of (i) April 28, 2001 or (ii) such time as the number of
fully diluted shares held by AT&T Wireless/McCaw is less than 7% of the total
number of fully diluted shares then outstanding and (c) with respect to THL
Equity Fund at such time as the number of fully diluted shares held by THL
Equity Fund and the other purchasers of shares of Series A Cumulative
Convertible Preferred Stock, par value $.01 per share, of the Company is less
than 4,375,000 (without giving effect to certain reductions to the conversion
value provided in the certificate of designation to such shares and subject
to appropriate adjustment for subdivision, combination, consolidation or
reclassification of such shares into a greater or lesser number of shares).
The members of the Executive Committee are Messrs. Steven Price
and Sperling.
Compensation of Directors
Directors of the Company are not paid fees, other than Scott
Anderson, who receives $35,000 per annum.
Executive Officers
The following table sets forth certain information with respect
to the executive officers of the Company.
<TABLE>
Name Age Office
- ------------------------------------- ----- ----------------------------------------------------
<S> <C> <C>
Robert Price......................... 65 Director, Chairman
Steven Price......................... 36 Director, Chief Executive Officer and President
Stuart B. Rosenstein................. 37 Executive Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary
Kim I. Pressman...................... 41 Director, Executive Vice President and Secretary
</TABLE>
Stuart B. Rosenstein has been an Executive Vice President of
the Company since April 1997 and Chief Financial Officer and Assistant
Secretary since December 1993. Mr. Rosenstein has also served as Treasurer of
the Company since December 1994. From September 1996 to April 1997, he was a
Senior Vice President of the Company. From 1990 to December 1993, he was the
Company's Controller and from 1990 to September 1996, he was a Vice President.
Prior to that time, Mr. Rosenstein, a certified public accountant, was a
senior manager with the accounting firm of Ernst & Young. Mr. Rosenstein has a
B.S. degree from SUNY at Buffalo, where he graduated magna cum laude.
Item 11 Compensation of Executive Officers
The following table sets forth the compensation earned in 1995,
1996, and 1997 by the Company's chief executive officer and each other
executive officer whose total annual salary and bonus exceeded $100,000 for the
year ended December 31, 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
----------------------- ------------
Number of
Securities
Underlying All Other
Name and Principal Position Year Salary Bonus(1) Options(2) Compensation
- --------------------------------------------- ---- -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Robert Price, Chairman (3)................... 1997 $325,000 $325,000 0 0
1996 325,000 325,000 0 0
1995 237,500 325,000 180,664 0
Steven Price, Chief Executive Officer
and President................................ 1997 $200,000 $325,000 0 $ 0
1996 195,609 165,000 0 0
1995 160,000 135,000 153,320 0
Stuart B. Rosenstein, Executive Vice
President, Chief Financial Officer and
Treasurer.................................... 1997 $225,000 $225,000 0 $ 0
1996 201,218 165,000 43,750 0
1995 160,000 135,000 153,320 0
Kim Pressman, Executive Vice
President and Secretary...................... 1997 $98,333 $50,000 0 $2,100
1996 26,154 50,000 0 0
1995 20,000 10,000 0 0
- ------------
(1) Bonuses for 1995 were paid in April 1996, bonuses for 1996 were paid in February 1997, and bonuses
for 1997 were paid in January 1998. See "--Compensation Committee Report to
Stockholders--Compensation of the Chief Executive Officer."
(2) The stock options have been restated to give effect to all stock splits.
(3) Mr. Robert Price served as President of the Company until May, 1997.
</TABLE>
Option/SAR Grants in Last Fiscal Year
Individual Grants
<TABLE>
Percent of
Total
Number of Options/ Potential Realizable
Securities SARs Value at
Underlying Granted to Assumed Annual
Options/ Employees Exercise or Rates of Stock
SARs in Fiscal Base Price Expiration Price Appreciation
Name Granted(#) 1997 ($/Share) Date For Option Term
- ----------------------- ---------- ---------- ----------- ----------- --------------------
5% 10%
---- -----
<S> <C> <C> <C> <C> <C> <C>
Robert Price............ 0 0% -- -- -- --
Steven Price............ 0 0% -- -- -- --
Stuart B. Rosenstein.... 0 0% -- -- -- --
__________________
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and
Fiscal Year-End Option/SAR Values
<TABLE>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options/SARs Options/SARs
Acquired at December 31, 1997 at December 31, 1997
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
- ---------------------------- -------- --------- -------------------- --------------------
<S> <C> <C> <C> <C>
Robert Price................ 742,188 $4,702,347 0/0 0/0
Steven Price................ 0 0 248,697/51,107 $1,575,606/$294,887
Stuart B. Rosenstein........ 0 0 248,697/94,857 $1,575,606/$294,887
Kim I. Pressman............. 0 0 68,490/35,464 $297,282/$20,314
</TABLE>
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is comprised of Messrs. Anderson,
Applegate and Sperling.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), requires the Company's executive officers and
Directors, and beneficial owners of more than 10% of the Class A Common Stock
of the Company, to file initial reports of ownership and reports of changes in
ownership with the SEC. Executive officers and Directors are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
Directors, the Company noted that no individual who, at any time during 1997,
was a Director, officer or beneficial owner of more than 10% of the Class A
Common Stock of the Company failed to file the reports required by Section
16(a) of the 1934 Act on a timely basis.
Item 12 Security Ownership of Management and Principal Stockholders of
PriCellular
The following table provides information with respect to the
beneficial ownership of PriCellular's Common Stock by (i) each person known by
PriCellular to be the beneficial owner of more than 5% of any class of
PriCellular voting securities, (ii) each director, PriCellular's President and
Chief Executive Officer and the four most highly compensated other executive
officers and (iii) all directors and executive officers as a group. Except
as otherwise indicated, the address of each holder is the same as PriCellular.
Except as discussed in the notes hereto, each holder has sole voting and
investment power with respect to all shares of stock listed as owned by such
person. All Information is provided as of December 31, 1997 unless otherwise
indicated.
<TABLE>
<CAPTION>
Beneficial Ownership of
Class A and B Common Stock(1)
---------------------------------------------------------
Percentage of Percentage of
Combined Combined
Name of Beneficial Owner Shares Classes Voting
- ------------------------ ---------- ------------- -------------
<S> <C> <C> <C>
Directors and Officers
Robert Price(2).......................................... 6,725,788 12.36% 27.75%
Stuart B. Rosenstein(3).................................. 269,465 0.5 0.16
Kim I. Pressman(4)....................................... 71,144 0.13 0.06
Steven Price(5).......................................... 3,472,371 6.38 16.5
Brion B. Applegate(6).................................... 2,780,452 5.11 11.26
Scott M. Sperling(7)..................................... 7,244,640 13.31 3.83
All directors and officers as a group (6 persons)........ 20,563,860 37.78 59.56
Other 5% Stockholders
AT&T Wireless Services, Inc.(8).......................... 6,537,544 12.01 15.96
(formerly McCaw)
5400 Carillon Point
Kirkland, WA 98033
The Thomas H. Lee Company(9)............................. 7,244,640 13.31 3.83
75 State Street
Boston, MA 02109
Putnam Investments, Inc.(10)............................. 5,736,289 10.54 3.03
One Post Office Square
Boston, MA 02109
Eileen Farbman(11)....................................... 3,714,644 6.82 19.58
c/o Suite 3200
45 Rockefeller Plaza
NY, NY 10020
Janus Capital Corp.(12).................................. 3,914,449 7.19 2.07
100 Fillmore Street
Denver, CO 80206
Spectrum Equity Investors, L.P.(13)...................... 2,780,452 5.11 11.26
One International Place, 29th Floor
Boston, MA 02110
The Public School Employees' Retirement System(14)....... 3,622,320 6.65 1.92
5 North 5th Street, Box 125
Harrisburg, PA 17108
Price Communications Corporation(15)..................... 3,124,334 5.74 10.32
Suite 3200
45 Rockefeller Plaza
NY, NY 10020
Leo Farbman(16).......................................... 1,523,436 2.8 8.06
c/o Suite 3200
45 Rockefeller Plaza
NY, NY 10020
Alexandra Farbman(17).................................... 1,523,436 2.8 8.06
c/o Suite 3200
45 Rockefeller Plaza
NY, NY 10020
College Retirement Equities Fund(18)..................... 2,130,650 3.91 1.13
730 Third Avenue
NY, NY 10017
</TABLE>
(1) As used in this table, "beneficial ownership" means the sole or shared
power to vote or direct the voting or to dispose or direct the disposition
of any security. A person is deemed as of any date to have "beneficial
ownership" of any security that such person has a right to acquire within
60 days after such date. Any security that any person named above has the
right to acquire within 60 days is deemed to be outstanding for purposes of
calculating the ownership percentage of such person, but is not deemed to
be outstanding for purposes of calculating the ownership percentage of any
other person.
(2) Consists of 1,580,139 shares of Class B Common Stock and 106,588 shares of
Class A Common Stock owned directly by Robert Price, 14,000 shares of Class
A Common Stock held by Robert Price and Eileen Farbman, as joint tenants
(see also footnote 11), 1,304,750 shares of Class A Common Stock held by
Price Communications and warrants to purchase 1,819,584 shares of Class B
Common Stock held by Price Communications that are currently exercisable
(see also footnote 15) and 50,000 shares of Class A Common Stock and 50,000
shares Class B Common Stock held by Mr. Price as custodian for certain of
his grandchildren.
(3) Consists of 3,906 shares of Class B Common Stock owned directly by Mr.
Rosenstein and options to purchase 265,559 shares of Class A Common Stock
granted pursuant to the Company's 1994 Stock Option Plan that are currently
exercisable. Does not include options to purchase 95,495 shares of Class A
Common Stock granted pursuant to the Company's 1994 Stock Option Plan that
are not exercisable within 60 days.
(4) Consists of 3,906 shares of Class B Common Stock owned directly by Ms.
Pressman and options to purchase 67,238 shares of Class A Common Stock
granted pursuant to the Company's 1994 Stock Option Plan that are currently
exercisable. Does not include options to purchase 66,716 shares of Class A
Common Stock granted pursuant to the Company's 1994 Stock Option Plan that
are not exercisable within 60 days. Includes 25,000 options to purchase
shares of Class A Common Stock that are currently exercisable held in
custody for her children.
(5) Consists of 3,080,537 shares of Class B Common Stock owned directly by
Steven Price, 30,038 shares of Class A Common Stock owned directly by
Steven Price and options to purchase 250,976 shares of Class A Common Stock
granted pursuant to the Company's 1994 Stock Option Plan that are currently
exercisable. Includes 110,820 options to purchase shares of Class A Common
Stock held in custody for his daughter. Does not include options to
purchase 48,828 shares of Class A Common Stock granted pursuant to the
Company's 1994 Stock Option Plan that are not exercisable within 60 days.
(6) All of such shares are owned by Spectrum (see footnote 13). Pursuant to
the definition of beneficial ownership in footnote 1, Brion Applegate may
be deemed to have beneficial ownership of such shares as the general
partner of the partnership which is the general partner of Spectrum.
(7) All of such shares are owned by The Thomas H. Lee Company and attributed to
Scott M. Sperling, a Managing Director of The Thomas H. Lee Company,
pursuant to the definition of beneficial ownership provided in footnote 1.
(8) Consists of 2,625,781 shares of Class B Common Stock and 3,911,763 shares
of Class A Common Stock.
(9) Consists of 7,244,640 shares of Class A Common Stock currently issuable
(subject to adjustments) upon conversion of 54,728 shares of the Company's
Series A Preferred Stock held by Thomas H. Lee Equity Fund III L.P. and
5,272 shares of Series A Preferred Stock held by THL-CCI Investors Limited
Partnership.
(10) Consists of 4,589,804 shares of Class A Common Stock issuable upon
conversion of the Company's outstanding 10 3/4% Senior Subordinated
Convertible Discount Notes due 2004 and 1,146,485 shares of Class A
Common Stock. Information with respect to the shares of Class A Common
Stock held is based on a Schedule 13G dated February 8, 1995, which
reflects the collective beneficial ownership of Marsh & McLennan
Companies, Inc., Putnam Investments, Inc. and its two wholly owned
registered investment advisers (Putnam Investment Management, Inc. and
The Putnam Advisory Company, Inc.) and the Putnam New Opportunities Fund
(the "Fund") (collectively, the "Putnam Entities"). According to the
Schedule 13G, none of the Putnam Entities have the sole power to vote or
dispose of any such shares of Class A Common Stock nor (except the Fund
with respect to 506,250 of such shares) the shared power to vote any of
such shares and all of the Putnam Entities have the shared power to
dispose of such shares.
(11) Consists of 652,772 shares of Class B Common Stock and 1,000 shares of
Class A Common Stock owned directly by Ms. Farbman, 14,000 shares of
Class A Common Stock held by Robert Price and Eileen Farbman, as joint
tenants (see also footnote 2), 761,718 shares of Class B Common Stock
held by Eileen Farbman and Leo Farbman, as joint tenants, 761,718 shares
of Class B Common Stock held by Eileen Farbman and Alexandra Farbman, as
joint tenants and 761,718 shares of Class B Common Stock held by Eileen
Farbman as custodian for Leo Farbman UGTMA until age 21 and 761,718
shares of Class B Common Stock held by Eileen Farbman as custodian for
Alexandra Farbman UGTMA until age 21 (see also footnotes 16 and 17).
Eileen Farbman is the daughter of Robert Price.
(12) Consists of 3,914,449 shares of Class A Common Stock. Information with
respect to the shares of Class A Common Stock held is based on a
Schedule 13G dated February 13, 1998, which reflects the collective
beneficial ownership of Janus Capital Corporation, Janus Enterprise
Fund, and Thomas H. Bailey, President of Janus Capital (collectively,
the "Janus Reporting Persons"). According to the Schedule 13G, none of
the Janus Reporting Persons has either the sole power to vote or to
dispose of any such shares, and all of the Janus Reporting Persons have
the shared power to vote and dispose of all such shares (except that
Janus Enterprise Fund has shared power to vote and dispose of 1,077,025
shares only).
(13) Consists of 724,464 shares of Class A Common Stock currently issuable
upon conversion of 6,000 shares of the Series A Preferred Stock and
2,055,988 shares of Class B Common Stock. Information with respect to
the shares of Class B Common Stock and Series A Preferred Stock held is
based on a Schedule 13D dated March 16, 1998 filed by Spectrum Equity
Investors, L.P. ("SEI"), Spectrum Equity Associates, L.P. ("SEA"),
Spectrum Equity Investors II, L.P., Spectrum Equity Associates II, L.P.
and certain individual general partners of those partnerships including
Brion Applegate (collectively, the "Spectrum Reporting Persons").
According to the 13D, none of the Spectrum Reporting Persons has either
the sole power to vote or to dispose of any such shares; SEA, by virtue
of being the general partner of Spectrum, and William Collatos and Brion
Applegate, by virtue of being the general partners of SEA, may be deemed
to have the shared power to vote and dispose of all of such shares. The
above Schedule 13D was also filed by various entities and individuals
associated with Sandler Capital Management (the "Sandler Reporting
Persons"), who may be deemed to be a group with the Spectrum Reporting
Persons. According to the Schedule 13D, neither the Sandler Reporting
Persons nor the Spectrum Reporting Persons affirm the existence of such
a group.
(14) Consists of 3,622,320 shares of Class A Common Stock currently issuable
upon conversion of 30,000 shares of the Series A Preferred Stock.
(15) Consists of 1,304,750 shares of Class A Common Stock currently
outstanding and 1,819,584 shares of Class B Common Stock issuable
pursuant to warrants that are currently exercisable. See also footnote
2. The per share price at which shares may be purchased pursuant to the
warrants is $5.01 subject to adjustment.
(16) Consists of 761,718 shares of Class B Common Stock held by Eileen
Farbman and Leo Farbman, as joint tenants and 761,718 shares of Class B
Common Stock held by Eileen Farbman as custodian for Leo Farbman UGTMA
until age 21 (see also footnote 11). Leo Farbman is the son of Eileen
Farbman and grandson of Robert Price.
(17) Consists of 761,718 shares of Class B Common Stock held by Eileen
Farbman and Alexandra Farbman, as joint tenants and 761,718 shares of
Class B Common Stock held by Eileen Farbman as custodian for Alexandra
Farbman UGTMA until age 21 (see also footnote 11). Alexandra Farbman is
the daughter of Eileen Farbman and granddaughter of Robert Price.
(18) Consists of 2,130,650 shares of Class A Common Stock. Information with
respect to shares of Class A Common Stock held is based on a Schedule
13G dated February 2, 1998, which reflects the collective beneficial
ownership of College Retirement Equities Fund ("CREF") and its
Investment adviser, TIAA-CREF Investment Management, LLC ("TIAA-CREF").
According to the Schedule 13G, CREF has sole power to vote all of such
shares, and shares with TIAA-CREF the power to dispose of all of such
shares.
Several of the above shareholders are party to a voting agreement
with American Cellular Corporation ("ACC"), dated as of March 6, 1998, pursuant
to which such shareholders have agreed to vote in favor of the merger of ACC
with and into the Company. See Item 13, "Certain Relationships and Related
Transactions--Merger with American Cellular Corporation."
Item 13 Certain Relationships and Related Transactions
Merger with American Cellular Corporation
On March 6, 1998, the Company and American Cellular Corporation
("ACC") entered into an Agreement and Plan of Merger (the "Merger Agreement").
Pursuant to the Merger Agreement and subject to the terms and conditions set
forth therein, ACC will be merged with and into the Company, with the Company to
be the surviving corporation of such merger (the "Merger"). At the Effective
Time (as defined in the Merger Agreement) of the Merger, each issued and
outstanding share of Class A Common Stock, par value $0.01 per share of the
Company (the "Class A Shares") and Class B Common Stock, par value $0.01 per
share, of the Company will in each case be converted into the right to receive
$14.00 in cash, without interest (the "Merger Consideration"), and each issued
and outstanding share of Series A Cumulative Convertible Preferred Stock, par
value $0.01 per share (the "Series A Preferred Stock"), of the Company will be
converted into the right to receive the product of the Merger Consideration and
the number of Class A Shares into which each such share of Series A Preferred
Stock is convertible at such time in connection with a change of control. The
Merger Agreement permits the Company, under certain circumstances, to respond to
unsolicited third party acquisition proposals and, upon payment of certain fees
to ACC, to terminate the Merger Agreement.
Brion Applegate, one of the Company's directors, and Spectrum
Equity Investors, L.P. ("Spectrum"), one of its principal stockholders, are each
affiliated with ACC. Mr. Applegate is a general partner of Spectrum and an
affiliate of Spectrum, Spectrum Equity Investors II, L.P., is a founding
stockholder of ACC. In his capacity as a general partner of Spectrum, Mr.
Applegate led the investor group that made ACC's acquisition proposal relating
to the merger.
In connection with the execution of the Merger Agreement, AT&T
Wireless, Inc., The Thomas H. Lee Company, Steven Price and Eileen Farbman
(collectively, the "Principal Shareholders") entered into a voting agreement
(the "Voting Agreement") with ACC. Pursuant to the agreement, the Principal
Shareholders, the beneficial owners of approximately 39% of the outstanding
Common Stock and Preferred Stock of the Company (or 57% of the fully diluted
voting power of the Company), agreed to vote their shares in favor of the
approval and adoption of the Merger Agreement. The Voting Agreement terminates
upon termination of the Merger Agreement.
In connection with the execution of the Merger Agreement and the
Voting Agreement, each of Spectrum and the Public School Employees' Retirement
System ("PSERS") executed side letters agreeing not to exercise certain
redemption rights associated with the shares of Series A Preferred Stock owned
by them that may arise at such time as the Merger is approved by the Company's
stockholders.
Concurrently with the execution of the Merger Agreement, AT&T
Wireless Services, Inc. ("AT&T Wireless/McCaw"), a principal shareholder of
PriCellular, entered into a Consent and Waiver agreement with PriCellular.
Pursuant to the Consent and Waiver agreement, AT&T Wireless/McCaw agreed to
waive certain rights (including veto rights with respect to any merger between
PriCellular and any other corporation) arising under the AT&T Wireless/McCaw
Stockholders Agreement (see below) among PriCellular, AT&T Wireless/McCaw and
the other shareholders of PriCellular party thereto in connection with the
Merger. The Consent and Waiver agreement will only be effective if (i) pursuant
to the Merger all outstanding shares of Class A Common Stock and Class B Common
Stock of PriCellular are converted into the right to receive an amount in cash
equal to not less than $14.00 per share; (ii) there is no material change to the
Merger Agreement; and (iii) the beneficial owners of ACC's securities at the
closing of the Merger are Spectrum, ACC's management and other financial
institutions or investment entities.
AT&T Wireless/McCaw Registration Rights
AT&T Wireless/McCaw is a principal stockholder of the Company,
owning 2,625,781 shares of Class B Common Stock and 3,911,763 shares of Class A
Common Stock. As of February 9, 1996, the Company agreed, and Harvard Private
Capital, Spectrum, THL Equity Fund, THL-CCI Investors Limited Partnership
("THL-CCI"), PSERS and Dominion Cellular, Inc. ("Dominion") consented, to
provide AT&T Wireless/McCaw with certain registration rights (the "McCaw
Registration Rights"). The McCaw Registration Rights are substantially the same
as the Registration Rights described below, except that AT&T Wireless/McCaw will
be entitled to one demand registration and participation rights in registrations
proposed to be effected by the Company.
Other Registration Rights
On February 9, 1996, the Company, Aeneas Venture Corp., an
affiliate of Harvard Private Capital Group, Inc. ("Harvard"), Spectrum, THL
Equity Fund, THL-CCI, PSERS and Dominion entered into an Amended and Restated
Registration Rights Agreement (the "Registration Rights"), which superseded and
canceled the Amended and Restated Registration Rights Agreement dated as of
December 28, 1995 among the same parties. The agreement provided, subject to
certain limitations, that Spectrum will have the right to one demand
registration, Harvard Private Capital will have the right to two demand
registrations, THL Equity Fund (together with THL-CCI) will have the right to
two demand registrations and PSERS will have the right to two demand
registrations. The minimum amount of securities that must be registered pursuant
to these demand rights is, for each of Harvard, THL and PSERS, 20% of the
Harvard registrable securities, the THL registrable securities and the PSERS
registrable securities (or a lesser amount of shares whose aggregate offering
price is expected to be at least $10 million), respectively, or, for Spectrum,
40% of the Spectrum registrable securities. In each demand registration, holders
of registrable securities other than the holders initiating the registration may
include their securities in such registration, subject to certain notice
requirements. The Registration Rights further provide, subject to certain
limitations, that in the event the Company proposes to register any of its
equity securities in connection with a public offering, the Company will use its
best efforts to have such registration cover all of the registrable securities,
subject to certain notice requirements.
Harvard Share Repurchase
In July, 1997, the Company repurchased and retired, under
separate authorization of its Board of Directors, 1,948,052 shares of Class B
Common Stock from Harvard at $9.00 per share, which was the then current market
price at the date of the transaction. In addition, 56,275 warrants to purchase
shares of Class B Common Stock, also owned by Harvard, were redeemed at a net
cash expenditure of $3.83 per warrant ($9.00, the then current market price,
less the exercise price of %5.17).
AT&T Operating Agreement
During 1997, there remained in effect an Operating Agreement
between the Company and AT&T Wireless/McCaw dated as of April 28, 1994 (the
"1994 Operating Agreement"). The 1994 Operating Agreement provided that AT&T
Wireless/McCaw would (i) assist the Company and its subsidiaries in evaluating
potential acquisitions, (ii) make available to the Company its volume purchase
discounts on cellular system switches, cell site equipment and other equipment,
(iii) use its efforts to cause certain of its service vendors to provide
services to the Company on terms comparable to those provided to AT&T
Wireless/McCaw, (iv) assist the Company in negotiating favorable price terms
with vendors, (v) use reasonable efforts to help the Company secure financing
arrangements with vendors of cellular service equipment, (vi) assist the Company
in its capital financing efforts, (vii) along with the Company, use its best
efforts to design and construct adjacent cellular systems, and (viii) provide
the Company with access to information relating to sales and marketing,
technology, and cellular system operating techniques (subject to certain
restrictions). The 1994 Operating Agreement also provided that any of the
Company's adjacent systems had the right to enter into switch sharing and
roaming arrangements with AT&T Wireless/McCaw or certain of its affiliates.
During 1997, no fees were paid either to or by the Company pursuant to the 1994
Operating Agreement. During 1997 and 1998, the Company engaged in discussions
with AT&T Wireless/McCaw to enter into a new agreement to replace the 1994
Operating Agreement.
In addition, during 1997 the Company began a limited trial of
reselling AT&T Wireless/McCaw's cellular service in certain portions of the New
York City MSA. The arrangement was negotiated in the normal course of business
and the fees paid by the Company to AT&T Wireless/McCaw were consistent with
those paid by other resellers of AT&T Wireless/McCaw's cellular service. At
December 31, 1997, the Company had approximately 1300 customers serviced by the
reselling arrangement, which generated approximately $550,000 in revenue during
1997. The fees paid to AT&T Wireless/McCaw during 1997 totaled $367,000. The
arrangement was discontinued in May, 1998.
Stockholders Agreements
AT&T Wireless/McCaw Stockholders Agreement
On April 28, 1994, in connection with the sale of 1,625,000
shares of the Company's Class B Common Stock, the Company and AT&T
Wireless/McCaw entered into, among other agreements, a Stockholders Agreement
(the "AT&T Wireless/McCaw Stockholders Agreement"). The AT&T Wireless/McCaw
Stockholders Agreement (as amended through July 28, 1995) contains, among other
provisions, agreements with respect to (i) preemptive rights on sales of
additional stock, (ii) asset purchase rights, (iii) rights of first refusal in
sales of existing stock, (iv) co-sale rights to participate in sales by certain
stockholders and (v) rights concerning the election of directors of the Company.
The preemptive rights provide, subject to certain limitations, that in the event
the Company issues to a third party any stock, rights or instruments, as defined
in the agreement, AT&T Wireless/McCaw will have the right to purchase such
stock, rights or instruments on the same terms as the third party so as to
maintain the same proportional interest of the fully diluted equity securities
of the Company as was held by AT&T Wireless/McCaw prior to the issuance of such
stock, rights or instruments. The asset purchase rights provide, subject to
certain limitations, that in the event the Company offers to sell to a third
party any asset for a purchase price which exceeds five percent of the value of
the Company or $1.5 million, AT&T Wireless/McCaw shall have the right to
purchase such asset on the same terms as the third party. The rights of first
refusal provide, subject to certain limitations and modified in part by another
stockholders agreement to which the company is a party, that in any offer to
sell or otherwise dispose of shares of stock in the Company by a stockholder,
each of the Company and AT&T Wireless/McCaw shall have a right of first refusal
to acquire its pro rata portion of such stock. The co-sale rights provide that
prior to any public offering AT&T Wireless/McCaw shall have the right to share
on a pro rata basis, as described in the agreement, in any sale of stock of the
Company by a member of the Price family (with certain exceptions). With regard
to the composition of the board of directors of the Company, AT&T Wireless/McCaw
will be entitled to elect one director.
The AT&T Wireless/McCaw Stockholders Agreement also contains a
series of negative covenants whereby the Company, among other provisions, agrees
that without the written consent of AT&T Wireless/McCaw it will not acquire
through the purchase of stock or assets an interest in any business or other
entity the value of which exceeds 10% of the value of the Company unless AT&T
Wireless/McCaw has made a bona fide attempt to acquire such stock or assets.
Pursuant to the negative covenants, the Company further agrees that it will not
(i) enter into any business not related to wireless communications, (ii) amend
its organizing documents in a manner that would have a material adverse effect
on the rights and preferences of AT&T Wireless/McCaw as a stockholder and (iii)
bid on or apply for a license to construct or operate any non-wireline system if
such bid or application would preclude AT&T Wireless/McCaw from bidding,
applying or obtaining such license or permit.
Termination of the AT&T Wireless/McCaw Stockholders Agreement
occurs with respect to preemptive rights, asset purchase rights, rights of first
refusal and co-sale rights upon the earlier of the seventh anniversary of the
agreement or a reduction in AT&T Wireless/McCaw's ownership to 7% of the Company
on a fully diluted basis. With regard to the board election rights and the
negative covenants of the Company, the AT&T Wireless/McCaw Stockholders
Agreement will terminate on the earlier of the dates described in the previous
sentence or on the third anniversary of the agreement if the Company is unable
to acquire assets representing two million Pops due, in substantial part, to (x)
AT&T Wireless/McCaw's refusal to consent to acquisitions by the Company of
cellular systems or (y) AT&T Wireless/McCaw's acquisition of non-contiguous,
non-wireline cellular systems which the Company would otherwise have acquired.
Voting Agreement
Since December, 1995, the Company and several of its principal
shareholders (including AT&T Wireless/McCaw, The Thomas H. Lee Company, Spectrum
and certain members of the Price family) have been parties to a Voting Agreement
(the "1995 Voting Agreement") pursuant to which certain shareholders were given
the right to designate nominees to the Company's Board, for which all other
parties to the Agreement would vote. Under the Agreement, each of Harvard, AT&T
Wireless/McCaw, Spectrum and The Thomas H. Lee Company were given the right to
designate one nominee for the Board (subject to certain limitations), and the
Price family was given the right to designate such number of nominees as would
constitute a majority of the Board. Each stockholder further agreed not to vote
to remove any member of the Board designated by one of the above parties unless
such designating party also voted to remove such director. The 1995 Voting
Agreement terminates (A) with respect to AT&T Wireless/McCaw, on the earlier to
occur of (i) April 28, 2001 or (ii) such time as the number of fully-diluted
shares (as defined therein) held by AT&T Wireless/McCaw is less than 7% of the
total number of fully diluted shares then outstanding and (B) with respect to
The Thomas H. Lee Company, at such time as the number of fully-diluted shares
held by affiliates of The Thomas H. Lee Company plus those held by PSERS is less
than 2,800,000 (subject to adjustment). The 1995 Voting Agreement has already
terminated with respect to Harvard and Spectrum.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this amendment
to this report to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of New York, State of New York, on the 7th day of May
1998.
PriCellular Corporation
By: /s/ Steven Price
------------------------------------
Steven Price
President
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
<TABLE>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Steven Price Director and President (Principal May 7, 1998
- ------------------------------------------ Executive Officer
Steven Price
/s/ Stuart B. Rosenstein Senior Vice President, Chief Financial May 7, 1998
- ------------------------------------------ Officer and Treasurer (Principal
Stuart B. Rosenstein Financial and Accounting Officer
/s/ Kim I. Pressman Director, Vice President and Secretary May 7, 1998
- ------------------------------------------ Corporate Development
Kim I. Pressman
/s/ Scott Anderson Director May 7, 1998
- ------------------------------------------
Scott Anderson
Director
- ------------------------------------------
Brion Applegate
Director
- ------------------------------------------
Robert Price
Director
- ------------------------------------------
Scott Sperling
*By:
--------------------------------------
[ ]
Attorney-in-fact
</TABLE>
