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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the
Securities Exchange Act of 1934)
PACIFIC TELECOM, INC.
(Name of Issuer)
PACIFICORP
PACIFICORP HOLDINGS, INC.
PACIFIC TELECOM, INC.
PXYZ CORPORATION
(Names of Persons Filing Statement)
COMMON STOCK, NO PAR VALUE
(Title of Class of Securities)
694876 10 3
(CUSIP Number of Class of Securities)
JAMES H. HUESGEN RICHARD T. O'BRIEN
PACIFIC TELECOM, INC. PACIFICORP
805 BROADWAY 700 NE MULTNOMAH STREET
VANCOUVER, WA 98668-9901 SUITE 1600
(360) 905-5800 PORTLAND, OREGON 97232
(503) 731-2000
(Names, Addresses and Telephone Numbers of Persons
Authorized to Receive Notices and Communications on
Behalf of Persons Filing Statement)
WITH COPIES TO:
JOHN M. SCHWEITZER JOHN J. HUBER
EVA M. KRIPALANI LATHAM & WATKINS
STOEL RIVES BOLEY JONES & GREY 1001 PENNSYLVANIA AVENUE, N.W.
900 SW FIFTH AVENUE SUITE 1300
SUITE 2300 WASHINGTON, D.C. 20004-2505
PORTLAND, OREGON 97204 (202) 637-2200
(503) 224-3380
This statement is filed in connection with (check the
appropriate box):
(a) / x / The filing of solicitation materials or an
information statement subject to Regulation 14A
[17 CFR 240.14a-1 to 240.14b-1], Regulation 14C
[17 CFR 240.14c-1 to 240.14c-101] or Rule 13e-
3(c) [Section 240.13e-3(c)] under the Securities
Exchange Act of 1934.
(b) / / The filing of a registration statement under the
Securities Act of 1933.
(c) / / A tender offer.
(d) / / None of the above.
Check the following box if soliciting materials or
information referred to in checking box (a) are preliminary
copies: / x /
_________________________
CALCULATION OF FILING FEE
TRANSACTION AMOUNT OF
VALUATION* FILING FEE
- -------------------------------------------------------------
$158,728,260 $31,745.65
* For purposes of calculating fee only. This amount assumes
the purchase of 5,290,942 shares of common stock at $30.00
in cash per share. The amount of the filing fee
calculated in accordance with Regulation 240.0-11 of the
Securities Exchange Act of 1934 equals 1/50 of one
percentum of the value of the shares to be purchased.
/ / Check box if any part of the fee is offset 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 of Schedule and
the date of its filing.
Amount Previously Paid: None
Form of Registration No.: N.A.
Filing Party: N.A.
Date Filed: N.A.
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<PAGE>
INTRODUCTORY STATEMENT
This Transaction Statement on Schedule 13E-3 (this
"Statement") is being filed by Pacific Telecom, Inc., a
Washington corporation ("Pacific Telecom"), PacifiCorp
Holdings, Inc., a Delaware corporation and the owner of
approximately 86.6 percent of the outstanding common stock of
Pacific Telecom ("Holdings"), PXYZ Corporation, a Washington
corporation and newly formed, wholly owned subsidiary of
Holdings ("Merger Sub"), and PacifiCorp, an Oregon corporation
and the parent company of Holdings. Pacific Telecom, Holdings
and Merger Sub are parties to an Agreement and Plan of Merger
dated as of March 9, 1995 (the "Merger Agreement"), which
provides for the merger (the "Merger") of Merger Sub with and
into Pacific Telecom, in which Pacific Telecom will be the
corporation surviving after the Merger, the holders of all
then-outstanding shares of the common stock, without par value
("PTI Common Stock") of Pacific Telecom other than Holdings
will become entitled to receive $30.00 per share in cash, and
Holdings will become the holder of all outstanding equity
securities of Pacific Telecom.
This Statement relates to a solicitation of proxies
by the Board of Directors of Pacific Telecom in connection with
an Annual Meeting of the shareholders of Pacific Telecom (the
"Annual Meeting"), currently scheduled to be held in June,
1995. At the Annual Meeting, shareholders will be asked to
vote upon proposals (i) to approve the Merger Agreement and
(ii) to elect a slate of ten directors.
The cross-reference sheet below is being supplied
pursuant to General Instruction F to Schedule 13E-3 and shows
the location of the information required to be included in
response to the Items of Schedule 13E-3 in the preliminary
proxy statement of Pacific Telecom (the "Preliminary Proxy
Statement") which is included as Exhibit (d) to this Statement.
All cross-references below are to captions and subcaptions in
the text of, or appendices to, the Preliminary Proxy Statement
without reference to the Form of Proxy, Letter to Shareholders
or Notice of Meeting. The information in the Preliminary Proxy
Statement is hereby expressly incorporated by reference, each
cross-reference below being deemed to be an incorporation by
reference of the portions of the Preliminary Proxy Statement
referred to and the response to each Item being qualified in
its entirety by the provisions of the Preliminary Proxy
Statement.
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE
TRANSACTION.
(a) See "Meeting Information--Introduction" and
"--Solicitation, Revocation and Use of Proxies."
(b) See "Meeting Information--Voting Information."
(c)-(d) See "Market Price and Dividend Information for PTI
Common Stock."
(e) Not applicable.
(f) See "Certain Transactions in PTI Common Stock."
<PAGE>
ITEM 2. IDENTITY AND BACKGROUND.
Pacific Telecom is the issuer of PTI Common Stock
and, together with Holdings, Merger Sub and PacifiCorp, is
filing this Statement.
(a)-(d), (g) See "Information Concerning Holdings and
PacifiCorp and Their Directors and Executive Officers."
(e)-(f) None.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) (1) See "Special Factors--Background of the Merger"
and "Certain Transactions With Management and Others."
(2) See "Special Factors--Background of the Merger"
and "--Reasons of PacifiCorp and Holdings for the Merger."
(b) See "Special Factors--Background of the Merger" and
"Certain Transactions in PTI Common Stock."
ITEM 4. TERMS OF THE TRANSACTION.
(a) See "The Merger Agreement."
(b) See "The Merger Agreement" and "Special Factors--
Interests of Certain Persons in the Merger; Conflicts of
Interest."
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(g) See "Special Factors--Certain Effects of the
Merger," "--Conduct of Business After the Merger" and
"--Financing the Merger."
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) See "Special Factors--Financing the Merger."
(b) See "Special Factors--Expenses of the Transactions."
(c) See "Special Factors--Financing the Merger."
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a)-(d) See "Special Factors--Background of the Merger,"
"--Reasons of PacifiCorp and Holdings for the Merger," "--
Certain Effects of the Merger," "--Interests of Certain Persons
in the Merger; Conflicts of Interest" and "--Certain Federal
Income Tax Consequences."
<PAGE>
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)-(f) See "Special Factors--Background of the Merger,"
"--Recommendations of the Board of Directors of Pacific Telecom
and the Special Committee," "--Opinions of Smith Barney and CS
First Boston" and "--Reasons of PacifiCorp and Holdings for the
Merger." See also "The Merger Agreement--Conditions to the
Merger."
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN
NEGOTIATIONS.
(a)-(b) See "Special Factors--Background of the Merger,"
"--Recommendations of the Board of Directors of Pacific Telecom
and the Special Committee," "--Opinions of Smith Barney and CS
First Boston," "--Reasons of PacifiCorp and Holdings for the
Merger" and "--Opinion of Financial Advisor to PacifiCorp."
(c) See "Special Factors--Opinions of Smith Barney and CS
First Boston."
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) See "Security Ownership of Certain Beneficial Owners
and Management" and "Information Concerning Holdings and
PacifiCorp and Their Directors and Executive Officers."
(b) None.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH
RESPECT TO THE ISSUER'S SECURITIES.
See "Special Factors--Interests of Certain Persons in
the Merger; Conflicts of Interest" and "Executive
Compensation."
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN
PERSONS WITH REGARD TO THE TRANSACTION.
(a)-(b) See "Meeting Information--Voting Information" and
"Special Factors--Recommendations of the Board of Directors of
Pacific Telecom and the Special Committee."
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) See "Special Factors--Rights of Dissenting
Shareholders."
(b)-(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) See "Selected Financial Data; Pro Forma Financial
Information" and "Incorporation of Certain Documents by
Reference."
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a)-(b) See "Meeting Information--Solicitation, Revoca-
tion and Use of Proxies" and "Special Factors--Interests of
Certain Persons in the Merger; Conflicts of Interest."
<PAGE>
ITEM 16. ADDITIONAL INFORMATION.
Any additional information is set forth in the Proxy
Statement.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit Number Description
-------------- -----------
(a) Credit Agreement dated as of
___________, 1995 among PacifiCorp
Holdings, Inc., and the banks listed
therein and Morgan Guaranty Trust
Company of New York, as agent
(b)(1) Opinion of Smith Barney Inc.--see
Exhibit C to the Proxy Statement
(b)(2) Presentation Materials of Smith Barney
Inc. dated February 13, 1995
(b)(3) Presentation Materials of Smith Barney
Inc. dated February 15, 1995
(b)(4) Presentation Materials of Smith Barney
Inc. dated March 8, 1995
(b)(5) Opinion of CS First Boston
Corporation--see Exhibit D to the
Proxy Statement
(b)(6) Presentation Materials of CS First
Boston Corporation dated March 8, 1995
(b)(7) Opinion of Salomon Brothers Inc--see
Exhibit E to the Proxy Statement
(d) Preliminary Proxy Statement dated
April 7, 1995, together with Form of
Proxy, Letter to Shareholders and
Notice of Meeting
(e) Sections 23B.13.010 through 23B.13.310
of the Washington Business Corporation
Act - see Exhibit B to the Proxy
Statement<PAGE>
SIGNATURES
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: April 7, 1995
PACIFIC TELECOM, INC.
By JAMES H. HUESGEN
_____________________________
James H. Huesgen
Executive Vice President
and Chief Financial
Officer
<PAGE>
SIGNATURES
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: April 7, 1995
PACIFICORP HOLDINGS, INC.
By RICHARD T. O'BRIEN
_____________________________
Richard T. O'Brien
Senior Vice President
<PAGE>
SIGNATURES
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: April 7, 1995
PXYZ CORPORATION
By RICHARD T. O'BRIEN
_____________________________
Richard T. O'Brien
President<PAGE>
SIGNATURES
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: April 7, 1995
PACIFICORP
By RICHARD T. O'BRIEN
_____________________________
Richard T. O'Brien
Vice President
<PAGE>
EXHIBIT INDEX
Sequentially
Numbered
Exhibit No. Description Page
- ---------- ----------- ----------
(a) Credit Agreement dated as of
___________, 1995 among
PacifiCorp Holdings, Inc., and
the banks listed therein and
Morgan Guaranty Trust Company of
New York, as agent
(b)(1) Opinion of Smith Barney Inc.--
see Exhibit C to the Proxy
Statement
(b)(2) Presentation Materials of Smith
Barney Inc. dated February 13,
1995
(b)(3) Presentation Materials of Smith
Barney Inc. dated February 15,
1995
(b)(4) Presentation Materials of Smith
Barney Inc. dated March 8, 1995
(b)(5) Opinion of CS First Boston
Corporation--see Exhibit D to the
Proxy Statement
(b)(6) Presentation Materials of
CS First Boston Corporation dated
March 8, 1995
(b)(7) Opinion of Salomon Brothers
Inc--see Exhibit E to the Proxy
Statement
(d) Preliminary Proxy Statement dated
April 7, 1995, together with Form
of Proxy, Letter to Shareholders
and Notice of Meeting
(e) Sections 23B.13.010 through
23B.13.310 of the Washington
Business Corporation Act - see
Exhibit B to the Proxy Statement
EXHIBIT (a)
$350,000,000
CREDIT AGREEMENT
dated as of
April __, 1995
among
PacifiCorp Holdings, Inc.,
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms and
Determinations . . . . . . . . . . . 24
SECTION 1.03. Types of Borrowings. . . . . . . . . 24
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. . . . . . . . . 25
SECTION 2.02. Notice of Committed Borrowing. . . . 25
SECTION 2.03. Money Market Borrowings. . . . . . . 26
SECTION 2.04. Notice to Banks; Funding of Loans. . 30
SECTION 2.05. Notes. . . . . . . . . . . . . . . . 32
SECTION 2.06. Maturity of Loans. . . . . . . . . . 32
SECTION 2.07. Interest Rates . . . . . . . . . . . 32
SECTION 2.08. Fees . . . . . . . . . . . . . . . . 37
SECTION 2.09. Optional Termination or Reduction of
Commitments. . . . . . . . . . . . . 37
SECTION 2.10. Mandatory Termination of
Commitments. . . . . . . . . . . . . 37
SECTION 2.11. Optional Prepayments . . . . . . . . 38
SECTION 2.12. General Provisions as to Payments. . 38
SECTION 2.13. Funding Losses . . . . . . . . . . . 39
SECTION 2.14. Computation of Interest and Fees . . 39
ARTICLE III
CONDITIONS
SECTION 3.01. Borrowings . . . . . . . . . . . . . 40
SECTION 3.02. Conditions to Effectiveness. . . . . 40
SECTION 3.03. Termination of Existing Commitments;
Release of Collateral. . . . . . . . 42
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power. . . . 43
SECTION 4.02. Corporate and Governmental
Authorization; No Contravention. . . 43
SECTION 4.03. Binding Effect . . . . . . . . . . . 44
SECTION 4.04. Financial Information. . . . . . . . 44
SECTION 4.05. Litigation . . . . . . . . . . . . . 45
<PAGE>
SECTION 4.06. Compliance with ERISA. . . . . . . . 45
SECTION 4.07. Taxes. . . . . . . . . . . . . . . . 45
SECTION 4.08. Subsidiaries . . . . . . . . . . . . 45
SECTION 4.09. Regulation . . . . . . . . . . . . . 46
SECTION 4.10. Environmental Matters. . . . . . . . 46
SECTION 4.11. Spring Creek Documents . . . . . . . 46
ARTICLE V
COVENANTS
SECTION 5.01. Information. . . . . . . . . . . . . 47
SECTION 5.02. Adjusted Consolidated Debt . . . . . 50
SECTION 5.03. Interest Coverage. . . . . . . . . . 50
SECTION 5.04. Negative Pledge. . . . . . . . . . . 50
SECTION 5.05. Consolidations, Mergers and Sales of
Assets . . . . . . . . . . . . . . . 50
SECTION 5.06. Restricted Stock Payments and
Restricted Dividends . . . . . . . . 51
SECTION 5.07. Use of Proceeds. . . . . . . . . . . 51
SECTION 5.08. Debt of Restricted Subsidiaries. . . 52
SECTION 5.09. Guarantees of Certain Hedging
Agreements . . . . . . . . . . . . . 52
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. . . . . . . . . . 53
SECTION 6.02. Notice of Default. . . . . . . . . . 56
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. . . . 57
SECTION 7.02. Agent and Affiliates . . . . . . . . 57
SECTION 7.03. Action by Agent. . . . . . . . . . . 57
SECTION 7.04. Consultation with Experts. . . . . . 57
SECTION 7.05. Liability of Agent . . . . . . . . . 57
SECTION 7.06. Indemnification. . . . . . . . . . . 58
SECTION 7.07. Credit Decision. . . . . . . . . . . 58
SECTION 7.08. Successor Agent. . . . . . . . . . . 58
SECTION 7.09. Agent's Fees . . . . . . . . . . . . 59
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair . . . . . . . . 59
SECTION 8.02. Illegality . . . . . . . . . . . . . 60
SECTION 8.03. Increased Cost and Reduced Return. . 60
<PAGE>
SECTION 8.04. Taxes. . . . . . . . . . . . . . . . 62
SECTION 8.05. Base Rate Loans Substituted for
Affected Fixed Rate Loans. . . . . . 64
SECTION 8.06. Substitution of Bank . . . . . . . . 64
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. . . . . . . . . . . . . . . 65
SECTION 9.02. No Waivers . . . . . . . . . . . . . 65
SECTION 9.03. Expenses; Indemnification. . . . . . 65
SECTION 9.04. Sharing of Set-Offs. . . . . . . . . 66
SECTION 9.05. Amendments and Waivers . . . . . . . 67
SECTION 9.06. Successors and Assigns . . . . . . . 67
SECTION 9.07. Confidentiality. . . . . . . . . . . 69
SECTION 9.08. Governing Law; Submission to
Jurisdiction . . . . . . . . . . . . 70
SECTION 9.09. Counterparts; Integration. . . . . . 71
<PAGE>
Pricing Schedule
Exhibit A - Note
Exhibit B - Money Market Quote Request
Exhibit C - Invitation for Money Market Quotes
Exhibit D - Money Market Quote
Exhibit E - Assignment and Assumption Agreement
Exhibit F - Opinion of Counsel for the Borrower
Exhibit G - Opinion of Special Counsel for
the Agent
Exhibit H - Form of Tax Sharing Agreement
<PAGE>
CREDIT AGREEMENT
AGREEMENT dated as of April __, 1995 among
PACIFICORP HOLDINGS, INC., the BANKS party hereto and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Agent.
WHEREAS, the Borrower, the Banks party thereto,
Bank of America National Trust and Savings Association, as
co-agent and Morgan Guaranty Trust Company of New York, as
agent, are parties to the Existing Credit Agreement;
WHEREAS, the Borrower desires to replace the
Existing Credit Agreement with this Agreement under which the
Borrower desires to have available to it a revolving credit
facility in the aggregate amount of $350,000,000 pursuant to
which it may borrow the funds required to acquire outstanding
shares of capital stock of PTI not theretofore owned by it
and for other general corporate purposes; and
WHEREAS, the Banks are willing to make loans to the
Borrower for such purposes on the terms and conditions set
forth herein;
NOW, THEREFORE, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms,
as used herein, have the following meanings:
"Absolute Rate Auction" means a solicitation of
Money Market Quotes setting forth Money Market Absolute Rates
pursuant to Section 2.03.
"Adjusted Available Cash Income" means Available
Cash Income less any amounts described in clause (iv) of the
definition thereof.
"Adjusted CD Rate" has the meaning set forth in
Section 2.07(b).
"Adjusted Consolidated Debt" means at any date,
without duplication and after intercompany eliminations among
the Borrower and each of its Subsidiaries, the sum of (i) the
Debt of the Borrower (other than Excluded ESOP Debt) plus
(ii) the Borrower's Share of the Debt of each of its
Restricted Subsidiaries (other than (a) PFS Low Income
Housing Debt not exceeding $85,000,000 in aggregate
outstanding principal amount and (b) Excluded ESOP Debt).
"Adjusted London Interbank Offered Rate" has the
meaning set forth in Section 2.07(c).
<PAGE>
"Adjusted Pro Forma Interest Expense (After Tax)"
means at any date when (i) the Borrower ceases to own at
least 51% of the outstanding common stock of PFS or PGC or
(ii) PFS or PGC consolidates or merges with or into (or
transfers all or substantially all its assets to) a
corporation that is not a Subsidiary of the Borrower, Pro
Forma Interest Expense (After Tax) as calculated as of the
end of the then most recently ended Fiscal Quarter adjusted,
if any Debt of the Borrower is to be repaid in connection
with such transaction, to eliminate (a) the interest expense
(including related commitment fees, facility fees and similar
fees) originally estimated to accrue after the date of such
repayment with respect to such Debt of the Borrower to be
repaid and (b) the corresponding portion of the related
Estimated Tax Benefit.
"Adjusted Stockholder's Equity" means, at any date,
the stockholder's equity of the Borrower less the book value
of all equity investments of the Borrower and its Restricted
Subsidiaries in Excluded Subsidiaries, all determined as of
such date.
"Administrative Questionnaire" means, with respect
to each Bank, an administrative questionnaire in the form
prepared by the Agent, duly completed by such Bank and
submitted to the Agent (with a copy to the Borrower).
"Affiliate" of any Person means any other Person
directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person. A Person
shall be deemed to control another Person if such first
Person possesses directly or indirectly the power to direct,
or cause the direction of, the management and policies of the
second Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" means Morgan Guaranty Trust Company of New
York, in its capacity as agent for the Banks under this
Agreement, and its successors in such capacity.
"Applicable Lending Office" means, with respect to
any Bank, (i) in the case of its Domestic Loans, its Domestic
Lending Office, (ii) in the case of its Euro-Dollar Loans,
its Euro-Dollar Lending Office and (iii) in the case of its
Money Market Loans, its Money Market Lending Office.
"Approved Securities" means any of the following
types of instruments if they have remaining terms to maturity
not exceeding 90 days from the date of acquisition: (i)
U.S. treasury securities; (ii) certificates of deposit of, or
bankers' acceptances issued by, any depository institution or
trust company as long as the commercial paper, if any, and
the long-term debt obligations (other than such obligations
whose rating is based on the credit of a Person other than
such institution or trust company) of such depository
institution or trust company (or, in the case of the
principal depository institution in a holding company system,
the commercial paper, if any, and the long-term debt
<PAGE>
obligations of such holding company), at the time of
investment or contractual commitment providing for such
investment, have a credit rating from S&P or Moody's of at
least A-2 or P-2, respectively, in the case of commercial
paper and a rating of at least A- or A3, respectively, in the
case of long-term debt obligations; and (iii) commercial
paper having a credit rating from S&P or Moody's of at least
A-2 or P-2, respectively.
"Assessment Rate" has the meaning set forth in
Section 2.07(b).
"Assignee" has the meaning set forth in Section
9.06(c).
"Available Cash Income" means, for any period, the
sum of:
(i) the aggregate amount of cash dividends
actually received by the Borrower during such period on
common stock of its First Tier Subsidiaries (except
Qualified Investment Subsidiaries);
(ii) the aggregate amount of payments actually
received by the Borrower during such period with respect
to the Borrower's Interest in Spring Creek Obligations,
net of income taxes applicable thereto calculated at the
Net Effective Tax Rate for such period;
(iii) the aggregate amount of any interest payments
actually received by the Borrower during such period
with respect to Debt owing to the Borrower under the
Intercompany Loan Agreements and with respect to any
other intercompany loans or advances, net of income
taxes applicable thereto calculated at the Net Effective
Tax Rate for such period;
(iv) the aggregate amount of cash equity Invest-
ments made by the Parent in the Borrower during such
period less any Excluded Dividends declared during such
period; and
(v) Qualified Investment Subsidiary Income for
such period.
For purposes of clause (iv) of this definition, a cash equity
investment made by the Parent in the Borrower within 30 days
after the end of any Fiscal Quarter shall be deemed to have
been made during such Fiscal Quarter (and not during the
following Fiscal Quarter) if the Borrower so elects by giving
written notice of such election to the Agent within said 30-
day period.
"Bank" means each bank listed on the signature
pages hereof, each Assignee which becomes a Bank pursuant to
Section 9.06(c), and their respective successors.
<PAGE>
"Base Rate" means, for any day, a rate per annum
equal to the higher of (i) the Prime Rate for such day and
(ii) the sum of 1/2 of 1% plus the Federal Funds Rate for
such day.
"Base Rate Loan" means a Committed Loan to be made
by a Bank as a Base Rate Loan in accordance with the
applicable Notice of Committed Borrowing or Article VIII.
"Borrower" means PacifiCorp Holdings, Inc., a
Delaware corporation, and its successors.
"Borrower's Interest in Spring Creek Obligations"
means the Borrower's undivided 99% ownership interest in (i)
the Spring Creek Obligations and (ii) all rights of the
Borrower and PCI under the Spring Creek Loan Documents except
rights under Section 6.4(d) of the Spring Creek Loan
Agreement.
"Borrower's Share" means on any date, with respect
to any Restricted Subsidiary, the quotient (expressed as a
decimal) obtained by dividing (i) the aggregate number of
outstanding shares of common stock of such Restricted
Subsidiary owned, directly or indirectly, by the Borrower by
(ii) the aggregate number of outstanding shares of common
stock of such Restricted Subsidiary, all determined as of
such date.
"Borrowing" has the meaning set forth in Section
1.03.
"CD Base Rate" has the meaning set forth in Section
2.07(b).
"CD Loan" means a Committed Loan to be made by a
Bank as a CD Loan in accordance with the applicable Notice of
Committed Borrowing.
"CD Margin" means a rate per annum determined in
accordance with the Pricing Schedule.
"CD Reference Banks" means ________________,
_______________, [Canadian Imperial Bank of Commerce, New
York Agency], [Bank of America Savings Association] and
Morgan Guaranty Trust Company of New York and each such other
Bank as may be appointed pursuant to Section 9.06(f).
"Change in Law" after any specified date means the
adoption after such date of any applicable law, rule or
regulation, or any change after such date in any applicable
law, rule or regulation, or any change after such date in the
interpretation or administration thereof by any governmental
authority (including, without limitation, any court or other
judicial or quasi-judicial body), central bank or comparable
agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having
<PAGE>
the force of law) promulgated after such date by any such
authority, central bank or comparable agency.
"Collateral" has the meaning set forth in Section
1 of the Existing Security Agreement.
"Collateral Agent" means Morgan Guaranty Trust
Company of New York, in its capacity as collateral agent for
the Secured Parties under the Existing Security Agreement.
"Commitment" means (i) with respect to any Bank
listed on the signature pages hereof, the amount set forth
opposite its name on the signature pages hereof as its
Commitment or (ii) with respect to any Assignee, the amount
of the transferor Bank's Commitment assigned to such Assignee
pursuant to Section 9.06(c), in each case as such amount may
be reduced from time to time pursuant to Section 2.09 or
changed as a result of an assignment pursuant to Section
9.06(c).
"Commitment Fee Rate" means a rate per annum
determined in accordance with the Pricing Schedule.
"Committed Loan" means a loan made by a Bank
pursuant to Section 2.01.
"Consolidated Capitalization" means, at any date,
the sum of Adjusted Consolidated Debt plus Adjusted
Stockholder's Equity, all determined as of such date.
"Consolidated Subsidiary" means, with respect to
any Person at any date, any corporation or other entity the
accounts of which would be consolidated with those of such
Person in its consolidated financial statements if such
statements were prepared as of such date.
"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments,
secured or unsecured, (iii) all obligations of such Person 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 as lessee
under capital leases, (v) all non-contingent reimbursement,
indemnity or similar obligations of such Person in respect of
amounts paid under letters of credit, surety bonds or similar
instruments, (vi) all Debt (of the kind described in, and
subject to the proviso at the end of, this definition) of
others secured by a Lien on any asset of such Person, whether
or not such Debt is assumed by such Person, and (vii) all
Debt (of the kind described in, and subject to the proviso at
the end of, this definition) of others which is Guaranteed by
such Person; provided that (a) with respect to the Debt of a
joint venture or partnership, such Debt shall be deemed to be
Debt of each Person participating therein in an amount equal
to such Person's pro rata interest in such joint venture or
partnership and (b) Debt shall not include obligations
<PAGE>
arising under any agreement or arrangement (in a form
substantially similar to Exhibit I hereto) between members of
a group consolidated or combined for purposes of computing
income tax liability requiring a member to make capital
contributions or cash payments based upon assumed tax
benefits.
"Default" means any condition or event which
constitutes an Event of Default or which with the giving of
notice or lapse of time or both would, unless cured or
waived, become an Event of Default.
"Domestic Business Day" means any day except a
Saturday, Sunday or other day on which commercial banks in
New York City are authorized by law to close.
"Domestic Lending Office" means, as to each Bank,
its office located at its address set forth in its Admini-
strative Questionnaire (or identified in its Administrative
Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic
Lending Office by notice to the Borrower and the Agent;
provided that any Bank may from time to time by notice to the
Borrower and the Agent designate separate Domestic Lending
Offices for its Base Rate Loans, on the one hand, and its CD
Loans, on the other hand, in which case all references herein
to the Domestic Lending Office of such Bank shall be deemed
to refer to either or both of such offices, as the context
may require.
"Domestic Loans" means CD Loans or Base Rate Loans
or both.
"Domestic Reserve Percentage" has the meaning set
forth in Section 2.07(b).
"Effective Date" means the date on which this
Agreement becomes effective pursuant to Section 3.02.
"Eligible ESOP Debt" means Debt of an ESOP that is
guaranteed by the Borrower or a First Tier Subsidiary other
than PFS; provided that the aggregate original principal
amount of all Eligible ESOP Debt issued after June 4, 1990
(excluding Eligible ESOP Debt issued to refinance an equal or
greater outstanding principal amount of Eligible ESOP Debt)
shall not exceed $100,000,000 and provided, further, that an
issue of Debt of an ESOP shall constitute "Eligible ESOP
Debt" only if (i) such Debt is secured by a pledge of all
unallocated shares of capital stock of the Parent purchased
with the proceeds of such Debt and held in the ESOP, (ii) the
lender or lenders of such Debt agree that, if such Debt is
accelerated, they will first attempt in good faith to satisfy
such Debt by disposing of such pledged shares, (iii) neither
the Borrower nor any First Tier Subsidiary shall be obligated
to pay such Debt pursuant to its Guaranty thereof, except to
the extent that such lender or lenders are not able to
satisfy such Debt in full through such good faith attempts
within a specified period (not less than six Domestic
<PAGE>
Business Days) after such Debt has been accelerated and (iv)
the provisions of the relevant documentation implementing the
foregoing clauses (i), (ii) and (iii) shall not be less
favorable to the guarantor of such Debt, in any material
respect, than the provisions of (a) the Stock Pledge and
Security Agreement, dated as of October 19, 1990, between
Harris Trust and Savings Bank, as trustee under a trust
established under the PacifiCorp K Plus Employee Savings and
Stock Ownership Trust Agreement and The Bank of New York, as
agent and (b) the Guaranty Agreement, dated as of October 19,
1990, between the Borrower, the banks listed therein and The
Bank of New York, as agent, relating to the Debt of the
Borrower's current ESOP outstanding on August 31, 1993.
"Environmental Laws" means, with respect to any
Person, any and all federal, state, local and foreign
statutes, laws and ordinances, and all rules and regulations
lawfully promulgated thereunder and judicial decisions with
respect thereto, as applicable to such Person; all judgments,
orders, decrees, injunctions issued to or against such Person
or to which such Person is subject; all concessions, grants,
franchises, licenses and agreements held or entered into by
such Person; and all other governmental restrictions on such
Person; all as the foregoing relate to the environment, or to
the effect of the environment on human health, or to
emissions, discharges or releases of pollutants,
contaminants, toxic, hazardous, corrosive or radioactive
substances or wastes into the environment (including, without
limitation, ambient air, surface water, groundwater and
land), or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of
pollutants, contaminants, toxic, hazardous, corrosive or
radioactive substances or wastes, or to the cleanup or other
remediation thereof.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, or any successor statute.
"ERISA Group" means the Borrower, any First Tier
Significant Subsidiary and all members of a controlled group
of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the
Borrower or any First Tier Significant Subsidiary, are
treated as a single employer under Section 414 of the
Internal Revenue Code.
"ESOP" means, as the context may require, (i) an
employee stock ownership plan (as defined by the Internal
Revenue Code) adopted by the Borrower, (ii) a trust created
under any such plan or (iii) the trustee of any such trust.
"Estimated Interest Expense" means, for any period
of four consecutive Fiscal Quarters, the interest expense
(including related commitment fees, facility fees and similar
fees) estimated to accrue during such period in respect of
Debt of the Borrower, calculated on the basis of the
following assumptions: (i) the principal amount of Debt of
the Borrower outstanding at all times during such period
<PAGE>
shall be the principal amount thereof outstanding at the
beginning of such period, reduced by scheduled amortization
of long-term Debt during such period, (ii) the rate of
interest on any Debt which fluctuates in relation to market
rates of interest shall be the rate in effect on the last day
of the Fiscal Quarter immediately preceding such period,
(iii) interest expense in respect of Debt of the Borrower
outstanding under the Intercompany Loan Agreements shall be
estimated net of (A) estimated interest payments to be
received by the Borrower thereunder and/or under other
interest-bearing securities and (B) estimated dividend
payments to be received by the Borrower on preferred stocks,
in each case held by the Borrower as of the first day of such
period (calculated in accordance with clauses (i) and (ii)
above), provided that such amount shall not be less than zero
for purposes of determining Estimated Interest Expense for
such period, and (iv) interest expense in respect of Debt
Guaranteed by the Borrower shall include only such portion of
such interest expense as is estimated by the Borrower to be
payable by the Borrower under its Guarantees during such
period.
"Estimated Tax Benefit" means, for any period of
four consecutive Fiscal Quarters, the product of (i) the
Estimated Interest Expense for such period times (ii) the Net
Effective Tax Rate for the period of four consecutive Fiscal
Quarters ended immediately prior to such period.
"Euro-Dollar Business Day" means any Domestic
Business Day on which commercial banks are open for
international business (including dealings in dollar
deposits) in London.
"Euro-Dollar Lending Office" means, as to each
Bank, its office, branch or affiliate located at its address
set forth in its Administrative Questionnaire (or identified
in its Administrative Questionnaire as its Euro-Dollar
Lending Office) or such other office, branch or affiliate of
such Bank as it may hereafter designate as its Euro-Dollar
Lending Office by notice to the Borrower and the Agent.
"Euro-Dollar Loan" means a Committed Loan to be
made by a Bank as a Euro-Dollar Loan in accordance with the
applicable Notice of Committed Borrowing.
"Euro-Dollar Margin" means a rate per annum
determined in accordance with the Pricing Schedule.
"Euro-Dollar Reference Banks" means the principal
London offices of __________, __________, [ABN AMRO Bank
N.V.], [Bank of America National Trust and Savings
Association] and Morgan Guaranty Trust Company of New York
and each such other Bank as may be appointed pursuant to
Section 9.06(f).
"Euro-Dollar Reserve Percentage" has the meaning
set forth in Section 2.07(c).
<PAGE>
"Event of Default" has the meaning set forth in
Section 6.01.
"Excluded Dividend" means a dividend on shares of
the Borrower's capital stock which is designated, in a notice
signed by a Responsible Officer and delivered to the Agent
within 10 Domestic Business Days after such dividend is
declared, as an Excluded Dividend pursuant to one or both of
the following clauses of this definition:
(i) the Borrower may designate a dividend as an
Excluded Dividend pursuant to this clause if,
immediately after the declaration thereof, the aggregate
amount of all dividends designated as Excluded Dividends
pursuant to this clause would not exceed the aggregate
amount of all cash equity Investments made by the Parent
in the Borrower after September 30, 1994, other than (a)
any portion of such equity Investments used as a basis
for designating dividends as Excluded Dividends pursuant
to clause (ii) below and (b) any cash equity Investment
made by the Parent in the Borrower after September 30,
1994 that, if not received by the Borrower, would have
resulted in a default under Section 5.03; and
(ii) the Borrower may designate a dividend as an
Excluded Dividend pursuant to this clause if such
dividend does not exceed the amount of a cash equity
Investment that the Borrower expects to receive from the
Parent within three Domestic Business Days after such
dividend is declared, provided that, if the Borrower
fails to receive such expected equity Investment within
said three Domestic Business Days, then such dividend
shall be designated as an Excluded Dividend pursuant to
this clause only to the extent of the portion (if any)
of such expected equity Investment actually received by
the Borrower within said three Domestic Business Days.
"Excluded ESOP Debt" means, with respect to each
issue of Eligible ESOP Debt at any time, the lesser of (i)
the aggregate principal amount of such Eligible ESOP Debt
then outstanding or (ii) 75% of the then current fair market
value of any unallocated shares of capital stock of the
Parent held in the relevant ESOP and pledged to secure such
issue of Eligible ESOP Debt.
"Excluded Subsidiary" means:
(i) any Subsidiary (other than PTI), if both
(a) the Borrower shall have elected, by notice to the
Agent (which notice may be rescinded by the Borrower at
its election at any time), to treat such Subsidiary as
an Excluded Subsidiary for the purposes of this
Agreement and (b) when the Agent receives such notice
(and after giving effect thereto), no Default shall have
occurred and be continuing, and
(ii) any Subsidiary of any Excluded Subsidiary
described in the foregoing clause (i).
<PAGE>
"Existing Commitments" means the "Commitments", as
such term is defined in the Existing Credit Agreement.
"Existing Credit Agreement" means the Credit
Agreement dated as of September 30, 1993 among the Borrower,
the banks party thereto, Bank of America National Trust and
Savings Association, as co-agent and Morgan Guaranty Trust
Company of New York, as agent.
"Existing Hedging Support Agreements" means:
(i) the Support Agreement dated as of May 8, 1991
by and between the Borrower and PFS relating to the
Interest Rate Swap Agreement dated as of May 8, 1991
between PFS and The Bank of Nova Scotia ($14.548 million
notional amount) and
(ii) the Support Agreement dated as of September
15, 1992 by and between the Borrower and PFS relating to
the Interest Rate and Currency Exchange Agreement dated
as of May 16, 1989 between PFS and Canadian Imperial
Bank of Commerce ($20.5 million and $26.2 million
notional amounts).
"Existing Secured Parties" means the "Secured
Parties", as such term is defined in Section 1 of the
Existing Security Agreement.
"Existing Security Agreement" means the Security
Agreement dated as of September 30, 1993 between the Borrower
and the Collateral Agent.
"Facility Fee Rate" means a rate per annum
determined in accordance with the Pricing Schedule.
"Federal Funds Rate" means, for any day, the rate
per annum (rounded upward, if necessary, to the nearest 1/100
of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New
York on the Domestic Business Day next succeeding such day,
provided that (i) if such day is not a Domestic Business Day,
the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Domestic Business Day
as so published on the next succeeding Domestic Business Day,
and (ii) if no such rate is so published on such next
succeeding Domestic Business Day, the Federal Funds Rate for
such day shall be the average rate quoted to Morgan Guaranty
Trust Company of New York on such day for such transactions
as determined by the Agent.
"First Tier Significant Subsidiary" means any First
Tier Subsidiary which is a Significant Subsidiary; provided
that the term First Tier Significant Subsidiary shall in any
event include PTI and PFS and their respective successors so
long as they are Subsidiaries of the Borrower.
<PAGE>
"First Tier Subsidiary" means any Subsidiary of the
Borrower the majority of whose Voting Stock is directly owned
by the Borrower.
"Fiscal Quarter" means a fiscal quarter of the
Borrower.
"Fiscal Year" means a fiscal year of the Borrower.
"Fixed Rate Loans" means CD Loans or Euro-Dollar
Loans or Money Market Loans (excluding Money Market LIBOR
Loans bearing interest at the Base Rate pursuant to Section
8.01(a)) or any combination of the foregoing.
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or
indirectly guaranteeing any Debt of any other Person and,
without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt (whether
arising by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, securities or
services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose
of assuring in any other manner the obligee of such Debt of
the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part), provided that the
term Guarantee shall not include endorsements for collection
or deposit in the ordinary course of business. The terms
"Guarantor" used as a noun and "Guarantee" used as a verb
have corresponding meanings.
"Indemnitee" has the meaning set forth in Section
9.03(b).
"Intercompany Loan Agreements" means (i) the
Umbrella Loan Agreement dated as of April 4, 1983 between the
Parent and certain of its Subsidiaries, as in effect on
__________, 1995, (ii) the Intercompany Borrowing Agreement
dated as of April 1, 1991 between the Borrower and certain of
its Subsidiaries and Affiliates, as in effect on
_________ __, 1995, (iii) the Intercompany Credit Agreement
dated as of September 30, 1993 between the Borrower and PFS,
as in effect on _________ __, 1995 and (iv) any additional or
substitute intercompany lending agreement, or amendment
thereto, among substantially the same parties and on
substantially the terms and conditions (other than rates of
interest) as any agreement described in clause (i), (ii) or
(iii) of this definition.
"Interest Expense" means, for any period of four
consecutive Fiscal Quarters, the interest expense (including
related commitment fees, facility fees and similar fees)
accrued during such period in respect of Debt of the
Borrower; provided that interest expense in respect of Debt
Guaranteed by the Borrower shall be included only to the
extent actually paid by the Borrower.
<PAGE>
"Interest Period" means: (1) with respect to each
Euro-Dollar Borrowing, the period commencing on the date of
such Borrowing and ending one, two, three or six months
thereafter, as the Borrower may elect in the applicable
Notice of Committed Borrowing; provided that:
(a) any Interest Period which would otherwise end
on a day which is not a Euro-Dollar Business Day shall
be extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest
Period shall end on the next preceding Euro-Dollar
Business Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a
day for which there is no numerically corresponding day
in the calendar month at the end of such Interest
Period) shall, subject to clause (c) below, end on the
last Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end
after the Termination Date shall end on the Termination
Date.
(2) with respect to each CD Borrowing, the period commencing
on the date of such Borrowing and ending 30, 60, 90 or 180
days thereafter, as the Borrower may elect in the applicable
Notice of Committed Borrowing; provided that:
(a) any Interest Period which would otherwise end
on a day which is not a Euro-Dollar Business Day shall
be extended to the next succeeding Euro-Dollar Business
Day; and
(b) any Interest Period which would otherwise end
after the Termination Date shall end on the Termination
Date.
(3) with respect to each Base Rate Borrowing, the period
commencing on the date of such Borrowing and ending 30 days
thereafter; provided that:
(a) any Interest Period which would otherwise end
on a day which is not a Euro-Dollar Business Day shall
be extended to the next succeeding Euro-Dollar Business
Day; and
(b) any Interest Period which would otherwise end
after the Termination Date shall end on the Termination
Date.
(4) with respect to each Money Market LIBOR Borrowing, the
period commencing on the date of such Borrowing and ending
not less than 7 days thereafter, as the Borrower may elect in
accordance with Section 2.03; provided that:
<PAGE>
(a) any Interest Period which would otherwise end
on a day which is not a Euro-Dollar Business Day shall
be extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest
Period shall end on the next preceding Euro-Dollar
Business Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a
day for which there is no numerically corresponding day
in the calendar month at the end of such Interest
Period) shall, subject to clause (c) below, end on the
last Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end
after the Termination Date shall end on the Termination
Date.
(5) with respect to each Money Market Absolute Rate
Borrowing, the period commencing on the date of such
Borrowing and ending not less than 7 days thereafter, as the
Borrower may elect in accordance with Section 2.03; provided
that:
(a) any Interest Period which would otherwise end
on a day which is not a Euro-Dollar Business Day shall
be extended to the next succeeding Euro-Dollar Business
Day; and
(b) any Interest Period which would otherwise end
after the Termination Date shall end on the Termination
Date.
"Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended, or any successor statute.
"Investment" by any Person means (i) any investment
by such Person in any other Person, whether by means of share
purchase, capital contribution, loan (including a
non-recourse loan), advance, time deposit or otherwise and
(ii) any acquisition by such Person of equipment or other
assets (or interests therein) to be leased to any other
Person; provided that the term "Investment" shall not include
any capital contribution or cash payment made under any
agreement or arrangement (in a form substantially similar to
Exhibit I hereto) between members of a group consolidated or
combined for purposes of computing income tax liability
requiring a member to make capital contributions or cash
payments based upon assumed tax benefits.
"Invitation for Money Market Quotes" has the
meaning set forth in Section 2.03(c).
"LIBOR Auction" means a solicitation of Money
Market Quotes setting forth Money Market Margins based on the
London Interbank Offered Rate pursuant to Section 2.03.
<PAGE>
"Lien" means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, or any other type of preferential
arrangement that has substantially the same practical effect
as a security interest, in respect of such asset. For the
purposes of this Agreement, the Borrower or any Subsidiary
shall be deemed to own subject to a Lien any asset which it
has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or
other title retention agreement relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan
or a Money Market Loan and "Loans" means Domestic Loans or
Euro-Dollar Loans or Money Market Loans or any combination of
the foregoing.
"London Interbank Offered Rate" has the meaning set
forth in Section 2.07(c).
"Material Debt" means Debt arising under a single
or series of related instruments or other agreements in a
principal amount exceeding $10,000,000; provided that the
Non-Recourse Debt of PFS and PGC and their respective
Subsidiaries shall not constitute "Material Debt".
"Material Plan" means at any time a Plan or Plans
having aggregate Unfunded Liabilities in excess of
$50,000,000.
"Money Market Absolute Rate" has the meaning set
forth in Section 2.03(d).
"Money Market Absolute Rate Loan" means a loan to
be made by a Bank pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each
Bank, its Domestic Lending Office or such other office,
branch or affiliate of such Bank as it may hereafter
designate as its Money Market Lending Office by notice to the
Borrower and the Agent; provided that any Bank may from time
to time by notice to the Borrower and the Agent designate
separate Money Market Lending Offices for its Money Market
LIBOR Loans, on the one hand, and its Money Market Absolute
Rate Loans, on the other hand, in which case all references
herein to the Money Market Lending Office of such Bank shall
be deemed to refer to either or both of such offices, as the
context may require.
"Money Market LIBOR Loan" means a loan to be made
by a Bank pursuant to a LIBOR Auction (including such a loan
bearing interest at the Base Rate pursuant to Section
8.01(a)).
"Money Market Loan" means a Money Market LIBOR Loan
or a Money Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in
Section 2.03(d).
<PAGE>
"Money Market Quote" means an offer by a Bank to
make a Money Market Loan in accordance with Section 2.03.
"Money Market Quote Request" has the meaning set
forth in Section 2.03(b).
"Moody's" means Moody's Investors Service, Inc., a
Delaware corporation, and its successors or, if such
corporation shall be dissolved or liquidated or shall no
longer perform the functions of a securities rating agency,
"Moody's" shall be deemed to refer to any other nationally
recognized securities rating agency designated by the
Required Banks, with the approval of the Borrower, by notice
to the Agent and the Borrower.
"Multiemployer Plan" means at any time an employee
pension benefit plan within the meaning of Section 4001(a)(3)
of ERISA to which any member of the ERISA Group is then
making or accruing an obligation to make contributions or has
within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a
member of the ERISA Group during such five year period.
"Net Effective Tax Rate" means, for any period, the
net effective book rate of federal and state income tax
recorded for such period by the consolidated group of which
the Borrower was a member.
"Non-Recourse Debt" of any Person means at any time
Debt secured by a Lien in or upon one or more assets of such
Person where the rights and remedies of the holder of such
Debt in respect of such Debt do not extend to any other
assets of such Person. Notwithstanding the foregoing, Debt
of any Person shall not fail to constitute Non-Recourse Debt
by reason of the inclusion in any document evidencing,
governing, securing or otherwise relating to such Debt of
provisions to the effect that such Person shall be liable,
beyond the assets securing such Debt, for (i) misapplied
moneys, including insurance and condemnation proceeds and
security deposits, (ii) indemnification by such Person in
favor of holders of such Debt and their affiliates in respect
of liabilities to third parties, including environmental
liabilities, (iii) breaches of customary representations and
warranties given to the holders of such Debt and (iv) such
other similar obligations as are customarily excluded from
the provisions that otherwise limit the recourse of
commercial lenders making so-called "non-recourse" loans to
institutional borrowers.
"Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit A hereto, evidencing the
obligation of the Borrower to repay the Loans, and "Note"
means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed
Borrowing (as defined in Section 2.02) or a Notice of Money
Market Borrowing (as defined in Section 2.03(f)).
<PAGE>
"Parent" means PacifiCorp, an Oregon corporation,
and its successors.
"Participant" has the meaning set forth in Section
9.06(b).
"PBGC" means the Pension Benefit Guaranty
Corporation or any entity succeeding to any or all of its
functions under ERISA.
"PCI" means PacifiCorp Credit, Inc., an Oregon
corporation, and its successors.
"Percentage" means, with respect to each Bank, the
percentage that such Bank's Commitment constitutes of the
aggregate amount of the Commitments.
"Permitted Liens" means the following:
(i) Liens for taxes or other governmental charges
either not yet delinquent or nonpayment of which is at the
time being contested in good faith by appropriate
proceedings;
(ii) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics and materialmen or other
like Liens incurred in the ordinary course of business for
sums not yet due or the payment of which is at the time being
contested in good faith by appropriate proceedings;
(iii) Liens incurred or deposits made in the
ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of
social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases,
government contracts, and reclamation, performance and
return-of-money bonds (in each case, not constituting Debt);
(iv) Liens created by or relating to any legal
proceeding which at the time is being contested in good faith
by appropriate proceedings; provided that, in the case of a
Lien consisting of an attachment or judgment Lien, the
judgment it secures shall, within 60 days of entry thereof,
have been discharged or execution thereof stayed pending
appeal, or discharged within 60 days after the expiration of
any such stay;
(v) any Lien on any asset securing Debt incurred
or assumed for the purpose of financing all or any part of
the cost of acquiring such asset, provided that such Lien
attaches to such asset concurrently with or within 90 days
after the acquisition thereof;
(vi) any Lien on any asset of any corporation
existing at the time such corporation is merged or
consolidated with or into the Borrower and not created in
contemplation of such event;
<PAGE>
(vii) any Lien existing on any asset prior to the
acquisition thereof by the Borrower and not created in
contemplation of such acquisition;
(viii) any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt secured by any
Lien permitted by any of the foregoing clauses (v), (vi) and
(vii), provided that such Debt is not increased and is not
secured by any additional assets;
(ix) any Lien securing Non-Recourse Debt of the
Borrower;
(x) any Lien on (i) the proceeds of sale of
commercial paper issued by the Borrower or (ii) the
Borrower's right to receive such proceeds, securing the
Borrower's obligation to reimburse the issuer of a letter of
credit for drawings to repay commercial paper previously
issued by the Borrower; and
(xi) any Lien incidental to the conduct of the
Borrower's business or the ownership of its assets which (x)
does not secure Debt and (y) does not secure any single
obligation, or any class or series of related obligations, in
an amount exceeding $75,000,000.
"Person" means an individual, a corporation, a
partnership, an association, a trust or any other entity or
organization, including a government or political subdivision
or an agency or instrumentality thereof.
"PFS" means PacifiCorp Financial Services, Inc., an
Oregon corporation, and its successors.
"PFS Low Income Housing" means Non-Recourse Debt of
PFS which is secured by a Lien in or upon one or more low
income housing projects and assets related thereto, and is
not secured by a Lien on any other assets of PFS.
"PGC" means Pacific Generation Company, an Oregon
corporation, and its successors.
"Plan" means at any time an employee pension
benefit plan (other than a Multiemployer Plan) which is
covered by Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Internal Revenue
Code and either (i) is maintained, or contributed to, by any
member of the ERISA Group for employees of any member of the
ERISA Group or (ii) has at any time within the preceding five
years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of
any Person which was at such time a member of the ERISA
Group.
"Pricing Schedule" means the Pricing Schedule
attached hereto.
<PAGE>
"Prime Rate" means the rate of interest publicly
announced by Morgan Guaranty Trust Company of New York in New
York City from time to time as its Prime Rate.
"Pro Forma Available Cash Income", when used with
reference to a time when (i) the Borrower ceases to own at
least 51% of the outstanding common stock of PFS or PGC or
(ii) PFS or PGC consolidates or merges with or into, or
transfers all or substantially all its assets to, a
corporation that is not a Subsidiary of the Borrower, means
Available Cash Income for the period of four consecutive
Fiscal Quarters then most recently ended, adjusted to
eliminate all cash dividends received by the Borrower during
such period from PFS or PGC, as the case may be.
"Pro Forma Interest Expense (After Tax)" means, at
the end of any Fiscal Quarter, an amount equal to (i)
Estimated Interest Expense for the period of four consecu-
tive Fiscal Quarters immediately following such Fiscal
Quarter minus (ii) Estimated Tax Benefits for such period.
"PTI" means Pacific Telecom, Inc., a Washington
corporation, and its successors.
"Qualified Investment Subsidiary" means any
Subsidiary of the Borrower, so long as (i) it has no Debt,
(ii) it engages in no business other than investing in
securities and holding securities for investment and (iii)
the Borrower owns directly 100% of its capital stock.
"Qualified Investment Subsidiary Income" means, for
any period, the aggregate amount of dividends and interest
actually received by Qualified Investment Subsidiaries during
such period, less (i) any portion thereof which could not be
paid to the Borrower as dividends during such period without
violating any legal or contractual restriction applicable to
the relevant Qualified Investment Subsidiary and (ii) the
amount of any taxes or other liabilities that would be
payable by the Borrower or its Qualified Investment
Subsidiaries if said aggregate amount were paid to the
Borrower as dividends during such period.
"Rating Agency" means S&P or Moody's.
"Reference Banks" means the CD Reference Banks or
the Euro-Dollar Reference Banks, as the context may require,
and "Reference Bank" means any one of such Reference Banks.
"Refunding Borrowing" means a Committed Borrowing
which, after application of the proceeds thereof, results in
no net increase in the aggregate outstanding principal amount
of Committed Loans made by any Bank.
"Regulation U" means Regulation U of the Board of
Governors of the Federal Reserve System, as in effect from
time to time.
<PAGE>
"Required Banks" means at any time Banks having at
least 60% of the aggregate amount of the Commitments or, if
the Commitments shall have been terminated, holding Notes
evidencing at least 60% of the aggregate unpaid principal
amount of the Loans.
"Responsible Officer" means the Chairman of the
Board, the President, any Vice President, the Treasurer or
the Controller of the Borrower.
"Restricted Dividend" means any dividend or other
distribution on any shares of the Borrower's capital stock,
except (i) dividends payable solely in shares of its capital
stock and (ii) Excluded Dividends.
"Restricted Stock Payment" means any payment on
account of the purchase, redemption, retirement or
acquisition of (i) any shares of the Borrower's capital stock
or (ii) any option, warrant or other right to acquire shares
of the Borrower's capital stock.
"Restricted Subsidiary" means any Consolidated
Subsidiary of the Borrower which is not an Excluded
Subsidiary.
"S&P" means Standard & Poor's Ratings Group or, if
Standard & Poor's Ratings Group shall no longer perform the
functions of a securities rating agency, "S&P" shall be
deemed to refer to any other nationally recognized securities
rating agency designated by the Required Banks, with the
approval of the Borrower, by notice to the Agent and the
Borrower.
"Short-Term Debt Rating" means a rating of the
Borrower's short-term debt which is not secured or supported
by a guarantee, letter of credit or other form of credit
enhancement. If a Short-Term Debt Rating by a Rating Agency
is required to be at or above a specified level and such
Rating Agency shall have changed its system of
classifications after the date hereof, the requirement will
be met if the Short-Term Debt Rating by such Rating Agency is
at or above the new rating which most closely corresponds to
the specified level under the old rating system.
"Significant Subsidiary" means at any time any
Subsidiary of the Borrower which as of such time meets the
definition of a "significant subsidiary" contained as of
___________, 1995 in Regulation S-X of the Securities and
Exchange Commission; provided that in any event the term
Significant Subsidiary shall (i) include PTI and PFS,
(ii) include PCI so long as it holds any legal or beneficial
interest in any of the Spring Creek Obligations or any rights
under the Spring Creek Loan Documents and (iii) not include
Color Spot, Inc., an Oregon corporation, Comdial Corporation,
a Delaware corporation, or Alascom, Inc., an Alaska
corporation.
<PAGE>
"Spring Creek" means Spring Creek Coal Company, a
Montana corporation, and its successors.
"Spring Creek Coal Supply Contract" means the Coal
Supply Agreement dated June 2, 1978 between Spring Creek and
Utility Fuels, Inc., as amended from time to time.
"Spring Creek Loan Agreement" means the Loan
Commitment and Agreement dated as of June 2, 1993 between
Spring Creek and the Borrower (under which the Borrower
designated PCI as the affiliate to make the initial loan of
$225,000,000 to Spring Creek), as such agreement may be
amended from time to time.
"Spring Creek Loan Documents" means the "Loan
Documents" (as such term is defined in Section 1.1 of the
Spring Creek Loan Agreement as in effect on the date hereof),
as such Loan Documents may be amended from time to time.
"Spring Creek Note" means the promissory note
issued by Spring Creek to PCI pursuant to the Spring Creek
Loan Agreement, as such note may be amended from time to
time.
"Spring Creek Obligations" means the obligations
under the Spring Creek Loan Documents of Spring Creek, Spring
Creek's affiliates and each issuer of a Letter of Credit (as
defined in Section 1.1 of the Spring Creek Loan Agreement as
in effect on the date hereof), in each case whether now
existing or hereafter issued or arising.
"Spring Creek Participation Agreement" means the
Amended and Restated Participation Agreement dated as of June
2, 1993 between PCI and the Borrower (under which the
Borrower purchased the Borrower's Interest in Spring Creek
Obligations from PCI), as such agreement may be amended from
time to time.
"Subsidiary" means, with respect to any Person, any
corporation or other entity of which securities or other
ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons
performing similar functions are at the time directly or
indirectly owned by such Person.
"Termination Date" means April __, 2000, or, if
such day is not a Euro-Dollar Business Day, the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case
the Termination Date shall be the next preceding Euro-Dollar
Business Day.
"Unfunded Liabilities" means, with respect to any
Plan at any time, the amount (if any) by which (i) the value
of all benefit liabilities under such Plan, determined on a
plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds
(ii) the fair market value of all Plan assets allocable to
<PAGE>
such liabilities under Title IV of ERISA (excluding any
accrued but unpaid contributions), all determined as of the
then most recent valuation date for such Plan, but only to
the extent that such excess represents a potential liability
of a member of the ERISA Group to the PBGC or any other
Person under Title IV of ERISA.
"United States" means the United States of America,
including the States and the District of Columbia, but
excluding its territories and possessions.
"Voting Stock" of any corporation means stock that
has ordinary voting power to vote for the election of one or
more directors of such corporation.
SECTION 1.02. Accounting Terms and Determinations.
Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations
hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as
in effect from time to time, applied on a basis consistent
(except for changes concurred in by the Borrower's
independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its
Consolidated Subsidiaries delivered to the Banks; provided
that, if the Borrower notifies the Agent that the Borrower
wishes to amend any covenant in Article V to eliminate the
effect of any change in generally accepted accounting
principles on the operation of such covenant (or if the Agent
notifies the Borrower that the Required Banks wish to amend
Article V for such purpose), then the Borrower's compliance
with such covenant shall be determined on the basis of
generally accepted accounting principles in effect
immediately before the relevant change in generally accepted
accounting principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Banks.
SECTION 1.03. Types of Borrowings. The term
"Borrowing" denotes the aggregation of Loans of one or more
Banks to be made to the Borrower pursuant to Article II on a
single date and for a single Interest Period. Borrowings are
classified for purposes of this Agreement either by reference
to the pricing of Loans comprising such Borrowing (e.g., a
"Euro-Dollar Borrowing" is a Borrowing comprised of
Euro-Dollar Loans) or by reference to the provisions of
Article II under which participation therein is determined
(i.e., a "Committed Borrowing" is a Borrowing under Section
2.01 in which all Banks participate in proportion to their
Commitments, while a "Money Market Borrowing" is a Borrowing
under Section 2.03 in which the Bank participants are deter-
mined on the basis of their bids in accordance therewith).
<PAGE>
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. Each Bank
severally agrees, on the terms and conditions set forth in
this Agreement, to make loans to the Borrower pursuant to
this Section from time to time prior to the Termination Date;
provided that, immediately after each such Loan is made, the
aggregate outstanding principal amount of Committed Loans
made by such Bank shall not exceed the amount of its
Commitment. Each Borrowing under this Section shall be in an
aggregate principal amount of $10,000,000 or any larger
integral multiple of $1,000,000 (except that any such
Borrowing may be in the aggregate amount available in
accordance with Section 3.01(b)) and shall be made from the
several Banks ratably in accordance with their respective
Percentages. Within the foregoing limits, the Borrower may
borrow, repay, or to the extent permitted by Section 2.11,
prepay Loans and reborrow at any time prior to the
Termination Date.
SECTION 2.02. Notice of Committed Borrowing. (a)
The Borrower shall give the Agent notice (a "Notice of
Committed Borrowing") not later than 11:00 A.M. (New York
City time) on (x) the date of each Base Rate Borrowing,
(y) the second Domestic Business Day before each CD Borrowing
and (z) the third Euro-Dollar Business Day before each
Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a
Domestic Business Day in the case of a Domestic
Borrowing or a Euro-Dollar Business Day in the case of
a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing
are to be CD Loans, Base Rate Loans or Euro-Dollar
Loans, and
(iv) in the case of a Fixed Rate Borrowing, the
duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest
Period.
(b) The provisions of subsection (a) above
notwithstanding, if the Borrower shall not have given a
Notice of Committed Borrowing at least two Domestic Business
Days before the last day of the Interest Period applicable to
an outstanding Committed Borrowing, then, unless the Borrower
notifies the Agent at least two Domestic Business Days before
such date that it elects not to borrow on such date, the
Agent shall be deemed to have received a Notice of Committed
Borrowing specifying that (i) the date of the proposed
Borrowing shall be the last day of the Interest Period
applicable to such outstanding Committed Borrowing, (ii) the
<PAGE>
aggregate amount of the proposed Borrowing shall be the
amount of such outstanding Committed Borrowing (reduced to
the extent necessary to reflect any reduction of the
Commitments on or prior to the date of the proposed
Borrowing), and (iii) the Loans comprising the proposed
Borrowing shall be Base Rate Loans.
SECTION 2.03. Money Market Borrowings. (a) The
Money Market Option. In addition to Committed Borrowings
pursuant to Section 2.01, the Borrower may, as set forth in
this Section, request the Banks to make offers to make Money
Market Loans to the Borrower from time to time prior to the
Termination Date; provided that no such request shall be made
on any day unless on such day (i) Pricing Level I, Pricing
Level II, Pricing Level III or Pricing Level IV (as each of
such terms is defined in the Pricing Schedule) applies or
(ii) the Borrower has a Short-Term Debt Rating at or above
the level of A-2 from S&P or P-2 from Moody's. Any Bank may,
but shall have no obligation to, make such offers and the
Borrower may, but shall have no obligation to, accept any
such offers in the manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower
wishes to request offers to make Money Market Loans under
this Section, it shall transmit to the Agent by telex or
facsimile transmission a Money Market Quote Request
substantially in the form of Exhibit B hereto (a "Money
Market Quote Request") so as to be received no later than
11:00 A.M. (New York City time) on (x) the fifth Euro-Dollar
Business Day prior to the date of Borrowing proposed therein,
in the case of a LIBOR Auction or (y) the Domestic Business
Day next preceding the date of Borrowing proposed therein, in
the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Borrower and the Agent shall
have agreed upon and the Agent shall have specified in a
notice given to the Banks not later than the date of the
Money Market Quote Request for the first LIBOR Auction or
Absolute Rate Auction for which such change is to be
effective) specifying:
(i) the proposed date of Borrowing, which shall be
a Euro-Dollar Business Day in the case of a LIBOR
Auction or a Domestic Business Day in the case of an
Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which
shall be $10,000,000 or a larger integral multiple of
$1,000,000 (except that any such Borrowing may be in the
aggregate amount available in accordance with Section
3.01(b)),
(iii) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of
Interest Period, and
(iv) whether the Money Market Quotes requested are
to set forth a Money Market Margin or a Money Market
Absolute Rate.
<PAGE>
The Borrower may request offers to make Money Market Loans
for up to five Interest Periods in a single Money Market
Quote Request. No Money Market Quote Request shall be given
within five Euro-Dollar Business Days (or such other number
of days as the Borrower and the Agent may agree) of any other
Money Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly
upon receipt of a Money Market Quote Request, the Agent shall
send to the Banks by telex or facsimile transmission an
Invitation for Money Market Quotes substantially in the form
of Exhibit C hereto (an "Invitation for Money Market
Quotes"), which shall constitute an invitation by the
Borrower to each Bank to submit Money Market Quotes offering
to make the Money Market Loans to which such Money Market
Quote Request relates in accordance with this Section.
(d) Submission and Contents of Money Market
Quotes. (i) Each Bank may submit a Money Market Quote
containing an offer or offers to make Money Market Loans in
response to any Invitation for Money Market Quotes. Each
Money Market Quote must comply with the requirements of this
subsection (d) and must be submitted to the Agent by telex or
facsimile transmission at its offices specified in or
pursuant to Section 9.01 not later than (x) 2:00 P.M. (New
York City time) on the fourth Euro-Dollar Business Day prior
to the proposed date of Borrowing, in the case of a LIBOR
Auction or (y) 9:30 A.M. (New York City time) on the proposed
date of Borrowing, in the case of an Absolute Rate Auction
(or, in either case, such other time or date as shall be
agreed upon by the Borrower and the Agent and specified in
the Invitation for Money Market Quotes); provided that Money
Market Quotes submitted by the Agent (or any affiliate of the
Agent) in the capacity of a Bank may be submitted, and may
only be submitted, if the Agent or such affiliate notifies
the Borrower of the terms of the offer or offers contained
therein not later than (x) one hour prior to the deadline for
the other Banks, in the case of a LIBOR Auction or (y) 15
minutes prior to the deadline for the other Banks, in the
case of an Absolute Rate Auction. Subject to Articles III
and VI, any Quote so made shall be irrevocable except with
the written consent of the Agent given on the instructions of
the Borrower.
(ii) Each Money Market Quote shall be in
substantially the form of Exhibit D hereto and shall in any
case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan
for which each such offer is being made, which principal
amount (w) may be greater than, equal to or less than
the Commitment of the quoting Bank, (x) must be
$1,000,000 or a larger integral multiple thereof,
(y) may not exceed the principal amount of Money Market
Loans for which offers were requested in the related
Money Market Quote Request, and (z) may be subject to a
<PAGE>
limitation as to the aggregate principal amount of Money
Market Loans for which offers being made by such quoting
Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin
above or below the applicable London Interbank Offered
Rate (the "Money Market Margin"), if any, offered for
each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000 of 1%) to be added to
or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the
rate of interest per annum (specified to the nearest
1/10,000 of 1%) (the "Money Market Absolute Rate")
offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate
offers by the quoting Bank with respect to each Interest
Period specified in the related Invitation for Money
Market Quotes.
(iii) Any Money Market Quote shall be disregarded
if it:
(A) is not substantially in conformity with
Exhibit D hereto or does not specify all of the
information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar
language;
(C) proposes terms other than or in addition to
those set forth in the applicable Invitation for Money
Market Quotes; or
(D) arrives after the time set forth in subsection
(d)(i).
(e) Notice to Borrower. The Agent shall promptly
notify the Borrower of the terms (x) of any Money Market
Quote submitted by a Bank that is in accordance with
subsection (d) and (y) of any Money Market Quote that amends,
modifies or is otherwise inconsistent with a previous Money
Market Quote submitted by such Bank with respect to the same
Money Market Quote Request. Any such subsequent Money Market
Quote shall be disregarded by the Agent unless such
subsequent Money Market Quote is submitted solely to correct
a manifest error in such former Money Market Quote. The
Agent's notice to the Borrower shall specify (A) the
aggregate principal amount of Money Market Loans for which
offers have been received for each Interest Period specified
in the related Money Market Quote Request (B) the respective
principal amounts and Money Market Margins or Money Market
Absolute Rates, as the case may be, so offered and (C) if
applicable, limitations on the aggregate principal amount of
Money Market Loans for which offers in any single Money
Market Quote may be accepted.
<PAGE>
(f) Acceptance and Notice by Borrower. Not later
than 10:30 A.M. (New York City time) on (x) the third
Euro-Dollar Business Day prior to the proposed date of
Borrowing, in the case of a LIBOR Auction or (y) the proposed
date of Borrowing, in the case of an Absolute Rate Auction
(or, in either case, such other time or date as the Borrower
and the Agent shall have agreed upon and the Agent shall have
specified in a notice given to the Banks not later than the
date of the Money Market Quote Request for the first LIBOR
Auction or Absolute Rate Auction for which such change is to
be effective), the Borrower shall notify the Agent of its
acceptance or non-acceptance of the offers so notified to it
pursuant to subsection (e). In the case of acceptance, such
notice (a "Notice of Money Market Borrowing") shall specify
the aggregate principal amount of offers for each Interest
Period that are accepted. The Borrower may accept any Money
Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money
Market Borrowing may not exceed the applicable amount
set forth in the related Money Market Quote Request,
(ii) immediately after giving effect to such Money
Market Borrowing, the condition set forth in Section
3.01(b) would be satisfied,
(iii) the principal amount of each Money Market
Borrowing must be $10,000,000 or a larger integral
multiple of $1,000,000 (except that any such Borrowing
may be in the aggregate amount available in accordance
with Section 3.01(b)),
(iv) acceptance of offers for a given Interest
Period may only be made on the basis of ascending Money
Market Margins or Money Market Absolute Rates, as the
case may be;
(v) the Borrower may not accept any offer that is
described in subsection (d)(iii) or that otherwise fails
to comply with the requirements of this Agreement; and
(vi) on the date of the acceptance of such Money
Market Borrowing either (A) Pricing Level I, Pricing
Level II, Pricing Level III or Pricing Level IV (as each
of such terms is defined in the Pricing Schedule)
applies or (B) the Borrower has a Short-Term Debt Rating
at or above the level of A-2 from S&P or P-2 from
Moody's.
(g) Allocation by Agent. If offers are made by
two or more Banks with the same Money Market Margins or Money
Market Absolute Rates, as the case may be, for a greater
aggregate principal amount than the amount in respect of
which such offers are accepted for the related Interest
Period, the principal amount of Money Market Loans in respect
of which such offers are accepted shall be allocated by the
Agent among such Banks as nearly as possible (in integral
multiples of such amount not greater than $1,000,000 as the
<PAGE>
Agent may deem appropriate) in proportion to the aggregate
principal amounts of such offers. Determinations by the
Agent of the amounts of Money Market Loans shall be
conclusive in the absence of manifest error.
SECTION 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the
Agent shall promptly notify each Bank of the contents thereof
and of such Bank's share (if any) of such Borrowing and such
Notice of Borrowing shall not thereafter be revocable by the
Borrower.
(b) Not later than (x) 12:00 Noon (New York City
time) on the date of each Borrowing other than a Base Rate
Borrowing and (y) 1:00 P.M. (New York City time) on the date
of each Base Rate Borrowing, each Bank participating therein
shall (except as provided in subsection (c) of this Section)
make available its share of such Borrowing, in Federal or
other funds immediately available in New York City, to the
Agent at its address specified in or pursuant to Section
9.01. Unless the Agent determines that any applicable
condition specified in Article III has not been satisfied or
waived, the Agent will, promptly upon receipt thereof, make
the funds so received from the Banks available to the
Borrower in immediately available funds at the Agent's
aforesaid address.
(c) If any Bank makes a new Loan hereunder on a
day on which the Borrower is to repay all or any part of an
outstanding Loan from such Bank, such Bank shall apply the
proceeds of its new Loan to make such repayment and only an
amount equal to the difference (if any) between the amount
being borrowed and the amount being repaid shall be made
available by such Bank to the Agent as provided in subsection
(b), or remitted by the Borrower to the Agent as provided in
Section 2.12, as the case may be.
(d) Unless the Agent shall have received notice
from a Bank prior to the date of any Borrowing that such Bank
will not make available to the Agent such Bank's share of
such Borrowing, the Agent may assume that such Bank has made
such share available to the Agent on the date of such
Borrowing in accordance with subsections (b) and (c) of this
Section 2.04 and the Agent may, in reliance upon such
assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank
shall not have so made such share available to the Agent,
such Bank and the Borrower severally agree to repay to the
Agent, within one Domestic Business Day after demand, such
corresponding amount together with interest thereon, for each
day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Agent,
at (i) in the case of the Borrower, a rate per annum equal to
the higher of the Federal Funds Rate and the interest rate
applicable to the Loans included in such Borrowing pursuant
to Section 2.07 and (ii) in the case of such Bank, the
Federal Funds Rate. If such Bank shall repay to the Agent
<PAGE>
such corresponding amount, such amount so repaid shall
constitute such Bank's Loan included in such Borrowing for
purposes of this Agreement.
SECTION 2.05. Notes. (a) The Loans of each Bank
shall be evidenced by a single Note payable to the order of
such Bank for the account of its Applicable Lending Office in
an amount equal to the aggregate unpaid principal amount of
such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and
the Agent, request that its Loans of a particular type be
evidenced by a separate Note in an amount equal to the
aggregate unpaid principal amount of such Loans. Each such
Note shall be in substantially the form of Exhibit A hereto
with appropriate modifications to reflect the fact that it
evidences solely Loans of the relevant type. Each reference
in this Agreement to the "Note" of such Bank shall be deemed
to refer to and include any or all of such Notes, as the
context may require.
(c) Upon receipt of each Bank's Note pursuant to
Section 3.02(b), the Agent shall forward such Note to such
Bank. Each Bank shall record the date, amount, type and
maturity of each Loan made by it and the date and amount of
each payment of principal made by the Borrower with respect
thereto, and may, if such Bank so elects in connection with
any transfer or enforcement of its Note, endorse on the
schedule forming a part thereof appropriate notations to
evidence the foregoing information with respect to each such
Loan then outstanding; provided that the failure of any Bank
to make any such recordation or endorsement, or any error in
the making thereof, shall not affect the obligations of the
Borrower hereunder or under the Notes. Each Bank is hereby
irrevocably authorized by the Borrower so to endorse its Note
and to attach to and make a part of its Note a continuation
of any such schedule as and when required.
SECTION 2.06. Maturity of Loans. Each Loan
included in any Borrowing shall mature, and the principal
amount thereof shall be due and payable, on the last day of
the Interest Period applicable to such Borrowing.
SECTION 2.07. Interest Rates.
(a) Each Base Rate Loan shall bear interest on the
outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per
annum equal to the Base Rate for such day. Such interest
shall be payable for each Interest Period on the last day
thereof. Any overdue principal of and overdue interest on
any Base Rate Loan shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to the sum
of (i) 1% plus (ii) the Base Rate for such day.
(b) Each CD Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of
<PAGE>
the CD Margin plus the applicable Adjusted CD Rate; provided
that if any CD Loan or any portion thereof shall, as a result
of clause (2)(b) of the definition of Interest Period, have
an Interest Period of less than 30 days, such CD Loan or
portion thereof shall bear interest for each day during such
Interest Period at a rate per annum equal to the Base Rate
for such day. Such interest shall be payable for each
Interest Period on the last day thereof and, if such Interest
Period is longer than 90 days, 90 days after the first day
thereof. Any overdue principal of and overdue interest on
any CD Loan shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to the sum of 1%
plus the higher of (i) the sum of the CD Margin plus the
Adjusted CD Rate applicable to such Loan and (ii) the Base
Rate for such day.
The "Adjusted CD Rate" applicable to any Interest
Period means a rate per annum determined pursuant to the
following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upward, if
necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest
Period is the rate of interest determined by the Agent to be
the arithmetic average (rounded upward, if necessary, to the
next higher 1/100 of 1%) of the prevailing rates per annum
bid at 10:00 A.M. (New York City time) (or as soon there-
after as practicable) on the first day of such Interest
Period by two or more New York certificate of deposit dealers
of recognized standing for the purchase at face value from
each CD Reference Bank (except as provided in subsection (h)
of this Section) of its certificates of deposit in an amount
comparable to the unpaid principal amount of the CD Loan of
such CD Reference Bank to which such Interest Period applies
and having a maturity comparable to such Interest Period.
"Domestic Reserve 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 (including without limitation any
basic, supplemental or emergency reserves) for a member bank
of the Federal Reserve System in New York City with deposits
exceeding five billion dollars in respect of new non-personal
time deposits in dollars in New York City having a maturity
comparable to the related Interest Period and in an amount of
<PAGE>
$100,000 or more. The Adjusted CD Rate shall be adjusted
automatically on and as of the effective date of any change
in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual
assessment rate in effect on such day which is payable by a
member of the Bank Insurance Fund classified as adequately
capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within
the meaning of 12 C.F.R. Section 327.4(a) (or any successor
provision) to the Federal Deposit Insurance Corporation (or
any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the
United States. The Adjusted CD Rate shall be adjusted
automatically on and as of the effective date of any change
in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on
the outstanding principal amount thereof, for each day during
the Interest Period applicable thereto, at a rate per annum
equal to the sum of the Euro-Dollar Margin for such day plus
the applicable Adjusted London Interbank Offered Rate. Such
interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than
three months, three months after the first day thereof.
The "Adjusted London Interbank Offered Rate"
applicable to any Interest Period means a rate per annum
equal to the quotient obtained (rounded upward, if necessary,
to the next higher 1/100 of 1%) by dividing (i) the
applicable London Interbank Offered Rate by (ii) 1.00 minus
the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to
any Interest Period means the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the respective
rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks (except as provided
in subsection (h) of this Section) in the London interbank
market at approximately 11:00 A.M. (London time) two
Euro-Dollar Business Days before the first day of such
Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar
Reference Bank to which such Interest Period is to apply and
for a period of time comparable to such Interest Period.
"Euro-Dollar Reserve 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 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
Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a
non-United States office of any Bank to United States
<PAGE>
residents). The Adjusted London Interbank Offered Rate shall
be adjusted automatically on and as of the effective date of
any change in the Euro-Dollar Reserve Percentage.
(d) Any overdue principal of and overdue interest
on any Euro-Dollar Loan shall bear interest, payable on
demand, for each day from and including the date payment
thereof was due to but excluding the date of actual payment,
at a rate per annum equal to the sum of 1% plus the
Euro-Dollar Margin plus the higher of (i) the Adjusted London
Interbank Offered Rate applicable to such Loan and (ii) the
quotient obtained (rounded upward, if necessary, to the next
higher 1/100 of 1%) by dividing (x) the average (rounded
upward, if necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at which one day (or, if such
amount due remains unpaid more than three Euro-Dollar
Business Days, then for such other period of time not longer
than three months as the Agent may select) deposits in
dollars in an amount approximately equal to such overdue
payment due to each of the Euro-Dollar Reference Banks are
offered to such Euro-Dollar Reference Bank in the London
interbank market for the applicable period determined as
provided above by (y) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a)
or (b) of Section 8.01 shall exist, at a rate per annum equal
to the sum of 1% plus the Base Rate for such day).
(e) Subject to Section 8.01(a), each Money Market
LIBOR Loan shall bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto,
at a rate per annum equal to the sum of the London Interbank
Offered Rate for such Interest Period (determined in
accordance with Section 2.07(c) as if the related Money
Market LIBOR Borrowing were a Committed Euro-Dollar
Borrowing) plus (or minus) the Money Market Margin quoted by
the Bank making such Loan in accordance with Section 2.03.
Each Money Market Absolute Rate Loan shall bear interest on
the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the
Money Market Absolute Rate quoted by the Bank making such
Loan in accordance with Section 2.03. Such interest shall
be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof. Any
overdue principal of and overdue interest on any Money Market
Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the sum of 1% plus
the Base Rate for such day.
(f) The Agent shall determine each interest rate
applicable to the Loans hereunder. The Agent shall give
prompt notice to the Borrower and the participating Banks of
each rate of interest so determined, and its determination
thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best
efforts to furnish quotations to the Agent as contemplated by
this Section. If any Reference Bank does not furnish a
<PAGE>
timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations
furnished by the remaining Reference Bank or Banks or, if
none of such quotations is available on a timely basis, the
provisions of Section 8.01 shall apply.
(h) If all five Reference Banks furnish timely
quotations for an Interest Period, the highest quotation (or
one of the highest quotations if two or more Reference Banks
furnish the same highest quotation) and the lowest quotation
(or one of the lowest quotations if two or more Reference
Banks furnish the same lowest quotation) shall be disregarded
and the interest rate applicable to such Interest Period
shall be determined on the basis of the remaining three
quotations.
SECTION 2.08. Fees.
(a) Commitment Fee. The Borrower shall pay to the
Agent, for the account of the Banks, ratably in accordance
with their respective Percentages, a commitment fee at the
Commitment Fee Rate. Such commitment fee shall accrue for
each day from and including the Effective Date to but
excluding the Termination Date (or earlier date of
termination of the Commitments in their entirety) on the
amount by which the aggregate amount of the Commitments
exceeds the aggregate outstanding principal amount of the
Loans on such day.
(b) Facility Fee. The Borrower shall pay to the
Agent, for the account of the Banks, ratably in accordance
with their respective Percentages, a facility fee at the
Facility Fee Rate. Such facility fee shall accrue for each
day (i) from and including the Effective Date to but
excluding the Termination Date (or earlier date of
termination of the Commitments in their entirety), on the
aggregate amount of the Commitments (whether used or unused)
on such day and (ii) if any Committed Loans remain
outstanding after the Commitments terminate in their
entirety, then from and including the date on which the
Commitments terminate in their entirety to but excluding the
first day thereafter on which no Committed Loans remain
outstanding, on the aggregate outstanding amount of the
Committed Loans on such day.
(c) Payments. Fees accrued under subsections (a)
and (b) above shall be payable quarterly in arrears on each
March 31, June 30, September 30 and December 31 or, if
earlier, the date of termination of the Commitments in their
entirety (and, if later, the first day thereafter on which no
Committed Loans remain outstanding).
SECTION 2.09. Optional Termination or Reduction of
Commitments. The Borrower may, upon at least three Domestic
Business Days' notice to the Agent, (i) terminate the
Commitments at any time, if no Loans are outstanding at such
time, or (ii) ratably reduce from time to time, by an
aggregate amount of $10,000,000 or any larger integral
<PAGE>
multiple of $1,000,000, the aggregate amount of the
Commitments in excess of the aggregate outstanding principal
amount of the Loans.
SECTION 2.10. Mandatory Termination of
Commitments. The Commitments shall terminate on the
Termination Date, and any Loans then outstanding (together
with accrued interest thereon) shall be due and payable on
such date.
SECTION 2.11. Optional Prepayments. (a) The
Borrower may, upon at least one Domestic Business Day's
notice to the Agent, prepay any Base Rate Borrowing (or any
Money Market Borrowing bearing interest at the Base Rate
pursuant to Section 8.01(a)) in whole at any time, or from
time to time in part in amounts aggregating $5,000,000 or any
larger integral multiple of $1,000,000, by paying the
principal amount to be prepaid together with interest accrued
thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Loans of
the several Banks included in such Borrowing.
(b) Subject to the provisions of Section 2.13, the
Borrower may, upon at least three Domestic Business Days'
notice to the Agent, in the case of CD Loans or Money Market
Loans (other than Money Market Loans bearing interest at the
Base Rate pursuant to Section 8.01(a)), and three Euro-Dollar
Business Days' notice to the Agent, in the case of
Euro-Dollar Loans, prepay any Fixed Rate Borrowing in whole
at any time by paying the principal amount to be prepaid
together with interest accrued thereon to the date of
prepayment.
(c) Upon receipt of a notice of prepayment
pursuant to this Section, the Agent shall promptly notify
each Bank of the contents thereof and of such Bank's ratable
share (if any) of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.12. General Provisions as to Payments.
(a) The Borrower shall make each payment of principal of,
and interest on, the Loans and of fees hereunder, not later
than 12:00 Noon (New York City time) on the date when due, in
Federal or other funds immediately available in New York
City, to the Agent at its address referred to in Section
9.01. The Agent will promptly distribute to each Bank its
ratable share (if any) of each such payment received by the
Agent for the account of the Banks. Whenever any payment of
principal of, or interest on, the Domestic Loans or of fees
shall be due on a day which is not a Domestic Business Day,
the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, the Euro-Dollar Loans shall be
due on a day which is not a Euro-Dollar Business Day, the
date for payment thereof shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case
the date for payment thereof shall be the next preceding
<PAGE>
Euro-Dollar Business Day. Whenever any payment of principal
of, or interest on, the Money Market Loans shall be due on a
day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day. If the date for any payment of
principal is extended in accordance with this Section 2.12,
by operation of law or otherwise, interest thereon shall be
payable for such extended time.
(b) Unless the Agent shall have received notice
from the Borrower prior to the date on which any payment is
due to the Banks hereunder that the Borrower will not make
such payment in full, the Agent may assume that the Borrower
has made such payment in full to the Agent on such date and
the Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to
the amount then due such Bank. If and to the extent that the
Borrower shall not have so made such payment, each Bank shall
repay to the Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for
each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower
makes any payment of principal with respect to any Fixed Rate
Loan (pursuant to Section 2.11(b) or Article VI or VIII or
otherwise) on any day other than the last day of the Interest
Period applicable thereto, or the last day of an applicable
period fixed pursuant to Section 2.07(d), or if the Borrower
fails to borrow or prepay any Fixed Rate Loans after notice
has been given to any Bank in accordance with Section 2.04(a)
or 2.11(c), the Borrower shall reimburse each Bank within 15
days after demand for any resulting loss or expense incurred
by it (or by an existing or prospective Participant in the
related Loan), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from
third parties, but excluding loss of margin for the period
after any such payment or failure to borrow, provided that
such Bank shall have delivered to the Borrower a certificate
as to the amount of such loss or expense, which certificate
shall be conclusive in the absence of manifest error.
SECTION 2.14. Computation of Interest and Fees.
Interest based on the Prime Rate hereunder shall be computed
on the basis of a year of 365 days (or 366 days in a leap
year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All
other interest, commitment fees and facility fees shall be
computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but
excluding the last day).
<PAGE>
ARTICLE III
CONDITIONS
SECTION 3.01. Borrowings. The obligation of each
Bank to make a Loan on the occasion of each Borrowing is
subject to the satisfaction of the following conditions:
(a) receipt by the Agent of notice of such
Borrowing as required by Section 2.02 or 2.03;
(b) the fact that, immediately after giving effect
to such Borrowing, the aggregate outstanding principal
amount of the Loans will not exceed the aggregate amount
of the Commitments;
(c) the fact that, immediately before and after
such Borrowing: (i) in the case of a Refunding
Borrowing, no Event of Default and no Default under
clause (a) or (b) of Section 6.01 and (ii) in the case
of any other Borrowing, no Default shall have occurred
and be continuing; and
(d) the fact that the representations and
warranties of the Borrower contained in this Agreement
(except (i) in the case of a Refunding Borrowing, the
representations and warranties set forth in Sections
4.04(c), 4.05 and 4.06 and clause (ii) of Section 4.08
and (ii) in the case of all Borrowings after the
Effective Date, the representations and warranties set
forth in Section 4.11) shall be true on and as of the
date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a
representation and warranty by the Borrower on the date of
such Borrowing as to the facts specified in clauses (b), (c)
and (d) of this Section.
SECTION 3.02. Conditions to Effectiveness. This
Agreement shall become effective and binding upon the parties
hereto on the date on which each of the following conditions
shall have been satisfied (or waived in accordance with
Section 9.05):
(a) receipt by the Agent of counterparts of this
Agreement signed by each of the parties listed on the
signature pages hereof (or, in the case of any such
party as to which an executed counterpart shall not have
been received, receipt by the Agent in form satisfactory
to it of facsimile or other written confirmation from
such party of its execution of a counterpart of this
Agreement);
(b) receipt by the Agent of a duly executed Note
for the account of each Bank dated on or before the
Effective Date complying with the provisions of Section
2.05;
<PAGE>
(c) evidence satisfactory to the Agent that (i)
the Existing Commitments have been terminated, (ii) no
loans or letters of credit are outstanding under the
Existing Credit Agreement and (iii) all interest and
fees accrued thereunder to but excluding the Effective
Date have been paid or the Borrower has made
arrangements satisfactory to the Agent to pay such
amounts in full on the Effective Date;
(d) evidence satisfactory to the Agent that
(i) the security interests created by the Existing
Security Agreement have been released, (ii) termination
statements have been filed or delivered for filing under
the Uniform Commercial Code as required to evidence the
termination of such security interests and (iii) all
stock certificates and other instruments pledged under
the Existing Security Agreement have been returned to
the Borrower;
(e) receipt by the Agent of an opinion dated the
Effective Date of Stoel Rives Boley Jones & Grey,
counsel for the Borrower, substantially in the form of
Exhibit F hereto and covering such additional matters
relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(f) receipt by the Agent of an opinion dated the
Effective Date of Davis Polk & Wardwell, special counsel
for the Agent, substantially in the form of Exhibit G
hereto and covering such additional matters relating to
the transactions contemplated hereby as the Required
Banks may reasonably request;
(g) receipt by each Bank (or the Agent on its
behalf) of a purpose statement on Form FR U-1 completed
in conformity with the requirements of Regulation U,
together with such other information or documents as may
be requested by such Bank in order to determine or
establish compliance with Regulation U with respect to
any Loans to be made by it hereunder; and
(h) receipt by the Agent of all documents it may
reasonably request relating to the existence of the
Borrower, the corporate authority for and the validity
of this Agreement and the Notes, all in form and
substance satisfactory to the Agent;
provided that this Agreement shall not become effective or be
binding on any party hereto unless all of the foregoing
conditions are satisfied or waived not later than _______ __,
1995. The Agent shall promptly notify the other parties
hereto of the Effective Date, and such notice shall be
conclusive and binding on all parties hereto.
SECTION 3.03. Termination of Existing Commitments;
Release of Collateral. (a) The Borrower and each Bank which
is a party to the Existing Credit Agreement agree that the
Existing Commitments shall terminate, without further action
<PAGE>
of any party thereto, on the date on which all other
conditions to the effectiveness of this Agreement are
satisfied, and that any loans outstanding thereunder on such
date may be prepaid on such date, all without any prior
notice of such termination or prepayment. Any note delivered
to any Bank under the Existing Credit Agreement (an "Old
Note") shall become void upon payment of the amounts referred
to in Section 3.02(c) and, upon receiving its share of such
payments, each such Bank will cancel its Old Note and return
it to the Borrower. No failure of a Bank so to cancel and
return its Old Notes shall affect the validity of its new
Note.
(b) Each party hereto which is an Existing Secured
Party also consents to the release of the Collateral and
waives all requirements in the Existing Security Agreement
that prior notice of such release be given to the Collateral
Agent; provided that, prior to or concurrently with such
release, the condition specified in Section 3.02(c) hereof is
satisfied. Each such party authorizes the Collateral Agent,
concurrently with such release, to deliver all securities
included in the Collateral to the Borrower.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The
Borrower is a corporation duly incorporated, validly exist-
ing and in good standing under the laws of its jurisdiction
of incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
SECTION 4.02. Corporate and Governmental
Authorization; No Contravention. The execution and delivery
by the Borrower of this Agreement and the Notes and the
performance by the Borrower of its obligations hereunder and
thereunder are within the Borrower's corporate powers and
have been duly authorized by all necessary corporate action.
The execution and delivery by PCI of the Spring Creek
Participation Agreement and the performance by PCI of its
obligations thereunder are within PCI's corporate powers and
have been duly authorized by all necessary corporate action.
This Agreement has been duly executed and delivered by the
Borrower and the Spring Creek Participation Agreement has
been duly executed and delivered by PCI. No registration,
recordation or filing with or consent, approval or other
action by any regulatory or other governmental body, agency
or official is required in connection with the execution or
delivery of this Agreement and the Notes by the Borrower or
the execution or delivery of the Spring Creek Participation
Agreement by PCI or is necessary for the validity or
enforceability hereof or thereof, and the execution,
<PAGE>
delivery, performance and enforcement of this Agreement and
the Notes and the Spring Creek Participation Agreement do not
and will not contravene, or constitute a default under, any
provision of applicable law or regulation, or of the
certificate of incorporation or by-laws of the Borrower or
any of its Subsidiaries or of any agreement, judgment,
injunction, order, decree or other instrument binding upon
the Borrower or PCI or result in the creation or imposition
of any Lien upon any asset of the Borrower or any of its
Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement
constitutes a valid and binding agreement of the Borrower and
the Notes constitute valid and binding obligations of the
Borrower and the Spring Creek Participation Agreement
constitute valid and binding agreements of PCI, all
enforceable in accordance with their respective terms, except
as the foregoing may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, or other
similar laws affecting the rights of creditors generally and
by general principles of equity, including those limiting the
availability of specific performance, injunctive relief, and
other equitable remedies and those providing for defenses
based on fairness and reasonableness, regardless of whether
considered in a proceeding in equity or at law.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries as of December 31, 1994 and
the related statements of consolidated income and retained
earnings and of consolidated cash flows for the Fiscal Year
then ended, reported on by Deloitte & Touche, copies of which
have been delivered to each of the Banks, present fairly, in
all material respects, the consolidated financial position of
the Borrower and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and cash
flows for such Fiscal Year, in conformity with generally
accepted accounting principles.
(b) The consolidated balance sheet of each First
Tier Significant Subsidiary and its Consolidated Subsidi-
aries as of December 31, 1994 and the related consolidated
statements of income and retained earnings and of cash flows
for the fiscal year then ended, reported on by Deloitte &
Touche, copies of which have been delivered to each of the
Banks, present fairly, in all material respects, the
consolidated financial position of such First Tier
Significant Subsidiary and its Consolidated Subsidiaries as
of such date and their consolidated results of operations and
cash flows for such fiscal year, in conformity with general
accepted accounting principles.
(c) Since December 31, 1994 there has been no
change in the business, financial position, results of
operations or prospects of (i) the Borrower and its
Consolidated Subsidiaries, considered as a whole, or (ii) PTI
and its Consolidated Subsidiaries, considered as a whole,
<PAGE>
which, in any such case, would materially and adversely
affect the ability of the Borrower to perform its obligations
hereunder.
SECTION 4.05. Litigation. Except as disclosed in
(i) PTI's annual report on Form 10-K for 1994 and (ii) PFS's
annual report on Form 10-K for 1994, there is no action, suit
or proceeding pending against, or to the knowledge of the
Borrower threatened against or affecting, the Borrower or any
of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which would
materially and adversely affect the ability of the Borrower
to perform its obligations under this Agreement or which in
any manner draws into question the validity of this Agreement
or the Notes.
SECTION 4.06. Compliance with ERISA. Each member
of the ERISA Group has fulfilled its obligations under the
minimum funding standards of ERISA and the Internal Revenue
Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of
ERISA and the Internal Revenue Code with respect to each
Plan. No member of the ERISA Group has (i) sought a waiver
of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiem-
ployer Plan or made any amendment to any Plan which has
resulted or could result in the imposition of a Lien or the
posting of a bond or other security under ERISA or the
Internal Revenue Code or (iii) incurred any material
liability under Title IV of ERISA other than a liability to
the PBGC for premiums under Section 4007 of ERISA.
SECTION 4.07. Taxes. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in
respect of taxes or other governmental charges are, in the
opinion of the Borrower, adequate.
SECTION 4.08. Subsidiaries. Each of the First
Tier Significant Subsidiaries, PGC and PCI (i) is a
corporation duly incorporated and validly existing under the
laws of its jurisdiction of incorporation, (ii) has paid all
franchise taxes (or other similar taxes) heretofore required
to be paid and has filed all reports heretofore required to
be filed to maintain its existence under the laws of its
jurisdiction of incorporation and (iii) has all corporate
powers and all material governmental licenses, authoriza-
tions, consents and approvals required to carry on its
business as now conducted; provided that each of PGC and PCI
shall be excluded from the foregoing representation and
warranty if and whenever it is made (or deemed made) pursuant
to Section 3.01 at a time when PCG or PCI, as the case may
be, is not a Significant Subsidiary.
SECTION 4.09. Regulation. The Borrower is not
subject to regulation under the Public Utility Holding
Company Act of 1935, the Investment Company Act of 1940, the
<PAGE>
Interstate Commerce Act or any other law or regulation which
limits the incurrence by the Borrower of Debt, including, but
not limited to, laws relating to common or contract carriers
or the sale of electricity, gas, steam, water or other public
utility services.
SECTION 4.10. Environmental Matters. Each of PTI
and PGC conducts in the ordinary course of its business a
review of the effect of applicable Environmental Laws on its
business, operations and properties, and as a result thereof
the Borrower has reasonably concluded that such Environmen-
tal Laws are unlikely to have a material adverse effect on
the Borrower's ability to perform its obligations under this
Agreement; provided that PGC shall be excluded from the
foregoing representation and warranty if and whenever it is
made (or deemed made) pursuant to Section 3.01 at a time when
PGC is an Excluded Subsidiary.
SECTION 4.11. Spring Creek Documents. Each of the
Spring Creek Loan Agreement, the Spring Creek Note and the
Spring Creek Participation Agreement is a valid and binding
agreement or obligation of the parties thereto and is in full
force and effect. The execution, delivery and performance of
the Spring Creek Loan Agreement, the Spring Creek Note and
the Spring Creek Participation Agreement did not and will not
contravene, or constitute a default under, any provision of
the Spring Creek Coal Supply Contract.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has
any Commitment hereunder or any amount payable under any Note
remains unpaid:
SECTION 5.01. Information. The Borrower will
deliver to each of the Banks:
(a) as soon as available and in any event within
120 days after the end of each Fiscal Year, a
consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such Fiscal
Year and the related consolidated statements of income
and retained earnings and of cash flows for such Fiscal
Year, in each case setting forth the figures for the
previous Fiscal Year, all reported on by Deloitte &
Touche or other independent public accountants of
nationally recognized standing;
(b) as soon as available and in any event within
60 days after the end of each of the first three
quarters of each Fiscal Year, a consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries
as of the end of such quarter (setting forth in
comparative form the figures for the end of the previous
<PAGE>
Fiscal Year) and the related consolidated statement of
income and retained earnings for such quarter and the
portion of the Fiscal Year then ended and the related
statement of cash flows for the portion of the Fiscal
Year then ended, setting forth in each case in
comparative form the figures for the corresponding
quarter and the corresponding portion of the previous
Fiscal Year, all certified (subject to normal year-end
adjustments) as to fairness of presentation and
consistency by a Responsible Officer;
(c) simultaneously with the delivery of each set
of financial statements referred to in clauses (a) and
(b) above, (i) a consolidated balance sheet of each
First Tier Significant Subsidiary and its Subsidiaries
as of the end of the relevant fiscal period and the
related consolidated statements of income and retained
earnings and of cash flows for the period or periods
specified in clause (a) or (b), as the case may be,
setting forth in each case in comparative form the
figures for the corresponding period or periods in the
previous Fiscal Year, all certified (subject, in the
case of statements delivered with respect to each of the
first three quarters of each Fiscal Year, to normal
year-end adjustments) as to fairness of presentation and
consistency by a Responsible Officer, provided that
footnotes may be omitted from such financial statements
and the Responsible Officer's certification thereof may
be qualified by a reference to the omission of such
footnotes; (ii) consolidating financial information
substantially similar to that provided to the Banks in
connection with this Agreement; and (iii) a certificate
of a Responsible Officer (A) setting forth in detail
satisfactory to the Agent the calculations required to
establish whether the Borrower was in compliance with
the requirements of Sections 5.02, 5.03, 5.06(a) and
5.08 on the date of such financial statements and, in
the case of Section 5.06(a), identifying any Excluded
Dividends declared or paid by the Borrower and
(B) stating whether any Default exists on the date of
such certificate and, if any Default then exists,
setting forth the details thereof and the action which
the Borrower is taking or proposes to take with respect
thereto;
(d) simultaneously with the delivery of each set
of financial statements referred to in clause (a) above,
a statement of the firm of independent public
accountants which reported on such statements
(i) whether anything has come to their attention to
cause them to believe that any Default existed on the
date of such statements and (ii) confirming the
calculations set forth in the officer's certificate
delivered simultaneously therewith pursuant to clause
(c) above, it being understood that such public
accountants shall not be liable, directly or indirectly,
for any failure to obtain knowledge of any Default,
unless such public accountants should have obtained
knowledge thereof in making an audit in accordance with
generally accepted auditing standards;
<PAGE>
(e) forthwith upon the occurrence of any Default,
a certificate of a Responsible Officer setting forth the
details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the
shareholders of the Borrower or any First Tier
Significant Subsidiary generally, copies of all
financial statements, reports and proxy statements so
mailed;
(g) promptly upon the filing thereof, copies of
all registration statements (other than the exhibits
thereto and any registration statements on Form S-8 or
its equivalent) and annual, quarterly or other reports
which the Borrower or any First Tier Significant
Subsidiary shall have filed with the Securities and
Exchange Commission;
(h) if and when any member of the ERISA Group (i)
is required to give notice to the PBGC under Section
4043(b)(3) of ERISA with respect to any Plan or would be
required to give notice under the Section with respect
to any Plan but for the provisions of Section 4043(b)(2)
of ERISA, notice to that effect, (ii) gives or is
required to give notice to the PBGC of any "reportable
event" (as defined in Section 4043 of ERISA) for which
the requirement of notice to the PBGC within 30 days has
not been waived, with respect to any Plan which might
constitute grounds for a termination of such Plan under
Title IV of ERISA, or knows that the plan administrator
of any Plan has given or is required to give any such
notice of any such reportable event, a copy of the
notice of such reportable event given or required to be
given to the PBGC; (iii) receives notice of complete or
partial withdrawal liability under Title IV of ERISA in
excess of $1,000,000 or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been
terminated (which event or condition causes or could
cause one or more members of the ERISA Group to have a
current payment obligation in excess of $1,000,000), a
copy of such notice; (iv) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate,
impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (v) applies
for a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code, a copy of such
application; (vi) gives notice of intent to terminate
any Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vii)
gives notice of withdrawal from any Plan pursuant to
Section 4063 of ERISA (which event or condition causes
or could cause one or more members of the ERISA Group to
have a current payment obligation in excess of
$1,000,000), a copy of such notice; or (viii) fails to
make any payment or contribution to any Plan or
Multiemployer Plan or makes any amendment to any Plan
<PAGE>
which has resulted or could result in the imposition of
a Lien or the posting of a bond or other security, a
certificate of a Responsible Officer setting forth
details as to such occurrence and action, if any, which
the Borrower or applicable member of the ERISA Group is
required or proposes to take;
(i) promptly upon receipt of notice by the
Borrower of an adverse change in any Debt Rating (as
such term is defined in the Pricing Schedule) or Short-
Term Debt Rating, a notice of such event; and
(j) from time to time such additional information
regarding the financial position or business of the
Borrower or any Significant Subsidiary as the Agent, at
the request of any Bank, may reasonably request.
SECTION 5.02. Adjusted Consolidated Debt.
Adjusted Consolidated Debt shall not exceed 70% of
Consolidated Capitalization at any time.
SECTION 5.03. Interest Coverage. At the end of
each Fiscal Quarter ending after December 31, 1994, Available
Cash Income for the period of four consecutive Fiscal
Quarters then ended shall not be less than 300% of Pro Forma
Interest Expense (After Tax) for the next succeeding period
of four consecutive Fiscal Quarters.
SECTION 5.04. Negative Pledge. The Borrower will
not create, assume or suffer to exist any Lien on any asset
(other than the Borrower's Interest in Spring Creek
Obligations) now owned or hereafter acquired by it, other
than (i) inchoate tax liens and (ii) Permitted Liens;
provided that the Borrower may at any time secure its
obligations to another creditor or group of creditors (each
an "Other Creditor") by creating a Lien on cash or Approved
Securities (such Other Creditor's "Collateral"), but only if,
when any such Lien is created and thereafter so long as any
such Lien remains in effect, the Borrower's obligations
outstanding hereunder are secured by an equivalent Lien on
cash or Approved Securities (the "Banks' Collateral"). A
Lien shall be considered "equivalent" for purposes of the
foregoing proviso only if (i) the value of the Banks'
Collateral, expressed as a percentage of the aggregate amount
of the Borrower's obligations outstanding hereunder from time
to time, is not materially less than the value of any Other
Creditor's Collateral, expressed as a percentage of the
obligations (including contingent obligations) secured by it,
and (ii) the documentation creating such Lien on the Banks'
Collateral is not materially less favorable to the Banks than
the documentation creating a Lien on any Other Creditor's
Collateral is to such Other Creditor.
SECTION 5.05. Consolidations, Mergers and Sales of
Assets. The Borrower will not (i) consolidate or merge with
or into any other Person, (ii) transfer any shares of PTI or
PFS directly or indirectly to any Subsidiary or Affiliate or
(iii) sell, lease or otherwise transfer all or substantially
<PAGE>
all of its assets to any other Person; provided that (i) the
Borrower may merge with another Person if (x) the corporation
surviving such merger is (A) the Borrower or (B) a
wholly-owned Subsidiary of the Parent formed solely for the
purpose of reincorporating the Borrower in the State of
Oregon and (y) immediately after giving effect to such
merger, no Default shall have occurred and be continuing and
(ii) the Borrower may transfer shares of PFS if, immediately
after giving effect to such transfer, no Default shall have
occurred and be continuing. In the case of a merger
permitted under clause (B) of the first sentence of this
Section, the corporation surviving such merger shall assume
the obligations of the Borrower under this Agreement and the
Notes by an assumption agreement satisfactory in form and
substance to the Agent, and the Borrower shall provide to the
Agent, no later than 10 Domestic Business Days following the
consummation of such merger, an opinion of counsel,
satisfactory to the Agent, to the effect that: (x) the
surviving corporation has been duly incorporated and is
validly existing under the laws of Oregon; (y) the foregoing
assumption agreement has been duly authorized, executed and
delivered by such surviving corporation and is a valid and
binding agreement of the surviving corporation enforceable in
accordance with its terms; and (z) this Agreement constitutes
a valid and binding agreement of the surviving corporation
enforceable in accordance with its terms and the Notes
constitute valid and binding obligations of the surviving
corporation enforceable in accordance with their terms.
SECTION 5.06. Restricted Stock Payments and
Restricted Dividends. (a) The Borrower will not declare any
Restricted Dividend or make any Restricted Stock Payment
during any Fiscal Quarter (the "Current Fiscal Quarter")
unless, immediately after giving effect to the declaration of
such Restricted Dividend or the making of such Restricted
Stock Payment, either:
(i) Adjusted Available Cash Income for the
immediately preceding four Fiscal Quarters shall be at
least 105% of the sum of (x) Interest Expense for said
four preceding Fiscal Quarters, net of related tax
benefits calculated at the Net Effective Tax Rate for
said four preceding Fiscal Quarters, and (y) the
aggregate amount of all Restricted Dividends declared
and Restricted Stock Payments made during the Current
Fiscal Quarter and the three immediately preceding
Fiscal Quarters (excluding any such Restricted Dividends
and Restricted Stock Payments that were permitted solely
by reason of clause (ii) of this Section) or
(ii) the aggregate amount of all Restricted
Dividends declared and Restricted Stock Payments made
after December 31, 1994 that were not permitted by
clause (i) shall not exceed $70,000,000.
(b) The Borrower will not declare any Restricted
Dividend or make any Restricted Stock Payment at a time when
a Default shall have occurred and be continuing; provided
<PAGE>
that in determining, for purposes of this subsection (b),
whether any Default shall have occurred and be continuing
under Section 5.03, there shall be excluded from the
calculation of Available Cash Income any cash equity
Investments made by the Parent in the Borrower that, if not
received by the Borrower, would have resulted in one or more
Defaults under Section 5.03, except that the first such
equity Investment made after December 31, 1994 and required
to avoid one or more such Defaults shall not be so excluded.
(c) The Borrower will not permit any of its
Subsidiaries to make any Restricted Stock Payment.
SECTION 5.07. Use of Proceeds. The proceeds of
the Loans made under this Agreement will be used by the
Borrower to acquire outstanding shares of capital stock of
PTI not theretofore owned by it and/or for the Borrower's
other general corporate purposes.
SECTION 5.08. Debt of Restricted Subsidiaries.
The Borrower will not permit any Restricted Subsidiary to
incur or otherwise become or remain liable with respect to
any Debt, except:
(i) in the case of PTI, any Debt of PTI;
(ii) in the case of PFS or PGC, any Debt existing
at December 31, 1994 and any Debt incurred to refinance
an equal or greater principal amount of the Debt
permitted by this clause (ii);
(iii) in the case of any corporation acquired by the
Borrower after December 31, 1994, any Debt existing when
such corporation was acquired by the Borrower and not
incurred in contemplation of such event;
(iv) in the case of any Restricted Subsidiary, Debt
owed to the Borrower; and
(v) any other Debt of Restricted Subsidiaries
(other than PTI); provided that, immediately after such
Debt is incurred, the aggregate outstanding principal
amount of all Debt of Restricted Subsidiaries permitted
by clause (iii) above and this clause (v) shall not
exceed 10% of Adjusted Stockholder's Equity.
SECTION 5.09. Guarantees of Certain Hedging
Agreements. Neither the Borrower nor any of its Restricted
Subsidiaries will guarantee any obligation of any Excluded
Subsidiary under any interest rate swap, currency exchange
agreement or other agreement entered into for the purpose of
hedging the risk of changes in interest rates or currency
exchange rates; provided that this Section 5.09 shall not
apply to the Existing Hedging Support Agreements insofar as
they guarantee obligations of PFS under the Interest Rate
Agreement and the Interest Rate and Currency Exchange
Agreement referred to therein as in effect on the Effective
Date (but not any extensions thereof or replacements
therefor).
<PAGE>
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more
of the following events ("Events of Default") shall have
occurred and be continuing:
(a) the Borrower shall fail to pay when due any
principal of any Loan, or shall fail to pay within five
days of the due date thereof any interest, commitment
fee or facility fee payable hereunder;
(b) the Borrower shall fail to pay any other
amount claimed by one or more Banks under this Agreement
within five days of the due date thereof, unless (i) such
claim is disputed in good faith by the Borrower, (ii) such
unpaid claimed amount does not exceed $100,000 and (iii) the
aggregate of all such unpaid claimed amounts does not exceed
$300,000;
(c) the Borrower shall fail to observe or perform
any covenant contained in Sections 5.02 to 5.08,
inclusive;
(d) the Borrower shall fail to observe or perform
any covenant or agreement contained in this Agreement
(other than those covered by clause (a), (b) or (c)
above) for 15 days after written notice thereof has been
given to the Borrower by the Agent at the request of any
Bank;
(e) any representation, warranty, certification or
statement made by the Borrower in this Agreement or in
any certificate, financial statement or other document
delivered pursuant to this Agreement shall prove to have
been incorrect in any material respect when made (or
deemed made);
(f) the Borrower and/or one or more Significant
Subsidiaries shall fail to make any payment in respect
of any Material Debt (other than the Notes) when due or
within any applicable grace period;
(g) any event or condition shall occur which
results in the acceleration of the maturity of any
Material Debt of the Borrower and/or one or more
Significant Subsidiaries or enables the holder of such
Debt or any Person acting on such holder's behalf to
accelerate the maturity thereof; provided that this
clause (g) shall not apply to Debt of a Person (other
than the Borrower or any of its Significant Subsidi-
aries) which is Guaranteed by the Borrower and/or one or
more Significant Subsidiaries unless the Borrower or any
such Significant Subsidiary shall have failed to duly
perform its respective obligations under such
Guarantees;
<PAGE>
(h) the Borrower or any Significant Subsidiary (or
any group of Subsidiaries of the Borrower which, if
considered in the aggregate as a single Subsidiary,
would constitute a Significant Subsidiary) shall
commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect
to itself or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or
any substantial part of its property, or shall consent
to any such relief or to the appointment of or taking
possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make
a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any
of the foregoing;
(i) an involuntary case or other proceeding shall
be commenced against the Borrower or any Significant
Subsidiary (or any group of Subsidiaries of the Borrower
which, if considered in the aggregate as a single
Subsidiary, would constitute a Significant Subsidiary)
seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar
official of it or any substantial part of its property,
and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 60 days;
or an order for relief shall be entered against the
Borrower or any such Significant Subsidiary or group of
Subsidiaries under the federal bankruptcy laws as now or
hereafter in effect;
(j) any member of the ERISA Group shall fail to
pay when due an amount or amounts aggregating in excess
of $10,000,000 which it shall have become liable to pay
under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV
of ERISA by any member of the ERISA Group, any plan
administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of
ERISA to terminate, to impose liability in excess of
$10,000,000 (other than for premiums under Section 4007
of ERISA) in respect of, or to cause a trustee to be
appointed to administer any Material Plan; or a
condition shall exist by reason of which the PBGC would
be entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall occur
a complete or partial withdrawal from, or a default,
within the meaning of Section 4219(c)(5) of ERISA, with
respect to, one or more Multiemployer Plans which could
cause one or more members of the ERISA Group to incur a
current payment obligation in excess of $25,000,000;
<PAGE>
(k) the Parent shall cease to own 100% of the
Voting Stock of the Borrower;
(l) a final judgment or order for the payment of
money in excess of $5,000,000 shall be rendered against
the Borrower or any Significant Subsidiary and such
judgment or order shall continue unsatisfied and
unstayed for a period of 30 days;
(m) the Borrower shall cease to own, directly or
indirectly, at least 51% of the outstanding common stock
of each corporation which is a Significant Subsidiary
immediately before such ownership declines below 51%,
except that (i) the Borrower may cease to own at least
51% of the outstanding common stock of such a
corporation if the existence of such corporation is
terminated by merger, consolidation or liquidation and
the Borrower shall own, directly or indirectly, at least
51% of the outstanding common stock of the corporation
into which such corporation is merged or consolidated or
to which a majority of its net assets are transferred
upon its liquidation and (ii) the Borrower may cease to
own at least 51% of the outstanding common stock of PFS
or PGC if, immediately after such ownership declines
below 51%, (A) no Default shall have occurred and be
continuing and (B) Pro Forma Available Cash Income is
not less than 300% of Adjusted Pro Forma Interest
Expense (After Tax);
(n) any Subsidiary of the Borrower shall create,
assume or suffer to exist any Lien (other than inchoate
tax liens) on any equity security of any corporate
Significant Subsidiary of the Borrower now owned or
hereafter acquired by such Subsidiary, and such Lien
shall continue to exist for 15 days after written notice
requesting the removal of such Lien has been given to
the Borrower by the Agent at the request of any Bank; or
(o) any corporate Significant Subsidiary of the
Borrower shall consolidate or merge with or into, or
transfer all or substantially all of its assets to, any
Person other than the Borrower, except that (i) any
corporate Significant Subsidiary of the Borrower may
consolidate or merge with or into, or transfer all or
substantially all of its assets to, any Person other
than the Borrower if the corporation surviving such
consolidation or merger or the transferee of such assets
is a Subsidiary of the Borrower, (ii) PCI may transfer
all or any part of the Spring Creek Obligations and its
rights under the Spring Creek Loan Agreement to a Person
other than the Borrower if no Default shall have
occurred and be continuing immediately after such
transfer, and (iii) PFS or PGC may consolidate or merge
with or into, or transfer all or substantially all of
its assets to, any Person other than the Borrower if
immediately after giving effect thereto (A) no Default
shall have occurred and be continuing and (B) Pro Forma
<PAGE>
Available Cash Income is not less than 300% of Adjusted
Pro Forma Interest Expense (After Tax);
then, and in every such event, the Agent shall (i) if
requested by the Required Banks, by notice to the Borrower
terminate the Commitments and they shall thereupon terminate,
and (ii) if requested by Banks holding Notes evidencing at
least 60% in aggregate principal amount of the Loans
outstanding, by notice to the Borrower declare the Notes
(together with accrued interest thereon) to be, and the Notes
shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower; provided that if
any Event of Default specified in clause (h) or (i) above
occurs with respect to the Borrower, then without any notice
to the Borrower or any other act by the Agent or the Banks,
the Commitments shall thereupon terminate and the Notes
(together with accrued interest thereon) shall become
immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby
waived by the Borrower.
SECTION 6.02. Notice of Default. The Agent shall
give notice to the Borrower under subsection (d) or (n) of
Section 6.01 promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. Each
Bank irrevocably appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such
powers under this Agreement and the Notes as are delegated to
the Agent by the terms hereof or thereof, together with all
such powers as are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan
Guaranty Trust Company of New York shall have the same rights
and powers under this Agreement as any other Bank and may
exercise or refrain from exercising the same as though it
were not the Agent, and Morgan Guaranty Trust Company of New
York and its affiliates may accept deposits from, lend money
to, and generally engage in any kind of business with the
Borrower or any Subsidiary or affiliate of the Borrower as if
it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of
the Agent hereunder are only those expressly set forth
herein. Without limiting the generality of the foregoing,
the Agent shall not be required to take any action with
respect to any Default, except as expressly provided in
Article VI.
<PAGE>
SECTION 7.04. Consultation with Experts. The
Agent may consult with legal counsel (who may be counsel for
the Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action
taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or
experts.
SECTION 7.05. Liability of Agent. Neither the
Agent nor any of its affiliates nor any of their respective
directors, officers, agents or employees shall be liable for
any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks
or (ii) in the absence of its own gross negligence or will-
ful misconduct. Neither the Agent nor any of its affiliates
nor any of their respective directors, officers, agents or
employees shall be responsible for or have any duty to
ascertain, inquire into or verify (i) any statement, warranty
or representation made in connection with this Agreement or
any borrowing hereunder; (ii) the performance or observance
of any of the covenants or agreements of the Borrower in this
Agreement; (iii) the satisfaction of any condition specified
in Article III, except receipt of items required to be
delivered to the Agent or (iv) the validity, effectiveness or
genuineness of this Agreement or the Notes or any other
instrument or writing furnished in connection herewith. The
Agent shall not incur any liability by acting in reliance
upon any notice, consent, certificate, statement, or other
writing (which may be a bank wire, facsimile transmission,
telex or similar writing) believed by it to be genuine or to
be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall,
ratably in accordance with its Percentage, indemnify the
Agent, its affiliates and their respective directors,
officers, agents and employees (to the extent not reimbursed
by the Borrower) against any cost, expense (including counsel
fees and disbursements), claim, demand, action, loss or
liability (except such as result from such indemnitees' gross
negligence or willful misconduct) that such indemnitees may
suffer or incur in connection with this Agreement or any
action taken or omitted by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank
acknowledges that it has, independently and without reliance
upon the Agent or any other Bank, and based on such docu-
ments and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any
other Bank, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking any action under
this Agreement.
SECTION 7.08. Successor Agent. The Agent may
resign at any time by giving written notice thereof to the
Banks and the Borrower. Upon any such resignation, the
<PAGE>
Required Banks, with the consent of the Borrower (which
consent shall not be unreasonably withheld), shall have the
right to appoint another Bank as successor Agent. If no
successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 10
days after the retiring Agent gives notice of resignation,
then the retiring Agent may, on behalf of the Banks, appoint
a successor Agent, which shall be one of the Banks or shall
be a commercial bank organized or licensed under the laws of
the United States of America or of any State thereof and
having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of its appointment as
Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the
rights and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation hereunder
as Agent, the provisions of this Article shall inure to its
benefit as to any actions taken or omitted to be taken by it
while it was Agent.
SECTION 7.09. Agent's Fees. The Borrower shall
pay to the Agent for its own account fees in the amounts and
at the times previously agreed upon between the Borrower and
the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair. If on or prior to the first day of any
Interest Period for any Fixed Rate Borrowing:
(a) the Agent is advised by the Reference Banks
that deposits in dollars (in the applicable amounts) are
not being offered to the Reference Banks in the relevant
market for such Interest Period, or
(b) Banks having 60% or more of the aggregate
amount of the Commitments advise the Agent that the
Adjusted CD Rate or the Adjusted London Interbank
Offered Rate, as the case may be, as determined by the
Agent will not adequately and fairly reflect the cost to
such Banks of funding their CD Loans or Euro-Dollar
Loans, as the case may be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower
and the Banks, whereupon until the Agent notifies the
Borrower that the circumstances giving rise to such
suspension no longer exist, the obligations of the Banks to
make CD Loans or Euro-Dollar Loans, as the case may be, shall
be suspended. Unless the Borrower notifies the Agent at
least two Domestic Business Days before the date of any Fixed
Rate Borrowing for which a Notice of Borrowing has previously
been given that it elects not to borrow on such date, (i) if
<PAGE>
such Fixed Rate Borrowing is a Committed Borrowing, such
Borrowing shall instead be made as a Base Rate Borrowing and
(ii) if such Fixed Rate Borrowing is a Money Market LIBOR
Borrowing, the Money Market LIBOR Loans comprising such
Borrowing shall bear interest for each day from and including
the first day to but excluding the last day of the Interest
Period applicable thereto at the Base Rate for such day.
SECTION 8.02. Illegality. If, on or after the
date of this Agreement, any Change in Law shall make it
unlawful or impossible for any Bank (or its Euro-Dollar
Lending Office) to make, maintain or fund its Euro-Dollar
Loans and such Bank shall so notify the Agent, the Agent
shall forthwith give notice thereof to the other Banks and
the Borrower, whereupon until such Bank notifies the Borrower
and the Agent that the circumstances giving rise to such
suspension no longer exist, the obligation of such Bank to
make Euro-Dollar Loans shall be suspended. Before giving any
notice to the Agent pursuant to this Section, such Bank shall
designate a different Euro-Dollar Lending Office if such
designation will avoid the need for giving such notice and
will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank shall determine
that it may not lawfully continue to maintain and fund any of
its outstanding Euro-Dollar Loans to maturity and shall so
specify in such notice, the Borrower shall immediately prepay
in full the then outstanding principal amount of each such
Euro-Dollar Loan, together with accrued interest thereon.
Concurrently with prepaying each such Euro-Dollar Loan, the
Borrower shall borrow a Base Rate Loan in an equal principal
amount from such Bank (on which interest and principal shall
be payable contemporaneously with the related Euro-Dollar
Loans of the other Banks), and such Bank shall make such a
Base Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return.
(a) If on or after (x) the date of this Agreement, in the
case of any Committed Loan or any obligation to make
Committed Loans, or (y) the date of the related Money Market
Quote, in the case of any Money Market Loan, any Change in
Law 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 (i) with respect to any CD Loan any such
requirement included in an applicable Domestic Reserve
Percentage and (ii) with respect to any Euro-Dollar Loan any
such requirement included in an applicable Euro-Dollar
Reserve Percentage), special deposit, insurance assessment
(excluding, with respect to any CD Loan, any such requirement
reflected in an applicable Assessment Rate) or similar
requirement against assets of, deposits with or for the
account of, or credit extended by, any Bank (or its
Applicable Lending Office) or shall impose on any Bank (or
its Applicable Lending Office) or on the United States market
for certificates of deposit or the London interbank market
any other condition affecting its Fixed Rate Loans, its Note
or its obligation to make Fixed Rate Loans and the result of
any of the foregoing is to increase the cost to such Bank (or
<PAGE>
its Applicable Lending Office) of making or maintaining any
Fixed Rate Loan, or to reduce the amount of any sum received
or receivable by such Bank (or its Applicable Lending Office)
under this Agreement or under its Note with respect thereto,
by an amount deemed by such Bank to be material, then, within
15 days after demand by such Bank (with a copy to the Agent),
the Borrower shall pay to such Bank such additional amount or
amounts as will compensate such Bank for such increased cost
or reduction, provided that the Borrower's obligation to pay
such Bank shall be limited to the cost or reduction that is
attributable to the period commencing 90 days prior to the
date on which such Bank gave notice to the Borrower pursuant
to Section 8.03(c) of the event entitling such Bank to such
compensation.
(b) If any Bank shall have determined that, after
the date of this Agreement, any Change in Law regarding
capital adequacy has or would have the effect of reducing the
rate of return on capital of such Bank (or its Parent) as a
consequence of such Bank's obligations hereunder to a level
below that which such Bank (or its Parent) could have
achieved but for such Change in Law (taking into
consideration its policies with respect to capital adequacy)
by an amount deemed by such Bank to be material, then from
time to time, within 15 days after demand by such Bank (with
a copy to the Agent), the Borrower shall pay to such Bank
such additional amount or amounts as will compensate such
Bank (or its Parent) for such reduction, provided that the
Borrower's obligation to pay such Bank (or its Parent) shall
be limited to the reduction that is attributable to the
period commencing 90 days prior to the date on which such
Bank gave notice to the Borrower pursuant to Section 8.03(c)
of the event entitling such Bank (or its Parent) to such
compensation.
(c) Each Bank will promptly notify the Borrower
and the Agent of any event of which it has knowledge,
occurring after the date of this Agreement, which will
entitle such Bank (or its Parent) 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 judgment of such Bank, be otherwise disadvantageous to
such Bank. A certificate of any Bank claiming compensation
under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the
absence of manifest error. In determining such amount, such
Bank may use any reasonable averaging and attribution
methods.
SECTION 8.04. Taxes. (a) If, as a result of a
Change in Law after the date of this Agreement (or the date
of the related Money Market Quote, in the case of payments
with respect to any Money Market Loan), any Tax (as defined
below) is imposed on any payment by the Borrower to or for
the account of any Bank or the Agent hereunder or under any
Note (a "Payment"), or the amount of any such Tax is
increased, and as a result thereof the aggregate amount of
<PAGE>
Taxes payable with respect to Payments to or for the account
of such Bank or the Agent is increased (the amount by which
such Taxes are increased as a result of such Change in Law
being herein called "Additional Tax"), the Borrower shall
indemnify such Bank or the Agent (as the case may be) for
such Additional Tax and otherwise make payments in respect
thereof as provided in this Section 8.04. As used herein,
the term "Tax" means any tax, duty, levy, import, deduction,
charge or withholding, or any liability with respect thereto,
excluding, in the case of each Bank and the Agent, taxes
imposed on its income, and franchise taxes imposed on it, by
the jurisdiction under the laws of which such Bank or the
Agent (as the case may be) is organized or managed or any
political subdivision thereof and, in the case of each Bank,
taxes imposed on its income, and franchise or similar taxes
imposed on it, by the jurisdiction of such Bank's Applicable
Lending Office or any political subdivision thereof.
(b) To the extent permitted by applicable law, the
Borrower shall make all Payments free and clear of, and
without deduction for, Taxes. If the Borrower shall be
required by applicable law to deduct any Taxes from or in
respect of any Payment to any Bank or the Agent, (i) the sum
payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to
additional sums payable under this Section 8.04) such Bank or
the Agent (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been
made with respect to any Additional Taxes, (ii) the Borrower
shall make all deductions required by applicable law, (iii)
the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance
with applicable law and (iv) the Borrower shall furnish to
the Agent, at its address referred to in Section 9.01, the
original or a certified copy of a receipt evidencing payment
thereof.
(c) In addition, the Borrower agrees to pay any
present or future stamp or documentary taxes and any other
excise or property taxes, or charges or similar levies which
arise from any payment made hereunder or under any Note or
from the execution or delivery of, or otherwise with respect
to, this Agreement or any Note (hereinafter referred to as
"Other Taxes").
(d) The Borrower agrees to indemnify each Bank and
the Agent for the full amount of Additional Taxes or Other
Taxes (including, without limitation, any Taxes or Other
Taxes imposed or asserted by any jurisdiction on amounts
payable under this Section 8.04) paid by such Bank or the
Agent (as the case may be) and any liability (including
penalties, additions to tax, interest and expenses) arising
therefrom or with respect thereto. This indemnification
shall be made within 30 days from the date such Bank or the
Agent (as the case may be) makes demand therefor.
(e) Each Bank organized under the laws of a
jurisdiction outside the United States, on or prior to the
<PAGE>
date of its execution and delivery of this Agreement in the
case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case
of each other Bank, and from time to time thereafter if
requested in writing by the Borrower or the Agent (but only
so long as such Bank remains lawfully able to do so), shall
provide each of the Borrower and the Agent with Internal
Revenue Service form 1001 or 4224 and form W-8 or W-9, as
appropriate, or any successor forms prescribed by the
Internal Revenue Service, certifying that such Bank is
entitled to benefits under an income tax treaty to which the
United States is a party which reduces the rate of
withholding tax on payments of interest or certifying that
the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business
in the United States.
(f) For any period with respect to which a Bank
has failed to provide the Borrower with the appropriate form
pursuant to Section 8.04(e) (unless such form can no longer
be provided due to a Change in Law after the date on which a
form originally was required to be provided by such Bank),
such Bank shall not, except to the extent that such failure
can be cured without prejudice to the Borrower, be entitled
to indemnification under Section 8.04(a) with respect to
Taxes imposed by the United States; provided that should a
Bank which is otherwise exempt from or subject to a reduced
rate of withholding tax, become subject to Taxes because of
its failure to deliver a form required hereunder, the
Borrower shall take such steps as such Bank shall reasonably
request to assist such Bank to recover such Taxes.
(g) If the Borrower is required to pay additional
amounts to or for the account of any Bank pursuant to this
Section 8.04, then such Bank will change the jurisdiction of
its Applicable Lending Office so as to eliminate or reduce
any such additional payment which may thereafter accrue if
such change, in the judgment of such Bank, is not otherwise
disadvantageous to such Bank.
SECTION 8.05. Base Rate Loans Substituted for
Affected Fixed Rate Loans. (a) If (i) the obligation of any
Bank to make Euro-Dollar Loans has been suspended pursuant to
Section 8.02 or (ii) any Bank has demanded compensation under
Section 8.03(a) or 8.04 with respect to its CD Loans or Euro-
Dollar Loans and the Borrower shall, by at least five
Euro-Dollar Business Days' prior notice to such Bank through
the Agent, have elected that the provisions of this Section
8.05(a) shall apply to such Bank, then, unless and until such
Bank notifies the Borrower that the circumstances giving rise
to such suspension or demand for compensation no longer
apply:
(x) all Loans which would otherwise be made by
such Bank as CD Loans or Euro-Dollar Loans, as the case
may be, shall be made instead as Base Rate Loans (on
which interest and principal shall be payable
<PAGE>
contemporaneously with the related Fixed Rate Loans of
the other Banks), and
(y) after each of its CD Loans or Euro-Dollar
Loans, as the case may be, has been repaid, all payments
of principal which would otherwise be applied to repay
such Fixed Rate Loans shall be applied to repay its Base
Rate Loans instead.
(b) If (i) any Bank has demanded compensation
under Section 8.03 with respect to its CD Loans or Euro-
Dollar Loans or (ii) the Borrower has become obligated to pay
any Taxes or other amounts to or for the account of any Bank
pursuant to Section 8.04, and the Borrower shall, by at least
five Euro-Dollar Business Days' prior notice to the Banks
through the Agent, have elected that the provisions of this
Section 8.05(b) shall apply to all of the Banks, then the
Borrower shall, on the fifth Euro-Dollar Business Day
following such notice, prepay in full the then outstanding
principal amount of each outstanding Euro-Dollar Loan or CD
Loan, as the case may be, of each Bank, together with accrued
interest thereon.
SECTION 8.06. Substitution of Bank. If (i) the
obligation of any Bank to make Euro-Dollar Loans has been
suspended pursuant to Section 8.02 or (ii) any Bank has given
notice of an event entitling such Bank (or its Parent) to
compensation under Section 8.03 or 8.04, the Borrower shall
have the right, with the assistance of the Agent, to seek a
mutually satisfactory substitute bank or banks (which may be
one or more of the Banks) to purchase the Note and assume the
Commitment of such Bank.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. 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 to such party: (x) in
the case of the Borrower or the Agent, at its address,
facsimile number or telex number set forth on the signature
pages hereof, (y) in the case of any Bank, at its address,
facsimile number or telex number set forth in its
Administrative Questionnaire or (z) in the case of any party,
at such other address, facsimile number or telex number as
such party may hereafter specify for the purpose by notice to
the Agent and the Borrower. Each such notice, request or
other communication shall be effective (i) if given by telex,
when such telex is transmitted to the telex number specified
in this Section and the appropriate answerback is received,
(ii) if given by mail, three Domestic Business Days after
such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid, (iii) if given by
facsimile transmission, when such facsimile is transmitted to
<PAGE>
the facsimile number specified in or pursuant to this Section
and the sender thereof requests and receives confirmation of
transmission or (iv) if given by any other means, when
delivered at the address specified in this Section; provided
that notices to the Agent under Article II or Article VIII
shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by
the Agent or any Bank in exercising any right, power or
privilege hereunder or under any Note shall operate as a
waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights
and remedies provided herein shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses
of the Agent, including fees and disbursements of one firm of
special counsel for the Agent, in connection with the
preparation of this Agreement, any waiver or consent
hereunder or any amendment hereof or any Default or any event
or condition reasonably alleged by any Bank to be a possible
Default hereunder and (ii) if an Event of Default occurs, all
reasonable out-of-pocket expenses incurred by the Agent or
any Bank, including fees and disbursements of counsel, in
connection with such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings
resulting therefrom.
(b) The Borrower shall indemnify the Agent and
each Bank, their respective affiliates and the respective
directors, officers, agents and employees of the foregoing
(each an "Indemnitee") and hold each Indemnitee harmless from
and against any and all liabilities, losses, damages, costs
and expenses of any kind (including, without limitation, the
reasonable fees and disbursements of counsel for any Bank
(including allocated costs of internal counsel and
disbursements of internal counsel) and settlement costs in
connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnitee shall be
designated a party thereto), relating to or arising out of
any actual or proposed use of proceeds of Loans hereunder for
the purpose of acquiring equity securities of any other
Person; provided that no Indemnitee shall have the right to
be indemnified hereunder for such Indemnitee's own gross
negligence or willful misconduct as finally determined by a
court of competent jurisdiction.
(c) If any proceeding shall be brought or, to the
knowledge of any Indemnitee threatened, against such
Indemnitee by reason of or in connection with which such
Indemnitee may claim indemnification pursuant to this Section
9.03, such Indemnitee shall promptly notify the Borrower
thereof in writing. Such Indemnitee shall have the right to
employ its own counsel and to determine its own defense in
such proceeding, but the reasonable fees and expenses thereof
(including allocated costs of internal counsel and
<PAGE>
disbursements of internal counsel) shall be paid by the
Borrower. The Borrower shall not be liable for any
settlement of any such proceeding effected without its
consent, which consent shall not be unreasonably withheld.
Nothing in this Section 9.03 is intended to limit the
obligations of the Borrower under any other provision of this
Agreement.
SECTION 9.04. Sharing of Set-Offs. Each Bank
agrees that if it shall, by exercising any right of set-off
or counterclaim or otherwise, receive (i) payment of a
proportion of the aggregate amount of principal and interest
due with respect to any Note held by it which is greater than
the proportion received by any other Bank in respect of the
aggregate amount of principal and interest due with respect
to any Note held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such
participations in the Notes held by the other Banks, and such
other adjustments shall be made, as may be required so that
all such payments of principal and interest with respect to
the Notes held by the Banks shall be shared by the Banks pro
rata; provided that nothing in this Section shall impair the
right of any Bank to exercise any right of set-off or
counterclaim it may have and to apply the amount subject to
such exercise to the payment of indebtedness of the Borrower
other than its indebtedness under the Notes. The Borrower
agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Note,
whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim
and other rights with respect to such participation as fully
as if such holder of a participation were a direct creditor
of the Borrower in the amount of such participation.
SECTION 9.05. Amendments and Waivers. Any
provision of this Agreement or the Notes may be amended or
waived if, but only if, such amendment or waiver is in
writing and is signed by the Borrower and the Required Banks
(and, if the rights or duties of the Agent are affected
thereby, by the Agent); provided that no such amendment or
waiver shall, unless signed by all the Banks, (i) increase or
decrease the Commitment of any Bank (except for a ratable
decrease in the Commitments of all Banks) or subject any Bank
to any additional obligation, (ii) reduce the principal of or
rate of interest on any Loan or any fees hereunder, (iii)
postpone the date fixed for any payment of principal of or
interest on any Loan or any fees hereunder or for the
termination of any Commitment or (iv) change the percentage
of the Commitments or of the aggregate unpaid principal
amount of the Loans, or the number of Banks, which shall be
required for the Banks or any of them to take any action
under this Section or any other provision of this Agreement.
SECTION 9.06. Successors and Assigns. (a) The
provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower shall not
assign or otherwise transfer any of its rights under this
<PAGE>
Agreement (except pursuant to a merger permitted by clause
(B) of Section 5.05) without the prior written consent of all
the Banks.
(b) Any Bank may at any time grant to one or more
banks or other institutions (each a "Participant") partici-
pating interests in its Commitment or any or all of its
Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon
notice to the Borrower and the Agent, such Bank shall remain
responsible for the performance of its obligations hereunder,
and the Borrower and the Agent shall continue to deal solely
and directly with such Bank in connection with such Bank's
rights and obligations under this Agreement. Any agreement
pursuant to which any Bank may grant such a participating
interest shall provide that such Bank shall retain the sole
right and responsibility to enforce the obligations of the
Borrower under this Agreement including, without limitation,
the right to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such
participation agreement may provide that such Bank will not
agree to any amendment, modification or waiver of this
Agreement described in clause (i), (ii) or (iii) of Section
9.05 without the consent of the Participant. Promptly after
any Bank grants any such participating interest (except a
participating interest in one or more Money Market Loans),
such Bank shall inform the Borrower of the identity of the
Participant and the amount of such participating interest.
The Borrower agrees that each Participant shall, to the
extent provided in its participation agreement, be entitled
to the benefits of Article VIII with respect to its
participating interest. An assignment or other transfer
which is not permitted by subsection (c) or (d) below shall
be given effect for purposes of this Agreement only to the
extent of a participating interest granted in accordance with
this subsection (b).
(c) Any 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 and the Notes, and such Assignee shall
assume such rights and obligations, pursuant to an Assignment
and Assumption Agreement in substantially the form of Exhibit
E hereto (an "Assignment and Assumption Agreement") executed
by such Assignee and such transferor Bank, with (and subject
to) the subscribed consent of the Borrower and the Agent
(which consents shall not be unreasonably withheld); provided
that (i) if an Assignee is another Bank or is an Affiliate of
such transferor Bank, no such consent shall be required and
(ii) any such assignment may, but need not, exclude rights of
the transferor Bank in respect of outstanding Money Market
Loans. No assignment of a proportionate part of the rights
and obligations of a Bank under this Agreement and the Notes
may be made unless the "Assigned Amount" set forth in the
related Assignment and Assumption Agreement equals or exceeds
$5,000,000. Upon execution and delivery of an Assignment and
Assumption Agreement and payment by such Assignee to such
transferor Bank of an amount equal to the purchase price
<PAGE>
agreed between such transferor 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 Assignment and Assumption
Agreement, and the transferor 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 transferor Bank, the Agent and the
Borrower shall make appropriate arrangements so that, if
required, a new Note is issued to the Assignee. In
connection with any such assignment, the transferor Bank
shall pay to the Agent an administrative fee for processing
such assignment in the amount of $2,500. If the Assignee is
not incorporated under the laws of the United States of
America or a state thereof, it shall deliver to the Borrower
and the Agent certification as to whether and to what extent
it is exempt from deduction or withholding of United States
federal income taxes, as required by Section 8.04.
(d) Any Bank may at any time assign all or any
portion of its rights under this Agreement and its Note to a
Federal Reserve Bank. No such assignment shall release the
transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee
of any Bank's rights shall be entitled to receive any greater
payment under Section 8.03 or 8.04 than such Bank would have
been entitled to receive with respect to the rights trans-
ferred, unless such transfer is made with the Borrower's
prior written consent or by reason of the provisions of
Section 8.02, 8.03 or 8.04 requiring such Bank to designate
a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise
to such greater payment did not exist.
(f) If any Reference Bank assigns its Note to an
unaffiliated institution, the Agent shall, with the consent
of the Borrower and the Required Banks, appoint another Bank
to act as a Reference Bank hereunder.
SECTION 9.07. Confidentiality. Each of the Agent
and the Banks agrees to exercise all reasonable efforts to
keep any proprietary or financial information delivered or
made available by the Borrower to it, which is clearly
indicated to be confidential information, confidential from
anyone other than (x) the officers, directors and employees
of the Agent, any Bank or any of their respective Affiliates
who have a need to know such information in accordance with
customary banking practices and (y) agents of, or persons
retained by, the Agent or any Bank who are or are expected to
become engaged in evaluating, approving, structuring or
administering the Loans, and who, in the case of (x) and (y),
receive such information having been made aware of the
restrictions set forth in this Section; provided that nothing
herein shall prevent the Agent or any Bank from disclosing
such information (i) to the Agent or any Bank in connection
with the transactions contemplated by this Agreement, (ii)
<PAGE>
upon the order of any court or administrative agency or
otherwise pursuant to subpoena or similar procedure or in
accordance with law, (iii) upon the request or demand of any
regulatory agency or authority having jurisdiction over the
Agent or any Bank, (iv) which has been publicly disclosed,
(v) to the extent reasonably required in connection with any
litigation to which the Agent, any Bank or their respective
Affiliates may be a party, (vi) to the Agent's or any Bank's
legal counsel and independent auditors, (vii) to any actual
or proposed Participant or Assignee of all or part of such
Bank's rights hereunder which has agreed in writing to be
bound by the provisions of this Section 9.07, (viii) in
connection with the exercise of any remedy hereunder or (ix)
with the prior written consent of the Borrower. The Agent
and each Bank shall attempt in good faith, to the extent
permitted by applicable law, (i) to notify the Borrower of
any disclosure of such information referred to in clause (ii)
of the preceding sentence and (ii) upon a reasonable and
timely request by the Borrower, apply (at the Borrower's
expense) for an appropriate protective order to preserve the
confidentiality of such information or limit the disclosure
thereof.
SECTION 9.08. Governing Law; Submission to
Jurisdiction. This Agreement and each Note shall be governed
by and construed in accordance with the laws 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 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.
SECTION 9.09. Counterparts; Integration. This
Agreement may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and
all prior agreements and understandings, oral or written,
relating to the subject matter hereof.
IN WITNESS WHEREOF, the undersigned parties hereto
have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first
above written.
<PAGE>
PACIFICORP HOLDINGS, INC.
By ______________________________
Name:
Title:
700 N.E. Multnomah, Suite 1600
Portland, Oregon 97232-4116
Facsimile number: 503-731-2092
Commitments
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By ________________________________
Name:
Title:
J. P. MORGAN DELAWARE
By ________________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By ________________________________
Name:
Title:
ABN AMRO BANK N.V.
By ________________________________
Name:
Title:
By ________________________________
Name:
Title:
<PAGE>
CANADIAN IMPERIAL BANK
OF COMMERCE, NEW YORK AGENCY
By ________________________________
Name:
Title:
FIRST INTERSTATE BANK
OF OREGON, N.A.
By ________________________________
Name:
Title:
UNITED STATES NATIONAL BANK
OF OREGON
By ________________________________
Name:
Title:
THE BANK OF NEW YORK
By ________________________________
Name:
Title:
CREDIT SUISSE
By ________________________________
Name:
Title:
By ________________________________
Name:
Title:
<PAGE>
FUJI BANK
By ________________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By _______________________________
Name:
Title:
BANK OF HAWAII
By _______________________________
Name:
Title:
THE BANK OF NOVA SCOTIA
By _______________________________
Name:
Title:
THE BANK OF TOKYO, LTD.
By _______________________________
Name:
Title:
CHEMICAL BANK
By ________________________________
Name:
Title:
<PAGE>
CITIBANK, N.A.
By ________________________________
Name:
Title:
THE LONG TERM CREDIT BANK
OF JAPAN, LTD.
By _______________________________
Name:
Title:
NATIONAL WESTMINSTER BANK PLC
By _______________________________
Name:
Title:
THE SUMITOMO BANK, LIMITED
By _______________________________
Name:
Title:
Total Commitments
$350,000,000
============
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By _______________________________
Name:
Title:
60 Wall Street
New York, New York 10260
Attention: Loan Department
Telex number: 177615
<PAGE>
PRICING SCHEDULE
Each of the terms "Euro-Dollar Margin", "CD
Margin", "Commitment Fee Rate" and "Facility Fee Rate" means,
for any day, the rate per annum set forth below in the row
opposite such term and in the column corresponding to the
Pricing Level that applies on such day:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Pricing Level Level I Level II Level III Level IV Level V
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CD Margin 0.3500% 0.4000% 0.4250% 0.4750% 0.6875%
- --------------------------------------------------------------------
Euro-Dollar 0.2250% 0.2750% 0.3000% 0.3500% 0.5625%
- --------------------------------------------------------------------
Margin
- --------------------------------------------------------------------
Commitment Fee 0% 0.0250% 0.0250% 0.0250% 0.0625%
- --------------------------------------------------------------------
Facility Fee
- --------------------------------------------------------------------
Rate 0.1000% 0.1000% 0.1250% 0.1500% 0.1875%
- --------------------------------------------------------------------
</TABLE>
For purposes of this Pricing Schedule, the following terms
have the following meanings:
"Debt Rating" means a credit rating assigned by a Rating
Agency to the senior unsecured long-term debt securities of the
Borrower without third-party credit enhancement. For purposes of
this Pricing Schedule, any rating assigned to any other debt
security of the Borrower shall be disregarded. The Debt Rating in
effect on any day is that in effect at the close of business on
such day. If a Rating Agency shall have changed its system of
classifications after the date hereof, the requirement that the
Debt Rating be at or above the specified levels set forth in this
Pricing Schedule will be met if the Debt Rating by such Rating
Agency is at or above the new rating which most closely corresponds
to the specified level under the old rating system.
"Pricing Level" refers to the determination of which Pricing
Level I, Pricing Level II, Pricing Level III, Pricing Level IV or
Pricing Level V applies on any day.
"Pricing Level I" applies on any day if, on such day, the
Borrower has a Debt Rating of A- or higher by S&P and A3 or higher
by Moody's.
"Pricing Level II" applies on any day if, on such day, (i)
the Borrower has a Debt Rating of BBB+ or higher by S&P and Baa1
or higher by Moody's and (ii) Pricing Level I does not apply.
"Pricing Level III" applies on any day if, on such day, (i)
the Borrower has a Debt Rating of BBB or higher by S&P and Baa2 or
higher by Moody's and (ii) neither Pricing Level I nor Pricing
Level II applies.
<PAGE>
"Pricing Level IV" applies on any day if, on such day, (i)
the Borrower has a Debt Rating of BBB- or higher by S&P and Baa3
or higher by Moody's and (ii) none of Pricing Level I, Pricing
Level II and Pricing Level III applies.
"Pricing Level V" applies on any day if, on such day, no
other Pricing Level applies.
<PAGE>
EXHIBIT A
NOTE
New York, New York
__________, 199_
For value received, PACIFICORP HOLDINGS, INC., a Delaware
corporation (the "Borrower"), promises to pay to the order of
__________ (the "Bank"), for the account of its Applicable Lending
Office, the unpaid principal amount of each Loan made by the Bank
to the Borrower pursuant to the Credit Agreement referred to below
on the last day of the Interest Period relating to such Loan. The
Borrower promises to pay interest on the unpaid principal amount
of each such Loan on the dates and at the rate or rates provided
for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in
Federal or other immediately available funds at the office of
Morgan Guaranty Trust Company of New York, 60 Wall Street, New
York, New York.
All Loans made by the Bank, the respective types and
maturities thereof and all repayments of the principal thereof
shall be recorded by the Bank and, if the Bank so elects in
connection with any transfer or enforcement hereof, appropriate
notations to evidence the foregoing information with respect to
each such Loan then outstanding may be endorsed by the Bank on the
schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided that the failure of
the Bank to make any such recordation or endorsement, or any error
in the making thereof, shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Credit
Agreement dated as of April __, 1995 among the Borrower, the banks
party thereto and Morgan Guaranty Trust Company of New York, as
Agent (as the same may be amended from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein
with the same meanings. Reference is made to the Credit Agreement
for provisions for the prepayment hereof and the acceleration of
the maturity hereof.
PACIFICORP HOLDINGS, INC.
By
Name:
Title:
<PAGE>
Note (Con't)
LOANS AND PAYMENTS OF PRINCIPAL
- ------------------------------------------------------------------------
Amount of
Amount Type Principal Maturity Notation
Date of Loan of Loan Repaid Date Made By
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
<PAGE>
EXHIBIT B
Form of Money Market Quote Request
[Date]
To: Morgan Guaranty Trust Company of New York
(the "Agent")
From: PacifiCorp Holdings, Inc.
Re: Credit Agreement (the "Credit Agreement") dated as
of April __, 1995 among the Borrower, the Banks party
thereto and the Agent
We hereby give notice pursuant to Section 2.03 of the
Credit Agreement that we request Money Market Quotes for the
following proposed Money Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
$
Such Money Market Quotes should offer a Money Market
[Margin] [Absolute Rate]. [The applicable base rate is the
London Interbank Offered Rate.]
Terms used herein have the meanings assigned to them
in the Credit Agreement.
PACIFICORP HOLDINGS, INC.
By________________________
Title:<PAGE>
EXHIBIT C
Form of Invitation for Money Market Quotes
To: [Name of Bank]
Re: Invitation for Money Market Quotes to PacifiCorp
Holdings, Inc. (the "Borrower")
Pursuant to Section 2.03 of the Credit Agreement
dated as of April __, 1995 among the Borrower, the Banks party
thereto and the undersigned, as Agent, we are pleased on
behalf of the Borrower to invite you to submit Money Market
Quotes to the Borrower for the following proposed Money Market
Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
$
Such Money Market Quotes should offer a Money Market
[Margin] [Absolute Rate]. [The applicable base rate is the
London Interbank Offered Rate.]
Please respond to this invitation by no later than
[2:00 P.M.] [9:30 A.M.] (New York City time) on [date].
The Borrower may accept your Quotes until (but not
after) 10:00 A.M. (New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By______________________
Authorized Officer
<PAGE>
EXHIBIT D
Form of Money Market Quote
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
60 Wall Street
New York, New York 10260
Attention:
Re: Money Market Quote to PacifiCorp Holdings, Inc.
(the "Borrower")
In response to your invitation on behalf of the
Borrower dated _____________, 19__, we hereby make the following
Money Market Quote on the following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Date of Borrowing: ____________________
4. We hereby offer to make Money Market Loan(s) in the
following principal amounts, for the following Interest
Periods and at the following rates:
Principal Interest Money Market [Absolute
Amount Period [Margin] Rate]
$
$
$
[Provided that the aggregate principal amount of Money Market
Loans for which the above offers may be accepted shall not
exceed $ .]**
We understand and agree that the offer(s) set forth
above, subject to the satisfaction of the applicable conditions
set forth in the Credit Agreement dated as of April __, 1995
among the Borrower, the Banks party thereto and yourselves, as
Agent, irrevocably obligates us to make the Money Market Loan(s)
for which any offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:__________________________
Authorized Officer
<PAGE>
EXHIBIT E
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among
[ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"),
PACIFICORP HOLDINGS, INC. (the "Borrower"), and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
W I T N E S E T H
WHEREAS, this Assignment and Assumption Agreement
(the "Agreement") relates to the Credit Agreement dated as of
April __, 1995 among the Borrower, the Assignor and the other
Banks party thereto, as Banks, and the Agent (the "Credit
Agreement");
WHEREAS, as provided under the Credit Agreement,
the Assignor has a Commitment to make Loans to the Borrower
up to an aggregate principal amount at any time outstanding
not to exceed $__________;
WHEREAS, Committed Loans made to the Borrower by
the Assignor under the Credit Agreement are outstanding on
the date hereof in the aggregate principal amount of
$________; and
WHEREAS, the Assignor proposes to assign to the
Assignee all of the rights of the Assignor under the Credit
Agreement in respect of a portion of its Commitment thereunder
in an amount equal to $__________ (the "Assigned Amount"),
together with a corresponding portion of its outstanding
Committed Loans, and the Assignee proposes to accept
assignment of such rights and assume the corresponding
obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing
and the mutual agreements contained herein, the parties hereto
agree as follows:
SECTION 1. Definitions. All capitalized terms not
otherwise defined herein have the respective meanings set
forth in the Credit Agreement.
SECTION 2. Assignment.The Assignor hereby assigns
and sells to the Assignee all of the rights of the Assignor
under the Credit Agreement to the extent of the Assigned
Amount, and the Assignee hereby accepts such assignment from
the Assignor and assumes all of the obligations of the
Assignor under the Credit Agreement to the extent of the
Assigned Amount, including the purchase from the Assignor of
the corresponding portion of the principal amount of each of
<PAGE>
the Committed Loans made by the Assignor outstanding at the
date hereof. Upon the execution and delivery hereof by the
Assignor, the Assignee, the Borrower and the Agent and the
payment of the amounts specified in Section 3 required to be
paid on the date hereof (i) the Assignee shall, as of the date
hereof, succeed to the rights and be obligated to perform the
obligations of a Bank under the Credit Agreement with a
Commitment in an amount equal to the Assigned Amount, holding
Committed Loans in amounts corresponding to the Assigned
Amount, and (ii) the Commitment and Committed Loans of the
Assignor shall, as of the date hereof, be reduced by a like
amount and the Assignor released from its obligations under
the Credit Agreement to the extent such obligations have been
assumed by the Assignee. The assignment provided for herein
shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the
assignment and sale contemplated in Section 2 hereof, the
Assignee shall pay to the Assignor on the date hereof in
Federal funds the amount heretofore agreed between them. It
is understood that commitment and/or facility fees accrued
with respect to the Assigned Amount (or the unused portion
thereof) to the date hereof are for the account of the
Assignor and such fees accruing from and including the date
hereof are for the account of the Assignee. Each of the
Assignor and the Assignee hereby agrees that if it receives
any amount under the Credit Agreement which is for the account
of the other party hereto, it shall receive the same for the
account of such other party to the extent of such other
party's interest therein and shall promptly pay the same to
such other party.
SECTION 4. Consent of the Borrower and the Agent.
This Agreement is conditioned upon the consent of the Borrower
and the Agent pursuant to Section 9.06(c) of the Credit Agreement.
The execution of this Agreement by the Borrower and the Agent
is evidence of this consent. Pursuant to Section 9.06(c) of
the Credit Agreement, the Borrower agrees to execute and
deliver a Note payable to the order of the Assignee to
evidence the assignment and assumption provided for herein.
SECTION 5. Non-Reliance on Assignor. The Assignor
makes no representation or warranty in connection with, and
shall have no responsibility with respect to, the solvency,
financial condition, or statements of the Borrower, or the
validity and enforceability of the obligations of the Borrower
under the Credit Agreement or any Note. The Assignee
acknowledges that it has, independently and without reliance
on the Assignor, and based on such documents and information
as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the
business, affairs and financial condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York.
<PAGE>
SECTION 7. Counterparts. This Agreement may be
signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed and delivered by their duly
authorized officers as of the date first above written.
[ASSIGNOR]
By_________________________
Title:
[ASSIGNEE]
By__________________________
Title:
PACIFICORP HOLDINGS, INC.
By__________________________
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, AS AGENT
By__________________________
Title:
<PAGE>
EXHIBIT F
OPINION OF
COUNSEL FOR THE BORROWER
_________ __, 1995
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have acted as counsel for PacifiCorp Holdings,
Inc. (the "Borrower") in connection with the Credit Agreement
dated as of April __, 1995 (the "Credit Agreement") among the
Borrower, the banks listed on the signature pages thereof and
Morgan Guaranty Trust Company of New York, as Agent.
Capitalized terms used herein have the respective meanings set
forth in the Credit Agreement unless otherwise defined herein.
This opinion is furnished to you pursuant to Section
3.02(e) of the Credit Agreement. In connection with this
opinion, we have examined and are familiar with (a) the Credit
Agreement and (b) the certificates of incorporation and bylaws
of the Borrower and PCI. We have also examined or caused to
be examined such corporate documents and records of the
Borrower and PCI and such certificates of public officials and
other documents and have satisfied ourselves as to such other
matters as we have deemed necessary in order to render this
opinion.
In rendering this opinion, we have assumed the
genuineness of all signatures, the authenticity of all
documents provided to us as originals, and the conformity to
authentic original documents of all documents provided to us
as certified, conformed or photostatic copies. As to
questions of fact material to the following opinions, when
relevant facts were not independently established, we have
relied upon representations of the Borrower within the Credit
Agreement, certificates of officers and representatives of the
Borrower and its Subsidiaries and certificates of public
officials.
Based upon the foregoing and subject to the
qualifications below, we are of the opinion that:
(i) The Borrower is a corporation duly
incorporated, validly existing and in good standing under
the laws of Delaware, and has all corporate powers
required to own its properties and to carry on its
business as now conducted.
<PAGE>
(ii) PCI is a corporation duly incorporated and
validly existing under the laws of Oregon.
(iii) The execution and delivery by the Borrower of
the Credit Agreement and the Notes and the performance
by the Borrower of its obligations thereunder are within
the Borrower's corporate powers and have been duly
authorized by all necessary corporate action. The Credit
Agreement and the Notes have been duly executed and
delivered by the Borrower. No registration, recordation
or filing with or consent, approval or other action by
any regulatory or other governmental body, agency or
official is required in connection with the execution or
delivery of the Credit Agreement and the Notes by the
Borrower or is necessary for the validity or
enforceability thereof, and the execution, delivery,
performance and enforcement of the Credit Agreement and
the Notes do not and will not contravene, or constitute
a default under, any provision of (a) applicable law or
regulation, (b) the certificate of incorporation or
by-laws of the Borrower as currently in effect, or (c)
to the best of our knowledge after due inquiry, any
existing agreement, judgment, injunction, order, decree
or other instrument binding upon the Borrower or, to the
best of our knowledge after due inquiry, result in the
creation or imposition of any Lien upon any asset of the
Borrower or any of its Subsidiaries.
(iv) The execution and delivery by PCI of the Spring
Creek Participation Agreement and the performance by PCI
of its obligations thereunder are within PCI's corporate
powers and has been duly authorized by all necessary
corporate action. The Spring Creek Participation
Agreement has been duly executed and delivered by PCI.
No registration, recordation or filing with or consent,
approval or other action by any regulatory or other
governmental body, agency or official is required in
connection with the execution or delivery of the Spring
Creek Participation Agreement by PCI or is necessary for
the validity or enforceability thereof.
(v) The Credit Agreement constitutes a valid and
binding agreement of the Borrower, the Notes constitute
valid and binding obligations of the Borrower and the
Spring Creek Participation Agreement constitutes a valid
and binding agreement of PCI, all enforceable in
accordance with their respective terms, except as the
foregoing may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, or other
similar laws affecting the rights of creditors generally
and by general principles of equity, including those
limiting the availability of specific performance,
injunctive relief and other equitable remedies and those
that may under some circumstances provide for defenses
based on lack of good faith, fairness or reasonableness,
regardless of whether considered in a proceeding in
equity or at law. We also advise you that a court might
not permit the exercise of certain remedies provided for
<PAGE>
in Section 6.01 of the Credit Agreement if the court
finds that there has not been a material breach of a
material provision thereof.
(vi) Each of the First Tier Significant Subsidiaries
and PGC is a corporation validly existing under the laws
of its jurisdiction of incorporation.
(vii) To the best of our knowledge after due
investigation, except as disclosed in (i) PTI's annual
report on Form 10-K for 1994 and (ii) PFS' annual report
on Form 10-K for 1994, there is no action, suit or
proceeding pending against, or to the best of our
knowledge threatened against or affecting, the Borrower
or any of its Subsidiaries before any court or arbitrator
or any governmental body, agency or official, in which
there is a reasonable possibility of an adverse decision
which would materially and adversely affect the ability
of the Borrower to perform its obligations under the
Credit Agreement or which in any manner draws into
question the validity of the Credit Agreement or the
Notes.
The opinions herein expressed are limited to the
matters governed by the laws of the United States of America
and the State of Oregon and, as to the opinions expressed in
paragraphs (i) and (iii) above, the General Corporation Law
of the State of Delaware, and, as to the opinions expressed
in paragraph (vi) above, the Washington Business Corporation
Act, in each case as they exist at the date hereof, and we
express no opinion as to the law of any other jurisdiction.
In rendering the opinions set forth in paragraph (v) above,
we have assumed that the laws of the State of Oregon would
apply despite selection of New York law under Section 9.08 of
the Credit Agreement. In making the foregoing assumption we
do not intend to imply that an Oregon court would not give
effect to such selection of New York law and we note that, in
a separate opinion being delivered to you today, Davis Polk
& Wardwell is expressing, under New York law, substantially
the same opinions with respect to the Borrower as are set
forth in paragraph (v) above.
In connection with the foregoing opinions, we have
reviewed the Spring Creek Coal Supply Contract. Such contract
provides that it is governed by the laws of the State of
Montana and, as indicated above, we are not expressing any
opinion (by implication in paragraph (v) above or otherwise)
as to Montana law. However, if such contract were governed
by the laws of the State of Oregon, we believe that, while
there is no controlling precedent directly on point, an Oregon
court would conclude, in a properly presented case, that the
execution, delivery and performance of the Spring Creek Loan
Documents and the Spring Creek Participation Agreement do not
and will not contravene, or constitute a default under, any
provision of such contract.
In giving the foregoing opinions, we express no
opinions as to the effect (if any) of any law of any
<PAGE>
jurisdiction in which any Bank is located which limits the
rate of interest that such Bank may charge or collect or as
to the enforceability of provisions in the Credit Agreement
providing for the payment of interest on overdue interest.
This opinion is addressed solely to you and is not
to be relied upon by any other person nor is it to be used,
circulated, quoted or otherwise referred to in connection with
any transaction other than those contemplated by the Credit
Agreement.
Very truly yours,
<PAGE>
EXHIBIT G
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
_________ __, 1995
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the
Credit Agreement (the "Credit Agreement") dated as of April
__, 1995 among PacifiCorp Holdings, Inc., a Delaware
corporation (the "Borrower"), the banks listed on the
signature pages thereof (the "Banks") and Morgan Guaranty
Trust Company of New York, as Agent (the "Agent"), and have
acted as special counsel for the Agent for the purpose of
rendering this opinion pursuant to Section 3.02(f) of the
Credit Agreement. Terms defined in the Credit Agreement are
used herein as therein defined.
We have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents,
corporate records, certificates of public officials and other
instruments and have conducted such other investigations of
fact and law as we have deemed necessary or advisable for
purposes of this opinion.
Upon the basis of the foregoing, we are of the
opinion that:
1. The execution, delivery and performance by the
Borrower of the Credit Agreement and the Notes are within the
Borrower's corporate powers and have been duly authorized by
all necessary corporate action.
2. The Credit Agreement constitutes a valid and
binding agreement of the Borrower and the Notes constitute
valid and binding obligations of the Borrower, enforceable in
accordance with their respective terms, except as the
foregoing may be limited by (a) bankruptcy, insolvency or
similar laws affecting creditor's rights generally and (b)
equitable principles of general applicability.
The opinions expressed herein are limited to matters
governed by the laws of the United States of America and the
<PAGE>
State of New York, and the General Corporation Law of the
State of Delaware.
In giving the foregoing opinion, we express no
opinion as to the effect (if any) of any law of any
jurisdiction (except the State of New York) in which any Bank
is located which limits the rate of interest that such Bank
may charge or collect.
This opinion is rendered solely to you in connection
with the above matter. This opinion may not be relied upon
by you for any other purpose or relied upon by any other
person without our prior written consent.
Very truly yours,
(b)(2)
CONFIDENTIAL
___________________________________________________________________________
PACIFIC TELECOM, INC.
February 13, 1995
Smith Barney Inc.
___________________________________________________________________________
<PAGE>
Pacific Telecom, Inc.
___________________________________________________________________________
TABLE OF CONTENTS
Tab
Summary Valuation Analysis. . . . . . . . . . . . . . . . . . . 1
Implied Discount Rates to Final Offer Price . . . . . . . . . . 2
Pacific Telecom's Five Year Projections . . . . . . . . . . . . 3
Valuation Methodologies Using Near-Term Projections . . . . . . 4
* Component Valuation
* Valuation Matrix
Valuation Methodologies Using Long-Term Projections . . . . . . 5
* Discounted Cash Flow Analysis
* Present Value of Future Stock Price
Value Per Share Impact of Generic Acquisitions. . . . . . . . . 6
Trading Multiple Analysis of Selected Publicly Traded
Comparable Companies. . . . . . . . . . . . . . . . . . . . . 7
* Local Exchange Companies
* Cellular Companies
Acquisition Multiple Analysis of Selected Acquired
Companies . . . . . . . . . . . . . . . . . . . . . . . . . . 8
* Local Exchange Companies
* Local Exchange and Cellular Companies
Minority Squeezeout Transactions. . . . . . . . . . . . . . . . 9
APPENDIX
Rural LEC EBITDA Multiple Calculations. . . . . . . . . . . . . 10
* Telephone and Data Systems
* Citizens Utilities
<PAGE>
___________________________________________________________________________
TAB 1
___________________________________________________________________________
<PAGE>
__________________________________________________________________________
SUMMARY VALUATION ANALYSIS
__________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
____________________________________________________________________________________________________
SUMMARY VALUATION ANALYSIS
Range
______________________________
Low High
______________________________
<S> <C> <C>
Premiums Paid in Minority Squeezeout Transactions $30.01 $30.76
Near-Term Projections
____________________________________________________________________________________________________
Component Valuation $28.10 $33.67
Valuation Matrix 30.00 35.00
____________________________________________________________________________________________________
Average Price Per Share $29.05 $34.33
____________________________________________________________________________________________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
____________________________________________________________________________________________________
SUMMARY VALUATION ANALYSIS
Range
______________________________
Low High
______________________________
Long-Term Projections
____________________________________________________________________________________________________
<S> <C> <C>
Discounted Cash Flow Analysis
Without Generic Acquisitions $34.57 $38.30
With Generic Acquisitions 36.08 40.71
Present Value of Future Stock Price
Without Generic Acquisitions 32.42 35.66
With Generic Acquisitions 35.17 38.72
_____________________________________________________________________________________________
Average Price Per Share without Generic Acquisition $33.50 $36.98
Average Price Per Share with Generic Acquisitions 35.63 39.71
_____________________________________________________________________________________________
____________________________________________________________________________________________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
____________________________________________________________________________________________________
SUMMARY VALUATION ANALYSIS
Valuation Range
___________________________________
All Cash
Premiums Paid in Minority Squeezeout Transactions Transactions Transactions
_________________________________________________ ____________ ____________
Base Median
Price Premium
_____ _______
<S> <C> <C> <C> <C>
Premium of Final Offer Price over
Pre-Announcement Price $24.625
- All Transactions 25.0% $30.78
- Cash Transactions 24.8% $30.74
Premium of Final Offer Price over $28.000
Initial Offer Price
- All Transactions 4.4% $29.24
- Cash Transactions 10.0% $30.79
______________ _____________
MEAN IMPLIED VALUE $30.01 $30.76
============== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
____________________________________________________________________________________________________
SUMMARY VALUATION ANALYSIS - Selected Minority Squeezeout Transactions
ALL TRANSACTIONS
____________________________________________________________________________________________________
_______________
Median Premium of Final Offer Price over Pre-Announcement Stock Price 25.0%
_______________
Median Premium of Final Offer Price over Initial Offer Price 4.4%
Percent of all Offers Increased 82.0%
____________________________________________________________________________________________________
CASH TRANSACTIONS
____________________________________________________________________________________________________
Premiums
_____________________________________________________________________________________
Initial Offer Final Offer Final Offer Final Offer Price
Price over Target's Price over Target's Price over Initial over Target's Price
Pre-Announ. Pre-Announ. Offer Price Prior to Announ.
Stock Price Stock Price (the "bump") of Final Trans.
___________________ ___________________ ___________________ ____________________
___________________
<S> <C> <C> <C> <C>
Mean 16.0% 25.4% 9.9% 7.9%
Median 14.9% 24.8% 10.0% 6.5%
___________________
High 46.3% 85.4% 26.7% 24.6%
____________________
Low -15.3% -9.2% 1.6% 0.0%
____________________
____________________________________________________________________________________________________
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
____________________________________________________________________________________________________
SUMMARY VALUATION ANALYSIS - VALUATION MATRIX
(in thousands, with the exception of per share value)
Per Share Value $28.00 $28.50 $29.00 $29.50 $30.00 $30.50
____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Equity Value(1) $1,109,349 $1,129,159 $1,148,969 $1,168,779 $1,188,589 $1,208,399
Total Enterprise
Value(2) $1,606,820 $1,626,630 $1,646,440 $1,666,250 $1,686,060 $1,705,870
Net Income
1995(3) 22.2x 22.6x 23.0x 23.4x 23.8x 24.2x
1996(4) 15.9 16.2 16.5 16.8 17.0 17.3
EBITDA
1995(3) 7.4x 7.5x 7.6x 7.7x 7.8x 7.9x
1996(4) 6.1 6.2 6.3 6.3 6.4 6.5
Dividend Yield
LTM 4.7% 4.6% 4.6% 4.5% 4.4% 4.3%
Premium to Pre- ____________________________________________
Announcement Price(5) 13.7% 15.7% 17.8% 19.8% 21.8% 23.9%
____________________________________________
Premium to Initial ____________________________________________
Offer Price (6) 0.0% 1.8% 3.6% 5.4% 7.1% 8.9%
____________________________________________
Premium to Current
Stock Price (7) -9.7% -8.1% -6.5% -4.8% -3.2% -1.6%
_______________________________________________________
<FN>
(1) Equity Value is defined as Share Price multiplied by fully-diluted shares outstanding.
(2) The Total Enterprise Value is calculated as follows: Equity Value plus total debt
(12/31/94) less cash less the anticipated after-tax benefit of the Alascom divestiture
proceeds plus the acquisition cost of the US WEST properties less the debt assumed by AT&T
in the Alascom divestiture.
(3) Excludes Alascom. Figures have not been adjusted to reflect the full year impact of the
US WEST transaction.
(4) Excludes Generic 1 EC acquisitions.
(5) PTI's pre-bid stock price was $24 5/8.
(6) PacifiCorp's initial offer price is $28.
(7) PTI's current stock price is $31 at 2/10/95.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
____________________________________________________________________________________________________
SUMMARY VALUATION ANALYSIS - VALUATION MATRIX
(in thousands, with the exception of per share value)
(continued from previous two pages)
Median EBITDA Multiples
______________________________
Comparable Comparable
Public M&A
Per Share Value $31.00 $31.50 $32.00 $32.50 Companies Transactions
_____________________________________________________________________ ______________________________
<S> <C> <C> <C> <C> <C> <C>
Equity Value(1) $1,228,208 $1,248,018 $1,267,828 $1,287,638 LEC &
1995E Cellular
Total Enterprise _____________ ____________
Value(2) $1,725,679 $1,745,489 $1,765,299 $1,785,109 5.9x 11.8x
Net Income LEC only
1995(3) 24.6x 25.0x 25.4x 25.8x ____________
1996(4) 17.6 17.9 18.2 18.5 9.0x
EBITDA
1995(3) 8.0x 8.1x 8.2x 8.3x
1996(4) 6.6 6.6 6.7 6.8
Dividend Yield
LTM 4.3% 4.2% 4.1% 4.1%
Premium to Pre- ________________________________________________
Announcement Price(5) 25.9% 27.9% 29.9% 32.0%
________________________________________________
Premium to Initial ________________________________________________
Offer Price (6) 10.7% 12.5% 14.3% 16.1%
________________________________________________
Premium to Current
Stock Price (7) 0.0% 1.6% 3.2% 4.8%
_______________________________________________________
<FN>
(1) Equity Value is defined as Share Price multiplied by fully-diluted shares outstanding.
(2) The Total Enterprise Value is calculated as follows: Equity Value plus total debt
(12/31/94) less cash less the anticipated after-tax benefit of the Alascom divestiture
proceeds plus the acquisition cost of the US WEST properties less the debt assumed by AT&T
in the Alascom divestiture.
(3) Excludes Alascom. Figures have not been adjusted to reflect the full year impact of the
US WEST transaction.
(4) Excludes Generic 1 EC acquisitions.
(5) PTI's pre-bid stock price was $24 5/8.
(6) PacifiCorp's initial offer price is $28.
(7) PTI's current stock price is $31 at 2/10/95.
/TABLE
<PAGE>
___________________________________________________________________________
TAB 2
___________________________________________________________________________
<PAGE>
__________________________________________________________________________
IMPLIED DISCOUNT RATES TO FINAL
OFFER PRICE
___________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
___________________________________________________________________________
IMPLIED DISCOUNT RATES TO FINAL OFFER PRICE
Discounted Cash Flow Analysis - with Generic Acquisitions
Potential WACCs
Terminal EBITDA Multiples
_________________________________________________________________
Price 5.50x 5.75x 6.00x 6.25x
___________________________________________________________________________
<S> <C> <C> <C> <C>
$32.50 6.7% 7.6% 8.5% 9.4%
$32.00 6.9% 7.9% 8.8% 9.7%
$31.00 7.4% 8.4% 9.3% 10.2%
$30.00 7.9% 8.9% 9.8% 10.7%
$29.00 8.5% 9.4% 10.4% 11.2%
$28.00 9.0% 10.0% 10.9% 11.8%
_________________________________________________________________
/TABLE
<PAGE>
___________________________________________________________________________
TAB 3
___________________________________________________________________________
<PAGE>
___________________________________________________________________________
PACIFIC TELECOM'S FIVE YEAR PROJECTIONS
___________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
____________________________________________________________________________________________________
PACIFIC TELECOM CONSOLIDATED INCOME STATEMENTS - WITHOUT GENERIC ACQUISITIONS
(dollars in thousands)
1995 1996 1997 1998 1999
__________ __________ __________ __________ __________
<S> <C> <C> <C> <C> <C>
Revenues
Alascom $135,135 $0 $0 $0 $0
Local Operating Companies 337,820 353,866 370,046 387,594 405,480
Pacific Telecom Cable 22,702 24,886 27,209 29,898 32,471
PTI Cellular 32,649 41,504 50,617 59,648 68,152
US WEST Acquisitions 79,005 110,941 112,655 114,812 115,201
Parent and Others 2,196 2,570 2,764 2,962 3,189
________ _______ _______ _______ _______
Total Revenues 609,507 533,767 563,291 594,914 624,493
EBITDA
Alascom 37,572 0 0 0 0
Local Operating Companies 152,625 167,627 180,349 190,689 200,887
Pacific Telecom Cable 4,291 5,564 7,223 9,403 11,221
PTI Cellular 11,061 18,123 24,079 31,264 37,984
US WEST Acquisitions 47,492 69,160 70,126 71,632 72,552
Parent and Others 432 2,186 2,380 2,578 2,805
____________________________________________________________________________________________________
Total EBITDA 253,473 262,660 284,157 305,566 325,449
____________________________________________________________________________________________________
EBIT
Alascom 23,840 0 0 0 0
Local Operating Companies 88,556 95,537 103,629 109,482 115,072
Pacific Telecom Cable 3,287 4,340 5,796 7,843 9,349
PTI Cellular 4,541 11,029 16,155 22,365 28,154
US WEST Acquisitions 27,241 40,836 41,286 40,453 40,705
Parent and Others (144) 1,610 1,804 2,002 2,229
_______ _______ _______ _______ _______
Total EBIT 147,321 153,352 168,670 182,145 195,509
Interest expense, net (38,226) (36,316) (35,165) (31,288) (28,543)
Other (4,210) (3,145) (1,385) 1,852 5,374
_______ _______ _______ _______ _______
Pre-tax 104,885 113,891 132,120 152,709 172,340
Taxes 40,353 44,178 51,616 60,230 68,420
____________________________________________________________________________________________________
Net Income 64,532 69,713 80,504 92,479 103,920
____________________________________________________________________________________________________
Shares outstanding 39,620 39,620 39,620 39,620 39,620
E.P.S. 1.63 1.76 2.03 2.33 2.62
Dividend / Share $1.32 $1.34 $1.38 $1.42 $1.46
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
____________________________________________________________________________________________________
PACIFIC TELECOM CONSOLIDATED INCOME STATEMENTS - WITH GENERIC ACQUISITIONS
(dollars in thousands)
1995 1996 1997 1998 1999
__________ __________ __________ __________ __________
<S> <C> <C> <C> <C> <C>
Revenues
Alascom $135,135 $0 $0 $0 $0
Local Operating Companies 337,820 353,866 370,046 387,594 405,480
Generic Locals(1) 0 73,025 76,017 122,911 125,320
Pacific Telecom Cable 22,702 24,886 27,209 29,898 32,471
PTI Cellular 32,649 41,504 50,617 59,648 68,152
US WEST Acquisitions 79,005 110,941 112,655 114,812 115,201
Parent and Others 2,196 2,570 2,764 2,962 3,189
________ _______ _______ _______ _______
Total Revenues 609,507 606,792 693,308 717,825 749,813
EBITDA
Alascom 37,572 0 0 0 0
Local Operating Companies 152,625 167,627 180,349 190,689 200,887
Generic Locals 0 50,473 53,221 85,600 87,280
Pacific Telecom Cable 4,291 5,564 7,223 9,403 11,221
PTI Cellular 11,061 18,123 24,079 31,264 37,984
US WEST Acquisitions 47,492 69,160 70,126 71,632 72,552
Parent and Others 432 2,186 2,380 2,578 2,805
____________________________________________________________________________________________________
Total EBITDA 253,473 313,133 337,378 391,166 412,729
____________________________________________________________________________________________________
EBIT
Alascom 23,840 0 0 0 0
Local Operating Companies 88,556 95,537 103,629 109,482 115,072
Generic Locals 0 30,027 32,730 51,885 53,177
Pacific Telecom Cable 3,287 4,340 5,796 7,843 9,349
PTI Cellular 4,541 11,029 16,155 22,365 28,154
US WEST Acquisitions 27,241 40,836 41,286 40,453 40,705
Parent and Others (144) 1,610 1,804 2,002 2,229
_______ _______ _______ _______ _______
Total EBIT 147,321 183,379 201,040 234,030 248,686
Interest expense, net (38,226) (58,626) (57,108) (65,002) (60,003)
Other (4,210) (6,313) (4,649) (2,583) 805
_______ _______ _______ _______ _______
Pre-tax 104,885 118,440 139,283 166,445 189,488
Taxes 40,353 45,975 54,444 65,653 75,191
____________________________________________________________________________________________________
Net Income 64,532 72,465 84,839 100,792 114,297
____________________________________________________________________________________________________
Shares outstanding 39,620 39,620 39,620 39,620 39,620
E.P.S. 1.63 1.83 2.14 2.54 2.88
Dividend / Share $1.32 $1.34 $1.38 $1.42 $1.46
</TABLE>
<PAGE>
___________________________________________________________________________
TAB 4
___________________________________________________________________________
<PAGE>
___________________________________________________________________________
VALUATION METHODOLOGIES USING
NEAR-TERM PROJECTIONS
___________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
____________________________________________________________________________________________________
COMPONENT VALUATION ANALYSIS - PUBLIC MARKET VALUE
(dollars in thousands)
__________ __________
Local Exchange Properties(1) Low High
___________________________ __________ __________
<S> <C> <C> <C> <C> <C>
1996 EBITDA(2) $236,787 $236,787
Multiple 4.75x 5.25x
__________ __________
Aggregate Value $1,124,738 $1,243,132
Cellular Properties(3) Value per POP
______________________ __________________
POPS Low High
____ ___ ____
Majority MSAs 603,214 $150 $175 $90,482 $105,562
Minority MSAs 384,300 100 125 38,430 48,038
Majority RSAs 587,538 75 100 44,065 58,754
Minority RSAs 437,735 40 60 17,509 26,264
_________ ____ ____ ________ ________
Total 2,012,787 $95 $119 $190,487 $238,618
Plus: Cellular net PP&E 24,721 24,721
________ ________
Aggregate Cellular Value $215,208 $263,339
North Pacific Cable (80%-100% of Book Value as of 12/31/94) $40,035 $50,044
___________________
Total Aggregate Value $1,379,981 $1,556,515
Less: Debt as of December 31, 1994 (413,214) (413,214)
Less: US WEST Acquisition Costs (357,728) (357,728)
Plus: Cash as of December 31, 1994 8,920 8,920
Plus: Alascom Divesture Proceeds 255,551 255,551
Plus: Debt Assumed by AT&T 17,000 17,000
Equity Value $890,510 $1,067,044
Equity Value per Share - Public Market Value $22.48 $26.93
____________________________________________________________________________________________________
Equity Value per Share - With Minority Squeezeout Premium of 25% $28.10 $33.67
____________________________________________________________________________________________________
<FN>
(1) Includes Existing Local Exchange Companies, US WEST Acquisitions, but excludes generic
acquisitions.
(2) 1996 figures are used in order to obtain the full-year impact of the US West transaction.
(3) No value has been assigned to managed properties.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
____________________________________________________________________________________________________
VALUATION MATRIX
(in thousands, with the exception of per share value)
____________________________________________________________________________________________________
Per Share Value $24.00 $25.00 $26.00 $27.00 $28.00
____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Equity Value(1) $950,871 $990,491 $1,030,110 $1,069,730 $1,109,349
Total Enterprise Value(2) $1,448,342 $1,487,962 $1,527,581 $1,567,201 $1,606,820
Net Income
1995(3) 19.0x 19.8x 20.6x 21.4x 22.2x
______________________________
1996(4) 13.6 14.2 14.8 15.3 15.9
______________________________
EBIDTA
1995(3) 6.7x 6.9x 7.1x 7.3x 7.4x
___________________________________________________________________________
1996(4) 5.5 5.7 5.8 6.0 6.1
___________________________________________________________________________
Dividend Yield
_____________________________________________
LTM 5.5% 5.3% 5.1% 4.9% 4.7%
_____________________________________________
____________________________________________________________________________________________________
___________________
<FN>
(1) Equity Value is defined as Share Price multiplied by fully-diluted shares outstanding.
(2) The Total Enterprise Value is calculated as follows: Equity Value plus total debt
(12/31/94) less cash less the anticipated after-tax benefit of the Alascom divestiture
proceeds plus the acquisition cost of the US WEST properties less the debt assumed by AT&T
in the Alascom divestiture.
(3) Excludes Alascom. Figures have not been adjusted to reflect the full year impact of the
US WEST transaction.
(4) Excludes Generic LEC acquisitions.
</TABLE>
<PAGE>
___________________________________________________________________________
TAB 5
___________________________________________________________________________
<PAGE>
___________________________________________________________________________
VALUATION METHODOLOGIES USING
LONG-TERM PROJECTIONS
___________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
DISCOUNTED CASH FLOW ANALYSIS - PUBLIC MARKET VALUE
WITHOUT THE GENERIC ACQUISITIONS
(dollars in thousands)
Projected
__________________________________________________________________________________________
1995-Full Yr. 1995-Half Yr.(2) 1996 1997 1998 1999
_____________ ________________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C> <C>
EBIT $147,321 $73,661 $153,352 $168,670 $182,145 $195,509
Less: Income taxes(1) 56,680 28,340 59,485 65,895 71,840 77,618
_________ _______ ________ ________ ________ ________
Unlevered After-Tax Income 90,641 45,321 93,867 102,775 110,305 117,891
Plus: Depreciation & Amortization 106,152 53,076 109,308 113,479 123,421 129,940
Less: Capital Expenditures (127,500) (63,750) (117,100) (108,700) (112,100) (104,900)
Less: Cost of Businesses Acquired (357,728) 0 0 0 0 0
Plus: Other Cash Flow Items (12,251) (6,126) (300) (3,700) (10,100) (14,700)
_________ _______ ________ ________ ________ ________
Free Cash Flow ($300,686) $28,521 $85,775 $103,854 $111,526 $128,231
========= ======= ======== ======== ======== ========
_______________________________________________ _______________________________________________________
DISCOUNTED FREE CASH FLOWS DISCOUNTED TERMINAL VALUE
Discount PV of Terminal Multiple of 1999 EBITDA
Rate Cash Flows ________________________________________________________
___________ __________ 5.50x 5.75x 6.00x 6.25x
__________ __________ __________ __________
8.0% $365,431 $1,266,015 $1,323,561 $1,381,107 $1,438,653
8.5% $360,625 1,239,972 1,296,334 1,352,697 1,409,059
9.0% $355,915 1,214,581 1,269,789 1,324,997 1,380,205
9.5% $351,300 1,189,822 1,243,905 1,297,988 1,352,071
10.0% $346,777 1,165,678 1,218,663 1,271,649 1,324,634
_______________________________________________ _______________________________________________________
_______________________________________________________
Adjustments: EQUITY VALUE(2)
___________
$1,132,014 $1,189,560 $1,247,106 $1,304,652
Less: Debt as of 12/31/94 ($413,214) 1,101,164 1,157,527 1,213,889 1,270,251
Less: Cost of US WEST (357,728) 1,071,064 1,126,272 1,181,480 1,236,688
Acquisitions 1,041,690 1,095,773 1,149,856 1,203,939
Less: 1995 First Half Cash (9,961) 1,013,023 1,066,008 1,118,994 1,171,979
Flow(3) _______________________________________________________
Plus: Cash as of 12/31/94 8,920
Plus: Alascom Divestiture 255,551 ________________________________________________________
Proceeds EQUITY VALUE PER SHARE
Plus: Debt assumed by AT&T 17,000
__________ $28.57 $30.02 $31.48 $32.93
Net Debt ($499,432) ____________________________
27.79 29.22 30.64 32.06
27.03 28.43 29.82 31.21
26.29 27.66 29.02 30.39
25.57 26.91 28.24 29.58
________________________________________________________
______________________________________________________________________
EQUITY VALUE PER SHARE APPLYING A MINORITY SQUEEZEOUT PREMIUM OF 25%
$34.57 $38.30
______________________________________________________________________
<FN>
(1) Effective tax rate applied for each year.
(2) Assumes US WEST acquisitions will close on 6/30/95.
(3) Figure equals 1995's first half cash flows, excluding cost of businesses acquired, sale of assets and financings.
(4) Equity Value = PV (Free Cash Flows) + PV (Terminal Value) - Net Debt.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
DISCOUNTED CASH FLOW ANALYSIS - PUBLIC MARKET VALUE
WITH GENERIC ACQUISITIONS
(dollars in thousands)
Projected
__________________________________________________________________________________________
1995-Full Yr. 1995-Half Yr.(2) 1996 1997 1998 1999
_____________ ________________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C> <C.
EBIT $147,321 $73,661 $183,379 $201,040 $234,030 $248,686
Less: Income taxes(1) 56,680 28,340 71,182 78,584 92,311 98,681
_________ _______ ________ ________ ________ ________
Unlevered After-Tax Income 90,641 45,321 112,197 122,456 141,719 150,005
Plus: Depreciation & Amortization 106,152 53,076 129,754 134,330 157,136 164,043
Less: Capital Expenditures (127,496) (63,748) (153,821) (115,925) (142,798) (118,965)
Less: Cost of Businesses Acquired (625,728) (268,000) 0 (165,500) 0 0
Plus: Other Cash Flow Items (12,089) (6,045) (1,143) 2,824 (4,579) (6,044)
_________ _________ ________ ________ ________ ________
Free Cash Flow ($568,520) ($239,396) $86,987 ($21,815) $151,478 $189,039
========= ========= ======== ======== ======== ========
_______________________________________________ _______________________________________________________
DISCOUNTED FREE CASH FLOWS DISCOUNTED TERMINAL VALUE
Discount PV of Terminal Multiple of 1999 EBITDA
Rate Cash Flows ________________________________________________________
___________ __________ 5.50x 5.75x 6.00x 6.25x
__________ __________ __________ __________
8.0% $78,559 $1,605,539 $1,678,518 $1,751,497 $1,824,476
8.5% $74,156 1,572,512 1,643,989 1,715,467 1,786,945
9.0% $69,859 1,540,311 1,610,325 1,680,339 1,750,353
9.5% $65,665 1,508,913 1,577,500 1,646,087 1,714,674
10.0% $61,572 1,478,293 1,545,488 1,612,684 1,679,879
_______________________________________________ _______________________________________________________
_______________________________________________________
Adjustments: EQUITY VALUE(4)
___________
$1,184,666 $1,257,645 $1,330,624 $1,403,603
Less: Debt as of 12/31/94 ($413,214) 1,147,236 1,218,714 1,290,191 1,361,669
Less: Cost of US WEST (357,728) 1,110,738 1,180,752 1,250,767 1,320,781
Acquisitions 1,075,146 1,143,733 1,212,320 1,280,907
Less: 1995 First Half Cash (9,961) 1,040,433 1,107,628 1,174,823 1,242,019
Flow(3) _______________________________________________________
Plus: Cash as of 12/31/94 8,920
Plus: Alascom Divestiture 255,551 ________________________________________________________
Proceeds EQUITY VALUE PER SHARE
Plus: Debt assumed by AT&T 17,000
__________ $29.90 $31.74 $33.58 $35.43
Net Debt ($499,432) ____________________________
28.96 30.76 32.56 34.37
28.04 29.80 31.57 33.34
27.14 28.87 30.60 32.33
26.26 27.96 29.65 31.35
________________________________________________________
______________________________________________________________________
EQUITY VALUE PER SHARE APPLYING A MINORITY SQUEEZEOUT PREMIUM OF 25%
$36.08 $40.71
______________________________________________________________________
<FN>
(1) Effective tax rate applied for each year.
(2) Assumes US WEST acquisitions will close on 6/30/95.
(3) Figure equals 1995's first half cash flows, excluding cost of businesses acquired, sale of assets and financings.
(4) Equity Value = PV (Free Cash Flows) + PV (Terminal Value) - Net Debt.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
____________________________________________________________________________________________________
PRESENT VALUE OF FUTURE STOCK PRICE
WITHOUT THE GENERIC ACQUISITIONS
_______________________________________________________
1999 Projected Earnings per Share $2.62
_______________________________________________________
PRESENT VALUE OF STOCK PRICE
_______________________________________________________________________
Multiple of 1999 Projected Earnings per Share
Discount _____________________________________________
Rate 15.0x 15.5x 16.0x 16.5x 17.0x
____________ _____ _____ _____ _____ ______
<S> <C> <C> <C> <C> <C>
11.5% $22.83 $23.59 $24.35 $25.11 $25.87
12.0% 22.32 23.07 23.81 24.56 25.30
12.5% 21.83 22.56 23.29 24.02 24.74
13.0% 21.35 22.07 22.78 23.49 24.20
13.5% 20.89 21.58 22.28 22.98 23.67
_______________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
PRESENT VALUE OF DIVIDENDS
______________________________________________________________________________________
Discount PV of
Rate Dividends 1995 1996 1997 1998 1999
___________ _________ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C>
11.5% $5.02 $1.32 $1.34 $1.38 $1.42 $1.46
12.0% $4.96
12.5% $4.90
13.0% $4.84
13.5% $4.78
______________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
TOTAL VALUE PER SHARE
_______________________________________________________________________
Multiple of 1999 Projected Earnings Per Share
Discount ___________________________________________________
Rate 15.0x 15.5x 16.0x 16.5x 17.0x
__________ ________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C>
11.5% $27.85 $28.61 $29.38 $30.14 $30.90
_______________________________
12.0% 27.28 28.03 28.77 29.52 30.26
12.5% 26.73 27.46 28.19 28.91 29.64
13.0% 26.19 26.90 27.62 28.33 29.04
_______________________________
13.5% 25.67 26.36 27.06 27.75 28.45
_______________________________________________________________________
TOTAL VALUE PER SHARE APPLYING A MINORITY SQUEEZEOUT PREMIUM OF 25%(1)
_______________________________________________________________________
Multiple of 1999 Projected Earnings per Share
Discount ___________________________________________________
Rate 15.0x 15.5x 16.0x 16.5x 17.0x
________ ________ ________ ________ ________ ________
11.5% $33.56 $34.51 $35.46 $36.41 $37.37
______________________________
12.0% $32.87 $33.80 $34.73 $35.66 $36.59
12.5% $32.19 $33.10 $34.01 $34.92 $35.83
13.0% $31.53 $32.42 $33.31 $34.20 $35.09
_______________________________
13.5% $30.89 $31.76 $32.63 $33.50 $34.37
_______________________________________________________________________
<FN>
(1) Minority squeezeout premiums have not been applied to the present value of the dividends.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
____________________________________________________________________________________________________
PRESENT VALUE OF FUTURE STOCK PRICE
WITH GENERIC ACQUISITIONS
_______________________________________________________
1999 Projected Earnings per Share $2.88
_______________________________________________________
PRESENT VALUE OF DIVIDENDS
_______________________________________________________________________
Multiple of 1999 Projected Earnings per Share
Discount _____________________________________________
Rate 15.0x 15.5x 16.0x 16.5x 17.0x
____________ _____ _____ _____ _____ ______
<S> <C> <C> <C> <C> <C>
11.5% $25.11 $25.95 $26.78 $27.62 $28.46
12.0% 24.55 25.37 26.19 27.01 27.83
12.5% 24.01 24.81 25.61 26.41 27.22
13.0% 23.49 24.27 25.05 25.84 26.62
13.5% 22.97 23.74 24.51 25.27 26.04
_______________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
PRESENT VALUE OF DIVIDENDS
______________________________________________________________________________________
Discount PV of
Rate Dividends 1995 1996 1997 1998 1999
___________ _________ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C>
11.5% $5.02 $1.32 $1.34 $1.38 $1.42 $1.46
12.0% $4.96
12.5% $4.90
13.0% $4.84
13.5% $4.78
______________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
TOTAL VALUE PER SHARE
_______________________________________________________________________
Multiple of 1999 Projected Earnings Per Share
Discount ___________________________________________________
Rate 15.0x 15.5x 16.0x 16.5x 17.0x
__________ ________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C>
11.5% $30.13 $30.97 $31.81 $32.64 $33.48
_______________________________
12.0% 29.51 30.33 31.15 31.97 32.79
12.5% 28.91 29.71 30.51 31.31 32.11
13.0% 28.32 29.11 29.89 30.67 31.46
_______________________________
13.5% 27.75 28.52 29.28 30.05 30.82
_______________________________________________________________________
TOTAL VALUE PER SHARE APPLYING A MINORITY SQUEEZEOUT PREMIUM OF 25%(1)
_______________________________________________________________________
Multiple of 1999 Projected Earnings per Share
Discount ___________________________________________________
Rate 15.0x 15.5x 16.0x 16.5x 17.0x
________ ________ ________ ________ ________ ________
11.5% $36.41 $37.46 $38.50 $39.55 $40.60
______________________________
12.0% 35.65 36.68 37.70 38.72 39.75
12.5% 34.91 35.92 36.92 37.92 38.92
13.0% 34.20 35.17 36.15 37.13 38.11
_______________________________
13.5% 33.50 34.45 35.41 36.37 37.32
_______________________________________________________________________
<FN>
(1) Minority squeezeout premiums have not been applied to the present value of the dividends.
/TABLE
<PAGE>
___________________________________________________________________________
TAB 6
___________________________________________________________________________
<PAGE>
___________________________________________________________________________
VALUE PER SHARE IMPACT
OF GENERIC ACQUISITIONS
___________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
___________________________________________________________________________
VALUE PER SHARE IMPACT OF GENERIC ACQUISITIONS - PUBLIC MARKET VALUES
Discounted Cash Flow
EBITDA Multiples
Discount _______________________________________________________
Rate 5.50x 5.75x 6.00x 6.25x
______________________________________________________________________
<S> <C> <C> <C> <C>
8.0% $1.33 $1.72 $2.11 $2.50
___________________________
8.5% 1.16 1.54 1.93 2.31
9.0% 1.00 1.38 1.75 2.12
9.5% 0.84 1.21 1.58 1.94
___________________________
10.0% 0.69 1.05 1.41 1.77
Present Value of Future Stock Price
Multiple of 1999 Projected Earnings per Share
Discount _______________________________________________________
Rate 15.0x 15.5x 16.0x 16.5x 17.0x
______________________________________________________________________
11.5% $1.52 $1.59 $2.43 $2.51 $2.58
_____________________________
12.0% 1.49 1.56 2.38 2.45 2.53
12.5% 1.45 1.53 2.33 2.40 2.47
13.0% 1.42 1.49 2.27 2.35 2.42
_____________________________
13.5% 1.39 1.46 2.22 2.29 2.36
/TABLE
<PAGE>
___________________________________________________________________________
TAB 7
___________________________________________________________________________
<PAGE>
___________________________________________________________________________
TRADING MULTIPLE ANALYSIS OF
SELECTED PUBLICLY TRADED
COMPARABLE COMPANIES
_____________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
TRADING MULTIPLE ANALYSIS OF RBOCS AND SELECTED INDEPENDENT LECS
(In millions, except share price)
Equity Market Value
Current Stock Price/ as a Multiple of
Stock Price ______________________ ___________________
____________________ EPS(1)(2)
LTM LTM Equity Enterprise ______________________ LTM Cash Book
Comparable Telephone Companies Current High Low Value Value LTM 1994E 1995E Flow(3) Value
______________________________ _______ ____ ___ ______ __________ ___ _____ _____ ________ _____
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Regional Bell Operating Companies
& GTE
Ameritech $41.625 $43.125 $36.250 $22,913 $29,400 13.7x 13.6x 12.6x 5.9x 2.8x
Bell Atlantic 50.250 58.375 48.375 21,920 30,952 15.4 14.2 13.1 5.6 3.5
BellSouth 55.375 63.500 50.500 27,479 36,113 13.1 13.5 12.4 5.8 1.9
GTE 30.875 34.875 29.500 29,702 44,745 12.4 13.1 12.1 6.0 2.9
NYNEX 36.750 41.375 33.250 15,511 25,572 14.4 12.5 11.0 4.9 1.8
Pacific Telesis(4) 28.500 33.703 28.000 12,086 17,187 11.3 10.4 10.6 4.7 2.3
Southwestern Bell 40.750 44.375 36.750 24,436 31,309 15.2 14.6 13.1 7.2 3.0
US WEST 36.375 44.875 34.625 16,584 23,588 12.7 12.9 12.5 4.7 2.5
______________________________________________________________________________
Mean $21,329 $29,858 13.5x 13.1x 12.2x 5.6x 2.6x
Median 22,416 30,176 13.4 13.3 12.5 5.7 2.7
______________________________________________________________________________
Lower Growth Independents
Lincoln Telecommunications $15.750 $20.000 $13.750 $510 $568 16.2x 14.1x 13.1x 7.9x 2.7x
Southern New England Telecom 33.000 36.875 28.250 2,126 3,091 12.4 12.1 11.8 6.0 2.3
Telephone & Data Systems 45.500 50.000 35.500 2,504 3,090 58.8 47.9 36.1 11.9 1.9
TDS-Rural LEC only(5) 45.500 50.000 35.500 280 603 7.0 6.9 7.1 2.2 1.5
______________________________________________________________________________
Mean $972 $1,421 11.9x 11.0x 10.7x 5.4x 2.1x
Median 510 603 12.4 12.1 11.8 6.0 2.3
______________________________________________________________________________
Higher Growth Independents
AllTel Corporation $30.500 $31.375 $23.125 $5,722 $7,556 19.6x 18.5x 16.1x 7.3x 3.5x
Century Telephone 30.500 32.250 21.875 1,630 2,313 19.6 19.6 17.0 9.1 2.6
Cincinnati Bell 18.125 20.125 15.375 1,194 1,771 21.8 17.4 15.4 6.0 2.2
Frontier 21.125 25.250 20.250 1,546 1,865 15.9 14.4 13.2 6.6 1.9
Citizens Utilities 13.750 16.891 12.375 2,828 3,823 17.4 17.2 16.8 8.3 1.8
Citizens Utilities-Rural LEC
only(6) 13.750 16.891 12.375 2.778 2,970 NA 23.0 16.0 NA NA
______________________________________________________________________________
Mean $2,574 $3,295 15.4x 18.6x 15.5x 5.8x 2.1x
Median 1,630 2,313 19.6 18.5 16.0 6.6 2.2
______________________________________________________________________________
__________________________________________________________________________________________________________________________________
Pacific Telecom(7) $30.125 $30.750 $20.750 $1,194 $1,630 15.1x 14.9x 19.1x 6.4x 1.8x
Pacific Telecom-Pre-announcement 24.625 976 1,412 12.3 12.2 15.6 5.3 1.5
__________________________________________________________________________________________________________________________________
Notes
_____
<FN>
*Financial information as of 9/30/94
(1) LTM earnings are from continuing operations and exclude restructuring charges, extraordinary gains/losses, and other
nonrecurring items
(2) Earnings estimates were obtained from Smith Barney Research Reports for the RBOCs. All others are based on I/B/E/S as of
12/18/94 with the exception of Pacific Telecom which we have obtained from the Company
(3) Cash flow equals net income from continuing operations plus depreciation & amortization, deferred taxes and minority
interests, less equity income from affiliates
(4) Pacific Telesis results pro forma for the spin-off of AirTouch Communications (PacTel Corporation's new name)
(5) Figures for TDS have been adjusted for US Cellular and American Paging
(6) Figures for Citizens Utilities have been adjusted for Centennial Cellular and Century Communications investments.
Adjustments were also made for the electric, water and gas segments of the business in order to arrive at pure-play rural LEC
company
(7) 1994E and 1995E EBITDA figures were obtained from the Company
/TABLE
<PAGE>
<TABLE>
<CAPTION>
(TABLE CONTINUED FROM PREVIOUS TWO PAGES) Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
TRADING MULTIPLE ANALYSIS OF RBOCS AND SELECTED INDEPENDENT LECS
(In millions, except share price)
Enterprise Value as a Multiple of
___________________________________________________
LTM 1994E 1995E Access
Comparable Telephone Companies Revenues EBITDA EBITDA EBITDA EBIT Lines
______________________________ ________ ______ ______ ______ ____ ______
<S> <C> <C> <C> <C> <C> <C>
Regional Bell Operating Companies
& GTE
Ameritech 2.4x 5.8 5.8 5.5 10.4x 1.7x
Bell Atlantic 2.3 5.8 5.7 5.2 11.3 1.7
BellSouth 2.2 5.1 5.0 4.7 9.4 1.9
GTE 2.3 5.5 5.4 5.2 9.4 2.2
NYNEX 1.9 5.3 5.4 4.7 11.4 1.6
Pacific Telesis(4) 1.9 4.4 4.3 4.2 8.1 1.2
Southwestern Bell 2.8 6.6 6.5 5.9 11.8 2.4
US WEST 2.2 5.2 5.1 4.7 9.4 1.7
______________________________________________________
2.2x 5.5 5.4x 5.0x 10.2x 1.8x
2.2 5.4 5.4 5.0 9.9 1.7
______________________________________________________
Lower Growth Independents
Lincoln Telecommunications 2.9x 6.2 5.8 5.5 9.4x 2.4x
Southern New England Telecom 1.8 4.5 4.4 4.4 8.5 1.6
Telephone & Data Systems 4.4 12.5 12.0 8.9 32.2 8.7
TDS-Rural LEC only(5) 2.0 3.8 3.8 3.5 7.1 8.7
______________________________________________________
2.2x 4.8 4.7x 4.5x 8.3x 4.2x
2.0 4.5 4.4 4.4 8.5 2.4
______________________________________________________
Higher Growth Independents
AllTel Corporation 2.7x 7.9 7.7 7.2 12.2x 4.8x
Century Telephone 4.5 9.1 8.4 7.8 14.9 5.3
Cincinnati Bell 1.5 5.9 5.4 5.1 13.0 2.1
Frontier 1.9 5.5 5.2 5.0 8.6 2.0
Citizens Utilities 3.3 7.9 NM NM 12.4 11.3
Citizens Utilities-Rural LEC
only(6) NA NA NM NM NA 11.3
______________________________________________________
2.1x 5.7x 5.3x 5.0x 9.8x 5.1x
1.9 5.9 5.4 5.1 12.2 4.8
______________________________________________________
__________________________________________________________________________________________________________________________________
Pacific Telecom(7) 2.3x 5.9 6.0 6.5 10.1x 4.1x
Pacific Telecom-Pre-announcement 2.0 5.1 5.2 5.7 8.7 3.5
__________________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
OPERATING STATISTICS OF RBOCS AND SELECTED INDEPENDENT LECS
(In millions, except share price, access lines and cellular POPS)
Revenues EBITDA EBIT Net Income(1)
________________ _______________ _______________ ____________________________________
5-Year Margin Margin Margin 5-Year 5 Yr Est.
Comparable Telephone Companies LTM CAGR LTM % LTM % LTM % CAGR Growth(2)
______________________________ _______ ______ ______ ______ ______ ______ ______ ______ ______ _________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Regional Bell Operating Companies
& GTE
Ameritech $12,275 3.4% $5,072 41.0% $2,814 22.9% $1,665 13.6% 4.7% 6.6%
Bell Atlantic(3) 13,500 3.5% 5,367 39.8% 2,745 20.3% 1,424 10.5% 3.0% 7.0%
BellSouth 16,575 3.2% 7,109 42.9% 3,861 23.3% 2,092 12.6% 1.3% 6.9%
GTE 19,759 2.8% 8,160 41.3% 4,758 24.1% 2,384 12.1% 9.0% 7.4%
NYNEX(3) 13,309 1.2% 4,859 36.5% 2,241 16.8% 1,064 8.0% -2.6% 5.1%
Pacific Telesis(4) 9,176 0.4% 3,901 42.5% 2,133 23.2% 1,072 11.7% -3.0% 4.2%
Southwestern Bell 11,309 4.8% 4,725 41.8% 2,651 23.4% 1,610 14.2% 6.2% 8.7%
US WEST(5) 10,780 3.0% 4,505 41.8% 2,497 23.2% 1,276 11.8% 1.8% 6.5%
__________________________________________________________________________________________
Mean 2.8% 40.9% 22.2% 11.8% 2.6% 6.5%
Median 3.1% 41.5% 23.2% 12.0% 2.4% 6.8%
__________________________________________________________________________________________
Lower Growth Independents
Lincoln Telecommunications $194 1.0% $91 47.1% $60 31.0% $36 18.3% 5.8% 7.8%
Southern New England Telecom 1,707 1.0% 687 40.2% 364 21.3% 171 10.0% 1.2% 5.8%
Telephone & Data Systems(6) 709 24.7% 247 34.9% 96 13.5% 42 5.9% 25.3% 28.6%
__________________________________________________________________________________________
Mean 8.9% 40.7% 22.0% 11.4% 10.8% 14.0%
Median 1.0% 40.2% 21.3% 10.0% 5.8% 7.8%
__________________________________________________________________________________________
Higher Growth Independents
AllTel Corporation $2,844 11.5% $950 33.4% $618 21.7% $296 10.4% 11.5% 11.2%
Century Telephone 512 18.5% 254 49.7% 155 30.3% 84 16.5% 25.6% 14.1%
Cincinnati Bell 1,192 8.3% 300 25.1% 136 11.4% 55 4.6% -10.6% 15.8%
Frontier 979 11.9% 351 35.9% 216 22.1% 105 10.7% 7.1% 12.3%
Citizens Utilities(7) 1,159 15.4% 478 41.2% 309 26.7% 173 14.9% 10.2% 10.0%
__________________________________________________________________________________________
Mean 13.1% 37.1% 22.4% 11.4% 8.8% 12.7%
Median 11.9% 35.9% 22.1% 10.7% 10.2% 12.3%
__________________________________________________________________________________________
_______________________________________________________________________________________________________________________________
Pacific Telecom $715 4.8% $277 38.7% $162 22.6% $79 11.1% -0.1% 7.0%
_______________________________________________________________________________________________________________________________
Notes
_____
<FN>
* Financial information as of 9/30/94
CAGR = Compound Annual Growth Rate
(1) LTM net income is from continuing operations and excludes restructuring charges, extraordinary gains/losses, and other
nonrecurring item.
(2) EPS growth estimates were obtained from Bloomberg.
(3) Company shown reclassified its historical operating revenues in 1993. The 1988 amount used to calculate 5-year CAGR does not
reflect the reclassification.
(4) Pacific Telesis results pro forma for the spin-off of AirTouch Communications (PacTel Corporation's new name). Cellular POPS
shown here represent those of AirTouch Communications and include international POPS.
(5) 1988 revenues used to calculate 5-year CAGR are pro forma for US WEST's discontinuance of its Capital Assets segment.
(6) TDS conducts substantially all of its cellular operations through US Cellular. Cellular POPS shown here represent those of
US Cellular.
(7) Represents the financial results from October 1, 1993 to the dates of acquisition for all the GTE Telephone Properties
Source: Citizens' January 1995 Red Herring acquired through Sept. 30, 1994 and for the yet to be acquired GTE properties and
AllTel Properties, in addition to the recent equity offering of 15 MM shares
/TABLE
<PAGE>
<TABLE>
<CAPTION>
(TABLE CONTINUED FROM PREVIOUS TWO PAGES) Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
OPERATING STATISTICS OF RBOCS AND SELECTED INDEPENDENT LECS
(In millions, except share price, access lines and cellular POPS)
(In thousands) Cellular
Cellular Access Leverage Dividend Dividend
Comparable Telephone Companies POPS Lines Factor Yield Yield
______________________________ ________ ______ ________ ________ ________
<S> <C> <C> <C> <C> <C>
Regional Bell Operating Companies
& GTE
Ameritech 20,500 17,560 1.2 4.6% 63.1%
Bell Atlantic(3) 31,589 18,645 1.7 5.5% 84.7%
BellSouth 38,845 19,333 2.0 5.0% 65.5%
GTE 40,230 20,065 2.0 6.1% 75.2%
NYNEX(3) 25,943 16,130 1.6 6.4% 92.4%
Pacific Telesis(4) 81,279 14,873 5.5 7.6% 85.7%
Southwestern Bell 32,180 13,238 2.4 3.9% 59.0%
US WEST(5) 18,500 13,843 1.3 5.9% 74.3%
__________________________________________________
2.2 5.6% 75.0%
1.8 5.7% 74.7%
__________________________________________________
Lower Growth Independents
Lincoln Telecommunications 510 238 2.1 3.3% 47.5%
Southern New England Telecom 3,257 1,937 1.7 5.3% 66.1%
Telephone & Data Systems(6) 23,725 356 66.6 0.8% 44.7%
__________________________________________________
23.5 3.1% 52.8%
2.1 3.3% 47.5%
__________________________________________________
Higher Growth Independents
AllTel Corporation 7,894 1,576 5.0 2.9% 56.2%
Century Telephone 7,093 435 16.3 1.0% 20.2%
Cincinnati Bell 2,290 848 2.7 4.4 94.9%
Frontier 2,080 932 2.2 3.8% 54.8%
Citizens Utilities(7) NA 339 0.0 5.7% 94.9%
__________________________________________________
5.3 3.6% 64.2%
2.7 3.8% 56.2%
__________________________________________________
_______________________________________________________________________________________
Pacific Telecom 2,013 399 5.0 4.4% 66.1%
_______________________________________________________________________________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
MARKET VALUATION ANALYSIS OF CELLULAR COMPANIES
(In thousands)
Most Comparable
___________________________________________
U.S. CommNet Centennial LIN Broad- Cellular Vanguard
Cellular Cellular Inc. Cellular Casting Comm. Cellular
__________ _____________ __________ __________ __________ ________
<S> <C> <C> <C> <C> <C> <C>
Market Data
Current POPs Owned 23,642 3,062 4,100 27,200 7,749 6,455
POP Profile
% Markets 1-10 3.6% 0.0% 2.8% 98.6% 29.6% 0.0%
% Markets 11-50 3.5% 0.0% 9.9% 0.0% 40.2% 0.0%
% Markets 51-305 29.7% 17.8% 71.8% 0.7% 28.1% 91.3%
% RSA 57.5% 82.2% 15.5% 0.7% 2.1% 8.7%
__________ ________ ________ __________ __________ ________
94.3% 100.0% 100.0% 100.0% 100.0% 100.0%
Ownership
% Majority 80.9% 64.3% 71.5% 81.2% 96.5% 84.4%
% Minority 19.1% 35.7% 28.5% 18.8% 3.5% 15.6%
__________ ________ ________ __________ __________ ________
Total Ownership 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Price/Share Data
Price Per Share $32.000 $26.875 $16.125 $131.750 $51.250 $25.500
Fully Diluted Shares Outstanding 76,907 11,713 11,957 51,524 42,540 25,602
__________ ________ ________ __________ __________ ________
Equity Value $2,461,032 $314,791 $192,807 $6,788,294 $2,180,175 $652,856
__________ ________ ________ __________ __________ ________
Asset Valuation
Add: Total Debt 255,695(3) 229,227 250,000 3,008,876(4) 349,228 273,652
Less: Net Prop., Plant & Equip. 258,547 57,462 34,331 347,320(6) 149,788 84,037
Working Capital(12) 2,245 47,063 61,139 235,308 224,955(11) (8,366)
Other Assets 0 8,349(7) 688,890(8) 0 0
Options Proceeds 887 6,996 3,128 103,330 43,083 40,405
__________ ________ ________ __________ __________ ________
Implied Cellular Market
Franchise Value $2,455,048 $432,497 $335,860 $8,422,322 $2,111,577 $810,432
========== ======== ======== ========== ========== ========
____________________________________________________________________________________
Implied Franchise Value per POP $103.8 $141.3 $81.9 $309.6 $272.5 $125.5
____________________________________________________________________________________
Implied Total Value per POP $114.8 $160.0 $90.3 $322.4 $291.8 $138.6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(TABLE CONTINUED FROM PREVIOUS TWO PAGES) Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
MARKET VALUATION ANALYSIS OF CELLULAR COMPANIES
(In thousands)
Contel AirTouch
Cellular Comm.
__________ ___________
<S> <C> <C>
Market Data
Current POPs Owned 24,210 73,300(1)
POP Profile
% Markets 1-10 14.7% 58.0%
% Markets 11-50 25.4% 24.1%
% Markets 51-305 39.5% 16.0%
% RSA 20.4% 1.9%
__________ ___________
100.0% 100.0%
Ownership
% Majority 54.2% 83.8%(2)
% Minority 45.8% 16.2%
__________ ___________
Total Ownership 100.0% 100.0%
Price/Share Data
Price Per Share $25.000 $29.750
Fully Diluted Shares Outstanding 99,951 492,652
__________ ___________
Equity Value $2,498,768 $14,656,385
__________ ___________
Asset Valuation
Add: Total Debt 1,990,343 83,900(5)
Less: Net Prop., Plant & Equip. 533,553 764,900
Working Capital(12) (78,186) 12,381
Other Assets 0 452,700(9)
Options Proceeds 1,894 24,292(10)
__________ ___________
Implied Cellular Market
Franchise Value $4,031,850 $13,486,013
========== ===========
Implied Franchise Value per POP $166.5 $179.1
Implied Total Value per POP $188.6 $189.3
<PAGE>
Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
MARKET VALUATION ANALYSIS OF CELLULAR COMPANIES
Notes:
<FN>
(1) Includes 40.4 million international POPs.
(2) Figures are for U.S. market only. AirTouch generates 53.7% of its POPs internationally.
(3) Involves revolving credit agreement and redeemable preferred stock.
(4) Includes $1,339 million of redeemable preferred stock.
(5) Includes amounts due to affiliates and non-affiliates.
(6) Assumes cellular comprises 85% of PP&E and broadcasting represents 15%.
(7) Represents asset value of mobile radio and paging business as of 5/31/93.
(8) Represents Lin's television stations valued at 10x cash flow.
(9) Represents AirTouch's paging service at 9x operating cash flow.
(10) Estimated option value based on 1.3 million options outstanding on an average exercise price of $18.69.
(11) Includes $56.1 million note receivable from Cellular Communications of Puerto Rico.
(12) Excludes short-term debt.
/TABLE
<PAGE>
___________________________________________________________________________
TAB 8
___________________________________________________________________________
<PAGE>
__________________________________________________________________________
ACQUISITION MULTIPLE ANALYSIS
OF SELECTED ACQUIRED COMPANIES
_____________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
SUMMARY ANALYSIS OF SELECTED LEC ACQUISITIONS
(Dollars in thousands)
Purchase Price as a Multiple of
_______________________________________________
Ann Date Target/ Purchase Transaction Net(c) Forward Proj. Cash Book
Eff Date Acquiror Price (a) Value (b) Income N.I. (d) N.I. (e) Flow (f) Value
________ _______________________________________ __________ ___________ ______ ________ ________ ________ _____
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/29/94 AllTel Corporation $258,000 $292,000 NA NA NA NA 2.4 x
Pending Citizens Utilities Company (g)
05/19/93 GTE Telephone Ops - Access Lines $1,104,000 $1,104,000 34.3 x NA NA 10.9 x 2.8 x
Pending Citizens Utilities Company (h)
02/03/93 GTE - Georgia Telephone Operations $440,000 $545,000 15.7 NA NA 6.6 3.4
11/01/93 AllTel Corp (i)
11/21/91 Central Telephone Co. of OH (Centel) $120,000 $134,604 20.6 NA NA 10.4 4.1
04/01/92 Century Telephone Enterprises
01/10/91 Centel - MN, IA Telephone Operations $218,465 $252,537 31.6 NA NA 11.5 3.9
08/07/91 Rochester Telephone Corp. (j)
01/10/91 Centel - Iowa Telephone Operations $78,600 $91,218 27.5 NA NA 10.7 3.6
08/07/91 Rochester Telephone Corp. (k)
01/10/91 Centel - Minnesota Telephone Operations $139,865 $161,319 34.5 NA NA 11.9 4.1
06/24/91 Rochester Telephone Corp. (l)
_________________________________________________
Median 29.6 x NA NA 10.8 x 3.8 x
Mean 27.4 NA NA 10.3 3.6
High 34.5 NA NA 11.9 4.1
Low 15.7 NA NA 6.6 2.8
_________________________________________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(TABLE CONTINUED FROM PREVIOUS PAGE) Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
SUMMARY ANALYSIS OF SELECTED LEC ACQUISITIONS
(Dollars in thousands)
Transaction Value as a Multiple of
_________________________________________ Cellular
Ann Date Target/ Access Leverage
Eff Date Acquiror Revs. EBIT EBITDA Assets Lines Factor
________ _______________________________________ _____ ______ ______ ______ ______ ________
<S> <C> <C> <C> <C> <C> <C> <C>
11/29/94 AllTel Corporation 2.4 x NA NA NA $2,662 NM
Pending Citizens Utilities Company (g)
05/19/93 GTE Telephone Ops - Access Lines 3.1 15.1 x 7.9 x 1.4x 2,208 NM
Pending Citizens Utilities Company (h)
02/03/93 GTE - Georgia Telephone Operations 3.2 12.1 6.4 NA 2,868 NM
11/01/93 AllTel Corp (i)
11/21/91 Central Telephone Co. of OH (Centel) 3.4 14.2 9.4 1.8 2,137 NM
04/01/92 Century Telephone Enterprises
01/10/91 Centel - MN, IA Telephone Operations 3.0 19.8 9.5 1.8 1,871 NM
08/07/91 Rochester Telephone Corp. (j)
01/10/91 Centel - Iowa Telephone Operations 3.4 17.0 8.6 1.6 1,824 NM
08/07/91 Rochester Telephone Corp. (k)
01/10/91 Centel - Minnesota Telephone Operations 3.1 21.7 10.1 1.8 1,898 NM
06/24/91 Rochester Telephone Corp. (l)
___________________________________________
3.2 x 16.1 x 9.0 x 1.8 x $2,137
3.1 16.6 8.6 1.7 2,210
3.4 21.7 10.1 1.8 2,868
2.4 12.1 6.4 1.4 1,824
___________________________________________
<PAGE>
Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
SUMMARY ANALYSIS OF SELECTED LEC ACQUISITIONS
(Dollars in thousands)
Notes:
_____
<FN>
Financial information shown for the targets is the latest twelve months as of the announcement date of the transaction.
NA = Not Available; NM = Not Meaningful
(a) Aggregate in cash or securities paid for the outstanding common equity as well as for any convertible securities and options.
(b) Cost of acquiring stock, convertible securities and options less cash and cash equivalents plus preferred stock, short term
and long term debt.
(c) Net income from continuing operations and before extraordinary items.
(d) Estimated net income for current year.
(e) Projected net income for the year following current year.
(f) Net income before extraordinary items plus depreciation, amortization and deferred taxes.
(g) Under the agreement, Citizens has agreed to turn over the operations of its telephone business to AllTel under a long-term
contract. The purchase price also includes a cable television system with 1,000 subscribers and Citizens will transfer 3,600
of its telephone access lines to AllTel.
(h) Citizens Utilities acquired the Idaho, Tennessee, Utah and West Virginia GTE telephone properties (189,000 access lines) on
December 31, 1993. On June 30, 1994, Citizens completed the purchase of the New York GTE telephone properties (270,000
access lines). The remainder of the properties are expected to be purchased in the second half of 1994.
(i) AllTel paid $440 million in cash and exchanged their telephone operations in Indiana, Michigan and Illinois, with a net book
value of approximately $105 million, for the GTE Georgia operations. Figures used in calculating multiples of purchase price
and transaction value include the results of the GTE Georgia operations less the financial results of the AllTel properties
sold to GTE. Where financial results for the AllTel properties were not available, it is assumed that AllTel's margins (e.g.
EBIT margin) are the same as those of the FTE properties.
(j) Combined purchase price, transaction value and financial results for the two transactions listed below. See note "k" for the
calculation of the purchase price for the Centel Minnesota properties.
(k) Because year end 1990 financial results for the Centel Iowa properties were not available, figures shown here were calculated
by annualizing the quarter ended March 31, 1991 results.
(l) Purchase price includes approximately $21.4 million in cash, 2,885,000 shares of Rochester common stock (at $29 per share,
1/10/91 closing price) and 435,000 Cellular POPs at $80 per POP.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
____________________________________________________________________________________________________
ANALYSIS OF ADDITIONAL LEC ACQUISITIONS*
(Dollars in thousands)
Midpoint Multiple Midpoint Multiple
Private Transaction Market Buyer x Book Value x EBITDA
________________________________ __________ _________________ _________________
<S> <C> <C> <C>
US WEST Colorado PTI 1.6 x 5.8 x
US WEST Montana Consortium 1.7 8.1
US WEST Wyoming Consortium 1.7 7.1
US WEST Oregon PTI 1.5 5.5
US WEST Washington PTI 1.6 6.1
Northwest PTI 2.5 9.6
Missouri Telephone AllTel 3.0 10.7
ATU PTI 1.6 10.0
__________________________________
Median 1.6 x 7.6 x
Mean 1.9 7.9
__________________________________
</TABLE>
<TABLE>
<CAPTION>
Cost per Midpoint Multiple Midpoint Multiple
Private Transactions (POTS only) Access Line x Book Value x EBITDA
________________________________ ___________ _________________ _________________
<S> <C> <C> <C>
Urban $1,958 3.1 x 10.0 x
Volcano 3,881 4.5 8.9
ATU 3,016 1.6 12.5
Viroqua 2,512 3.8 8.9
Lakeshore 1,781 3.0 12.4
North-West 2,492 2.5 9.6
Turtle Lake 1,617 3.8 8.2
Postville 2,042 2.8 6.1
Thorp 1,386 1.3 6.2
Delta 2,108 2.6 6.9
Minot 2,283 2.9 7.6
Wayside 1,795 2.2 8.9
Farmers 4,444 1.8 8.3
Mid-Plains 2,784 3.9 10.5
Northland 2,745 3.8 9.6
Missouri 2,510 3.0 10.7
Arizona 4,900 2.0 9.6
Helix Telephone 5,199 2.1 9.2
Casco 3,420 2.4 11.8
Rib Lake 3,104 3.3 7.6
____________________________________________________
Median $2,511 2.9 x 9.1 x
Mean 2,799 2.8 9.2
____________________________________________________
* Information provided by Pacific Telecom, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
SUMMARY ANALYSIS OF SELECTED LEC AND CELLULAR ACQUISITIONS
(Dollars in thousands)
Purchase Price as a Multiple of
_______________________________________________
Ann Date Target/ Purchase Transaction Net(c) Forward Proj. Cash Book
Eff Date Acquiror Price (a) Value (b) Income N.I. (d) N.I. (e) Flow (f) Value
________ _______________________________________ __________ ___________ ______ ________ ________ ________ _____
<S> <C> <C> <C> <C> <C> <C> <C> <C>
05/27/92 Centel Corp. $2,920,963 $4,261,016 48.7 x 48.3 x 37.1 x 10.8 x 2.4 x
03/09/93 Sprint Corp. (g)
06/06/92 SLT Communications Inc. $159,500 $209,542 44.5 NA NA 12.7 6.2
01/04/93 AllTel Corp. (h)
09/24/92 San Marcos Telephone and SM Telecorp $84,016 $101,753 60.0 NA NA 17.5 4.7
04/08/93 Century Telephone Enterprises (i)
07/12/90 Contel Corp. $6,379,107 $10,150,017 26.3 31.4 27.2 8.4 3.8
03/14/91 GTE Corp. (j)
_________________________________________________
Median 46.6 x 39.8 x 32.2 x 11.8 x 4.3 x
Mean 44.9 39.8 32.2 12.4 4.3
High 60.0 48.3 37.1 17.5 6.2
Low 26.3 31.4 27.2 8.4 2.4
_________________________________________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(TABLE CONTINUED FROM PREVIOUS PAGE) Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
SUMMARY ANALYSIS OF SELECTED LEC ACQUISITIONS
(Dollars in thousands)
Transaction Value as a Multiple of
_________________________________________ Cellular
Ann Date Target/ Access Leverage
Eff Date Acquiror Revs. EBIT EBITDA Assets Lines Factor
________ _______________________________________ _____ ______ ______ ______ ______ ________
<S> <C> <C> <C> <C> <C> <C> <C>
05/27/92 Centel Corp. 3.6 x 23.4 x 11.1 x 1.2 x $2,663 x 10.4
03/09/93 Sprint Corp. (g)
06/06/92 SLT Communications Inc. 5.9 26.6 12.6 2.0 4,873 7.6
01/04/93 AllTel Corp. (h)
09/24/92 San Marcos Telephone and SM Telecorp 2.5 32.7 15.6 2.1 4,522 13.7
04/08/93 Century Telephone Enterprises (i)
07/12/90 Contel Corp. 3.1 16.2 8.9 1.4 3,917 8.6
03/14/91 GTE Corp. (j)
______________________________________________________
3.4 x 25.0 x 11.8 x 1.7 x $4,220 9.5
3.8 24.7 12.0 1.7 3,994 10.1
5.9 32.7 15.6 2.1 4,873 13.7
2.5 16.2 8.9 1.2 2,663 7.6
______________________________________________________
<PAGE>
Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
SUMMARY ANALYSIS OF SELECTED LEC ACQUISITIONS
(Dollars in thousands)
Notes:
_____
<FN>
Financial information shown for the targets is the latest twelve months as of the announcement date of the transaction.
NA = Not Available; NM = Not Meaningful
(a) Aggregate in cash or securities paid for the outstanding common equity as well as for any convertible securities and options.
(b) Cost of acquiring stock, convertible securities and options less cash and cash equivalents plus preferred stock, short term
and long term debt.
(c) Net income from continuing operations and before extraordinary items.
(d) Estimated net income for current year.
(e) Projected net income for the year following current year.
(f) Net income before extraordinary items plus depreciation, amortization and deferred taxes.
(g) Purchase price for the transaction includes the following: 86,479,000 Centel shares converted at the exchange ratio (1.37);
95 shares of Centel cumulative Preferred Stock each converted into one share of Sprint's Preferred Stock - Fifth Series, par
value $100,000 per share; Convertible Junior Preferred of Central Telephone Company (a sub of Centel) converted into 6.47325
shares of Sprint common stock; and 2,015,000 outstanding Centel options assumed by Sprint and adjusted on the basis of the
exchange ratio. Centel net income for the 1991 and 1992 periods excludes (i) the $43.5 million after tax gain from the
divestiture of the Ohio properties in April 1992, (ii) the $45.6 million after tax gain from the 1991 divestiture of the
Minnesota properties, and (iii) the $13.9 million after tax gain on the sale of cellular properties.
(h) Purchase price includes the following: 99,630 SLT Communications common shares converted into 21.0937 shares of AllTel; and
90,000 shares of SLT Communications preferred stock converted into 21.0937 shares of AllTel common stock.
(i) Purchase price includes the following: each San Marcos Telephone share converted into 22.2069 Century shares plus $259.8126
in cash; and each SM Telecorp, Inc. share converted to the right to receive $77.4353 in cash.
(j) Purchase price includes only common shares of Contel converted at the exchange ratio (1.27). All outstanding Contel
preferred stock was redeemed prior to the merger.
/TABLE
<PAGE>
___________________________________________________________________________
TAB 9
___________________________________________________________________________
<PAGE>
___________________________________________________________________________
MINORITY SQUEEZEOUT TRANSACTIONS
_____________________________________________________________________________
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
ANALYSIS OF SELECTED MINORITY SQUEEZEOUT TRANSACTIONS
(1989 to Present; $20 Million or More Transactions; 5% - 50% of Minority Interest Purchased)
*****
Pre-Bid Target Premium
Date Trans % of Share Price of Final
_________ ____________________
Announced Value Target 4 Wks Bf Day Bf Initial Final Offer Price over
Acquiror/Target Effective ($ MM) Acquired Announced Announced Offer Price Price (1) Initial Price
_______________ _________ ________ ________ _________ _________ ___________ ___________ _____________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GTE Corp. 09/08/94 $253.8 10.0% $18.75 $17.75 $22.50 $25.50 13.3%
Contel Cellular Inc. Pending (a)
Dole Food Co. 08/24/94 $81.5 17.2% $10.38 $11.63 $14.00 $15.75 12.5%
Castle & Cooke Homes Inc. Pending (a)
WMX Technologies 07/28/94 $397.4 21.4% $8.75 $8.00 $7.86 $8.85 12.6%
Chemical Waste Management Pending (a)
Ogden Corp. 06/06/94 $97.1 15.8% $15.25 $17.38 $17.06 $17.96 5.2%
Ogden Projects Inc. 12/29/94
_____________________________________________________________________________
Ogden Corp. Stock Price $21.88 $21.38 -2.3%
Exchange Ratio 0.78 0.84 7.7%
_____________________________________________________________________________
National Intergroup Inc. 03/01/94 $79.7 19.5% $13.00 $13.50 $14.75 $14.46 -1.9%
FoxMeyer Corp. 10/13/94
_____________________________________________________________________________
National Intergroup Stock Price NM $16.00 NM
Exchange Ratio NM 0.904 NM
_____________________________________________________________________________
E.W. Scripps Co. 02/18/94 $118.9 13.9% $75.00 $75.00 $86.25 $82.80 -4.0%
Scripps Howard Broadcasting 09/14/94
_____________________________________________________________________________
E.W. Scripps Co. Stock Price $28.75 $24.00 -16.5%
Exchange Ratio 3.00 3.45 15.0%
_____________________________________________________________________________
Holderbank Financiere Glarus 01/07/94 $52.5 5.0% $7.13 $6.75 $7.65 $7.65 0.0%
Holman Inc. (Holdernam Inc.) 02/23/94
Medco Containment 10/13/94 $156.7 45.8% $29.50 $33.75 $25.00 $27.25 9.0%
Medical Marketing Group 04/06/94
Valley Fashions Corp. 09/20/93 $68.0 5.0% $48.63 $49.88 $46.00 $46.00 0.0%
West Point-Pepperell 12/10/93
<PAGE>
Apache Corp. 06/17/93 $31.9 33.5% $12.00 $11.88 $14.00 $15.00 7.1%
Hadson Energy Resources Corp. 11/12/93
Rust International Inc. 11/11/92 $185.0 44.0% $17.88 $17.88 $17.88 $18.75 4.9%
Brand Cos. Inc. 05/07/93
Leucadia National Corp. 08/17/92 $139.9 36.9% $20.00 $23.00 $23.00* $25.78 12.1%
PHL CORP. 12/31/92
_____________________________________________________________________________
Leucadia National Corp. Stock Price $58.88 $63.50 7.9%
Exchange Ratio 0.25* 0.406 NM
_____________________________________________________________________________
W.R. Grace & Co. 03/02/92 $77.3 16.6% $11.88 $14.50 $16.50 $19.00 15.2%
Grace Energy Corp. 07/14/92
Charter Co. (American Financial) 02/06/92 $43.1 18.0% $5.00 $4.75 $7.20 $7.25 0.7%
Spelling Entertainment Inc. 07/30/92
_____________________________________________________________________________
Charter Co. Stock Price $8.00 $7.25 -9.4%
Exchange Ratio 0.90 1.00 11.1%
_____________________________________________________________________________
Time Warner Inc. 10/29/91 $1,221.9 18.0% $49.00 $51.00 $61.71 $61.71 0.0%
American Television and Comm. 06/26/92
Arkla Inc. 09/16/91 $92.6 18.0% $11.63 $12.38 $14.74 $15.44 4.7%
Arkla Exploration Co. 01/28/92
________________________________________________________________________________________
Arkla Inc. Stock Price $16.38 $16.25 -0.8%
Exchange Ratio 0.90 0.95 5.6%
________________________________________________________________________________________
Penn Traffic Co. 09/06/91 $43.9 10.0% $32.50 $32.75 $34.00 $34.00 0.0%
P&C Food Markets Inc. 10/16/91
Land O'Lakes 07/25/91 $22.6 34.5% $10.00 $11.00 $13.50 $15.30 13.3%
Country Lake Foods 11/13/91
Staveley Industries PLC 06/13/91 $25.3 43.0% $14.50 $15.50 $19.00 $22.00 15.8%
Weigh-Tronix Inc. 08/31/91
Air & Water Technologies Corp. 03/01/91 $49.5 18.0% $15.50 $15.75 $18.70 $18.70 0.0%
Metcalf & Eddy Cos. Inc. 10/31/91
________________________________________________________________________________________
Air & Water Tech Stock Price $22.00 $21.38 -2.8%
Exchange Ratio 0.850 0.875 2.9%
________________________________________________________________________________________
BHP Holdings 02/06/91 $530.0 49.9% $30.50 $33.75 $40.00 $40.00 0.0%
Hamilton Oil Corp. 07/03/91
Murphy Oil Corp. 01/03/91 $368.9 38.9% $17.75 $17.00 $19.13 $18.36* -4.0%
Ocean Drilling & Exploration 07/03/91
<PAGE>
________________________________________________________________________________________
Murphy Oil Corp Stock Price $38.25 $33.38* -12.7%
Exchange Ratio 0.50 0.55 10.0%
________________________________________________________________________________________
ERC International (Ogden Corp.) 10/23/90 $33.6 38.8% $11.75 $11.00 $14.75 $15.13 2.6%
ERC Environ. & Energy Svcs. 04/01/91
Freeport-McMoRan Inc. 07/31/90 $252.9 18.5% $7.38 $8.00 $10.50 $11.00 4.8%
Freeport-McMoRan Oil & Gas 11/14/90
________________________________________________________________________________________
Freeport-McM Inc. Stock Price $34.34 $34.81 1.4%
Exchange Ratio 0.31 0.32 3.4%
________________________________________________________________________________________
Caesars World Inc. 07/19/90 $48.4 13.4% $15.63 $16.13 $22.00 $22.58 2.6%
Caesars New Jersey Inc. 12/27/90
Paramount Communications 07/10/90 $46.6 17.0%* $5.13 $5.25 $7.50 $9.50 26.7%
TVX Broadcast Group Inc. 02/26/91
Renault Vehicles Industriels 07/06/90 $103.7 39.9% $5.13 $5.25 $6.00 $6.25 4.2%
Mack Trucks Inc. 10/04/90
Kansas City Southern Ind. Inc. 05/17/90 $39.0 12.9% $10.50 $12.75 $14.00 $15.85 13.2%
DST Systems Inc. 08/27/90
American Express Co. 03/04/90 $360.0 31.6% $11.75 $12.50 $12.51 $12.90 3.1%
Shearson Lehman Brothers 08/10/90
________________________________________________________________________________________
American Express Co. Stock Price $29.38 $26.88 -8.5%
Exchange Ratio 0.426 0.480 12.7%
________________________________________________________________________________________
Anderson Mavor Investments 02/16/90 $21.0 48.1% $8.13 $7.38 $8.50 $8.88 4.4%
National Mines Service 05/24/90
Imetal SA 01/24/90 $78.2 44.4% $12.75 $11.50 $15.50 $17.00 9.7%
Copperweld Corp. (Imetal SA) 07/31/90
Esselte AB 11/08/89 $219.3 22.0% $45.50 $44.00 $46.50 $48.06* 3.4%
Esselte Business Systems Inc. 06/20/90
Heritage Media 11/01/89 $33.2 43.0% $23.25 $18.75 $20.50 $21.10* 2.9% c
POP Radio Corporation 11/16/90
Canadian Pacific 10/19/89 $89.8 44.2% $17.25 $17.50 $19.50 $21.50 10.3%
Soo Line 04/09/90
Dow Jones & Co. Inc. 09/21/89 $657.8 33.0% $16.25 $15.13 $18.00 $21.00 16.7%
Telerate Inc. 01/03/90
Montedison 07/31/89 $627.2 19.0% $39.00 $44.13 $49.00 $51.00 4.1%
HIMONT Inc. 02/20/90
<PAGE>
MacAndrews & Forbes Holding 06/14/89 $28.3 43.0% $5.63 $7.00 $7.25 $7.25 0.0%
Andrews Group Inc. 06/04/90
Primerica Corporation 06/09/89 $453.7 29.2% $15.38 $17.88 $19.40 $22.24 14.7%
Al Williams Corporation 11/01/89
________________________________________________________________________________________
Primerica Corp. Stock Price $24.25 $27.13 11.9%
Exchange Ratio 0.80 0.82 2.5%
________________________________________________________________________________________
Henley Group Inc. 06/08/89 $140.0 19.0% $19.75 $19.25 $20.50 $22.25 8.5%
Fisher Scientific Group Inc. 08/24/89
Tele-Communications, Inc. 05/24/89 $179.4 25.0% $24.25 $27.00 $31.75 $32.25 1.6%
Westmarc Communications, Inc. 01/04/90
Carlson Hospitality Group 05/19/89 $52.7 19.8% $13.00 $13.25 $14.50 $14.88 2.6%
TGI Friday's Inc. 02/21/90
Primerica Corp. 04/18/89 $48.3 17.4% $10.75 $9.75 $11.50 $11.50 0.0%
American Capital Management 10/29/90
Ingram Industries 12/14/88 $43.9 41.0% $9.38 $10.50 $12.50 $14.75 18.0%
Micro D 03/21/89
KK Amini (Chairman of Sage) 12/06/88 $22.0 31.0% $5.63 $5.25 $5.88 $6.50 10.6%
Sage Energy Co. 05/18/89
Qintex Resorts 11/15/88 $70.0 46.7% $15.00 $15.00 $15.50 $15.50 0.0%
Princeville Corp. 04/19/89
/TABLE
<PAGE>
<TABLE>
<CAPTION>
(TABLE CONTINUED FROM PREVIOUS FIVE PAGES) Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
ANALYSIS OF SELECTED MINORITY SQUEEZEOUT TRANSACTIONS
(1989 to Present; $20 Million or More Transactions; 5% - 50% of Minority Interest Purchased)
Premium of
Premium over Pre-Bid Target Price Final Price Premium over Pre-Bid
Price (Day Before Ann.) Day Before over Price Price (4 Weeks Before)
_______________________ ______________________
Initial Final Final Offer Day Before Initial Final
Price Price Announced Final Ann. Price Price Comments
_______ _____ ____________ ___________ _______ _____ ____________________
<S> <C> <C> <C> <C> <C> <C> <C>
GTE Corp. 26.8% 43.7% $24.25 5.2% 20.0% 36.0% Consideration: Cash.
Contel Cellular Inc. (a) (a) (a) (a) GTE offered to
acquire the remain-
ing 10% of its 90%
owned Contel Cellular
(CC) subsidiary by
acquiring all of the
Class A shares out-
standing of CC for
$25.50 in cash per
share. The Class B
shares owned by GTE
were to be converted
into shares of the
merged company.
Dole Food Co. 20.4% 35.5% $14.75 $6.8 34.9% 51.8% Consideration: Cash.
Castle & Cooke Homes Inc. (a) (a) (a) (a) Dole Food made an
amended definitive
offer to acquire the
remaining 17.2% stake
in its Castle & Cooke
Homes subsidiary for
$15.75 in cash per
share, or a total
value of $81.5
million. Dole had
originally offered
$14 in cash per
share.
WMX Technologies -1.7% 10.6% $7.88 12.4% -10.2% 1.1% Consideration: Cvt
Chemical Waste Management (a) (a) (a) (a) Debt into Stock or
Cash. WMX
definitively agreed
to acquire the
remaining 44.9
million common
shares, or 21.4%, it
did not already own
in Chemical Waste
Management (CWM) in a
<PAGE>
transaction valued at
an amended $8.85 per
share, or $397.4
million in $1,000
convertible sub-
ordinated notes.
CWM's shareholders
were to receive $7.86
per share in a stock-
for-stock exchange.
Ogden Corp. -1.8% 3.3% $15.88 13.1% 11.9% 17.7% Consideration:
Ogden Projects Inc. Stock. Ogden (OG)
acquired the
remaining 15.8% of
Ogden Projects (OP)
that it did not
already own in a
stock swap merger.
OP shareholders are
to receive .84 shares
of OG's common stock,
amended from .78
shares, for each OP
share held.
National Intergroup Inc. 9.3% 7.1% $14.25 1.5% 13.5% 11.3% Consideration:
FoxMeyer Corp. Stock. National
Intergroup (NI)
offered to acquire
the remaining common
shares of Foxmeyer
(FM) that it did not
already own for .904
common shares of NI
announced on
10/10/94, up from .90
common shares of NI
agreed to on 6/30/94
($15.75). The
exchange ratio was
based on the last 20
day training avg. of
NI and could not be
less than $14.40 per
share. The original
consideration con-
sisted of $14.75 per
share principal
amount of 8.25%
senior notes due 2004
of Foxmeyer Holding.
E.W. Scripps Co. 15.0% 10.4% $82.00 1.0% 15.0% 10.4% Consideration:
Scripps Howard Broadcasting Stock. E.W. Scripps
increased its offer
from the 3-to-1
<PAGE>
exchange ratio to
3.45-to-1 share of
Scripps Howard Broad-
casting (SHB) on
4/7/94. SHB ceased
trading at $101.50
per share when share-
holders of SHB
approved the trans-
action on 9/14/94.
Holderbank Financiere Glarus 13.3% 13.3% NM NM 7.3% 7.3% Consideration: Cash.
Holnam Inc. (Holdernam Inc.) Holderbank Financiere
Glarus acquired the
remaining 5%, or
about 6.8 million
common shares, that
it did not already
own for $7.65 per
share in cash.
Medco Containment -25.9% -19.3% $26.00 4.8% -15.3% -7.6% Consideration: Cash.
Medical Marketing Group The transaction was
contingent on the
completion of Merck's
merger with Medco
(completed in
November of 1993).
Medco lost legal
challenges to the
merger at a discount.
The original offer of
$25 per share was a
26% discount to the
Medical Marketing
Group stock price the
day before the
announcement.
Valley Fashions Corp. -7.8% -7.8% NM NM -5.4% -5.4% Consideration: Cash.
West Point-Pepperell William Farley
originally bought 95%
of the company in a
hostile takeover for
$58 per share in
1989, filed for bank-
ruptcy in 1990, and
emerged from bank-
ruptcy in September
1992. Shareholders
of West Point-
Pepperell (WPP) lost
legal challenges to
the minority squeeze-
out at a discount to
WPP's stock price.
<PAGE>
Apache Corp. 17.9% 26.3% $14.38 4.3% 16.7% 25.0% Consideration: Cash
Hadson Energy Resources Corp. or Stock. Apache
acquired 66.5% of
Hadson in July of
1993 for $14 per
share with the price
increasing to $15 if
Apache's holdings of
Hadson increased to
over 80% within
twelve months.
Rust International Inc. 0.0% 4.9% NA NA 0.0% 4.9% Consideration: Cash
Brand Cos. Inc. or Stock. Share-
holders were given a
choice of cash or
stock in Rust. 70%
of Brand shareholders
elected to receive
cash. Original offer
was at no premium.
Leucadia National Corp. -0.0% 12.1% $24.00 7.4% 15.0% 28.9% Consideration:
PHLCORP Stock. Shareholders
received 0.406 shares
of Leucadia for each
share of PHLCORP.
*Original offer was
at no premium and
0.25 shares of
Leucadia plus $8.28
principal amount 9
3/8 sub debt.
W.R. Grace & Co. 13.8% 31.0% $17.50 8.6% 38.9% 59.9% Consideration: Cash.
Grace Energy Corp.
Charter Co. (American Financial) 51.6% 52.6% $6.25 16.0% 44.0% 45.0% Consideration:
Spelling Entertainment Inc. Stock. Shareholders
received one share of
Charter for each
share of Spelling.
The original offer
was 0.9 shares of
Charter per share of
Spelling.
Time Warner Inc. 21.0% 21.0% NM NM 25.9% 25.9% Consideration: Debt.
American Television and Comm. Shareholders of
American Television
and Comm. common
stock received $82.50
principal amount of
Time Warner redeem-
able reset notes due
Aug. 15, 2002 which
were expected to
<PAGE>
trade between $61.71
and $63.11 per share.
Arkla Inc. 19.1% 24.7% $13.04 18.4% 26.8% 32.8% Consideration:
Arkla Exploration Co. Stock. Shareholders
received 0.95 shares
of Arkla for each
share of Arkla
Exploration. The
original offer was
0.90 shares.
Penn Traffic Co. 3.8% 3.8% NM NM 4.6% 4.6% Consideration: Cash
P&C Food Markets Inc. or Stock. Share-
holders were eligible
to receive either (1)
1.225 shares of Penn-
Corp stock or (2) $34
per share in cash,
subject to proration
by a cash considera-
tion which could not
exceed 43% of the
deal.
Land O'Lakes 22.7% 39.1% $14.38 6.4% 35.0% 53.0% Consideration: Cash.
Country Lake Foods Shareholders received
$15.30 in cash for
each share of Country
Lakes. The original
offer was $13.50
cash.
Staveley Industries PLC 22.6% 41.9% $18.13 21.4% 31.0% 51.7% Consideration: Cash.
Weigh-Tronix Inc. Staveley Industries
PLC increased its
offer from $19.00 to
$22.00 cash payment
per share for the
remaining 43% of
Weigh-Tronix, Inc.
Air & Water Technologies Corp. 18.7% 18.8% NM NM 20.6% 20.7% Consideration:
Metcalf & Eddy Cos. Inc. Stock. Shareholders
received 0.875 shares
of Air & Water for
each share of
Metcalf. The
original offer was
0.850 shares.
BHP Holdings 18.5% 18.5% NM NM 31.1% 31.1% Consideration: Cash
Hamilton Oil Corp. or Stock. Share-
holders were given a
choice of cash or
Broken Hill ADRs.
<PAGE>
Murphy Oil Corp. 12.5% 8.0% $16.38 12.1% 7.7% 3.4% Consideration:
Ocean Drilling & Exploration Stock. Shareholders
received 0.55 shares
of Murphy Oil for
each share of OD&E in
a hostile deal.
*This price is the
day before the tender
offer was commenced.
The original offer
was 0.50 shares.
ERC International (Ogden Corp.) 34.1% 37.5% $14.50 4.3% 25.5% 28.8% Consideration: Cash.
ERC Environ. & Energy Svcs. ERC International
increased its offer
from $14.75 to $15.13
cash payment per
share for the
remaining 38.8% of
ERC Environmental and
Energy Services not
already owned.
Freeport-McMoRan Inc. 31.3% 37.5% $10.63 3.5% 42.4% 49.2% Consideration:
Freeport-McMoRan Oil & Gas Stock. Shareholders
received an equiva-
lent value of $11.00
for each share of
Freeport Oil & Gas.
Caesars World Inc. 36.4% 40.0% $22.00 2.6% 40.8% 44.5% Consideration: Cash.
Caesars New Jersey Inc. Shareholders received
$22.58 which con-
sisted of $22.00 cash
plus interest accrued
and a $0.25 addi-
tional cash payment.
Paramount Communications 42.9% 81.0% $7.63 24.6% 46.3% 85.4% Consideration: Cash.
TVX Broadcast Group Inc. Shareholders received
$9.50 cash for each
share of TVX Broad-
casting. The
original offer was
for $7.50 per share.
*Reflects ownership
of 83% of total
capital stock prior
to announce.
Renault Vehicules Industriels 14.3% 19.0% $5.63 11.1% 17.0% 21.8% Consideration: Cash.
Mack Trucks Inc.
<PAGE>
Kansas City Southern Ind. Inc. 9.8% 24.3% $14.88 6.6% 33.3% 51.0% Consideration: Cash.
DST Systems Inc. Kansas City Southern
Industries increased
its offer from $14.00
to $15.85 cash pay-
ment per share for
DST Systems Inc.
American Express Co. 0.1% 3.2% $11.13 16.0% 6.5% 9.8% Consideration:
Shearson Lehman Brothers Stock. Shareholders
received 0.48 Amex
shares for each share
of Shearson. Amex
originally offered
0.426 shares.
Anderson Mavor Investments 15.2% 20.3% $8.38 6.0% 4.6% 9.2% Consideration: Cash.
National Mines Service
Imetal SA 34.8% 47.8% $16.38 3.8% 21.6% 33.3% Consideration: Cash.
Copperweld Corp. (Imetal SA) Acquisition was con-
tingent upon redemp-
tion of 9.92%
convertible sub-
ordinated debentures
due 9/1/90.
Esselte AB 5.7% 9.2% $46.75 2.8% 2.2% 5.6% Consideration: Cash.
Esselte Business Systems Inc. Esselte originally
released a press
release disclosing
its potential
interest in a
minority squeeze out
and would propose a
price "in the order
of $40." Preliminary
price negotiations
between the companies
started at $43.50 and
a public announcement
was offered for
$46.50. *The final
price was $48.06 due
to an agreement of
$47.64 in cash plus
accrued interest
until day merger is
completed.
Heritage Media 9.3% 12.5% $17.00 24.1% c -11.8% -9.2% Consideration: Cash.
POP Radio Corporation *Shareholders
received $21.20 cash
per share for each
share of POP Radio
which was $20.50 in
cash and interest
<PAGE>
accruing at 10% until
date merger was
consummated.
Canadian Pacific 11.4% 22.9% $19.38 11.0% 13.0% 24.6% Consideration: Cash.
Soo Line Canadian Pacific had
previously sought a
buyer for its 56%
stake in Soo Line
without success.
Dow Jones & Co. Inc. 19.0% 38.8% $19.50 7.7% 10.8% 29.2% Consideration: Cash.
Telerate Inc.
Montedison 11.0% 15.6% $48.63 4.9% 25.6% 30.8% Consideration: Cash.
HIMONT Inc. Shareholders received
$51.00 cash for each
share of HIMONT. The
original offer of $49
consisted of $47 cash
plus a $2 warrant.
MacAndrews & Forbes Holdings 3.6% 3.6% NM NM 28.8% 28.8% Consideration:
Andrews Group Inc. Debentures. Share-
holders of Andrews
Group were issued
$7.25 per share
principal amount of
10% Senior Sub-
ordinated Debentures
due 1999.
Primerica Corp. 8.5% 24.4% $21.25 4.7% 26.1% 44.6% Consideration:
AL Williams Corporation Stock. Shareholders
received 0.82 shares
of Primerica for each
share of AL Williams.
The agreement called
for .85 shares of
Primerica if
Primerica stock fell
below $25.00 per
share. The original
offer of .80
Primerica shares was
the result of
preliminary nego-
tiations that dis-
cussed a range of .75
to .80 Primerica
shares.
Henley Group Inc. 6.5% 15.6% $21.75 2.3% 3.8% 12.7% Consideration: Cash.
Fisher Scientific Group Inc.
<PAGE>
Tele-Communications, Inc. 17.6% 19.4% $30.13 7.1% 30.9% 33.0% Consideration: Cash
Westmarc Communications Inc. and Pfd. The major-
ity of shareholders
received $32.25 in
cash for each share
of WestMarc while a
few shareholders
received payment in
preferred stock.
Carlson Hospitality Group 9.4% 12.3% $14.88 0.0% 11.5% 14.4% Consideration: Cash.
TGI Friday's Inc.
Primerica Corp. 17.9% 17.9% NM NM 7.0% 7.0% Consideration: Cash
American Capital Management or Stock. Share-
holders received
either (1) $11.50 in
cash or (2) 0.32
shares of Primerica.
Ingram Industries 19.0% 40.5% $13.38 10.3% 33.3% 57.2% Consideration: Cash.
Micro D A competitor, Micro-
America Inc., offered
$15 per share to buy
100% of Micro D,
prompting Ingram
Industries to
increase its offer to
buy the remaining 41%
to $14.75 per share.
KK Amini (Chairman of Sage) 11.9% 23.8% $5.63 15.6% 4.4% 15.6% Consideration: Cash.
Sage Energy Co. Sage had been held
for sale with no
offers coming in
above the $6.50 Mr.
Amini was offering.
Qintex Resorts 3.3% 3.3% NM NM 3.3% 3.3% Consideration: Cash.
Princeville Corp.
<PAGE>
________________________________________________________________________________
ALL TRANSACTIONS
________________
Mean 6.2% 14.3% 21.6% 8.8% 17.7% 25.3%
Median 4.4% 13.8% 19.0% 6.8% 16.7% 25.0%
High 26.7% 51.6% 81.0% 24.6% 46.3% 85.4%
Low -4.0% -25.9% -19.3% 0.0% -15.3% -9.2%
________________________________________________________________________________
________________________________________________________________________________
ALL CASH TRANSACTIONS (b)
_________________________
Mean 9.9% 14.2% 23.2% 7.9% 18.1% 29.5%
Median 10.0% 14.0% 19.9% 6.5% 18.5% 29.0%
High 26.7% 42.9% 81.0% 24.6% 46.3% 85.4%
Low 1.6% -25.9% -19.3% 0.0% -15.3% -9.2%
________________________________________________________________________________
Footnotes:
_________
<FN>
(1) For stock deals, Final Offer Price is calculated using the agreed to exchange ratio multiplied by the acquiror's stock price
on the day before the agreement by the Special Committee of the Target.
(a) Deals are still pending, take out price at effective date represents latest offer price for acquiror's remaining interest.
(b) Deals where payment was all cash, convertible into cash, or cash at the option of the acquiror or shareholder.
(c) Excluded from cash summary calculations.
Source: Securities Data Company, Bloomberg, IDD Information Services, Company Documents and News Articles.
/TABLE
<PAGE>
___________________________________________________
APPENDIX
___________________________________________________
<PAGE>
___________________________________________________
TAB 10
___________________________________________________
<PAGE>
___________________________________________________
Rural LEC EBITDA
Multiple Calculations
___________________________________________________
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
____________________________________________________________________________________________________
Rural LEC EBITDA Multiple Calculations - Citizens Utilities and TDS
Summary Observations
______________________________________________________________________________
Value Contribution
Citizens Utilities TDS
__________________ ________________________
<S> <C> <C>
Rural LEC 77.7% (1) 19.5% (2)
Non-Rural LEC 22.3% 80.5%
__________________ ________________________
Total 100.0% 100.0%
_____________________________________________________________________________
EBITDA Multiples
____________________________________________________________________________________________________
LTM - Pro Forma 1994E 1995E 1996E
_______________ _________ __________ _____________
Citizens Utilities - Consolidated 7.9 x NM x NM x 7.4 x
_____________
Citizens Utilities - Rural LEC only NA NM NM 7.8
_____________
TDS - Consolidated 12.5 x 12.0 x 8.9 x NA x
TDS - Rural LEC only NA 3.8 3.5 NA
____________________________________________________________________________________________________
Notes:
<FN>
____________________
(1) Figure equals Rural LEC operations adjusted market value ($2.970 billion) divided by the
Consolidated adjusted market value ($3.823 billion).
(2) Figure equals Rural LEC operations adjusted market value ($603 million) divided by the
Consolidated adjusted market value ($3.090 billion).
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
__________________________________________________________________________________________________________________________________
Rural LEC EBITDA Multiple Calculations - Citizens Utilities
(dollars in thousands, except per share data)
Income Statement Market Value
________________________________________________________
LTM - Pro Forma (1) Citizens Utilities - Consolidated
_______________ _________________________________
<S> <C> <C> <C>
Total Revenues $1,159,336 Shares Outstanding 205,682 (2)
Current Stock Price $13.75
EBIT 309,128 __________
Depreciation & Amortization 168,884 Market Value $2,828,134
__________
EBITDA 478,012 Centennial Cellular
_________________________________
Interest Expense, Net 39,605
Income Taxes 96,616 Shares of Centennial Cellular
Minority Interest 0 owned by Citizens 1,982
Equity in Affiliates 0 Current Stock Price $17.50
__________ __________
Net Income from Continuing Operations 172,907 Market Value $34,690
____________________________________________________________
Preferred Dividends 0 Century Communications
__________ _________________________________
Net Income Available to Common $172,907
Shares of Century Communications
Weighted Average Shares 219,675 owned by Citizens 1,915
EPS - From Continuing Operations $0.79 Current Stock Price $8.13
Market Value __________
15,559
Citizens' Market Value
adjusted for cellular interests $2,777,885
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Citizens' Balance Sheet as of September 30, 1994 (3) Citizens' Adjusted Market Value - Rural LEC only
_______________________________________________________________ ______________________________________________________________
<S> <C>
Less Cash & Investments $98,444 (4) Citizens' Adjusted Market Value less Cellular: $3,772,419
Plus: S/T Debt 0
Plus: Current Maturities 10,728 Electric Segment's Adjusted Market Value: 342,650
Plus: L/T Debt 1,082,250 Water Segment's Adjusted Market Value: 195,000
Plus: Pfd Stock 0 Gas Segment's Adjusted Market Value: 264,600
Consolidated Adjusted Market Value: $3,822,668 __________
Adjusted Market Value less Cellular: $3,772,419 Rural LEC only $2,970,169
_______________________________________________________________ ______________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
___________________________________________________________________________________________
Median Adjusted
EBITDA Market
EBITDA Multiple Value
___________ _____________ ___________
<S> <C> <C> <C>
Electric Segment's Adjusted Market Value: $44,500 7.7 x $342,650
Water Segment's Adjusted Market Value: $26,000 7.5 $195,000
Gas Segment's Adjusted Market Value: $42,000 6.3 $264,600
___________________________________________________________________________________________
Notes:
____________________
<FN>
(1) Represents the financial results from October 1, 1993 to the dates of acquisition for all the GTE Telephone Properties
Source: Citizens' January 1995 Red Herring acquired through Sept. 30, 1994 and for the yet to be acquired GTE properties and
AllTel Properties, in addition to the recent equity offering of 15 MM shares.
(2) Includes common stock shares outstanding on December 15, 1994, in addition to the 15 million shares of common stock series A
in the recent offering.
(3) Balance Sheet reflects the financings of the Telecommunications Properties (GTE and AllTel) and the recent equity offering.
(4) Excludes the investment in Centennial and Century Communications.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
_________________________________________________________________________________________________________________________________
Business Segment Information of Citizens Utilities
(dollars in thousands)
Revenue Contribution EBITDA Contribution EBIT Contribution
________________________________ ________________________________ ____________________________
Total Revenues Percentage Total EBITDA Percentage Total EBIT Percentage
________________________________ ________________________________ ____________________________
<S> <C> <C> <C> <C> <C> <C>
December 31, 1993 (1)
Telecommunications $177,497 28.7% 108,678 50.3% 85,900 39.8%
Natural Gas 211,892 34.2% 39,617 18.4% 29,000 13.4%
Electric 164,515 26.6% 43,584 20.2% 30,700 14.2%
Water/Wastewater 65,488 10.6% 23,979 11.1% 15,600 7.2%
________ _______ _______
619,392 215,858 161,200
1994E (2)
Telecommunications 468,000 50.4% 247,700 68.8% 169,600 67.8%
Natural Gas 225,000 24.2% 42,000 11.7% 31,000 12.4%
Electric 168,000 18.1% 44,500 12.4% 31,000 12.4%
Water/Wastewater 68,000 7.3% 26,000 7.2% 18,500 7.4%
______ ______ ______
929,000 360,200 250,100
1995E (2)
Telecommunications 601,600 (3) 55.7% 300,800 (3) 71.1% 192,500 (3) 68.6%
Natural Gas 229,500 21.2% 43,500 10.3% 32,000 11.4%
Electric 178,000 16.5% 51,500 12.2% 36,500 13.0%
Water/Wastewater 71,000 6.6% 27,500 6.5% 19,500 7.0%
______ ______ ______
1,080,100 423,300 280,500
1996E (2) _____________ _________
Telecommunications 762,700 (4) 60.5% 380,000 (5) 74.3% 243,000 (5) 72.0%
_____________ _________
Natural Gas 238,700 18.9% 45,600 8.9% 33,600 10.0%
Electric 185,000 14.7% 55,500 10.9% 40,000 11.8%
Water/Wastewater 74,000 5.9% 30,000 5.9% 21,000 6.2%
______ ______ ______
1,260,400 511,100 337,600
___________________
<FN>
(1) 1993 financials do not reflect the acquisition of the GTE access lines.
(2) Smith Barney Research projections include the acquisition of GTE's 500,000 access lines which Citizens bought for $1.1
billion in cash.
(3) Smith Barney Research estimates do not account for the 109,000 AllTel access line acquisition in 1995. According to Smith
Barney, the $290 million acquisition will be staggered throughout the second half of 1995.
(4) As a result of the AllTel acquisition, Smith Barney Research estimates expect telephone revenue to jump $125 million in 1996.
(5) As a result of the AllTel acquisition, Smith Barney Research estimates expect telephone operating income to increase to $243
million in 1996. Relationship between EBITDA and EBIT in 1996 is assumed to remain the same as 1995.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
___________________________________________________________________________________________________________________________
Rural LEC EBITDA Multiple Calculations - TDS
(dollars in thousands, except per share data)
Market Value EBITDA Estimates (1)
______________________________________________ __________________________________________________________________
<S> <C> <C> <C>
TDS - Consolidated 1994E 1995E
_________________________ _________ _________
Shares Outstanding - TDS 55,032 EBITDA
Current Price $45.50 ______
Market Value __________ TDS - Consolidated $258,441 $348,771
$2,503,956 US Cellular 83,056 148,500
Am Paging 17,656 27,336
US Cellular __________ __________
_________________________ EBITDA - Rural LEC Only $157,729 $172,935
Shares of US Cellular owned by TDS 63,880 __________________________________________________________________
Current Price $32.88
Market Value __________
2,100,055
American Paging
_________________________
shares of APP owned by TDS 16,500
Current Price $7.50
Market Value __________
$123,750
TDS Market Value less Investments: $280,151
_______________________________________________
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Balance Sheet as of September 30, 1994
____________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
TDS American TDS
Consolidated US Cellular Paging Rural LEC Only
____________ ___________ _____________ ______________
Less: Cash $103,716 $49,956 $3,222 $50,538
Plus: S/T Debt 116,474 0 116,474
Plus: Current Maturities 36,565 20,974 15,591
Plus: L/T Debt 521,046 277,211 7,882 235,953
Plus: Pfd Stock 15,401 9,597 5,804
___________ ___________ _____________ ______________
Adjusted Market Value: $3,089,726 $2,357,881 $128,410 $603,435
____________________________________________________________________________________________________________
Notes:
<FN>
(1) Figures taken from Salomon Brothers research report.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
___________________________________________________________________________________________________________________________
Rural LEC EBITDA Multiple Calculations - TDS
(dollars in thousands, except per share data)
Income Statement
_____________________________________________________________________________________________________________________________
TDS - Consolidated Less: US Cellular
_________________________________________ ______________________________________
1993 3Q1994 3Q1993 LTM 1993 3Q1994 3Q1993 LTM
________ ________ ________ ________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Revenues $590,744 $525,492 $406,896 $709,340 $247,259 $236,816 $151,970 $332,105
EBIT 69,733 83,612 57,273 96,072 (8,656) 15,614 (2,592) 9,550
Depreciation & Amortization (1) 127,509 117,061 93,437 151,133 45,944 47,800 32,813 60,931
________ ________ ________ ________ _______ _______ _______ _______
EBITDA $197,242 $200,673 $150,710 $247,205 $37,288 $63,414 $30,221 $70,481
_____________________________________________________________________________________________________________________________
/TABLE
<PAGE>
<TABLE>
<CAPTION>
________________________________________________________________
TDS
Less: American Paging Pro Forma
_________________________________________
1993 3Q1994 3Q1993 LTM Rural LEC Only
________ ________ ________ ________ _________________
<S> <C> <C> <C> <C>
$64,384 $56,451 $46,968 $73,867 $303,368
(759) 321 (1,714) 1,276 85,246
13,392 12,155 9,822 15,725 74,477
________ ________ ________ ________ _________________
$12,632 $12,476 $8,108 $17,000 $159,724
________________________________________________________________
</TABLE>
Exhibit (b)(3)
CONFIDENTIAL
----------------------------------------------------------
Pacific Telecom, Inc.
meeting with PacifiCorp
February 15, 1995
Smith Barney Inc.
------------------------------------------------------
<PAGE>
-------------------------------------------------
Principal Valuation Differences
------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------
Principal Valuation Differences
Smith Barney versus Salomon Brothers
- ----------------------------------- ----------------------------------
<S> <C>
- - Use of different valuation - Discounted Cash Flow ("DCF")
methodologies using near and analysis only (excluding generic
long-term projections which acquisitions) with a valuation
considered PTI's value with "check" based on component
and without: valuation
- General acquisitions(1)
- EPS benefit of "releveraging"
- Appreciation potential of
Company focused on LEC and
cellular operations with
consistent earnings growth
- Near-term dilution due to
Alascom transaction
- - Weighted average cost of capital - Weighted average cost of capital
of 8%-10% (Differences due to Beta of 10%-13%
and debt to capitalization)
- - Public market values with minority - "Intrinsic" value (i.e., present
squeezeout premiums. value of PTI's cash flows) with
no premiums.
- -------------------------------
<FN>
(1) Generic acquisitions are defined to be acquisitions of rural LEC properties that
are not presently owned or under contract.
/TABLE
<PAGE>
--------------------------------------------
Weighted Average Cost of
Capital ("WACC")
--------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- -------------------------------------------------------------------------------------
Weighted Average Cost of Capital ("WACC")
Salomon Salomon
Smith Brothers Brothers
1) Beta Barney Feb. 1995 Aug. 1995 Comments
------ --------- --------- -------------------------------
<S> <C> <C> <C> <C>
PTI 0.67 0.97 NA - Smith Barney and Salomon
Brothers used BARRA, an
Comparable 0.83 0.84 NA independent financial
companies consulting firm with
relevered significant expertise, to
beta determine Beta.
- In the book, VALUATION
--------
Measuring and Managing
---------------------
the Value of Companies
---------------------
by Tom Copeland, Tim
Koller and Jack Murin
of McKinsey & Company,
Inc. (hereinafter to be
referred to as
"McKinsey"), they
confirm that one should
use Betas published by
BARRA.
- However, Salomon Brothers
used PTI's historical Beta
while Smith Barney used
PTI's predicted Beta.<PAGE>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------
Weighted Average Cost of Capital ("WACC")
Salomon Salomon
1) Beta Smith Brothers Brothers
(Continued) Barney Feb. 1995 Aug. 1994 Comments
------ --------- --------- -------------------------------
- According to BARRA,
"predicted beta rather than
historical beta is a better
forecast of market
sensitivity."
- [Historical beta] "does
not recognize the
fundamental changes in
the company's
operations" and given
the restructuring of
PTI's business (i.e.,
divesting of non-core
businesses and focusing
on its rural LEC
acquisition program),
the predicted beta is a
more appropriate
indicator of where the
company is moving
towards.
<PAGE>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------
Weighted Average Cost of Capital ("WACC")
Salomon Salomon
1) Beta Smith Brothers Brothers
(Continued) Barney Feb. 1995 Aug. 1994 Comments
------ --------- --------- -------------------------------
- [Additionally,
historical beta] "is
influenced by events
specific to the company
that are unlikely to be
repeated."
- Given predicted beta is
the appropriate beta,
R2 is irrelevant.
- Effectively, Salomon
Brothers substituted its
judgment regarding the
appropriate beta in place of
BARRA's judgment
["(Historical beta is) the
most reliable . . . BARRA
relies on a series of
unpublished adjustments . .
."].
- Salomon Brothers also
erroneously concluded that
PTI's future risk profile is
greater than its historical
risk profile.<PAGE>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------
Weighted Average Cost of Capital ("WACC")
Salomon Salomon
1) Beta Smith Brothers Brothers
(Continued) Barney Feb. 1995 Aug. 1994 Comments
------ --------- --------- -------------------------------
- Many of the factors
that Salomon Brothers
sites regarding the
change in PTI's risk
profile supports Smith
Barney's and BARRA's
views. ("Divestiture
of more competitive
Alascom business . . .
Acquisition of LECs . .
. Increase in
leverage")
- Another factor regard-
ing PTI's historical
versus future risk
profile not considered
by Salomon Brothers is
the divestiture of TRT.<PAGE>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------
Weighted Average Cost of Capital ("WACC")
Salomon Salomon
Smith Brothers Brothers
Barney Feb. 1995 Aug. 1994 Comments
------ --------- --------- -------------------------------
2) Debt to 50.0% 30.9% 50.0% - Salomon Brothers uses market
Capitalization value of equity rather than
GAAP book value to determine
debt to capitalization.
- Salomon Brothers debt to
capitalization figure was
calculated using $28.00 per
share (versus PTI's pre-
announcement stock price of
$24.625) and excluded the
intention of management to
"relever" PTI.
Recalculating Salomon
Brothers' figure, accounting
for these factors, results
in a debt weighting of
44.5%, not 30.9%.
- Salomon Brothers' position
is correct for non-regulated
companies; however, the vast
majority of PTI's operations
are regulated.
- Regulators utilize book
value of equity in the
rate-making process.<PAGE>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------
Weighted Average Cost of Capital ("WACC")
Salomon Salomon
2) Debt to Smith Brothers Brothers
Capitalization Barney Feb. 1995 Aug. 1994 Comments
(Continued) ------ --------- --------- -------------------------------
- Fitch Investor Service,
October 1994: "The
capital structure (of a
regulated telecommuni-
cations company) has
traditionally been
presented as the
percent of debt to the
total sum of debt and
shareholders (i.e.,
book value of) equity .
. ."
- PTI manages its business to
a 50% debt to capitalization
ratio using GAAP book value.<PAGE>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------
Weighted Average Cost of Capital ("WACC")
To summarize, the two preceding valuation differences (Beta and debt to capitalization),
are the principal factors that contribute to the differences in the WACC and the
discount rate ranges between Smith Barney's and Salomon Brother's analysis.
Salomon Salomon
Smith Brothers Brothers
Barney Feb. 1995 Aug. 1994 Comments
------ --------- --------- -------------------------------
WACC 9.0%-9.4% 11.8% 10.0% - Inconsistencies exist in the
discount rate ranges used
between Salomon Brothers'
analysis in August 1994 vs.
February 1995.
Discount Rates 8.0%-10.0% 10.0%-13.0% 9.0%-11.0% - Using Salomon Brothers' DCF
Range methodology (i.e., excluding
generic acquisitions), the
value differential caused by
these differing discount
rate ranges is approximately
$2.50 per share (using the
mid-point of Salomon's
valuation range).
/TABLE
<PAGE>
-------------------------------------------
Consideration of Generic Acquisitions
--------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- ------------------------------------------------------------------------------------------
Consideration of Generic Acquisitions
Difference between Smith Barney and
Salomon Brothers Discussion
- ----------------------------------------- ------------------------------------------
<S> <C>
- - Salomon Brothers will not consider - PTI's strategic plan calls for
paying for "unidentified future "releveraging" the Company through
acquisitions." strategic acquisitions of rural LEC
properties (several potential
- - Smith Barney used a variety of acquisitions, including active
valuation methodologies, some of negotiations on US WEST Minnesota and
which included and others of which exclusive discussions with GTE, are
excluded the benefit of the generic presently underway). Absent a
acquisitions. transaction with PacifiCorp, this
results in value creation for PTI's
- - Salomon Brothers DCF analysis indicated minority shareholders over the long-term
that the value contributed from (between $2 to $3 per share)
generic acquisitions was roughly
neutral (i.e., ($0.63) to $1.47 per - PacifiCorp's proposal prevents
share value differential due to PTI's shareholders from partici-
generics). pating in this opportunity.
- Smith Barney's DCF analysis differs - Smith Barney believes it is appropriate
from this view, primarily because to consider this lost opportunity as one
of lower discount rates. part of a broader analysis in
considering PacifiCorp's proposal.
- However, Smith Barney's present value
of the future stock price analysis
results in a meaningful value contribution
from the generic acquisitions due to EPS
accretion from "releveraging"
(i.e., the funding of the transaction
with 00% debt rather than a hypothetical
50%/50% debt/equity structure.)<PAGE>
- - In February 1995, Salomon stated, - In August 1994, Salomon Brothers' pre-
"Concerns regarding the generic sentation to PTI: Review of Recent
acquisition description include . . . Line Acquisitions said,
acquisition opportunities appear
competitive . . . [and] operating - "An acquisition creates value to
projections are unknown and difficult the extent it is accretive on an
to estimate." EPS basis."
- "There is an increasing number of
rural telephone acquisition can-
didates and a limited number of
bidders."
/TABLE
<PAGE>
---------------------------------------
Premiums
--------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- ------------------------------------------------------------------------------------------
Premiums
Difference between Smith Barney and
Salomon Brothers Discussion
- ----------------------------------- -----------------------------------------
<S> <C>
- - Salomon Brothers does not believe - The payment of a minority squeezeout
that PTI's minority shareholders premium by a control acquiror in a
are entitled to any premiums. going-private cash transaction is a
Rather, PacifiCorp should simply universally accepted principal.
pay a price that equals the value
of PTI's stand-alone cash flows - PacifiCorp gains more than the
("premium is an output, not an stand-alone cash flows; it acquires
input"). 100% control of PTI and the benefit
of synergies.
- - Smith Barney believes PTI's
minority shareholders are entitled
to a squeezeout premium for their - Salomon Brothers indicated that it
shares. did not consider these factors in
its valuation analysis.
- One of the valuation methodologies used
by Salomon Brothers when they
represented the Special Committee of the
Board of Directors of Soo Line in their
minority squeezeout by Canadian Pacific
was to derive the theoretical range of
appropriate public market values and
then apply stock price premiums paid in
minority squeezeout transactions to
their range of values.
- (From the Merger Proxy, "Salomon
Brothers calculated theoretical
trading market values and then
applied premiums derived from
comparable merger and acquisition
transactions in the railroad
industry and buyouts of minority
shareholders by majority
shareholders to determine the
appropriate range of values for
(Soo Line)."
</TABLE>
EXHIBIT (b)(4)
CONFIDENTIAL
_____________________________________________________________________
PACIFIC TELECOM, INC.
March 8, 1995
Smith Barney Inc.
_____________________________________________________________________
<PAGE>
Pacific Telecom, Inc.
____________________________________________________________________________
TABLE OF CONTENTS
Tab
Summary Valuation Analysis. . . . . . . . . . . . . . . . . . . . . . . 1
Implied Discount Rates to Final Offer Price . . . . . . . . . . . . . . 2
Pacific Telecom's Five Year Projections . . . . . . . . . . . . . . . . 3
Valuation Methodologies Using Near-Term Projections . . . . . . . . . . 4
- Component Valuation
- Valuation Matrix
Valuation Methodologies Using Long-Term Projections . . . . . . . . . . 5
- Discount Cash Flow Analysis
- Present Value of Future Stock Price
Pacific Telecom Stock Price Analysis. . . . . . . . . . . . . . . . . . 6
Value Per Share Impact of Generic Acquisitions. . . . . . . . . . . . . 7
Trading Multiple Analysis of Selected Publicly Traded Comparable
Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
- Local Exchange Companies
- Cellular Companies
Acquisition Multiple Analysis of Selected Acquired Companies. . . . . . 9
- Local Exchange Companies
- Local Exchange and Cellular Companies
Minority Squeezeout Transactions. . . . . . . . . . . . . . . . . . . . 10
APPENDIX
Rural LEC EBITDA Multiple Calculations. . . . . . . . . . . . . . . . . 11
- Telephone and Data Systems
- Citizens Utilities<PAGE>
TAB 1<PAGE>
________________________________________
SUMMARY VALUATION ANALYSIS
________________________________________
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
________________________________________________________________________________________
SUMMARY VALUATION ANALYSIS
RANGE
_______________________
Low - High
_______________________
<S> <C> <C>
PREMIUMS PAID IN MINORITY SQUEEZEOUT TRANSACTIONS $30.01 $30.76
NEAR-TERM PROJECTIONS
Component Valuation $28.10 $33.67
Valuation Matrix 30.00 35.00
Average Price Per Share $29.05 $34.33
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
________________________________________________________________________________________
SUMMARY VALUATION ANALYSIS
Range
____________________________
Low - High
____________________________
LONG-TERM PROJECTIONS
Discounted Cash Flow Analysis
<S> <C> <C>
Without Generic Acquisitions $34.57 $38.30
With Generic Acquisitions 36.08 40.71
Present Value of Future Stock Price
Without Generic Acquisitions 32.42 35.66
With Generic Acquisitions 35.17 38.72
Average Price Per Share without Generic Acquisition $33.50 $36.98
Average Price Per Share with Generic Acquisitions 35.63 39.71
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
________________________________________________________________________________________
SUMMARY VALUATION ANALYSIS
Valuation Range
__________________________________
All Cash
Premiums Paid in Minority Squeezeout Transactions Transactions Transactions
_________________________________________________ __________________________________
Base Median
Price Premium
_____ _______
<S> <C> <C> <C> <C>
Premium of Final Offer Price over
Pre-Announcement Price $24.625
- All Transactions 25.0% $30.78
- Cash Transactions 24.8% $30.74
Premium of Final Offer Price over
Initial Offer Price $28.000
- All Transactions 4.4% $29.24
- Cash Transactions 10.0% $30.79
__________ __________
Mean Implied Value $30.01 $30.76
========== ==========
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
________________________________________________________________________________________
SUMMARY VALUATION ANALYSIS - SELECTED MINORITY SQUEEZEOUT TRANSACTIONS
ALL TRANSACTIONS
MEDIAN PREMIUM OF FINAL OFFER PRICE OVER PRE-ANNOUNCEMENT STOCK PRICE 25.0%
MEDIAN PREMIUM OF FINAL OFFER PRICE OVER INITIAL OFFER PRICE 4.4%
PERCENT OF ALL OFFERS INCREASED 82.0%
CASH TRANSACTION PREMIUMS
_________________________________________________________________________________
INITIAL OFFER FINAL OFFER FINAL OFFER FINAL OFFER PRICE
PRICE OVER TARGET'S PRICE OVER TARGET'S PRICE OVER INITIAL OVER TARGET'S PRICE
PRE-ANNOUNC. PRE-ANNOUNC. OFFER PRICE PRIOR TO ANNOUNC.
STOCK PRICE STOCK PRICE (THE "BUMP") OF FINAL TRANS.
___________________ ___________________ __________________ ___________________
<S> <C> <C> <C> <C>
MEAN 16.0% 25.4% 9.9% 7.9%
MEDIAN 14.9% 24.8% 10.0% 6.5%
HIGH 46.3% 85.4% 26.7% 24.6%
LOW -15.3% -9.2% 1.6% 0.0%
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
_____________________________________________________________________________________________________________
SUMMARY VALUATION ANALYSIS - VALUATION MATRIX
(in thousands, with the exception of per share value)
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Value $28.00 $28.50 $29.00 $29.50 $30.00 $30.50 $31.00
_____________________________________________________________________________________________________________
Equity Value (1) $1,109,349 $1,129,159 $1,148,969 $1,168,779 $1,188,589 $1,208,399 $1,228,208
Total Enterprise Value (2) $1,606,820 $1,626,630 $1,646,440 $1,666,250 $1,686,060 $1,705,870 $1,725,679
Net Income
1995 (3) 22.2 x 22.6 x 23.0 x 23.4 x 23.8 x 24.2 x 24.6 x
1996 (4) 15.9 16.2 16.5 16.8 17.0 17.3 17.6
EBITDA
1995 (3) 7.4 x 7.5 x 7.6 x 7.7 x 7.8 x 7.9 x 8.0 x
1996 (4) 6.1 6.2 6.3 6.3 6.4 6.5 6.6
Dividend Yield
LTM 4.7% 4.6% 4.6% 4.5% 4.4% 4.3% 4.3%
Premium to Pre-
Announcement 13.7% 15.7% 17.8% 19.8% 21.8% 23.9% 25.9%
Price (5)
Premium to Initial
Offer Price (6) 0.0% 1.8% 3.6% 5.4% 7.1% 8.9% 10.7%
Premium to Current
Stock Price (7) -9.7% -8.1% -6.5% -4.8% -3.2% -1.6% 0.0%
/TABLE
<PAGE>
<TABLE>
<CAPTION>
MEDIAN EBITDA MULTIPLES
_____________________________
Comparable Comparable
Public M&A
Per Share Value $31.50 $32.00 $32.50 Companies Transactions
_____________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Equity Value (1) $1,248,018 $1,267,828 $1,287,638 LEC &
1995E (8) Cellular
Total Enterprise Value (2) $1,745,489 $1,765,299 $1,785,109 5.6 x 11.8 x
Net Income
1995 (3) 25.0 x 25.4 x 25.8 x LEC only
1996 (4) 17.9 18.2 18.5 9.0 x
EBITDA
1995 (3) 8.1 x 8.2 x 8.3 x
1996 (4) 6.6 6.7 6.8
Dividend Yield
LTM 4.2% 4.1% 4.1%
Premium to Pre-
Announcement 27.9% 29.9% 32.0%
Price (5)
Premium to Initial
Offer Price (6) 12.5% 14.3% 16.1%
Premium to Current
Stock Price (7) 1.6% 3.2% 4.8%
________________________________________________________________________________________________
<FN>
(1) Equity Value is defined as Share Price multiplied by fully-diluted shares outstanding.
(2) The Total Enterprise Value is calculated as follows: Equity Value plus total debt (12/31/94) cash less the
anticipated after-tax benefit of the Alascom divestiture proceeds plus the acquisition cost of the US WEST
properties less the debt assumed by AT&T in the Alascom divestiture.
(3) Excludes Alascom. Figures have not been adjusted to reflect the full year impact of the US WEST transaction.
(4) Excludes Generic LEC acquisitions.
(5) PTI's pre-bid stock price was $24-5/8.
(6) PacifiCorp's initial offer price is $28.
(7) PTI's current stock price is $31.00 @ 2/10/95.
(8) Comparable public companies consists of lower growth and higher growth independents.
/TABLE
<PAGE>
TAB 2
<PAGE>
______________________________________________
IMPLIED DISCOUNT RATES TO FINAL
OFFER PRICE
______________________________________________
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
________________________________________________________________________________________
IMPLIED DISCOUNT RATES TO FINAL OFFER PRICE
DISCOUNTED CASH FLOW ANALYSIS - WITH GENERIC ACQUISITIONS
POTENTIAL WACCs
TERMINAL EBITDA MULTIPLES
__________________________________________________________
<S> <C> <C> <C> <C>
Price 5.50x 5.75x 6.00x 6.25x
_______________________________________________________________________
$32.50 6.7% 7.6% 8.5% 9.4%
$32.00 6.9% 7.9% 8.8% 9.7%
$31.00 7.4% 8.4% 9.3% 10.2%
$30.00 7.9% 8.9% 9.8% 10.7%
$29.00 8.5% 9.4% 10.4% 11.2%
$28.00 9.0% 10.0% 10.9% 11.8%
/TABLE
<PAGE>
TAB 3
<PAGE>
-----------------------------------------------
Pacific Telecom's Five Year Projections
-----------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------------------
Pacific Telecom Consolidated Income Statements - Without Generic Acquisitions
(dollars in thousands)
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Alascom $135,135 $0 $0 $0 $0
Local Operating Companies 337,820 353,866 370,046 387,594 405,480
Pacific Telecom Cable 22,702 24,886 27,209 29,898 32,471
PTI Cellular 32,649 41,504 50,617 59,648 68,152
US WEST Acquisitions 79,005 110,941 112,655 114,812 115,201
Parent and Others 2,196 2,570 2,764 2,962 3,189
---------- ---------- ---------- ---------- ----------
Total Revenues 609,507 533,767 563,291 594,914 624,493
EBITDA
Alascom 37,572 0 0 0 0
Local Operating Companies 152,625 167,627 180,349 190,689 200,887
Pacific Telecom Cable 4,291 5,564 7,223 9,403 11,221
PTI Cellular 11,061 18,123 24,079 31,264 37,984
US WEST Acquisitions 47,492 69,160 70,126 71,632 72,552
Parent and Others 432 2,186 2,380 2,578 2,805
---------- ---------- ---------- ---------- ----------
Total EBITDA 253,473 262,660 284,157 305,566 325,449
---------- ---------- ---------- ---------- ----------
EBIT
Alascom 23,840 0 0 0 0
Local Operating Companies 88,556 95,537 103,629 109,482 115,072
Pacific Telecom Cable 3,287 4,340 5,796 7,843 9,349
PTI Cellular 4,541 11,029 16,155 22,365 28,154
US WEST Acquisitions 27,241 40,836 41,286 40,453 40,705
Parent and Others (144) 1,610 1,804 2,002 2,229
---------- ---------- ---------- ---------- ----------
Total EBIT 147,321 153,352 168,670 182,145 195,509
Interest expense, net (38,226) (36,316) (35,165) (31,288) (28,543)
Other (4,210) (3,145) (1,385) 1,852 5,374
---------- ---------- ---------- ---------- ----------
Pre-tax 104,885 113,891 132,120 152,709 172,340
Taxes 40,353 44,178 51,616 60,230 68,420
- --------------------------------------------------------------------------------------
Net Income 64,532 69,713 80,504 92,479 103,920
- --------------------------------------------------------------------------------------------------
Shares outstanding 39,620 39,620 39,620 39,620 39,620
E.P.S. 1.63 1.76 2.03 2.33 2.62
Dividend / Share $1.32 $1.34 $1.38 $1.42 $1.46
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------------------
Pacific Telecom Consolidated Income Statements - With Generic Acquisitions
(dollars in thousands)
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Alascom $135,135 $0 $0 $0 $0
Local Operating Companies 337,820 353,866 370,046 387,594 405,480
Generic Locals (1) 0 73,025 76,017 122,911 125,320
Pacific Telecom Cable 22,702 24,886 27,209 29,898 32,471
PTI Cellular 32,649 41,504 50,617 59,648 68,152
US WEST Acquisitions 79,005 110,941 112,655 114,812 115,201
Parent and Others 2,196 2,570 2,764 2,962 3,189
---------- ---------- ---------- ---------- ----------
Total Revenues 609,507 606,792 639,308 717,825 749,813
EBITDA
Alascom 37,572 0 0 0 0
Local Operating Companies 152,625 167,627 180,349 190,689 200,887
Generic Locals 0 50,473 53,221 85,600 87,280
Pacific Telecom Cable 4,291 5,564 7,223 9,403 11,221
PTI Cellular 11,061 18,123 24,079 31,264 37,984
US WEST Acquisitions 47,492 69,160 70,126 71,632 72,552
Parent and Others 432 2,186 2,380 2,578 2,805
---------- ---------- ---------- ---------- ----------
Total EBITDA 253,473 313,133 337,378 391,166 412,729
---------- ---------- ---------- ---------- ----------
EBIT
Alascom 23,840 0 0 0 0
Local Operating Companies 88,556 95,537 103,629 109,482 115,072
Generic Locals 0 30,027 32,370 51,885 53,177
Pacific Telecom Cable 3,287 4,340 5,796 7,843 9,349
PTI Cellular 4,541 11,029 16,155 22,365 28,154
US WEST Acquisitions 27,241 40,836 41,286 40,453 40,705
Parent and Others (144) 1,610 1,804 2,002 2,229
---------- ---------- ---------- ---------- ----------
Total EBIT 147,321 183,379 201,040 234,030 248,686
Interest expense, net (38,226) (58,626) (57,108) (65,002) (60,003)
Other (4,210) (6,313) (4,649) (2,583) 805
---------- ---------- ---------- ---------- ----------
Pre-tax 104,885 118,440 139,283 166,445 189,488
Taxes 40,353 45,975 54,444 65,653 75,191
- --------------------------------------------------------------------------------------------------
Net Income 64,532 72,465 84,839 100,792 114,297
- --------------------------------------------------------------------------------------------------
Shares outstanding 39,620 39,620 39,620 39,620 39,620
E.P.S. 1.63 1.83 2.14 2.54 2.88
Dividend / Share $1.32 $1.34 $1.38 $1.42 $1.46
/TABLE
<PAGE>
TAB 4
<PAGE>
-----------------------------------------------
Valuation Methodologies Using
Near-Term Projections
-----------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------------------
Component Valuation Analysis - Public Market Value
(dollars in thousands)
------------------------------
Local Exchange Properties (1) Low High
- ----------------------------- -------------- -------------
<S> <C> <C>
1996 EBITDA (2) $236,787 $236,787
Multiple 4.75x 5.25x
-------------- -------------
Aggregate Value $1,124,738 - $1,243,132
Cellular Properties (3) Value per POP
- ----------------------- -------------
POPS Low High
---- --- ----
Majority MSAs 603,214 $150 $175 $90,482 $105,562
Minority MSAs 384,300 100 125 38,430 48,038
Majority RSAs 587,538 75 100 44,065 58,754
Minority RSAs 437,735 40 60 17,509 26,264
------- --- --- ---------- ----------
Total 2,012,787 $95 $119 $190,487 - $238,618
Plus: Cellular net PP&E 24,721 24,721
---------- ----------
Aggregate Cellular Value $215,208 $263,339
North Pacific Cable (80%-100% of Book Value as of 12/31/94) $40,035 - $50,044
- -------------------
Total Aggregate Value $1,379,981 - $1,556,515
Less: Debt as of December 31, 1994 (413,214) (413,214)
Less: US WEST Acquisition Costs (357,728) (357,728)
Plus: Cash as of December 31, 1994 8,920 8,920
Plus: Alascom Divestiture Proceeds 255,551 255,551
Plus: Debt Assumed by AT&T 17,000 17,000
Equity Value $890,510 - $1,067,044
Equity Value per Share - Public Market Value $22.48 - $26.93
- --------------------------------------------------------------------------------------------------
Equity Value per Share - With Minority Squeezeout Premium of 25% $28.10 $33.67
- --------------------------------------------------------------------------------------------------
<FN>
(1) Includes Existing Local Exchange Companies, US WEST Acquisition, but excludes generic
acquisitions.
(2) 1996 figures are used in order to obtain the full-year impact of the US WEST transaction.
(3) No value has been assigned to managed properties.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------------------
Valuation Matrix
(in thousands, with the exception of per share value)
Public Market Valuation Range
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Value $24.00 $25.00 $26.00 $27.00 $28.00
- ---------------------------------------------------------------------------------------------------
Equity Value (1) $950,871 $990,491 $1,030,110 $1,069,730 $1,109,349
Total Enterprise Value (2) $1,448,342 $1,487,962 $1,527,581 $1,567,201 $1,606,820
Net Income
1995 (3) 19.0 x 19.8 x 20.6 x 21.4 x 22.2 x
--------------------
1996 (4) 13.6 14.2 14.8 15.3 15.9
--------------------
EBITDA
1995 (3) 6.7 x 6.9 x 7.1 x 7.3 x 7.4 x
--------------------------------------------------------------
1996 (4) 5.5 5.7 5.8 6.0 6.1
--------------------------------------------------------------
Dividend Yield ----------------------------------
LTM 5.5% 5.3% 5.1% 4.9% 4.7%
- --------------------------------------------------------------------------------------------------
- ---------------------------------------
<FN>
(1) Equity Value is defined as Share Price multiplied by full-diluted shares outstanding.
(2) The Total Enterprise Value is calculated as follows: Equity Value plus total debt (12/31/94)
less cash less the anticipated after-tax benefit of the Alascom divestiture proceeds plus the
acquisition cost of the US WEST properties less the debt assumed by AT&T in the Alascom
divestiture.
(3) Excludes Alascom. Figures have not been adjusted to reflect the full year impact of the
US WEST transaction.
(4) Excludes Generic LEC acquisitions.
/TABLE
<PAGE>
TAB 5
<PAGE>
-----------------------------------------------
Valuation Methodologies Using
Long-Term Projections
-----------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------------------
Discounted Cash Flow Analysis - Public Market Value
Without the Generic Acquisitions
(dollars in thousands)
Projected
----------------------------------------------------------
1995-Full 1995-Half 1996 1997 1998 1999
Yr. Yr. (2)
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EBIT $147,321 $73,661 $153,352 $168,670 $182,145 $195,509
Less: Income taxes (1) 56,680 28,340 59,485 65,895 71,840 77,618
-------- ------- -------- -------- -------- --------
Unlevered After-Tax Income 90,641 45,321 93,867 102,775 110,305 117,891
Plus: Depreciation & Amortization 106,152 53,076 109,308 113,479 123,421 129,940
Less: Capital Expenditures (127,500) (63,750) (117,100) (108,700) (112,100) (104,900)
Less: Cost of Businesses Acquired (357,728) 0 0 0 0 0
Plus: Other Cash Flow Items (12,251) (6,126) (300) (3,700) (10,100) (14,700)
--------- -------- --------- --------- --------- ---------
Free Cash Flow ($300,686) $28,521 $85,775 $103,854 $111,526 $128,321
--------- -------- --------- --------- --------- ---------
------------------------------- ------------------------------------------------------
DISCOUNTED FREE CASH FLOWS DISCOUNTED TERMINAL VALUE
Terminal Multiple of 1999 EBITDA
-------------------------------------------------------
5.50x 5.75x 6.00x 6.25x
Discount PV of ----------- ---------- ---------- ----------
Rate Cash Flows
-------- ----------
8.0% $365,431 $1,266,015 $1,323,561 $1,381,107 $1,438,653
8.5% $360,625 1,239,972 1,296,334 1,352,697 1,409,059
9.0% $355,915 1,214,581 1,269,789 1,324,997 1,380,205
9.5% $351,300 1,189,822 1,243,905 1,297,988 1,352,071
10.0% $346,777 1,165,678 1,218,663 1,271,649 1,324,634
----------------------- --------------------------------------------------------
------------------------------------------------------
EQUITY VALUE (2)
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Adjustments:
------------
<S> <C> <C> <C> <C>
$1,132,014 $1,189,560 $1,247,106 $1,304,652
Less: Debt as of 12/31/94 ($413,214) 1,101,164 1,157,527 1,213,889 1,270,251
Less: Cost of US WEST (357,728) 1,071,064 1,126,272 1,181,480 1,236,688
Acquisitions 1,041,690 1,095,773 1,149,856 1,203,939
Less: 1995 First Half Cash (9,961) 1,013,023 1,066,008 1,118,994 1,171,979
Flow (3) -------------------------------------------------------
Plus: Cash as of 12/31/94 8,920 -------------------------------------------------------
Plus: Alascom Divestiture 255,551 EQUITY VALUE PER SHARE
Proceeds
Plus: Debt assumed by AT&T 17,000 $28.57 $30.02 $31.48 $32.93
---------- ---------------------------
Net Debt ($499,432) 27.79 29.22 30.64 32.06
27.03 28.43 29.82 31.21
26.29 27.66 29.02 30.39
---------------------------
25.57 26.91 28.24 29.58
-------------------------------------------------------
----------------------------------------------------------------------
EQUITY VALUE PER SHARE APPLYING A MINORITY SQUEEZEOUT PREMIUM OF 25%
$34.57 $38.30
----------------------------------------------------------------------
<FN>
(1) Effective tax rate applied for each year.
(2) Assumes US WEST acquisitions will close on 6/30/95.
(3) Figure equals 1995's first half cash flows, excluding cost of businesses acquired, sale of
assets and financing.
(4) Equity Value = PV(Free Cash Flows) + PV(Terminal Value) - Net Debt.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------------------
Discounted Cash Flow Analysis - Public Market Value
With Generic Acquisitions
(dollars in thousands)
Projected
-----------------------------------------------------------
1995-Full 1995-Half 1996 1997 1998 1999
Yr. Yr. (2)
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EBIT $147,321 $73,661 $183,379 $201,040 $234,030 $248,686
Less: Income taxes (1) 56,680 28,340 71,182 78,584 92,311 98,681
-------- -------- -------- -------- -------- --------
Unlevered After-Tax Income 90,641 45,321 112,197 122,456 141,719 150,005
Plus: Depreciation & Amortization 106,152 53,076 129,754 134,330 157,136 164,043
Less: Capital Expenditures (127,496) (63,748) (153,821) (115,925) (142,798) (118,965)
Less: Cost of Businesses Acquired (625,728) (268,000) 0 (165,500) 0 0
Plus: Other Cash Flow Items (12,089) (6,045) (1,143) 2,824 (4,579) (6,044)
--------- --------- --------- --------- --------- ---------
Free Cash Flow ($568,520)($239,396) $86,987 ($21,815) $151,478 $189,039
---------- --------- --------- --------- --------- ---------
------------------------------- ------------------------------------------------------
DISCOUNTED FREE CASH FLOWS DISCOUNTED TERMINAL VALUE
Terminal Multiple of 1999 EBITDA
-------------------------------------------------------
5.50x 5.75x 6.00x 6.25x
Discount PV of ----------- ---------- ---------- ----------
Rate Cash Flows
-------- ----------
8.0% $78,559 $1,605,539 $1,678,518 $1,751,497 $1,824,476
8.5% $74,156 1,572,512 1,643,989 1,715,467 1,786,945
9.0% $69,859 1,540,311 1,610,325 1,680,339 1,750,353
9.5% $65,665 1,508,913 1,577,500 1,646,087 1,714,674
10.0% $61,572 1,478,293 1,545,488 1,612,684 1,679,879
----------------------- --------------------------------------------------------
/TABLE
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------
EQUITY VALUE (4)
Adjustments:
------------
<S> <C> <C> <C> <C>
$1,184,666 $1,257,645 $1,330,624 $1,403,603
Less: Debt as of 12/31/94 ($413,214) 1,147,236 1,218,714 1,290,191 1,361,669
Less: Cost of US WEST (357,728) 1,110,738 1,180,752 1,250,767 1,320,781
Acquisitions 1,075,146 1,143,773 1,212,320 1,280,907
Less: 1995 First Half Cash (9,961) 1,040,433 1,107,628 1,174,823 1,242,019
Flow (3) -------------------------------------------------------
Plus: Cash as of 12/31/94 8,920 -------------------------------------------------------
Plus: Alascom Divestiture 255,551 EQUITY VALUE PER SHARE
Proceeds
Plus: Debt assumed by AT&T 17,000 $29.90 $31.74 $33.58 $35.43
---------- ---------------------------
Net Debt ($499,432) 28.96 30.76 32.56 34.37
28.04 29.80 31.57 33.34
27.14 28.87 30.60 32.33
---------------------------
26.26 27.96 29.65 31.35
-------------------------------------------------------
----------------------------------------------------------------------
EQUITY VALUE PER SHARE APPLYING A MINORITY SQUEEZEOUT PREMIUM OF 25%
$36.08 $40.71
----------------------------------------------------------------------
<FN>
(1) Effective tax rate applied for each year.
(2) Assumes US WEST acquisitions will close on 6/30/95.
(3) Figure equals 1995's first half cash flows, excluding cost of businesses acquired, sale of
assets and financing.
(4) Equity Value = PV(Free Cash Flows) + PV(Terminal Value) - Net Debt.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------------------
Present Value of Future Stock Price
Without the Generic Acquisitions
------------------------------------------------
1999 Projected Earnings per Share $2.62
------------------------------------------------
PRESENT VALUE OF STOCK PRICE
-------------------------------------------------------------------------
Multiple of 1999 Projected Earnings per Share
Discount ----------------------------------------------------------
Rate 15.0x 15.5x 16.0x 16.5x 17.0x
---------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11.5% $22.83 $23.59 $24.35 $25.11 $25.87
12.0% $22.32 $23.07 $23.81 $24.56 $25.30
12.5% $21.83 $22.56 $23.29 $24.02 $24.74
13.0% $21.35 $22.07 $22.78 $23.49 $24.20
13.5% $20.89 $21.58 $22.28 $22.98 $23.67
-------------------------------------------------------------------------
PRESENT VALUE OF DIVIDENDS
-------------------------------------------------------------------------------------
Discount PV of
Rate Dividends 1995 1996 1997 1998 1999
-------- --------- -------- -------- -------- -------- --------
11.5% $5.02 $1.32 $1.34 $1.38 $1.42 $1.46
12.0% $4.96
12.5% $4.90
13.0% $4.84
13.5% $4.78
-------------------------------------------------------------------------------------
TOTAL VALUE PER SHARE
-------------------------------------------------------------------------
Multiple of 1999 Projected Earnings per Share
Discount ----------------------------------------------------------
Rate 15.0x 15.5x 16.0x 16.5x 17.0x
---------- ----------------------------------------------------------
11.5% $27.85 $28.61 $29.38 $30.14 $30.90
-------------------------------
12.0% $27.28 $28.03 $28.77 $29.52 $30.26
12.5% $26.73 $27.46 $28.19 $28.91 $29.64
13.0% $26.19 $26.90 $27.62 $28.33 $29.04
-------------------------------
13.5% $25.67 $26.36 $27.06 $27.75 $28.45
-------------------------------------------------------------------------
TOTAL VALUE PER SHARE APPLYING A MINORITY SQUEEZEOUT PREMIUM OF 25% (1)
-------------------------------------------------------------------------
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Multiple of 1999 Projected Earnings per Share
Discount ----------------------------------------------------------
Rate 15.0x 15.5x 16.0x 16.5x 17.0x
---------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11.5% $33.56 $34.51 $35.46 $36.41 $37.37
-------------------------------
12.0% $32.87 $33.80 $34.73 $35.66 $36.59
12.5% $32.19 $33.10 $34.01 $34.92 $35.83
13.0% $31.53 $32.42 $33.31 $34.20 $35.09
-------------------------------
13.5% $30.89 $31.76 $32.63 $33.50 $34.37
-------------------------------------------------------------------------
<FN>
(1) Minority squeezeout premiums have not been applied to the present value of the dividends.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------------------
Present Value of Future Stock Price
With Generic Acquisitions
------------------------------------------------
1999 Projected Earnings per Share $2.88
------------------------------------------------
PRESENT VALUE OF DIVIDENDS
-------------------------------------------------------------------------
Multiple of 1999 Projected Earnings per Share
Discount ----------------------------------------------------------
Rate 15.0x 15.5x 16.0x 16.5x 17.0x
---------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11.5% $25.11 $25.95 $26.78 $27.62 $28.46
12.0% 24.55 25.37 26.19 27.01 27.83
12.5% 24.01 24.81 25.61 26.41 27.22
13.0% 23.49 24.27 25.05 25.84 26.62
13.5% 22.97 23.74 24.51 25.27 26.04
-------------------------------------------------------------------------
PRESENT VALUE OF DIVIDENDS
-------------------------------------------------------------------------------------
Discount PV of
Rate Dividends 1995 1996 1997 1998 1999
-------- --------- -------- -------- -------- -------- --------
11.5% $5.02 $1.32 $1.34 $1.38 $1.42 $1.46
12.0% $4.96
12.5% $4.90
13.0% $4.84
13.5% $4.78
-------------------------------------------------------------------------------------
TOTAL VALUE PER SHARE
-------------------------------------------------------------------------
Multiple of 1999 Projected Earnings per Share
Discount ----------------------------------------------------------
Rate 15.0x 15.5x 16.0x 16.5x 17.0x
---------- ----------------------------------------------------------
11.5% $30.13 $30.97 $31.81 $32.64 $33.48
-------------------------------
12.0% 29.51 30.33 31.15 31.97 32.79
12.5% 28.91 29.71 30.51 31.31 32.11
13.0% 28.32 29.11 29.89 30.67 31.46
-------------------------------
13.5% 27.75 28.52 29.28 30.05 30.82
-------------------------------------------------------------------------
TOTAL VALUE PER SHARE APPLYING A MINORITY SQUEEZEOUT PREMIUM OF 25% (1)
-------------------------------------------------------------------------
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Multiple of 1999 Projected Earnings per Share
Discount ----------------------------------------------------------
Rate 15.0x 15.5x 16.0x 16.5x 17.0x
---------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11.5% $36.41 $37.46 $38.50 $39.55 $40.60
-------------------------------
12.0% 35.65 36.68 37.70 38.72 39.75
12.5% 34.91 35.92 36.92 37.92 38.92
13.0% 34.20 35.17 36.15 37.13 38.11
-------------------------------
13.5% 33.50 34.45 35.41 36.37 37.32
-------------------------------------------------------------------------
<FN>
(1) Minority squeezeout premiums have not been applied to the present value of the dividends.
/TABLE
<PAGE>
TAB 6
<PAGE>
---------------------------------------------
Pacific Telecom Stock
Price Analysis
---------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------
Pacific Telecom Stock Price Analysis
Shares Traded
- --------------------------------------------------------------------------------------
$ 30.000 per $ 30.063 per
share and under share and over Total
--------------- -------------- ----------
<S> <C> <C> <C>
Total Shares Traded Since Announcement(1) 1,112,160 256,860 1,369,020
Percentage Traded 81.2% 18.8% 100.0%
- --------------------------------------------------------------------------------------
Weighted Average Stock Price
------------------------------------------------------------------------------------
Weighted Average of Daily Closing Prices $29.875
<FN>
(1) Total shares traded is estimated by multiplying 60% by 2,281,700 to help
remove double counting.
Source: IDD Information Services/Tradeline
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------
Pacific Telecom, Inc.
Total Volume Traded at Specified Prices
November 2, 1994 to March 3, 1995
<S> <C> <C> <C> <C> <C> <C>
Volume
Traded
- ---------
1,000,000
800,000 783,300
600,000
400,000
328,860
200,000
138,720
66,600
45,540
6,000
0
- ---------------------------------------------------------------------------------------
29.06-29.50 29.56-30.00 30.06-30.50 30.56-31.00 31.05-31.50 31.56-32.00
Daily Closing Price
Graph shows 1,369,020 cumulative shares, 3.5% of the 39,620,000 shares outstanding as reported on
03/03/95. Cumulative shares is estimated by multiplying 60% of 2,281,700 traded volume to help
remove double counting.
Source: IDD Information Services/Tradeline
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------
Autex Trading Analysis
(000s Shares)
Traded Volume
Number Number Number
% of of % of of % of of
1/95 Total Trades Rank 12/94 Total Trades Rank 11/94 Total Trades Rank
Broker ---- ----- ------ ---- ----- ----- ------ ---- ----- ----- ------ ----
- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Merrill Lynch, 22.6 46.8 10 1 39.5 30.5 11 2 227.0 20.2 17 1
Pierce Fenner
& Smith, Inc.
Herzog Heine & 18.7 38.7 6 2 44.6 34.4 11 1 163.1 14.5 19 4
Geduld, Inc.
Troster Singer 5.0 10.4 1 3 15.0 11.6 2 4 139.0 12.4 7 5
Stevens
Rothschild
Morgan Stanley & 2.0 4.1 1 4 0.0 0.0 0 0 0.0 0.0 0 0
Company, Inc.
Jefferies & 0.0 0.0 0 0 15.5 12.0 1 3 90.8 8.1 6 6
Company, Inc.
Jones & 0.0 0.0 0 0 0.0 0.0 0 0 10.0 0.9 1 8
Associates,
Inc.
Neuberger & 0.0 0.0 0 0 0.0 0.0 0 0 200.0 17.8 1 3
Berman
Ragen 0.0 0.0 0 0 15.0 11.6 2 4 204.0 18.2 6 2
Mackenzie,
Inc.
Schwab Mash 0.0 0.0 0 0 0.0 0.0 0 0 90.0 8.0 2 7
Institutional
---- ---- -- ----- ----- -- ------- ----- --
Total 48.3 100.0 18 129.6 100.0 27 1,123.9 100.0 59
Source: Autex Block DATA/Securities Data
/TABLE
<PAGE>
Pacific Telecom Inc.
[Graphic Bar Chart showing weekly prices and volume for period 3/3/92 to 3/3/95]
Source: IDD Information Services/Tradeline<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom Inc.
Price/Volume Analysis
Daily: November 2, 1994 to March 3, 1995
-----------------------------------------
Close
High Low Closing Trading as a % of
Date Price Price Price Volume 11/02/94
- ---------- ------- ------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
2-Nov-94 $30.250 $28.000 $29.500 937,100 100.0%
3-Nov-94 30.250 29.500 29.500 217,100 100.0%
4-Nov-94 30.250 29.500 29.625 171,500 100.4%
7-Nov-94 30.000 29.250 29.250 51,800 99.2%
8-Nov-94 30.000 29.250 29.250 67,100 99.2%
9-Nov-94 30.250 29.250 29.875 82,400 101.3%
10-Nov-94 30.250 29.750 29.750 26,700 100.8%
11-Nov-94 30.250 29.500 29.625 14,400 100.4%
14-Nov-94 30.250 29.500 29.500 19,500 100.0%
15-Nov-94 30.250 29.500 29.625 13,500 100.4%
16-Nov-94 29.750 29.500 29.625 5,200 100.4%
17-Nov-94 30.250 29.500 29.875 5,400 101.3%
18-Nov-94 30.250 29.500 30.000 20,800 101.7%
21-Nov-94 30.250 29.500 29.875 17,900 101.3%
22-Nov-94 29.750 29.625 29.625 8,000 100.4%
23-Nov-94 29.938 29.500 29.500 12,900 100.0%
24-Nov-94 29.938 29.500 29.500 NA 100.0%
25-Nov-94 30.250 29.500 29.500 NA 100.0%
28-Nov-94 30.250 29.500 30.250 24,800 102.5%
29-Nov-94 30.500 29.625 30.000 22,200 101.7%
30-Nov-94 30.750 29.875 30.750 12,800 104.2%
1-Dec-94 30.500 30.250 30.250 3,100 102.5%
2-Dec-94 30.375 30.000 30.000 7,500 101.7%
5-Dec-94 30.375 30.000 30.000 25,100 101.7%
6-Dec-94 30.750 30.000 30.000 8,300 101.7%
7-Dec-94 30.750 29.750 30.000 6,600 101.7%
8-Dec-94 30.250 29.750 29.875 10,400 101.3%
9-Dec-94 30.250 29.750 30.125 14,200 102.1%
12-Dec-94 30.000 29.750 29.750 8,000 100.8%
13-Dec-94 30.250 29.750 29.750 2,300 100.8%
14-Dec-94 29.750 29.750 29.750 100 100.8%
15-Dec-94 30.500 29.750 30.500 6,100 103.4%
16-Dec-94 30.500 29.750 29.750 8,400 100.8%
19-Dec-94 30.375 29.750 30.125 9,800 102.1%
20-Dec-94 30.500 29.750 30.500 12,600 103.4%
21-Dec-94 30.500 29.750 30.000 12,900 101.7%
22-Dec-94 30.250 30.000 30.250 4,700 102.5%
23-Dec-94 30.000 30.000 30.000 100 101.7%
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom Inc.
Price/Volume Analysis
Daily: November 2, 1994 to March 3, 1995
-----------------------------------------
Close
High Low Closing Trading as a % of
Date Price Price Price Volume 11/02/94
- ---------- ------- ------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
26-Dec-94 $30.000 $30.000 $30.000 NA 101.7%
27-Dec-94 30.500 30.000 30.000 34,600 101.7%
28-Dec-94 30.500 30.000 30.125 3,200 102.1%
29-Dec-94 30.250 30.000 30.125 4,000 102.1%
30-Dec-94 30.500 30.000 30.000 10,200 101.7%
2-Jan-95 30.500 30.000 30.000 NA 101.7%
3-Jan-95 30.500 30.000 30.500 38,200 103.4%
4-Jan-95 30.500 30.000 30.500 4,200 103.4%
5-Jan-95 30.500 30.000 30.125 2,100 102.1%
6-Jan-95 30.500 30.000 30.000 3,600 101.7%
9-Jan-95 30.000 30.000 30.000 5,300 101.7%
10-Jan-95 30.000 30.000 30.000 2,300 101.7%
11-Jan-95 30.000 30.000 30.000 1,100 101.7%
12-Jan-95 30.500 30.000 30.000 4,400 101.7%
13-Jan-95 30.125 30.000 30.000 3,300 101.7%
16-Jan-95 30.250 30.000 30.250 6,900 102.5%
17-Jan-95 30.500 29.750 30.000 5,600 101.7%
18-Jan-95 30.500 30.000 30.125 3,100 102.1%
19-Jan-95 30.500 30.000 30.500 9,000 103.4%
20-Jan-95 30.375 30.000 30.375 9,000 103.0%
23-Jan-95 30.375 30.250 30.313 5,200 102.8%
24-Jan-95 30.250 30.250 30.250 2,400 102.5%
25-Jan-95 30.375 30.250 30.250 1,200 102.5%
26-Jan-95 30.750 30.250 30.250 4,200 102.5%
27-Jan-95 30.750 30.250 30.750 10,700 104.2%
30-Jan-95 30.750 30.250 30.375 7,600 103.0%
31-Jan-95 30.750 30.250 30.750 4,200 104.2%
1-Feb-95 30.500 30.250 30.500 8,800 103.4%
2-Feb-95 30.500 30.250 30.375 8,000 103.0%
3-Feb-95 30.750 30.250 30.500 20,500 103.4%
6-Feb-95 30.750 30.250 30.563 18,300 103.6%
7-Feb-95 30.750 30.375 30.750 8,200 104.2%
8-Feb-95 31.250 30.500 31.250 18,300 105.9%
9-Feb-95 30.938 30.500 30.938 7,800 104.9%
10-Feb-95 31.375 30.750 31.000 29,200 105.1%
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom Inc.
Price/Volume Analysis
Daily: November 2, 1994 to March 3, 1995
-----------------------------------------
Close
High Low Closing Trading as a % of
Date Price Price Price Volume 11/02/94
- ---------- ------- ------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
13-Feb-95 $31.375 $30.625 $31.000 13,800 105.1%
14-Feb-95 31.375 30.625 31.000 2,500 105.1%
15-Feb-95 31.000 30.625 30.625 3,200 103.8%
16-Feb-95 31.375 30.625 31.250 16,400 105.9%
17-Feb-95 31.250 30.625 31.250 17,300 105.9%
20-Feb-95 31.250 30.625 31.250 NA 105.9%
21-Feb-95 31.250 30.625 31.000 10,600 105.1%
22-Feb-95 31.250 30.625 31.250 1,400 105.9%
23-Feb-95 31.250 30.625 31.250 21,300 105.9%
24-Feb-95 31.000 30.625 31.000 5,800 105.1%
27-Feb-95 31.000 30.750 31.000 2,100 105.1%
28-Feb-95 31.625 30.750 31.625 10,000 107.2%
1-Mar-95 31.250 31.250 31.250 600 105.9%
2-Mar-95 31.500 30.875 31.188 600 105.7%
3-Mar-95 30.875 30.875 30.875 100 104.7%
------- ------- ------- ---------
Average $30.525 $30.011 $30.260 27,490
High 31.625 31.625 937,100
Low 28.000 29.250 100
Total 2,281,700
Source: IDD Information Services/Tradeline
/TABLE
<PAGE>
TAB 7
<PAGE>
---------------------------------------------
Value Per Share Impact
of Generic Acquisitions
---------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------
Value Per Share Impact of Generic Acquisitions - Public Market Values
Discounted Cash Flow
Discount EBITDA Multiples
Rate 5.50 x 5.75 x 6.00 x 6.25 x
--------------------------------------------------------
<S> <C> <C> <C> <C>
8.0% $1.33 $1.72 $2.11 $2.50
8.5% 1.16 1.54 1.93 2.31
9.0% 1.00 1.38 1.75 2.12
9.5% 0.84 1.21 1.58 1.94
10.0% 0.69 1.05 1.41 1.77
Present Value of Future Stock Price
Discount Multiple of 1999 Projected Earnings per Share
Rate 15.0x 15.5x 16.0x 16.5x 17.0x
------------------------------------------------------------
11.5% $1.52 $1.59 $2.43 $2.51 $2.58
12.0% 1.49 1.56 2.38 2.45 2.53
12.5% 1.45 1.53 2.33 2.40 2.47
13.0% 1.42 1.49 2.27 2.35 2.42
13.5% 1.39 1.46 2.22 2.29 2.36
/TABLE
<PAGE>
TAB 8
<PAGE>
_______________________________________
TRADING MULTIPLE ANALYSIS OF
SELECTED PUBLICLY TRADED
COMPARABLE COMPANIES
________________________________________
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
__________________________________________________________________________________________________
TRADING MULTIPLE ANALYSIS OF RBOCs AND SELECTED INDEPENDENT LECs
(In millions, except share price)
Stock Price Current Stock Price/
____________________ ____________________
LTM LTM Equity Enterprise EPS(1)(2)
____________________
Comparable Telephone Companies Current High Low Value Value LTM 1994E 1995E
_______ _____ ______ _______ _______ _____ ______ _____
Regional Bell Operating
Companies & GTE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ameritech $42.125 $44.375 $36.250 $23,189 $29,675 13.9 x 13.8 x 12.8 x
Bell Atlantic 52.125 58.375 48.375 21,920 30,952 16.0 14.7 13.5
Bell South 57.250 63.500 50.500 28,410 37,043 13.6 14.0 12.9
GTE 33.125 34.375 29.500 31,867 46,910 13.3 14.1 13.0
NYNEX 39.125 40.250 33.250 16,514 26,575 15.3 13.3 11.7
Pacific Telesis (4) 29.375 33.500 28.000 12,457 17,558 11.6 10.7 10.9
Southwestern Bell 41.000 44.375 38.500 24,586 31,459 15.3 14.6 13.2
US WEST 38.375 43.750 34.625 17,496 24,500 13.4 13.6 13.2
Mean $22,055 30,584 14.1 x 13.6 x 12.6 x
Median 22,554 30,313 13.7 13.9 12.9
Lower Growth Independents
Lincoln Telecommunications $16.250 $18.750 $13.750 $526 $584 16.2 x 14.5 x 13.5 x
Southern New England Telecom 32.750 35.750 28.250 2,109 3,075 12.3 12.0 11.7
Telephone & Data Systems 45.000 49.875 35.500 2,476 3,090 58.2 47.4 35.7
TDS - Rural LEC only (5) 45.000 49.875 35.500 280 603 7.0 6.9 7.1
Mean $972 $1,421 11.8 x 11.2 x 10.8 x
Median 526 603 12.3 12.0 11.7
Higher Growth Independents
AllTel Corporation $28.750 $31.375 $23.125 $5,393 $7,227 18.5 x 17.4 x 15.1 x
Century Telephone 31.125 33.125 21.875 1,663 2,346 20.0 20.0 17.4
Cincinnati Bell 21.000 21.375 15.375 1,383 1,961 25.3 20.2 17.5
Frontier 22.750 25.250 19.250 1,664 1,984 15.9 15.5 14.2
Citizens Utilities 13.000 15.891 12.188 2,828 3,823 16.5 16.3 15.9
Citizens Utilities - 13.000 15.891 12.188 2,778 2,970 NA 23.0 16.0
Rural LEC only (6)
Mean $2,576 $3,298 19.9 x 19.2 x 16.0 x
Median 1,664 2,346 18.5 18.7 15.9
Pacific Telecom (7) $30.875 $31.625 $20.750 $1,223 $1,659 15.5 x 15.3 x 19.5 x
Pacific Telecom - 24.625 976 1,412 12.3 12.2 15.6
Pre-announcement
<FN>
Notes:
* Financial information as of 9/30/94.
(1) LTM earnings are from continuing operations and exclude restructuring charges, extraordinary
gains/losses, and other nonrecurring items.
(2) Earnings estimates were obtained from Smith Barney Research Reports for the RBOCs. All
others are based on I/B/E/S as of 12/18/94 with the exception of Pacific Telecom which we
have obtained from the Company.
(3) Cash flow equals net income from continuing operations plus depreciation & amortization,
deferred taxes and minority interests, less equity income from affiliates.
(4) Pacific Telesis results pro forma for the spin-off of AirTouch Communications (PacTel
Corporation's new name).
(5) Figures for TDS have been adjusted for US Cellular and American Paging.
(6) Figures for Citizens Utilities have been adjusted for Centennial Cellular and Century
Communications investments. Adjustments were also made for the electric, water, and gas
segments of the business in order to arrive at pure-play rural LEC company.
(7) 1994E and 1995E EBITDA figures were obtained from the Company.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Equity Market Value
as a Multiple of Enterprise Value as a Multiple of
___________________ _____________________________________________
LTM Cash Book LTM 1994E 1995E Access
Comparable Telephone Companies Flow (3) Value Revenues EBITDA EBITDA EBITDA EBIT Lines
___________________________ ________ _______ ________ ______ ______ ______ ____ _____
Regional Bell Operating
Companies & GTE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ameritech 6.0 x 2.9 x 2.4 x 5.9 5.8 5.5 10.5 x 1.7 x
Bell Atlantic 5.6 3.5 2.3 5.8 5.7 5.2 11.3 1.7
BellSouth 6.0 2.0 2.2 5.2 5.1 4.9 9.6 1.9
GTE 6.5 3.2 2.4 5.7 5.7 5.5 9.9 2.3
NYNEX 5.2 1.9 2.0 5.5 5.7 4.8 11.9 1.6
Pacific Telesis (4) 4.9 2.4 1.9 4.5 4.4 4.3 8.2 1.2
Southwestern Bell 7.2 3.1 2.8 6.7 6.5 5.9 11.9 2.4
US WEST 5.0 2.6 2.3 5.4 5.3 4.9 9.8 1.8
Mean 5.8 x 2.7 x 2.3 x 5.6 5.5 x 5.1 x 10.4 x 1.8 x
Median 5.8 2.7 2.3 5.6 5.7 5.1 10.2 1.7
Lower Growth Independents
Lincoln Telecommunications 8.2 x 2.8 x 3.0 x 6.4 5.9 5.7 9.7 x 2.5 x
Southern New England Telecom 5.9 2.3 1.8 4.5 4.4 4.4 8.4 1.6
Telephone & Data Systems 11.8 1.9 4.4 12.5 12.0 8.9 32.2 8.7
TDS - Rural LEC only (5) 2.2 1.5 2.0 3.8 3.8 3.5 7.1 8.7
Mean 5.4 x 2.2 x 2.3 x 4.9 4.7 x 4.5 x 8.4 x 4.2 x
Median 5.9 2.3 2.0 4.5 4.4 4.4 8.4 2.5
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Higher Growth Independents
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AllTel Corporation 6.9 x 3.3 x 2.5 x 7.6 7.4 6.8 11.7 x 4.6 x
Century Telephone 9.3 2.7 4.6 9.2 8.5 7.9 15.1 5.4
Cincinnati Bell 7.0 2.6 1.6 6.5 5.9 5.6 14.4 2.3
Frontier 7.1 2.1 2.0 5.5 5.5 5.3 9.2 2.1
Citizens Utilities 8.3 1.8 3.3 7.9 NM NM 12.4 11.3
Citizens Utilities - NA NA NA NA NM NM NA 11.3
Rural LEC only (6)
Mean 7.6 x 2.7 x 2.7 x 7.2 x 6.8 x 6.4 x 12.6 x 5.1 x
Median 7.1 2.6 2.5 7.6 5.9 5.6 12.4 5.0
Pacific Telecom (7) 6.6 x 1.8 x 2.3 x 6.0 6.1 6.6 10.3 x 4.2 x
Pacific Telecom - 5.3 1.5 2.0 5.1 5.2 5.7 8.7 3.5
Pre-announcement
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
__________________________________________________________________________________________________
OPERATING STATISTICS OF RBOCs AND SELECTED INDEPENDENT LECs
(In millions, except share price, access lines and cellular POPS)
Revenues EBITDA EBIT
________________ _______________ _________________
5-year Margin Margin
Comparable Telephone Companies LTM CAGR LTM % LTM %
_______ ______ ______ _______ _______ ________
Regional Bell Operating
Companies & GTE
<S> <C> <C> <C> <C> <C> <C>
Ameritech $12,275 3.4% $5,027 41.0% $2,814 22.9%
Bell Atlantic (3) 13,500 3.5% 5,367 39.8% 2,745 20.3%
BellSouth 16,575 3.2% 7,109 42.9% 3,861 23.3%
GTE 19,759 2.8% 8,160 41.3% 4,758 24.1%
NYNEX (3) 13,309 1.2% 4,859 36.5% 2,241 16.8%
Pacific Telesis (4) 9,176 0.4% 3,901 42.5% 2,133 23.2%
Southwestern Bell 11,309 4.8% 4,725 41.8% 2,651 23.4%
US WEST (5) 10,780 3.0% 4,505 41.8% 2,497 23.2%
Mean 2.8% 40.9% 22.2%
Median 3.1% 41.5% 23.2%
Lower Growth Independents
Lincoln Telecommunications $194 1.0% $91 47.1% $60 31.0%
Southern New England Telecom 1,707 1.0% 687 40.2% 364 21.3%
Telephone & Data Systems (6) 709 24.7% 247 34.9% 96 13.5%
Mean 8.9% 40.7% 22.0%
Median 1.0% 40.2% 21.3%
Higher Growth Independents
AllTel Corporation $2,844 11.5% $950 33.4% $618 21.7%
Century Telephone 512 18.5% 254 49.7% 155 30.3%
Cincinnati Bell 1,192 8.3% 300 25.1% 136 11.4%
Frontier 979 11.9% 351 35.9% 216 22.1%
Citizens Utilities (7) 1,159 15.4% 478 41.2% 309 26.7%
Mean 13.1% 37.1% 22.4%
Median 11.9% 35.9% 22.1%
Pacific Telecom $715 4.8% $277 38.7% $162 22.6%
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Net Income (1)
________________________________
(In thousands) Cellular
Margin 5-year 5-Yr Est. Cellular Access Leverage Dividend
Comparable Telephone LTM % CAGR Growth(2) POPS Lines Factor Yield Payout
Companies ______ ______ _____ _________ ______ _______ _______ _____ ______
Regional Bell Operating
Companies & GTE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ameritech $1,665 13.6% 4.7% 6.6% 20,500 17,560 1.2 4.6% 63.1%
Bell Atlantic (3) 1,424 10.5% 3.0% 7.0% 31,589 18,645 1.7 5.3% 84.7%
BellSouth 2,092 12.6% 1.3% 6.9% 38,845 19,333 2.0 4.8% 65.5%
GTE 2,384 12.1% 9.0% 7.4% 40,230 20,065 2.0 5.7% 75.2%
NYNEX (3) 1,064 8.0% -2.6% 5.1% 25,943 16,130 1.6 6.0% 92.4%
Pacific Telesis (4) 1,072 11.7% -3.0% 4.2% 81,279 14,873 5.5 7.4% 85.7%
Southwestern Bell 1,610 14.2% 6.2% 8.7% 32,180 13,238 2.4 3.9% 59.0%
US WEST (5) 1,276 11.8% 1.8% 6.5% 18,500 13,843 1.3 5.6% 74.3%
Mean 11.8% 2.6% 6.5% 2.2 5.4% 75.0%
Median 12.0% 2.4% 6.8% 1.8 5.4% 74.7%
Lower Growth Independents
Lincoln Telecommunications $36 18.3% 5.8% 7.8% 510 238 2.1 3.2% 47.5%
Southern New England Telecom 171 10.0% 1.2% 5.8% 3,257 1,937 1.7 5.4% 66.1%
Telephone & Data Systems (6) 42 5.9% 25.3% 28.6% 23,725 356 66.6 0.8% 44.7%
Mean 11.4% 10.8% 14.0% 23.5 3.1% 52.8%
Median 10.0% 5.8% 7.8% 2.1 3.2% 47.5%
Higher Growth Independents
AllTel Corporation $296 10.4% 11.5% 11.2% 7,894 1,576 5.0 3.1% 56.2%
Century Telephone 84 16.5% 25.6% 14.1% 7,093 435 16.3 1.0% 20.2%
Cincinnati Bell 55 4.6% -10.6% 15.8% 2,290 848 2.7 3.8% 94.9%
Frontier 105 10.7% 7.1% 12.3% 2,080 932 2.2 3.6% 54.8%
Citizens Utilities (7) 173 14.9% 10.2% 10.0% NA 339 0.0 6.1% 94.9%
Mean 11.4% 8.8% 12.7% 5.3 3.5% 64.2%
Median 10.7% 10.2% 12.3% 2.7 3.6% 56.2%
Pacific Telecom $79 11.1% -0.1% 7.0% 2,013 399 5.0 4.3% 66.1%
<PAGE>
Notes:
<FN>
* Financial information as of 9/30/94.
CAGR = Compound Annual Growth Rate
(1) LTM net income is from continuing operations and excludes restructuring charges,
extraordinary gains/losses, and other nonrecurring items.
(2) EPS growth estimates were obtained from Bloomberg.
(3) Company shown reclassified its historical operating revenues in 1993. The 1988 amount used
to calculate 5-year CAGR does not reflect the reclassification.
(4) Pacific Telesis results pro forma for the spin-off of AirTouch Communications (PacTel
Corporation's new name). Cellular POPS shown here represent those of AirTouch
Communications and include international POPS.
(5) 1988 revenues used to calculate 5-year CAGR are pro forma for US WEST's discontinuance
of its Capital Assets segment.
(6) TDS conducts substantially all of its cellular operations through US Cellular. Cellular POPS
shown here represent those of US Cellular.
(7) Represents the financial results from October 1, 1993 to the dates of acquisition for all the
GTE Telephone PropertiesSource: Citizens' January 1995 Red Herring acquired through
Sept. 30, 1994 and for the yet to be acquired GTE properties and AllTel Properties, in
addition to the recent equity offering of 15 MM shares.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
__________________________________________________________________________________________________
MARKET VALUATION ANALYSIS OF CELLULAR COMPANIES
(In thousands)
Most Comparable
___________________________________________
U.S. CommNet Centennial LIN Broad-
Cellular Cellular Inc. Cellular Casting
_________ _____________ __________ __________
MARKET DATA
<S> <C> <C> <C> <C>
Current POPs Owned 23,642 3,062 4,100 27,200
POP PROFILE
% Markets 1-10 3.6% 0.0% 2.8% 98.6%
% Markets 11-50 3.5% 0.0% 9.9% 0.0%
% Markets 51-305 29.7% 17.8% 71.8% 0.7%
% RSA 57.5% 82.2% 15.5% 0.7%
___________ ________ _________ ___________
94.3% 100.0% 100.0% 100.0%
OWNERSHIP
% Majority 80.9% 64.3% 71.5% 81.2%
% Minority 19.1% 35.7% 28.5% 18.8%
___________ ________ _________ ___________
Total Ownership 100.0% 100.0% 100.0% 100.0%
PRICE/SHARE DATA
Price Per Share $32.000 $26.875 $16.125 $131.750
Fully Diluted Shares 76,907 11,713 11,957 51,524
Outstanding __________ ________ ________ __________
EQUITY VALUE $2,461,032 $314,791 $192,807 $6,788,294
__________ ________ ________ __________
ASSET VALUATION
Add: Total Debt 255,695 (3) 229,227 250,000 3,008,876 (4)
Less: Net Prop., Plant & Equip. 258,547 57,462 34,331 347,320 (6)
Working Capital (12) 2,245 47,063 61,139 235,308
Other Assets 0 8,349 (7) 688,890 (8)
Options Proceeds 887 6,996 3,128 103,330
___________ ________ _________ __________
IMPLIED CELLULAR MARKET
FRANCHISE VALUE $2,455,048 $432,497 $335,860 $8,422,322
========== ======== ======== ==========
IMPLIED FRANCHISE VALUE PER POP $103.8 $141.3 $81.9 $309.6
IMPLIED TOTAL VALUE PER POP $114.8 $160.0 $90.3 $322.4
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
__________________________________________________________________________________________________
MARKET VALUATION ANALYSIS OF CELLULAR COMPANIES
(In thousands)
Cellular Vanguard Contel AirTouch
Comm. Cellular Cellular Comm.
_________ ___________ __________ __________
MARKET DATA
<S> <C> <C> <C> <C>
Current POPs Owned 7,749 6,455 24,210 75,300 (1)
POP PROFILE
% Markets 1-10 29.6% 0.0% 14.7% 58.0% (2)
% Markets 11-50 40.2% 0.0% 25.4% 24.1% (2)
% Markets 51-305 28.1% 91.3% 39.5% 16.0% (2)
% RSA 2.1% 8.7% 20.4% 1.9% (2)
___________ ________ _________ ___________
100.0% 100.0% 100.0% 100.0%
OWNERSHIP
% Majority 96.5% 84.4% 54.2% 83.8% (2)
% Minority 3.5% 15.6% 45.8% 16.2%
___________ ________ _________ ___________
Total Ownership 100.0% 100.0% 100.0% 100.0%
PRICE/SHARE DATA
Price Per Share $51.250 $25.500 $25.000 $29.750
Fully Diluted Shares 42,540 25,602 99,951 492,652
Outstanding __________ ________ __________ ___________
EQUITY VALUE $2,180,175 $652,856 $2,498,768 $14,656,385
__________ ________ __________ ___________
ASSET VALUATION
Add: Total Debt 349,228 273,652 1,990,343 83,900 (5)
Less: Net Prop., Plant & Equip. 149,788 84,037 533,553 764,900
Working Capital (12) 224,955 (11) (8,366) (78,186) 12,381
Other Assets 0 0 0 452,700 (9)
Options Proceeds 43,083 40,405 1,894 24,292 (10)
___________ ________ _________ ___________
IMPLIED CELLULAR MARKET
FRANCHISE VALUE $2,111,577 $810,432 $4,031,850 $13,486,013
========== ======== ========== ===========
IMPLIED FRANCHISE VALUE PER POP $272.5 $125.5 $166.5 $179.1
IMPLIED TOTAL VALUE PER POP $291.8 $138.6 $188.6 $189.3
Notes:
<FN>
(1) Includes 40.4 million international POPs.
(2) Figures are for U.S. market only. AirTouch generates 53.7% of its POPs internationally.
(3) Involves revolving credit agreement and redeemable preferred stock.
(4) Includes $1,339 million of redeemable preferred stock.
(5) Includes amounts due to affiliates and non-affiliates.
(6) Assumes cellular comprises 85% of PP&E and broadcasting presents 15%.
(7) Represents asset value of mobile radio and paging business as of 5/31/93.
(8) Represents Lin's television stations valued at 10x cash flow.
(9) Represents AirTouch's paging service at 9x operating cash flow.
(10) Estimated option value based on 1.3 million options outstanding on an average exercise price
of $18.69.
(11) Includes $56.1 million note receivable from Cellular Communications of Puerto Rico.
(12) Excludes short-term debt.
/TABLE
<PAGE>
TAB 9
<PAGE>
______________________________________________
ACQUISITION MULTIPLE ANALYSIS OF
SELECTED ACQUIRED COMPANIES
_______________________________________________
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
________________________________________________________________________________________________________________________
SUMMARY ANALYSIS OF SELECTED LEC ACQUISITIONS
(Dollars in thousands)
Purchase Price as a Multiple of:
____________________________________________
Ann. Date Target/ Purchase Transaction Net (c) Forward Proj. Cash Book
Eff. Date Acquiror Price (a) Value(b) Income N.I. (d) N.I. (e) Flow (f) Value
_________ ___________________________________ __________ ___________ _______ ________ ________ ________ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/29/94 AllTel Corporation
Pending Citizens Utilities Company (g) $258,000 $292,000 NA NA NA NA NA
05/19/93 GTE Telephone Ops. - Access Lines $1,104,000 $1,104,000 34.3 x NA NA 10.9 x 2.8 x
Pending Citizens Utilities Company (h)
02/03/93 GTE - Georgia Telephone Operations $440,000 $545,000 15.7 NA NA 6.6 3.4
11/01/93 AllTel Corp. (i)
11/21/91 Central Telephone Co. of OH (Centel) $120,000 $134,604 20.6 NA NA 10.4 4.1
04/01/92 Century Telephone Enterprises
01/10/91 Centel - MN, IA Telephone Operations $218,465 $252,537 31.6 NA NA 11.5 3.9
08/07/91 Rochester Telephone Corp. (j)
01/10/91 Centel - Iowa Telephone Operations $78,600 $91,218 27.5 NA NA 10.7 3.6
08/07/91 Rochester Telephone Corp. (k)
01/10/91 Centel - Minnesota Telephone Operations $139,865 $161,319 34.5 NA NA 11.9 4.1
06/24/91 Rochester Telephone Corp. (l)
Median 29.6 x NA NA 10.8 x 3.8 x
Mean 27.4 NA NA 10.3 3.6
High 34.5 NA NA 11.9 4.1
Low 15.7 NA NA 6.6 2.8
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
_______________________________________________________________________________________________________________
SUMMARY ANALYSIS OF SELECTED LEC ACQUISITIONS
(Dollars in thousands)
Transaction Value as a Multiple of:
__________________________________________________ Cellular
Ann. Date Target/ Access Leverage
Eff. Date Acquiror Revs. EBIT EBITDA Assets Lines Factor
_________ ___________________________________ ________ _________ _______ ________ ________ ________
<S> <C> <C> <C> <C> <C> <C> <C>
11/29/94 AllTel Corporation
Pending Citizens Utilities Company (g) 2.4 x NA NA NA $2,662 NM
05/19/93 GTE Telephone Ops. - Access Lines 3.1 15.1 x 7.9 x 1.4 x 2,208 NM
Pending Citizens Utilities Company (h)
02/03/93 GTE - Georgia Telephone Operations 3.2 12.1 6.4 NA 2,868 NM
11/01/93 AllTel Corp. (i)
11/21/91 Central Telephone Co. of OH (Centel) 3.4 14.2 9.4 1.8 2,137 NM
04/01/92 Century Telephone Enterprises
01/10/91 Centel - MN, IA Telephone Operations 3.0 19.8 9.5 1.8 1,871 NM
08/07/91 Rochester Telephone Corp. (j)
01/10/91 Centel - Iowa Telephone Operations 3.4 17.0 8.6 1.6 1,824 NM
08/07/91 Rochester Telephone Corp. (k)
01/10/91 Centel - Minnesota Telephone Operations 3.1 21.7 10.1 1.8 1,898 NM
06/24/91 Rochester Telephone Corp. (l)
Median 3.2 x 16.1 x 9.0 x 1.8 x $2,137
Mean 3.1 16.6 8.6 1.7 2,210
High 3.4 21.7 10.1 1.8 2,868
Low 2.4 12.1 6.4 1.4 1,824
Notes:
Financial information shown for the targets is the latest twelve months as of the announcement date of the transaction.
NA = Not Available; NM = Not Meaningful.
<FN>
(a) Aggregate in cash or securities paid for the outstanding common equity as well as for any convertible securities and
options.
(b) Cost of acquiring stock, convertible securities and options less cash and cash equivalents plus preferred stock, short
term and long term debt.
(c) Net income from continuing operations and before extraordinary items.
(d) Estimated net income for current year.
(e) Projected net income for the year following current year.
(f) Net income before extraordinary items plus depreciation, amortization and deferred taxes.
(g) Under the agreement, Citizens has agreed to turn over the operations of its telephone business to AllTel under a long-term
contract. The purchase price also includes a cable television system with 1,000 subscribers and Citizens will transfer
3,600 of its telephone access lines to AllTel.
(h) Citizens Utilities acquired the Idaho, Tennessee, Utah and West Virginia GTE telephone properties (189,000 access lines)
on December 31, 1993. On June 30, 1994, Citizens completed the purchase of the New York GTE telephone properties (270,000
access lines). The remainder of the properties are expected to be purchased in the second half of 1994.
(i) AllTel paid $440 million in cash and exchanged their telephone operations in Indiana, Michigan and Illinois, with a net
book value of approximately $105 million, for the GTE Georgia operations. Figures used in calculating multiples of
purchase price and transaction value include the results of the GTE Georgia operations less the financial results of the
AllTel properties sold to GTE. Where financial results for the AllTel properties were not available, it is assumed that
AllTel's margins (e.g. EBIT margin) are the same as those of the GTE properties.
(j) Combined purchase price, transaction value and financial results for the two transactions listed below. See note "k" for
the calculation of the purchase price for the Centel Minnesota properties.
(k) Because year end 1990 financial results for the Centel Iowa properties were not available, figures shown here were
calculated by annualizing the quarter ended March 31, 1991 results.
(l) Purchase price includes approximately $21.4 million in cash, 2,885,000 shares of Rochester common stock (at $29 per share,
1/10/91 closing price) and 435,000 Cellular POPs at $80 per POP.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
___________________________________________________________________________
ANALYSIS OF ADDITIONAL LEC ACQUISITIONS*
(Dollars in thousands)
Midpoint Multiple Midpoint Multiple
Private Transaction Market Buyer x Book Value x EBITDA
__________________________ ________ _________________ _________________
<S> <C> <C> <C>
US WEST Colorado PTI 1.6 x 5.8 x
US WEST Montana Consortium 1.7 8.1
US WEST Wyoming Consortium 1.7 7.1
US WEST Oregon PTI 1.5 5.5
US WEST Washington PTI 1.6 6.1
Northwest PTI 2.5 9.6
Missouri Telephone AllTel 3.0 10.7
ATU PTI 1.6 10.0
Median 1.6 x 7.6 x
Mean 1.9 7.9
Private Transactions Cost Per Midpoint Multiple Midpoint Multiple
(POTS only) Access Line x Book Value x EBITDA
_____________________ ___________ _________________ _________________
Urban $1,958 3.1 x 10.0 x
Volcano 3,881 4.5 8.9
ATU 3,016 1.6 12.5
Viroqua 2,512 3.8 8.9
Lakeshore 1,781 3.0 12.4
North-West 2,492 2.5 9.6
Turtle Lake 1,617 3.8 8.2
Postville 2,042 2.8 6.1
Thorp 1,386 1.3 6.2
Delta 2,108 2.6 6.9
Minot 2,283 2.9 7.6
Wayside 1,795 2.2 8.9
Farmers 4,444 1.8 8.3
Mid-Plains 2,784 3.9 10.5
Northland 2,745 3.8 9.6
Missouri 2,510 3.0 10.7
Arizona 4,900 2.0 9.6
Helix Telephone 5,199 2.1 9.2
Casco 3,420 2.4 11.8
Rib Lake 3,104 3.3 7.6
Median $2,511 2.9 x 9.1 x
Mean 2,799 2.8 9.2
<FN>
* Information provided by Pacific Telecom, Inc.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
__________________________________________________________________________________________________
SUMMARY ANALYSIS OF SELECTED LEC AND CELLULAR ACQUISITIONS
(Dollars in thousands)
Purchase Price as a Multiple of:
____________________________________________
Ann. Date Target/ Purchase Transaction Net (c) Forward Proj. Cash Book
Eff. Date Acquiror Price (a) Value(b) Income N.I. (d) N.I. (e) Flow (f) Value
_________ ___________________________________ __________ ___________ _______ ________ ________ ________ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
05/27/92 Centel Corp. $2,920,963 $4,261,016 48.7 x 48.3 x 37.1 x 10.8 x 2.4 x
03/09/93 Spring Corp. (g)
06/06/92 SLT Communications Inc. $159,500 $209,542 44.5 NA NA 12.7 6.2
01/04/93 AllTel Corp. (h)
09/24/92 San Marcos Telephone and SM Telecorp $84,016 $101,753 60.0 NA NA 17.5 4.7
04/08/93 Century Telephone Enterprises (i)
07/12/90 Contel Corp. $6,379,017 $10,150,017 26.3 31.4 27.2 8.4 3.8
03/14/91 CTE Corp. (j)
Median 46.6 x 39.8 x 32.2 x 11.8 x 4.3 x
Mean 44.9 39.8 32.2 12.4 4.3
High 60.0 48.3 37.1 17.5 6.2
Low 26.3 31.4 27.2 8.4 2.4
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
_______________________________________________________________________________________________________________
SUMMARY ANALYSIS OF SELECTED LEC ACQUISITIONS
(Dollars in thousands)
Transaction Value as a Multiple of:
__________________________________________________ Cellular
Ann. Date Target/ Access Leverage
Eff. Date Acquiror Revs. EBIT EBITDA Assets Lines Factor
_________ ___________________________________ ________ _________ _______ ________ ________ ________
<S> <C> <C> <C> <C> <C> <C> <C>
05/27/94 Centel Corp. 3.6 x 23.4 x 11.1 x 1.2 x $2,663 x 10.4
03/09/93 Sprint Corp. (g)
06/06/92 SLT Communications Inc. 5.9 26.6 12.6 2.0 4,873 7.6
01/04/93 AllTel Corp. (h)
09/24/92 San Marcos Telephone and SM Telecorp 2.5 32.7 15.6 2.1 4,522 13.7
04/08/93 Century Telephone Enterprises (i)
07/12/90 Contel Corp. 3.1 16.2 8.9 1.4 3,917 8.6
03/14/91 GTE Corp. (j)
Median 3.4 x 25.0 x 11.8 x 1.7 x $4,220 9.5
Mean 3.8 24.7 12.0 1.7 3,994 10.1
High 5.9 32.7 15.6 2.1 4,873 13.7
Low 2.5 16.2 8.9 1.2 2,663 7.6
<PAGE>
Notes:
Financial information shown for the targets is latest twelve months as of the announcement date of the transaction.
NA = Not Available; NM = Not Meaningful.
<FN>
(a) Aggregate in cash or securities paid for the outstanding common equity as well as for any convertible securities and
options.
(b) Cost of acquiring stock, convertible securities and options less cash and cash equivalents plus preferred stock, short
term and long term debt.
(c) Net income from continuing operations and before extraordinary items.
(d) Estimated net income for current year.
(e) Projected net income for the year following current year.
(f) Net income before extraordinary items plus depreciation, amortization and deferred taxes.
(g) Purchase price for the transaction includes the following: 86,479,000 Centel shares converted at the exchange ratio
(1.37); 95 shares of Centel cumulative Preferred Stock each converted into one share of Sprint's Preferred Stock - Fifth
Series, par value $100,000 per share; Convertible Junior Preferred of Central Telephone Company (a sub of Centel)
converted into 6.47325 shares of Sprint common stock; and 2,015,000 outstanding Centel options assumed by Sprint and
adjusted on the basis of the exchange ratio. Centel net income for the 1991 and 1992 period excludes (i) the $43.5 million
after tax gain from the divestiture of the Ohio properties in April 1992, (ii) the $45.6 million after tax gain from the
1991 divestiture of the Minnesota properties, and (iii) the $13.9 million after tax gain on the sale of cellular
properties.
(h) Purchase Price includes the following: 99,630 SLT Communications common shares converted into 21.0937 shares of AllTel;
and 90,000 shares of SLT Communications preferred stock converted into 21.0937 shares of AllTel common stock.
(i) Purchase price includes the following: each San Marcos Telephone share converted into 22.2069 Century shares plus
$259.8126 in cash; and each SM Telecorp, Inc. share converted to the right to receive $77.4353 in cash.
(j) Purchase price includes only common shares of Contel converted at the exchange ratio (1.27). All outstanding Contel
preferred stock was redeemed prior to the merger.
/TABLE
<PAGE>
TAB 10
<PAGE>
-----------------------------------------------
Minority Squeezeout Transactions
-----------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Analysis of Selected Minority Squeezeout Transactions
(1989 to Present; $20 Million or More Transactions; 5% - 50% of Minority Interest Purchased)
Pre-Bid Target
Date Share Price Premium
--------- Trans % of ------------------- of Final
Announced Value Target 4 Wks Bf. Day Bf. Initial Final Offer Price over
Acquiror/Target Effective ($ MM) Acquired Announced Announced Offer Price Price (1) Initial Price
- ---------------------------- --------- ------ -------- --------- --------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GTE Corp. 09/08/94 $253.8 10.0% $18.75 $17.75 $22.50 $25.50 13.3%
Contel Cellular Inc. Pending (a)
Dole Food Co. 08/24/94 $81.8 17.2% $10.38 $11.63 $14.00 $15.75 12.5%
Castle & Cooke Homes Inc. Pending (a)
WMX Technologies 07/28/94 $397.4 21.4% $8.75 $8.00 $7.86 $8.85 12.6%
Chemical Waste Management Pending (a)
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Premium of
Premium over Pre-Bid Target Price Final Price Premium Over Pre-Bid
Price (Day Before Ann.) Day Before over Price Price (4 Weeks Before)
- ----------------------- ----------------------
Initial Final Final Offer Day Before Initial Final
Price Price Announced Final Ann. Price Price Comments
------- ------- ----------- ---------- ------- ------ -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
26.8% 43.7% $24.25 5.2% 20.0% 36.0% Consideration: Cash. GTE offered to acquire the
(a) (a) (a) (a) remaining 10% of its 90% owned Contel Cellular (CC)
subsidiary by acquiring all of the Class A shares out-
standing of CC for $25.50 in cash per share. The
Class B shares owned by GTE were to be converted into
shares of the merged company.
20.4% 35.5% $14.75 6.8% 34.9% 51.8% Consideration: Cash. Dole Food made an amended
(a) (a) (a) (a) definitive offer to acquire the remaining 17.2% stake
in its Castle & Cooke Homes subsidiary for $15.75 in
cash per share, or a total value of $81.5 million.
Dole had originally offered $14 in cash per share.
-1.7% 10.6% $7.88 12.4% -10.2% 1.1% Consideration: Cvt Debt into Stock or Cash. WMX
(a) (a) (a) (a) definitively agreed to acquire the remaining 44.9
million common shares, or 21.4%, it did not already
own in Chemical Waste Management (CWM) in a
transaction valued at an amended $8.85 per share, or
$397.4 million in $1,000 convertible subordinated
notes. CWM's shareholders were to receive $7.86 per
share in a stock-for-stock exchange.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ogden Corp. 06/06/94 $97.1 15.8% $15.25 $17.38 $17.06 $17.96 5.2%
Ogden Projects Inc. 12/29/94
------------------------------------------------------------
Ogden Corp. Stock Price $21.88 $21.38 -2.3%
Exchange Ratio 0.78 0.84 7.7%
------------------------------------------------------------
National Intergroup Inc. 03/01/94 $79.7 19.5% $13.00 $13.50 $14.75 $14.46 -1.9%
FoxMeyer Corp. 10/13/94
-------------------------------------------------------------------
National Intergroup Stock Price NM $16.00 NM
Exchange Ratio NM 0.904 NM
-------------------------------------------------------------------
E.W. Scripps Co. 02/18/94 $118.9 13.9% $75.00 $75.00 $86.25 $82.80 -4.0%
Scripps Howard Broadcasting 09/14/94
-------------------------------------------------------------------
E.W. Scripps Co. Stock Price $28.75 $24.00 -16.5%
Exchange Ratio 3.00 3.45 15.0%
-------------------------------------------------------------------
Holderbank Financiere Glarus 01/07/94 $52.5 5.0% $7.13 $6.75 $7.65 $7.65 0.0%
Holnam Inc.(Holdernam Inc.) 02/23/94
Medco Containment 10/13/93 $156.7 45.8% $29.50 $33.75 $25.00 $27.25 9.0%
Medical Marketing Group 04/06/94
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
-1.8% 3.3% $15.88 13.1% 11.9% 17.7% Consideration: Stock. Ogden (OG) acquired the
remaining 15.8% of Ogden Projects (OP) that it did not
already own in a stock swap merger. OP shareholders
are to receive .84 shares of OG's common stock,
amended from .78 shares, for each OP share held.
9.3% 7.1% $14.25 1.5% 13.5% 11.3% Consideration: Stock. National Intergroup (NI)
offered to acquire the remaining common shares of
FoxMeyer (FM) that it did not already own for .904
common shares of NI announced on 10/10/94, up from .90
common shares of NI agreed to on 6/30/94 ($15.75).
The exchange ratio was based on the last 20 day
trading avg. of NI and could not be less than $14.40
per share. The original consideration consisted of
$14.75 per share principal amount of 8.25% senior
notes due 2004 of Foxmeyer Holding.
15.0% 10.4% $82.00 1.0% 15.0% 10.4% Consideration: Stock. E.W Scripps increased its
offer from the 3-to-1 exchange ratio to 3.45-to-1
share of Scripps Howard Broadcasting (SHB) on 4/7/94.
SHB ceased trading at $101.50 per share when
shareholders of SHB approved the transaction on
9/14/94.
13.3% 13.3% NM NM 7.3% 7.3% Consideration: Cash. Holderbank Financiere Glarus
acquired the remaining 5%, or about 6.8 million common
shares, that it did not already own for $7.65 per
share in cash.
-25.9% -19.3% $26.00 4.8% -15.3% -7.6% Consideration: Cash. The transaction was contingent
on the completion of Merck's merger with Medco
(completed in November of 1993). Medco lost legal
challenges to the merger at a discount. The original
offer of $25 per share was a 26% discount to the
Medical Marketing Group stock price the day before the
announcement.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Valley Fashions Corp. 09/20/93 $68.0 5.0% $48.63 $49.88 $46.00 $46.00 0.0%
West Point-Pepperell 12/10/93
Apache Corp. 06/17/93 $31.9 33.5% $12.00 $11.88 $14.00 $15.00 7.1%
Hadson Energy Resources Corp. 11/12/93
Rust International Inc. 11/13/92 $185.0 44.0% $17.88 $17.88 $17.88 $18.75 4.9%
Brand Cos Inc. 05/07/93
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
-7.8% -7.8 NM NM -5.4% -5.4% Consideration: Cash. William Farley originally
bought 95% of the company in a hostile takeover for
$58 per share in 1989, filed for bankruptcy in 1990,
and emerged from bankruptcy in September 1992. Share-
holders of West Point-Pepperell (WPP) lost legal
challenges to the minority squeezeout at a discount to
WPP's stock price.
17.9% 26.3% $14.38 4.3% 16.7% 25.0% Consideration: Cash or Stock. Apache acquired 66.5%
of Hadson in July of 1993 for $14 per share with the
price increasing to $15 if Apache's holdings of Hadson
increased to over 80% within twelve months.
0.0% 4.9% NA NA 0.0% 4.9% Consideration: Cash or Stock. Shareholders were
given a choice of cash or stock in Rust. 70% of Brand
shareholders elected to receive cash. Original offer
was at no premium.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Analysis of Selected Minority Squeezeout Transactions
(1989 to Present; $20 Million or More Transactions; 5% - 50% of Minority Interest Purchased)
Pre-Bid Target
Date Share Price Premium
--------- Trans. % of ------------------- of Final
Announced Value Target 4 Wks Bf. Day Bf. Initial Final Offer Price over
Acquiror/Target Effective ($ MM) Acquired Announced Announced Offer Price Price (1) Initial Price
- ---------------------------- --------- ------ -------- --------- --------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Leucadia National Corp 08/17/92 $139.9 36.9% $20.00 $23.00 $23.00 * $25.78 12.1%
PHLCORP 12/31/92
-------------------------------------------------------------------------
Leucadia National Corp. Stock Price: $58.88 $63.50 7.9%
Exchange Ratio: 0.25 * 0.406 NM
-------------------------------------------------------------------------
WR Grace & Co 03/02/92 $77.3 16.6% $11.88 $14.50 $16.50 $19.00 15.2%
Grace Energy Corp 07/14/92
Charter Co(American Financial) 02/06/92 $43.1 18.0% $5.00 $4.75 $7.20 $7.25 0.7%
Spelling Entertainment Inc. 07/30/92
-------------------------------------------------------------------------
Charter Co. Stock Price: $8.00 $7.25 -9.4%
Exchange Ratio: 0.90 1.00 11.1%
-------------------------------------------------------------------------
Time Warner Inc. 10/29/91 $1,221.9 18.0% $49.00 $51.00 $61.71 $61.71 0.0%
American Television and Comm.06/26/92
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Premium of
Premium over Pre-Bid Target Price Final Price Premium over Pre-Bid
Price (Day Before Ann.) Day Before over Price Price (4 Weeks Before)
- ----------------------- ----------------------
Initial Final Final Offer Day Before Initial Final
Price Price Announced Final Ann. Price Price Comments
------- ------- ----------- ---------- ------- ------ -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
-0.0% 12.1% $24.00 7.4% 15.0% 28.9% Consideration: Stock. Shareholders received 0.406
shares of Leucadia for each share of PHLCORP.
*Original offer was at no premium and 0.25 shares of
Leucadia plus $8.28 principal amount 9 3/8 sub debt.
13.8% 31.0% $17.50 8.6% 38.9% 59.9% Consideration: Cash.
51.6% 52.6% $6.25 16.0% 44.0% 45.0% Consideration: Stock. Shareholders received one
share of Charter for each share of Spelling. The
original offer was 0.9 shares of Charter per share of
Spelling.
21.0% 21.0% NM NM 25.9% 25.9% Consideration: Debt. Shareholder's of American
Television and Comm. common stock received $82.50
principal amount of Time Warner redeemable reset notes
due Aug. 15, 2002 which were expected to trade between
$61.71 and $63.11 per share.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Arka Inc. 09/16/91 $92.6 18.0% $11.63 $12.38 $14.74 $15.44 4.7%
Arkla Exploration Co 01/28/92
-------------------------------------------------------------------
Arkla Inc. Stock Price: $16.38 $16.25 -0.8%
Exchange Ratio: 0.90 0.95 5.6%
-------------------------------------------------------------------
Penn Traffic Co 09/06/91 $43.9 10.0% $32.50 $32.75 $34.00 $34.00 0.0%
P&C Food Markets Inc. 10/16/91
Land O'Lakes 07/25/91 $22.6 34.5% $10.00 $11.00 $13.50 $15.30 13.3%
Country Lake Foods 11/13/91
Staveley Industries PLC 06/13/91 $25.3 43.0% $14.50 $15.50 $19.00 $22.00 15.8%
Weigh-Tronix Inc. 08/31/91
Air & Water Technologies Corp 03/01/91 $49.5 18.0% $15.50 $15.75 $18.70 $18.70 0.0%
Metcalf & Eddy Cos Inc. 10/31/91
------------------------------------------------------------------
Air & Water Tech. Stock Price: $22.00 $21.38 -2.8%
Exchange Ratio: 0.850 0.875 2.9%
------------------------------------------------------------------
BHP Holdings 02/06/91 $530.0 49.9% $30.50 $33.75 $40.00 $40.00 0.0%
Hamilton Oil Corp 07/03/91
Murphy Oil Corp 01/03/91 $368.9 38.9% $17.75 $17.00 $19.13 $18.36 * -4.0%
Ocean Drilling & Exploration 07/03/91
------------------------------------------------------------------
Murphy Oil Corp. Stock Price: $38.25 $33.38 * -12.7%
Exchange Ratio: 0.50 0.55 10.0%
------------------------------------------------------------------
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
19.1% 24.7% $13.04 18.4% 26.8% 32.8% Consideration: Stock. Shareholders received 0.95
shares of Arkla for each share of Arkla Exploration.
The original offer was 0.90 shares.
3.8% 3.8% NM NM 4.6% 4.6% Consideration: Cash or Stock. Shareholders were
eligible to receive either (1) 1.225 shares of
PennCorp stock or (2) $34 per share in cash; subject
to proration by a cash consideration which could not
exceed 43% of the deal.
22.7% 39.1% $14.38 6.4% 35.0% 53.0% Consideration: Cash. Shareholders received $15.30 in
cash for each share of Country Lakes. The original
offer was $13.50 cash.
22.6% 41.9% $18.13 21.4% 31.0% 51.7% Consideration: Cash. Staveley Industries PLC
increased its offer from $19.00 to $22.00 cash payment
per share for the remaining 43% of Weigh-Tronix, Inc.
18.7% 18.8% NM NM 20.6% 20.7% Consideration: Stock. Shareholders received 0.875
shares of Air & Water for each share of Metcalf. The
original offer was 0.850 shares.
18.5% 18.5% NM NM 31.1% 31.1% Consideration: Cash or Stock. Shareholders were
given a choice of cash or Broken Hill ADRs.
12.5% 8.0% $16.38 12.1% 7.7% 3.4% Consideration: Stock. Shareholders received 0.55
shares of Murphy Oil for each share of OD&E in a
hostile deal. *This price is the day before the
tender offer was commenced. The original offer was
0.50 shares.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ERC International 10/23/90 $33.6 38.8% $11.75 $11.00 $14.75 $15.13 2.6%
(Odgen Corp.)
ERC Environ. & Energy Svcs. 04/01/91
Freeport-McMoRan Inc 07/31/90 $252.9 18.5% $7.38 $8.00 $10.50 $11.00 4.8%
Freeport-McMoRan Oil & Gas 11/14/90
-------------------------------------------------------------------
Freeport-McM Inc. Stock Price: $34.34 $34.81 1.4%
Exchange Ratio: 0.31 0.32 3.4%
-------------------------------------------------------------------
Caesars World Inc 07/19/90 $48.4 13.4% $15.63 $16.13 $22.00 $22.58 2.6%
Caesars New Jersey Inc 12/27/90
Paramount Communications 07/10/90 $46.6 17.0%* $5.13 $5.25 $7.50 $9.50 26.7%
TVX Broadcast Group Inc 02/26/91
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
34.1% 37.5% $14.50 4.3% 25.5% 28.8% Consideration: Cash. ERC International increased its
offer from $14.75 to $15.13 cash payment per share for
the remaining 38.8% of ERC Environmental and Energy
Services not already owned.
31.3% 37.5% $10.63 3.5% 42.4% 49.2% Consideration: Stock. Shareholders received an
equivalent value of $11.00 for each share of Freeport
Oil & Gas.
36.4% 40.0% $22.00 2.6% 40.8% 44.5% Consideration: Cash. Shareholders received $22.58
which consisted of $22.00 cash plus interest accrued
and a $0.25 additional cash payment.
42.9% 81.0% $7.63 24.6% 46.3% 85.4% Consideration: Cash. Shareholders recevied $9.50
cash for each share of TVX Broadcasting. The original
offer was for $7.50 per share.
*Reflects ownership of 83% of total capital stock
prior to announce.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Renault Vehicules Industriels 07/06/90 $103.7 39.9% $5.13 $5.25 $6.00 $6.25 4.2%
Mack Trucks Inc. 10/04/90
Kansas City Southern Ind. Inc. 05/17/90 $39.0 12.9% $10.50 $12.75 $14.00 $15.85 13.2%
DST Systems Inc. 08/27/90
American Express Co 03/04/90 $360.0 31.6% $11.75 $12.50 $12.51 $12.90 3.1%
Shearson Lehman Brothers 08/10/90
-------------------------------------------------------------------
American Express Co. Stock Price: $29.38 $26.88 -8.5%
Exchange Ratio: 0.426 0.480 12.7%
-------------------------------------------------------------------
Anderson Mavor Investments 02/16/90 $21.0 48.1% $8.13 $7.38 $8.50 $8.88 4.4%
National Mines Service 05/24/90
Imetal SA 01/24/90 $78.2 44.4% $12.75 $11.50 $15.50 $17.00 9.7%
Copperweld Corp(Imetal SA) 07/31/90
Esselte AB 11/08/89 $219.3 22.0% $45.50 $44.00 $46.50 $48.06* 3.4%
Esselte Business 06/20/90
Systems Inc
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
14.3% 19.0% $5.63 11.1% 17.0% 21.8% Consideration: Cash.
9.8% 24.3% $14.88 6.6% 33.3% 51.0% Consideration: Cash. Kansas City Southern Industries
increased its offer from $14.00 to $15.85 cash payment
per share for DST Systems Inc.
0.1% 3.2% $11.13 16.0% 6.5% 9.8% Consideration: Stock. Sharholders received 0.48 Amex
shares for each share of Shearson. Amex originally
offered 0.426 shares.
15.2% 20.3% $8.38 6.0% 4.6% 9.2% Consideration: Cash.
34.8% 47.8% $16.38 3.8% 21.6% 33.3% Consideration: Cash. Acquisition was contingent upon
redemption of 9.92% convertible subordinated
debentures due 9/1/90.
5.7% 9.2% $46.75 2.8% 2.2% 5.6% Consideration: Cash. Eseelte originally released a
press release disclosing its potential interest in a
minority squeeze out and would propose a price "in the
order of $40." Preliminary price negotiations between
the companies started at $43.50 and a public
announcement was offered for $46.50.* The final price
was $48.06 due to an agreement of $47.64 in cash plus
accrued interest until day merger is completed.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Heritage Media 11/01/89 $33.2 43.0% $23.25 $18.75 $20.50 $21.10* 2.9%
POP Radio Corporation 11/16/90
Canadian Pacific 10/19/89 $89.8 44.2% $17.25 $17.50 $19.50 $21.50 10.3%
Soo Line 04/09/90
Dow Jones & Co Inc. 09/21/89 $657.8 33.0% $16.25 $15.13 $18.00 $21.00 16.7%
Telerate Inc. 01/03/90
Montedison 07/31/89 $627.2 19.0% $39.00 $44.13 $49.00 $51.00 4.1%
HIMONT Inc. 02/20/90
MacAndrews & Forbes Holdings 06/14/89 $28.3 43.0% $5.63 $7.00 $7.25 $7.25 0.0%
Andrews Group Inc. 06/04/90
Primerica Corporation 06/09/89 $453.7 29.2% $15.38 $17.88 $19.40 $22.24 14.7%
AL Williams Corporation 11/01/89
-------------------------------------------------------------------
Primerica Corp. Stock Price: $24.25 $27.13 11.9%
Exchange Ratio: 0.80 0.82 2.5%
-------------------------------------------------------------------
Henley Group Inc. 06/08/89 $140.0 19.0% $19.75 $19.25 $20.50 $22.25 8.5%
Fisher Scientific Group Inc. 08/24/89
Tele-Communications Inc. 05/24/89 $179.4 25.0% $24.25 $27.00 $31.75 $32.25 1.6%
Westmarc Communications inc. 01/04/90
Carlson Hospitality Group 05/19/89 $52.7 19.8% $13.00 $13.25 $14.50 $14.88 2.6%
TGI Friday's Inc. 02/21/90
Primerica Corp 04/18/89 $48.3 17.4% $10.75 $9.75 $11.50 $11.50 0.0%
American Capital Management 10/29/90
Ingram Industries 12/14/88 $43.9 41.0% $9.38 $10.50 $12.50 $14.75 18.0%
Micro D 03/21/89
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
9.3% 12.5% $17.00 24.1%c -11.8% -9.2% Consideration: Cash. *Shareholders received $21.10
cash per share for each share of POP Radio which was
$20.50 in cash and interest accruing at 10% until date
merger was consummated.
11.4% 22.9% $19.38 11.0% 13.0% 24.6% Consideration: Cash. Canadian Pacific had previously
sought a buyer for its 56% stake in Soo Line without
success.
19.0% 38.8% $19.50 7.7% 10.8% 29.2% Consideration: Cash.
11.0% 15.6% $48.63 4.9% 25.6% 30.8% Consideration: Cash. Shareholders received $51.00
cash for each share of HIMONT. The original offer of
$49 consisted of $47 cash plus a $2 warrant.
3.6% 3.6% NM NM 28.8% 28.8% Consideration: Debentures. Shareholders of Andrews
Group were issued $7.25 per share principal amount of
10% Senior Subordinated Debentures due 1999.
8.5% 24.4% $21.25 4.7% 26.1% 44.6% Consideration: Stock. Shareholders received 0.82
shares of Primerica for each share of AL Williams.
The agreement called for .85 shares of Primerica if
Primerica stock fell below $25.00 per share. The
original offer of .80 Primerica shares was the result
of preliminary negotiations that discussed a range of
.75 to .80 Primerica shares.
6.5% 15.6% $21.75 2.3% 3.8% 12.7% Consideration: Cash.
17.6% 19.4% $30.13 7.1% 30.9% 33.0% Consideration: Cash and Pfd. The majority of
shareholders received $32.25 in cash for each share of
WestMarc while a few shareholders received payment in
preferred stock.
9.4% 12.3% $14.88 0.0% 11.5% 14.4% Consideration: Cash.
17.9% 17.9% NM NM 7.0% 7.0% Consideration: Cash or Stock. Shareholders received
either (1) $11.50 in cash or (2) 0.32 shares of
Primerica.
19.0% 40.5% $13.38 10.3% 33.3% 57.2% Consideration: Cash. A competitor, MicroAmerica
Inc., offered $15 per share to buy 100% of Micro D,
prompting Ingram Industries to increase its offer to
buy the remaining 41% to $14.75 per share.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
KK Amini (Chairman of Sage) 12/06/88 $22.0 31.0% $5.63 $5.25 $5.88 $6.50 10.6%
Sage Energy Co. 05/18/89
Qintex Resorts 11/15/88 $70.0 46.7% $15.00 $15.00 $15.50 $15.50 0.0%
Princeville Corp 04/19/89
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
11.9% 23.8% $5.63 15.6% 4.4% 15.6% Consideration: Cash. Sage had been held for sale
with no offers coming in above the $6.50 Mr. Amini was
offering.
3.3% 3.3% NM NM 3.3% 3.3% Consideration: Cash.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Premium of
Premium over Pre-Bid Final Price Premium over Pre-Bid
Premium Price (Day Before Ann.) over Price Price (4 Weeks Before)
of Final ----------------------- ----------------------
Price Over Initial Final Day Before Initial Final
Initial Price Price Price Final Ann. Price Price
------------- ------- ------- ----------- ---------- -------
ALL TRANSACTIONS
<S> <C> <C> <C> <C> <C> <C>
Mean 6.2% 14.3% 21.6% 8.8% 17.7% 25.3%
Median 4.4% 13.8% 19.0% 6.8% 16.7% 25.0%
High 26.7% 51.6% 81.0% 24.6% 46.3% 85.4%
Low -4.0% -25.9% -19.3% 0.0% -15.3% -9.2%
ALL CASH TRANSACTIONS(b)
Mean 9.9% 14.2% 23.2% 7.9% 16.0% 25.4%
Median 10.0% 14.0% 19.9% 6.5% 14.9% 24.8%
High 26.7% 42.9% 81.0% 24.6% 46.3% 85.4%
Low 1.6% -25.9% -19.3% 0.0% -15.3% -9.2%
- ------------------------
Footnotes:
- ---------
<FN>
(1) For stock deals, Final Offer Price is calculated using the agreed to exchange ratio multiplied by the acquiror's stock
price on the day before the agreement by the Special Committee of the Target.
(a) Deals are still pending, take out price at effective date represents latest offer price for acquiror's remaining interest.
(b) Deals where payment was all cash, convertible into cash, or cash at the option of the acquiror or shareholder.
(c) Excluded from cash summary calculations.
Source: Securities Data Company, Bloomberg, IDD Information Services, Company Documents and News Articles.
/TABLE
<PAGE>
APPENDIX<PAGE>
TAB 11<PAGE>
-----------------------------------------------
RURAL LEC EBITDA
Multiple Calculations
------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Rural LEC EBITDA Multiple Calculations - Citizens Utilities and TDS
Summary Observations
Value Contribution
Citizens Utilities TDS
------------------ --------------
<S> <C> <C>
Rural LEC 77.7%(1) 19.5%(2)
Non-Rural LEC 22.3% 80.5%
------------------ --------------
Total 100.0% 100.0%
EBITDA Multiples
LTM - Pro Forma 1994E 1995E 1996E
--------------- ----- ----- -----
Citizens Utilities - Consolidated 7.9x NMx NMx 7.4x
Citizens Utilities - Rural LEC only NA NM NM 7.8
TDS - Consolidated 12.5x 12.0x 8.9x NAx
TDS - Rural LEC Only NA 3.8 3.5 NA
Notes:
- --------------------
<FN>
(1) Figure equals Rural LEC operations adjusted market value ($2.970 billion) divided by the Consolidated adjusted market
value ($3.823 billion).
(2) Figure equals Rural LEC operations adjusted market value ($603 million) divided by the Consolidated adjusted market
value ($3.090 billion).
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Rural LEC EBITDA Multiple Calculations - Citizens Utilities
(dollars in thousands, except per share data)
INCOME STATEMENT MARKET VALUE
LTM - Pro Forma(1) Citizens Utilities - Consolidated
--------------- ---------------------------------
<S> <C> <C> <C>
Total Revenues $1,159,336 Shares Outstanding 205,682(2)
Current Stock Price $13.75
EBIT 309,128 ----------
Depreciation & Amortization 168,884 Market Value $2,828,134
-----------
EBITDA 478,012
Centennial Cellular
Interest Expense, Net 39,605 ---------------------------------
Income Taxes 96,616
Minority Interest 0 Shares of Centennial Cellular
Equity in Affiliates 0 owned by Citizens 1,982
----------- Current Stock Price $17.50
Net Income from Continuing Operations 172,907 ----------
Market Value $34,690
Preferred Dividends 0
-----------
Century Communications
Net Income Available to Common $172,907 ---------------------------------
Weighted Average Shares 219,675 Shares of Century Communications
EPS - From Continuing Operations $0.79 owned by Citizens 1,915
Current Stock Price $8.13
----------
Market Value $15,559
Citizens' Market Value adjusted
for cellular interests $2,777,885
/TABLE
<PAGE>
<TABLE>
<CAPTION>
CITIZENS' BALANCE SHEET AS OF SEPTEMBER 30, 1994(3) CITIZENS' ADJUSTED MARKET VALUE - RURAL LEC ONLY
<S> <C> <C> <C>
Less: Cash & Investments $98,444(4) Citizens' Adjusted Market Value less Cellular: $3,772,419
Plus: S/T Debt 0
Plus: Current Maturities 10,728 Electric Segment's Adjusted Market Value: 342,650
Plus: L/T Debt 1,082,250 Water Segment's Adjusted Market Value: 195,000
Plus: Pfd Stock 0 Gas Segment's Adjusted Market Value: 264,600
Consolidated Adjusted Market Value: $3,822,668 ----------
Adjusted Market Value less Cellular: $3,772,419 RURAL LEC ONLY $2,970,169
Median Adjusted
EBITDA Market
EBITDA Multiple Value
------ -------- --------
Electric Segment's Adjusted Market Value: $44,500 7.7x $342,650
Water Segment's Adjusted Market Value: $26,000 7.5 $195,000
Gas Segment's Adjusted Market Value: $42,000 6.3 $264,600
Notes:
- ------------------
<FN>
(1) Represents the financial results from October 1, 1993 to the dates of acquisition for all the GTE Telephone
PropertiesSource: Citizens' January 1995 Red Herring acquired through Sept. 30, 1994 and for the yet to be
acquired GTE properties and ALLTel Properties, in addition to the recent equity offering of 15 MM shares
(2) Includes common stock shares outstanding on December 15, 1994, in addition to the 15 million shares of common
stock series A in the recent offering.
(3) Balance Sheet reflects the financings of the Telecommunications Properties (GTE and ALLTel) and the recent equity
offering.
(4) Excludes the investment in Centennial and Century Communications.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Pacific Telecom, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
BUSINESS SEGMENT INFORMATION OF CITIZENS UTILITIES
(dollars in thousands)
REVENUE CONTRIBUTION EBITDA CONTRIBUTION EBIT CONTRIBUTION
_______________________________ ______________________________ ____________________________
TOTAL REVENUES PERCENTAGE TOTAL EBITDA PERCENTAGE TOTAL EBIT PERCENTAGE
_______________________________ ______________________________ ____________________________
DECEMBER 31, 1993(1)
<S> <C> <C> <C> <C> <C> <C>
Telecommunications $177,497 28.7% 108,678 50.3% 85,900 39.8%
Natural Gas 211,892 34.2% 39,617 18.4% 29,000 13.4%
Electric 164,515 26.6% 43,584 20.2% 30,700 14.2%
Water/Wastewater 65,488 10.6% 23,979 11.1% 15,600 7.2%
________ _______ ______
619,392 215,858 161,200
1994E(2)
Telecommunications 468,000 50.4% 247,700 68.8% 169,600 67.8%
Natural Gas 225,000 24.2% 42,000 11.7% 31,000 12.4%
Electric 168,000 18.1% 44,500 12.4% 31,000 12.4%
Water/Wastewater 68,000 7.3% 26,000 7.2% 18,500 7.4%
_______ _______ _______
929,000 360,200 250,100
1995E(2)
Telecommunications 601,600(3) 55.7% 300,800(3) 71.1% 192,500(3) 68.6%
Natural Gas 229,500 21.2% 43,500 10.3% 32,000 11.4%
Electric 178,000 16.5% 51,500 12.2% 36,500 13.0%
Water/Wastewater 71,000 6.6% 27,500 6.5% 19,500 7.0%
_______ _______ _______
1,080,100 423,300 280,500
1996E(2)
Telecommunications 762,700(4) 60.5% 380,000(5) 74.3% 243,000(5) 72.0%
Natural Gas 238,700 18.9% 45,600 8.9% 33,600 10.0%
Electric 185,000 14.7% 55,500 10.9% 40,000 11.8%
Water/Wastewater 74,000 5.9% 30,000 5.9% 21,000 6.2%
_______ _______ _______
1,260,400 511,100 337,600
<FN>
(1) 1993 financials do not reflect the acquisition of the GTE access lines.
(2) Smith Barney Research projections include the acquisition of GTE's 500,000 access lines which Citizens bought for $1.1
billion in cash.
(3) Smith Barney Research estimates do not account for the 109,000 AllTel access line acquisition in 1995. According to
Smith Barney, the $290 million acquisition will be staggered throughout the second half of 1995.
(4) As a result of the AllTel acquisition, Smith Barney Research estimates expect telephone revenue to jump $125 million
in 1996.
(5) As a result of the AllTel acquisition, Smith Barney Research estimates expect telephone operating income to increase to
$243 million in 1996. Relationship between EBITDA and EBIT in 1996 is assumed to remain the same as 1995.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
RURAL LEC EBITDA MULTIPLE CALCULATIONS - TDS
(dollars in thousands, except per share data)
MARKET VALUE EBITDA ESTIMATES(1)
TDS - Consolidated 1994E 1995E
_________________________________ ________ ________
<S> <C> <C> <C> <C>
Shares Outstanding - TDS 55,032 EBITDA
Current Price $45.50 _________
Market Value ---------- TDS - Consolidated $258,441 $348,771
$2,503.956 US Cellular 83,056 148,500
US Cellular Am Paging 17,656 27,336
__________________________________ ________ ________
Shares of US Cellular owned by TDS 63,880 EBITDA - Rural LEC Only $157,729 $172,935
Current Price $32.88
Market Value ----------
$2,100,055
American Paging
__________________________
Shares of APP owned by TDS 16,500
Current Price $7.50
Market Value ----------
$123,750
TDS Market Value less Investments: $280,151
BALANCE SHEET AS OF SEPTEMBER 30, 1994
TDS American TDS
Consolidated US Cellular Paging Rural LEC Only
____________ ___________ ________ ______________
Less: Cash $103,716 $49,956 $3,222 $50,538
Plus: S/T Debt 116,474 0 116,474
Plus: Current Maturities 36,565 20,974 15,591
Plus: L/T Debt 521,046 277,211 7,882 235,953
Plus: Pfd Stock 15,401 9,597 5,804
____________ ___________ ________ ______________
Adjusted Market Value: $3,089,726 $2,357,881 $128,410 $603,435
<FN>
Notes:
(1) Figures taken from Salomon Brothers research report.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
RURAL LEC EBITDA MULTIPLE CALCULATIONS - TDS Pacific Telecom, Inc.
(dollars in thousands, except per share data)
INCOME STATEMENT
TDS
TDS - Consolidated Less: US Cellular Less: American Paging Pro Forma
___________________________________ __________________________________ _______________________________ _________
1993 3Q1994 3Q1993 LTM 1993 3Q1994 3Q1993 LTM 1993 3Q1994 3Q1993 LTM Rural LEC
Only
________ ________ ________ ________ ________ ________ ________ ________ _______ _______ _______ _______ ________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total
Revenues $590,744 $525,492 $406,896 $709,340 $247,259 $236,816 $151,970 $332,105 $64,384 $56,451 $46,968 $73,867 $303,368
EBIT 69,733 83,612 57,273 96,072 (8,656) 15,614 (2,592) 9,550 (759) 321 (1,714) 1,276 85,246
Depreci-
ation &
Amorti-
zation(1) 127,509 117,061 93,437 151,133 45,944 47,800 32,813 60,931 13,392 12,155 9,822 15,725 74,477
________ ________ ________ ________ ________ ________ ________ _______ _______ _______ _______ _______ ________
EBITDA $197,242 $200,673 $150,710 $247,205 $ 37,288 $ 63,414 $ 30,221 $70,481 $12,632 $12,476 $ 8,108 $17,000 $159,724
/TABLE
<PAGE>
CERTAIN MATERIALS DISTRIBUTED
IN CONNECTION WITH
SMITH BARNEY'S MARCH 8 BOOK.<PAGE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
- --------------------------------------------------------------------------------------------------------------------------------
PACIFIC TELECOM STOCK PRICE ANALYSIS
Activity During Last Hour of Trading Activity During Last 15 Min. of Trading
-------------------------------------------------------------- -------------------------------------------------------
PTCM No. of Shares Stock Price Shares Traded as No. of Shares Stock Price Shares Traded as
Date Volume Trades Traded Increase/(Decrease) a % of Total Volume Trades Traded Increase/(Decrease) a % of Total Volume
- -------- ------ ------ ------ ------------------- ------------------- ------ ------ ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
03/03/95 100 NM NM NM NM NM NM NM NM
03/02/95 600 1 300 +0.313 50.0% 1 300 +0.313 50.0%
03/01/95 600 NM NM NM NM NM NM NM NM
02/28/95 10,000 11 7,900 +0.750 79.0% 6 6,900 +0.500 69.0%
02/27/95 2,100 2 700 0.000 33.3% 1 600 +0.250 28.6%
02/24/95 5,800 1 1,000 +0.125 17.2% 1 1,000 +0.125 17.2%
02/23/95 21,300 17 18,200 0.000 85.4% 12 16,400 +0.563 77.0%
02/22/95 1,400 1 1,000 +0.625 71.4% 1 1,000 +0.625 71.4%
02/21/95 10,600 6 8,300 +0.125 78.3% 2 1,100 +0.125 10.4%
02/17/95 17,300 3 3,900 +0.563 22.5% 3 3,900 +0.563 22.5%
02/16/95 16,400 2 1,300 +0.625 7.9% 2 1,300 +0.625 7.9%
02/15/95 3,200 3 1,700 0.000 53.1% NM NM NM NM
02/14/95 2,500 1 100 (0.313) 4.0% NM NM NM NM
02/13/95 13,800 8 12,200 +0.125 88.4% 7 6,600 +0.375 47.8%
02/10/95 29,200 1 1,000 +0.250 3.4% 1 1,000 +0.250 3.4%
02/09/95 7,800 6 6,500 +0.438 83.3% NM NM NM NM
02/08/95 18,300 3 2,000 +0.750 10.9% 3 2,000 +0.750 10.9%
02/07/95 8,200 7 4,100 0.000 50.0% NM NM NM NM
02/06/95 18,300 6 14,500 +0.188 79.2% 6 14,500 +0.188 79.2%
Source: Bloomberg Financial
/TABLE
<PAGE>
<TABLE>
<CAPTION>
3 EQUITY Q R
( 3/08) QTY 100 T R A D E R E C A P PAGE 1 OF 1
PACIFIC TELECOM INC (PTCM US) PRICE 31-1/8 Q $ DELAYED
- ---------------------------------------------------------------------------------
TIME SIZE PRICE E COND TIME SIZE PRICE E COND TIME SIZE PRICE E COND
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
16:01 1 31-1/8 Q
15:58 5 30-7/8 Q
15:52 20 30-3/4 Q
15:52 17 30-5/8 Q
15:15 10 30-1/2 Q
12:08 259 30-1/4 Q
12:05 50 30-3/8 Q
12:04 100 30-3/8 Q
12:04 50 30-3/8 Q
11:43 4 30-1/4 Q
11:21 10 30-1/4 Q
11:11 3 30-1/4 Q
11:00 10 30-1/2 Q
10:58 10 30-5/8 Q
10:58 10 30-5/8 Q
10:58 10 30-5/8 Q
10:57 10 30-3/4 Q
10:48 10 30-3/4 Q
n/a 50 30-3/4 Q
Bloomberg-all rights reserved. Frankfurt: 69-920410 Hong Kong: 2-521-3000 London:
71-330-7500 New York: 212-318-2000 Princeton: 609-279-3000 Singapore: 226-3000
Sydney: 2-777-8600 Washington DC: 202-434-1800
M106-119-3 08-Mar-95 16:42:11
</TABLE>
(b)(6)
March 8, 1995
Proposed Acquisition of the
Public Shareholders of Pacific Telecom
by PacifiCorp
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS
OF PACIFIC TELECOM, INC.
<PAGE>
Pacific Telecom, Inc.
TABLE OF EXHIBITS
1. Summary of the Proposed Transaction
2. Approach to Valuation
3. Pacific Telecom's Recent Projected Financial Performance
4. Pacific Telecom Inc.'s Recent Stock Price Performance
5. Comparison of Pacific Telecom to Other Large Independent
Regional Telephone Companies
6. Discounted Cash Flow Analysis
7. Valuation by Line of Business
8. Premiums Paid in Other Acquisitions of Minority
Shareholders by a Majority Shareholder
9. Valuation Summary
10. Analysis of the Proposed Transaction
<PAGE>
TAB 1
<PAGE>
1. Summary of the Proposed Transaction
<PAGE>
SUMMARY OF THE PROPOSED TRANSACTION
Proposed Price to Be Paid to Pacific Telecom Shareholders $30.00
Form of Consideration Cash
Expected Closing Date June, 1995
Public Shares of Common Stock Outstanding 5,194,000
Total Consideration to Be Received by Public Shareholders $155.8 million
<PAGE>
TAB 2
<PAGE>
2. Approach to Valuation
<PAGE>
Approach to Valuation
In determining the appropriate range of fair values to be received by the
public shareholders of Pacific Telecom in the proposed transaction, we
considered, among others, the following factors:
* Pacific Telecom's past equity market performance and
trading volume;
* Pacific Telecom's recent and projected financial performance
(including the impact of possible acquisitions);
* The values at which Pacific Telecom might trade (absent a large
majority shareholder) based on typical institutional investor
ownership and investment research coverage based on a comparison
with other large publicly-traded independent regional telephone
companies;
* The implied values of Pacific Telecom based on discounted cash
flow analyses;
* The going concern value of each of Pacific Telecom's component
businesses;
* Premiums paid by a majority shareholder to minority shareholders
of other public companies.
<PAGE>
TAB 3
<PAGE>
3. Pacific Telecom's Recent and Projected Financial Performance
<PAGE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
Revenue and Contribution by Line of Business (Including Planned Acquisitions)
Pro Forma 1995 for Sale of Alascom and Acquisition of U S WEST Properties (At 1/1/95)
(All Figures in Thousands, except per share data; projected figures from Pacific Telecom management)
- --------------------------------------------------------------------------------------------------------------------------------
1995-1999E
1992 1993 1994E 1995E 1996E 1997E 1998E 1999E CAGR(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Alascom $346,570 $337,843 $342,863 $ -- $ -- $ -- $ -- $ -- NM
Local Operating Companies 307,805 321,332 314,313 337,820 353,866 370,046 387,594 405,480 4.7%
US WEST (CO, OR and WA) -- -- -- 110,043 110,941 112,655 114,812 115,201 1.2%
Planned Acquisitions -- -- -- -- 73,025 76,017 122,911 125,320 19.7%
Pacific Telecom Cable 23,149 20,476 20,269 22,702 24,886 27,209 29,898 32,471 9.4%
PTI Cellular 10,169 16,056 23,447 32,649 41,504 50,617 59,648 68,152 20.2%
Other 16,836 13,352 981 2,196 2,570 2,764 2,962 3,189 9.8%
--------------------------------------------------------------------------------------------
Total Revenues 704,529 709,059 701,873 505,410 606,792 639,308 717,825 749,813 10.4%
Annual Revenue Growth 0.6% -1.0% -28.0% 20.1% 5.4% 12.3% 4.5%
EBITDA
Alascom 105,607 95,889 114,667 -- -- -- -- -- NM
Local Operating Companies 134,317 142,178 138,156 152,625 167,627 180,349 190,689 200,887 7.1%
US WEST (CO, OR and WA) -- -- -- 68,711 69,160 70,126 71,632 72,552 1.4%
Planned Acquisitions -- -- -- -- 50,473 53,221 85,600 87,280 20.0%
Pacific Telecom Cable 2,007 4,001 4,389 4,291 5,564 7,223 9,403 12,221 29.9%
PTI Cellular 1,330 2,595 6,994 11,061 18,123 24,079 31,264 37,984 36.1%
Other 6,862 2,950 1,017 432 2,186 2,380 2,578 2,805 59.6%
--------------------------------------------------------------------------------------------
Total EBITDA 250,123 247,613 265,223 237,120 313,133 337,378 391,166 413,729 14.9%
Annual EBITDA Growth -1% 7% -10.6% 32.1% 7.7% 15.9% 5.8%
EBITDA Margin Percentage 36% 35% 38% 46.9% 51.6% 52.8% 54.5% 55.2%
EBIT
Alascom 60,067 59,454 79,855 -- -- -- -- -- NM
Local Operating Companies 76,676 80,855 79,439 88,556 95,537 103,629 109,482 115,072 6.8%
US WEST (CO, OR and WA) -- -- -- 40,937 40,836 41,286 40,453 40,705 -0.1%
Planned Acquisitions -- -- -- -- 30,027 32,370 51,885 53,177 21.0%
Pacific Telecom Cable 1,712 3,221 3,812 3,287 4,340 5,796 7,843 9,349 29.9%
PTI Cellular (1,518) (1,433) 1,528 4,541 11,029 16,155 22,365 28,154 57.8%
Other 1,706 (1,280) (49) (144) 1,610 1,804 2,002 2,229 NM
--------------------------------------------------------------------------------------------
Total EBIT 138,643 140,817 164,585 137,177 183,379 201,040 234,030 248,686 16.0%
Annual EBIT Growth 1.6% 16.9% -16.7% 33.7% 9.6% 16.4% 6.3%
EBIT Margin Percentage 19.7% 19.9% 23.4% 27.1% 30.2% 31.4% 32.6% 33.2%
Interest expense, net (51,051) (43,341) (33,494) (46,792) (58,626) (57,108) (65,002) (60,003) 6.4%
Other (16,419) (15,912) (7,370) (4,210) (6,313) (4,649) (2,583) 805
Gain on Sale of subsidiaries
and investments 28,601 1,340 -- -- -- -- -- --
Pre-tax 99,774 82,904 123,721 86,175 118,440 139,283 166,445 189,488 21.8%
Taxes 32,526 23,846 42,396 33,232 45,975 54,444 65,653 75,191
--------------------------------------------------------------------------------
<PAGE>
NET INCOME FROM CONTINUING
OPERATIONS(2) 67,248 59,058 81,325 52,943 72,465 84,839 100,792 114,297 21.2%
Annual Net Income Growth -12.2% 37.7% -34.9% 36.9% 17.1% 18.8% 13.4%
Shares Outstanding 39,526 39,584 39,620 39,620 39,620 39,620 39,620 39,620
Net Income per Share 1.70 1.49 2.05 1.34 1.83 2.14 2.54 2.88 21.2%
Dividends per Share $ 1.31 $ 1.32 $ 1.32 $ 1.32 $ 1.34 $ 1.38 $ 1.42 $ 1.46 2.6%
- -------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Planned acquisitions CAGR calculated from 1996 to 1999.
(2) Does not include gains (losses) from discontinued operations.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
Historical Figures and Management Projections
(Includes U S WEST CO, WA and OR and Other Planned Acquisitions; Excludes Alascom 1995 Results)
Income Statement
(Dollars in Thousands, except per share figures)
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1991 1992 1993 1994E 1995E 1996E 1997E 1998E 1999E
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Local network service $68,392 $74,094 $81,783 $95,651 $121,572 $152,489 $159,629 $181,277 $190,688
Network access service 168,210 174,903 183,862 165,780 239,508 317,888 328,516 368,214 376,037
Long distance network service
(Alascom) (1) 286,065 275,467 262,528 271,947 -- -- -- -- --
Private line service
(Alascom) (1) 66,045 70,373 63,765 58,052 -- -- -- -- --
Sales of cable capacity 30,888 10,797 4,943 4,567 6,615 6,615 6,615 6,615 6,615
Cellular and other 104,824 98,895 112,178 105,876 106,677 129,800 144,548 161,719 176,473
------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating revenues 724,424 704,529 709,059 701,873 474,372 606,792 639,308 717,825 749,813
Operating expenses:
Plant support 117,542 120,146 125,010 110,232 92,140 105,460 109,702 120,404 123,953
Access expense 93,516 97,805 95,462 93,481 -- -- -- -- --
Other operating expense 69,490 57,101 67,820 68,148 27,406 32,000 33,836 37,533 39,619
Cost of cable sales 15,830 7,686 2,500 2,977 4,410 4,410 4,410 4,410 4,410
Customer operations 61,183 66,913 70,612 72,953 53,395 59,087 60,987 66,552 69,188
Administrative support 79,256 90,893 85,215 73,462 63,340 70,389 69,915 71,922 73,517
Taxes other than income taxes 12,851 13,862 14,827 15,397 17,780 22,313 23,080 25,838 26,397
EBITDA 274,756 250,123 247,613 265,223 215,901 313,133 337,378 391,166 412,729
Depreciation and amortization 115,163 111,480 106,796 100,638 92,420 129,754 136,338 157,136 164,043
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Operating Expenses 564,831 565,886 568,242 537,288 350,891 423,413 438,268 483,795 501,127
Operating income 159,593 138,643 140,817 164,585 123,481 183,379 201,040 234,030 248,686
Other income (expense);
Interest expense (54,955) (52,140) (44,273) (34,815) (38,058) (58,646) (57,128) (65,022) (60,023)
Interest income 8,021 1,089 932 1,321 57 20 20 20 20
Minority interest (1,955) (92) (580) (1,003) (1,128) (1,984) (2,544) (3,358) (4,074)
Other (18,537) (16,327) (15,332) (6,367) (3,082) (4,329) (2,105) 775 4,879
------- ------- ------- ------- ------- ------- ------- ------- -------
Total other income (expense) (67,426) (67,470) (59,253) (40,864) (42,211) (64,939) (61,757) (67,585) (59,198)
Gain on sale of subsidiaries and
investment 28,262 28,601 1,340 -- -- -- -- -- --
Income before income taxes 120,429 99,774 82,904 123,721 81,270 118,440 139,283 166,445 189,488
Income taxes 30,893 32,526 23,846 42,396 31,294 45,975 54,444 65,653 75,191
Net income from continuing
operations $89,536 $67,248 $59,058 $81,325 $49,976 $72,465 $84,839 $100,792 $114,297
Gain (loss) from discontinued
operations (8,431) (45,741) 60,444 -- 30,000 -- -- -- --
Net income after discontinued
operations $81,105 $21,507 $119,502 $81,325 $79,976 $72,465 $84,839 $100,792 $114,297
Average number of common shares
outstanding 39,477 39,526 39,584 39,620 39,620 39,620 39,620 39,620 39,620
<PAGE>
Net income per common share $2.27 $1.70 $1.49 $2.05 $1.26 $1.83 $2.14 $2.54 $2.88
Net income after disc. per $2.05 $0.54 $3.02 $2.05 $2.02 $1.83 $2.14 $2.54 $2.88
common share
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Revenues from management services provided to Alascom from 1995 to 1999 are included in "Cellular and other" revenue.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
Historical Figures and Management Projections
(Includes U S WEST CO, WA and OR and Other Planned Acquisitions; Excludes Alascom 1995 Results)
Balance Sheet - Assets
(Dollars in Thousands, except per share figures)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1991 1992 1993 1994E 1995E 1996E 1997E 1998E 1999E
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and temporary cash
investments $10,431 $9,735 $4,861 $8,920 $6,484 $6,484 $6,484 $6,484 $6,484
Accounts receivables 103,955 106,035 103,155 109,476 56,755 60,857 62,544 65,148 67,104
Notes receivables 1,337 970 2,039 0 0 0 0 0 0
Inventory-work
in progress 96,298 87,441 65,753 62,776 54,166 45,346 36,526 23,296 14,476
Material and supplies 15,004 14,737 15,967 15,374 11,552 21,694 22,127 28,655 29,023
Other 5,555 19,510 32,493 20,636 11,133 11,167 11,265 11,381 11,492
Total current
assets 232,580 238,428 224,268 217,182 140,090 145,548 138,946 134,964 128,579
Discontinued assets 153,070 99,195 0 0 0 0 0 0 0
Investments 99,060 101,669 105,818 183,030 146,173 146,522 147,431 152,244 161,325
Cost of acquisitions in
excess of equity 162,208 209,193 210,152 128,763 388,583 375,863 431,973 418,152 404,330
Plant in service:
Telecommunications 1,633,965 1,594,711 1,632,174 1,552,365 1,859,327 1,968,303 2,241,962 2,350,193 2,443,810
Other 17,502 15,824 17,695 22,054 18,248 13,248 13,248 13,248 13,248
Less accumulated
depreciation (661,312) (695,993) (741,061) (805,231) (833,378) (907,212) (1,093,539) (1,198,903) (1,324,803)
Net plant
in service 990,155 914,542 908,808 769,188 1,044,197 1,074,339 1,161,671 1,164,538 1,132,255
Construction work
in progress 37,015 21,368 14,523 28,477 6,538 11,938 12,338 12,738 13,138
Net plant 1,027,170 935,910 923,331 797,665 1,050,735 1,086,277 1,174,009 1,177,276 1,145,393
Deferred charges 11,580 22,894 22,755 126,723 128,768 127,092 120,596 116,952 110,216
Total assets $1,685,668 $1,607,289 $1,486,324 $1,453,363 $1,854,349 $1,881,302 $2,012,955 $1,999,588 $1,949,843
- ----------------------------------------------------------------------------------------------------------------------------------
/TABLE
<PAGE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
Historical Figures and Management Projections
(Includes U S WEST CO, WA and OR and Other Planned Acquisitions; Excludes Alascom 1995 Results)
Balance Sheet - Liabilities and Shareholders' Equity
(Dollars in Thousands, except per share figures)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1991 1992 1993 1994E 1995E 1996E 1997E 1998E 1999E
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Currently maturing
long-term debt $12,337 $31,531 $16,429 $6,739 $6,907 $7,030 $7,183 $18,218 $7,980
Notes payable 234,368 71,066 24,903 46,714 121,405 111,027 90,423 73,222 26,413
Accounts payable 50,395 47,244 54,430 78,759 60,283 60,126 60,565 60,930 61,148
Income taxes payable 9,478 3,268 0 7,037 (2,202) (2,202) (2,202) (2,202) (2,202)
Accrued liabilities 54,905 47,436 49,928 47,609 41,107 48,250 48,817 53,916 54,554
Accrued toll
settlements 22,220 19,438 17,756 17,112 6,797 6,797 6,797 6,797 6,797
Total current
liabilities 383,703 219,983 163,446 203,970 234,297 231,028 211,583 210,881 154,690
Long-term debt 528,391 571,585 426,669 359,761 666,498 675,374 800,710 746,022 701,050
Unamortized investment
trust credits 28,713 23,326 18,326 14,195 6,966 5,151 3,457 2,334 1,398
Deferred income taxes 108,385 126,675 153,455 108,146 108,477 111,164 114,741 110,961 105,434
Other long-term
liabilities 24,684 81,555 68,947 83,281 67,917 70,386 65,089 68,590 71,160
Minority interest 13,268 14,319 16,770 16,311 16,263 14,894 13,907 12,800 11,659
Shareholders' equity:
Common Stock 19,744 19,772 19,805 19,810 19,810 19,810 19,810 19,810 19,810
Additional paid-in
capital 202,906 204,276 205,842 205,788 205,788 205,788 205,788 205,788 205,788
Retained earnings 375,874 345,798 413,064 442,101 528,333 547,707 577,870 622,402 678,854
Total shareholders'
equity 598,524 569,846 638,711 667,699 753,931 773,305 803,468 848,000 904,452
Total liabilities
and capitalization $1,685,668 $1,607,289 $1,486,324 $1,453,363 $1,854,349 $1,881,302 $2,012,955 $1,999,588 $1,949,843
- ----------------------------------------------------------------------------------------------------------------------------------
/TABLE
<PAGE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
Historical Figures and Management Projections
(Includes U S WEST CO, WA and OR Acquisitions and 1995 Acquisitions; Excludes Other Planned Acquisitions and 1995 Alascom Results)
Income Statement
(Dollars in Thousands, except per share figures)
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1991 1992 1993 1994E 1995E 1996E 1997E 1998E 1999E
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues:
Local network service $68,392 $74,094 $81,783 $95,651 $121,572 $133,042 $139,117 $147,677 $155,639
Network access service 168,210 174,903 183,862 165,780 239,508 268,551 277,935 286,575 294,026
Long distance network
service (Alascom) (1) 286,065 275,467 262,528 271,947 -- -- -- -- --
Private line service
(Alascom) (1) 66,045 70,373 63,765 58,052 -- -- -- -- --
Sales of cable capacity 30,888 10,797 4,943 4,567 6,615 6,615 6,615 6,615 6,615
Cellular and other 104,824 98,895 112,178 105,876 106,677 125,559 139,624 154,047 168,193
------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating
revenues 724,424 704,529 709,059 701,873 474,372 533,767 563,291 594,914 624,493
Operating expenses:
Plant support 117,542 120,146 125,010 110,232 92,140 96,639 100,807 105,782 108,985
Access expense 93,516 97,805 95,462 93,481 -- -- -- -- --
Other operating expense 69,490 57,101 67,820 68,148 27,406 28,818 30,627 32,259 34,218
Cost of cable sales 15,830 7,686 2,500 2,977 4,410 4,410 4,410 4,410 4,410
Customer operations 61,183 66,913 70,612 72,953 53,395 53,795 55,650 57,780 60,208
Administrative support 79,256 90,893 85,215 73,462 63,340 68,668 68,141 69,032 70,545
Taxes other than
income taxes 12,851 13,862 14,827 15,397 17,780 18,777 19,499 20,085 20,678
EBITDA 274,756 250,123 247,613 265,223 215,901 262,660 284,157 305,566 325,449
Depreciation and
amortization 115,163 111,480 106,796 100,638 92,420 109,308 115,487 123,421 129,940
------- ------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses 564,831 565,886 568,242 537,288 350,891 380,415 394,621 412,769 428,984
Operating income 159,593 138,643 140,817 164,585 123,481 153,352 168,670 182,145 195,509
Other income (expense):
Interest expense (54,955) (52,140) (44,273) (34,815) (38,058) (36,336) (35,185) (31,308) (28,563)
Interest income 8,021 1,089 932 1,321 57 20 20 20 20
Minority interest (1,955) (92) (580) (1,003) (1,128) (1,984) (2,544) (3,358) (4,074)
Other (18,537) (16,327) (15,332) (6,367) (3,082) (1,161) 1,159 5,210 9,448
------- ------- ------- ------- ------- ------- ------- ------- -------
Total other income
(expense) (67,426) (67,470) (59,253) (40,864) (42,211) (39,461) (36,550) (29,436) (23,169)
Gain on sale of
subsidiaries and
investments 28,262 28,601 1,340 -- -- -- -- -- --
Income before income taxes 92,167 71,173 81,564 123,721 81,270 113,891 132,120 152,709 172,340
------- ------- ------- ------- ------- ------- ------- ------- -------
Income taxes 30,893 32,526 23,846 42,396 31,294 44,178 51,616 60,230 68,420
<PAGE>
Net income from
continuing operations $89,536 $67,248 $59,058 $81,325 $49,976 $69,713 $80,504 $92,479 $103,920
Gain (loss) from
discontinued operations (8,431) (45,741) 60,444 -- 30,000 -- -- -- --
Net income after
discontinued operations $81,105 $21,507 $119,502 $81,325 $79,976 $69,713 $80,504 $92,479 $103,920
Average number of common
shares outstanding 39,477 39,526 39,584 39,620 39,620 39,620 39,620 39,620 39,620
Net income per common share $2.27 $1.70 $1.49 $2.05 $1.26 $1.76 $2.03 $2.33 $2.62
Net income after disc.
per common share $2.05 $0.54 $3.02 $2.05 $2.02 $1.76 $2.03 $2.33 $2.62
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Revenues from management services provided to Alascom from 1995 to 1999 are included in "Cellular and other" revenue.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
Historical Figures and Management Projections
(Includes 1995 U S WEST CO, WA and OR Acquisitions; Excludes Other Planned Acquisitions and 1995 Alascom results)
Balance Sheet - Assets
(Dollars in Thousands, except per share figures)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1991 1992 1993 1994E 1995E 1996E 1997E 1998E 1999E
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and temporary cash
investments $10,431 $9,735 $4,861 $8,920 $6,484 $6,484 $6,484 $6,484 $6,484
Accounts receivables 103,955 106,035 103,155 109,476 56,755 60,857 62,544 65,148 67,104
Notes receivables 1,337 970 2,039 -- -- -- -- -- --
Inventory-work
in progress 96,298 87,441 65,753 62,776 54,166 45,346 36,526 21,761 11,336
Material and supplies 15,004 14,737 15,967 15,374 11,552 11,552 11,552 11,552 11,552
Other 5,555 19,510 32,493 20,636 11,133 11,167 11,265 11,381 11,492
Total current
assets 232,580 238,428 224,268 217,182 140,090 135,406 128,371 116,326 107,968
Discontinued assets 153,070 99,195 -- -- -- -- -- -- --
Investments 99,060 101,669 105,818 183,030 146,173 146,522 147,431 152,244 161,325
Cost of acquisitions in
excess of equity 162,208 209,193 210,152 128,763 277,124 267,190 257,256 247,941 238,625
Plant in service:
Telecommunications 1,633,965 1,594,711 1,632,174 1,552,365 1,568,890 1,665,629 1,757,520 1,855,532 1,944,775
Other 17,502 15,824 17,695 22,054 18,248 13,248 13,248 13,248 13,248
Less accumulated
depreciation (661,312) (695,993) (741,061) (805,231) (699,482) (780,127) (870,526) (967,120) (1,072,169)
Net plant
in service 990,155 914,542 908,808 769,188 887,656 898,750 900,242 901,660 885,854
Construction work
in progress 37,015 21,368 14,523 28,477 6,538 11,938 12,338 12,738 13,138
Net plant 1,027,170 935,910 923,331 797,665 894,194 910,688 912,580 914,398 898,992
Deferred charges 11,580 22,894 22,755 126,723 128,768 123,097 117,600 112,488 107,367
Total assets $1,685,668 $1,607,289 $1,486,324 $1,453,363 $1,586,349 $1,582,903 $1,563,238 $1,543,397 $1,514,277
- ----------------------------------------------------------------------------------------------------------------------------------
/TABLE
<PAGE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
Historical Figures and Management Projections
(Includes 1995 U S WEST CO, WA and OR Acquisitions; Excludes Other Planned Acquisitions and 1995 Alascom results)
Balance Sheet - Liabilities and Shareholders' Equity
(Dollars in Thousands, except per share figures)
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1991 1992 1993 1994E 1995E 1996E 1997E 1998E 1999E
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Currently maturing
long-term debt $12,337 $31,531 $16,429 $6,739 $6,907 $7,030 $7,183 $18,218 $7,980
Notes payable 234,368 71,066 24,903 46,714 121,405 111,027 90,323 73,222 26,413
Accounts payable 50,395 47,244 54,430 78,759 60,283 60,126 60,565 60,930 61,148
Income taxes payable 9,478 3,268 -- 7,037 (2,202) (2,202) (2,202) (2,202) (2,202)
Accrued liabilities 54,905 47,436 49,928 47,609 41,107 40,914 41,402 41,806 42,230
Accrued toll
settlements 22,220 19,438 17,756 17,112 6,797 6,797 6,797 6,797 6,797
Total current
liabilities 383,703 219,983 163,446 203,970 234,297 223,692 204,068 198,771 142,366
Long-term debt 528,391 571,585 426,669 359,761 398,498 392,512 376,380 336,464 329,030
Unamortized investment
trust credits 28,713 23,326 18,326 14,195 6,966 5,151 3,457 2,334 1,398
Deferred income taxes 108,385 126,675 153,455 108,146 108,477 110,459 107,803 100,536 90,057
Other long-term
liabilities 24,684 81,555 68,947 83,281 67,917 65,642 61,242 59,892 61,092
Minority interest 13,268 14,319 16,770 16,311 16,263 14,894 13,907 12,800 11,659
Shareholders' equity:
Common Stock 19,744 19,772 19,805 19,810 19,810 19,810 19,810 19,810 19,810
Additional paid-in
capital 202,906 204,276 205,842 205,788 205,788 205,788 205,788 205,788 205,788
Retained earnings 375,874 345,798 413,064 442,101 528,333 544,955 570,783 607,002 653,077
Total shareholders'
equity 598,524 569,846 638,711 667,699 753,931 770,553 796,381 832,600 878,675
Total liabilities
and capitalization $1,685,668 $1,607,289 $1,486,324 $1,453,363 $1,586,349 $1,582,903 $1,563,238 $1,543,397 $1,514,277
- ----------------------------------------------------------------------------------------------------------------------------------
/TABLE
<PAGE>
TAB 4
<PAGE>
- ----------------------------------------------------------------------------
4.
Pacific Telecom Inc.'s Recent Stock Price Performance
<PAGE>
[Graphic line chart showing Comparison of Pacific Telecom Common Stock
price with Independent Telephone Composite (ALLTel, Century Telephone,
Cincinnati Bell, C-TEC, Lincoln, Frontier, Southern New England, TDS)
and S&P500 for period January 1, 1990 to January 27, 1995-Source:
IDD Information Services/Tradeline]
<PAGE>
[Graphic line chart showing Recent Trading History of Pacific
Telecom, Inc. Common Stock for period January 1, 1990 to
January 27, 1995-Source: IDD Information Service/Tradeline]
TAB 5
- ----------------------------------------------------------------------------
5.
Comparison of Pacific Telecom to Other Large Independent Regional Telephone
Companies
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
Comparison of Pacific Telecom to Other Large Independent Telephone Companies
- -----------------------------------------------------------------------------------------------------------------------------------
(Dollars in Millions)
Segment Revenue (1) Revenue Growth
--------------------------------- -----------------------
1995E Percentage 1994E-1995E
--------------------------------- -----------------------
<S> <C> <C> <C>
Lincoln Telecommunications
Telephone Operations $176.9 89.1% 4.0%
Long Distance Services $20.8 10.5% 2.7%
Product Sales $8.1 4.1% 0.5%
Other Revenues $0.4 0.2% 2.0%
Intercompany revenues ($7.7) -3.9% 0.5%
--------------- ----------------
Total $198.5 100.0% 3.9%
Frontier Corporation
Telephone Operations $646.0 61.1% 4.7%
Telecommunications Services - Includes $412.0 38.9% 11.1%
long distance and cellular services
--------------- ----------------
Total $1,058.0 100.0% 7.1%
Southern New England Telecommunications
Telephone Operations $1,302.9 73.8% 2.2%
Sales - Includes Cellular, Business $268.6 15.2% 4.9%
Communications, SNET Diversified Group,
SNET Real Estate, and SNET Paging
Publishing and Other $194.1 11.0% 2.5%
--------------- ----------------
Total $1,765.6 100.0% 2.6%
Pacific Telecom (without Alascom)
Telephone Operations (2) $337.8 85.4% 7.5%
Cellular $32.6 8.3% 39.2%
Cable $22.7 5.7% 12.0%
Other $2.2 0.6% 123.9%
--------------- ----------------
Total $395.4 100.0% 10.1%
Pacific Telecom (with Alascom)
Long Distance $135.1 25.5% NM
Telephone Operations (2) $337.8 63.7% 7.5%
Cellular $32.6 6.2% 39.2%
Cable $22.7 4.3% 12.0%
Other $2.2 0.4% 123.9%
--------------- ----------------
Total $530.5 100.0% -24.4%
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Revenue projections from selected research reports; PTI projections are from PTI management projections.
(2) Excludes U W WEST Colorado, Oregon and Washington acquisitions.
</TABLE/
</TABLE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
Comparison of Pacific Telecom to Other Large Independent Telephone Companies
- -----------------------------------------------------------------------------------------------------------------------------------
Southern
Pacific Telecom Lincoln Frontier New England
(Dollars in Millions, (PTCM) Telecommunications Corporation Telecommunications
except share price figures) 11/1/94 (1) 3/3/95 (LTEC) (FRO) (SNG)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Cap Based on All Common $960.0 $1,223.0 $526.4 $1,666.3 $2,116.6
Shares Outstanding
Share Price (3/3/95 Closing Price) $24.250 $30.875 $16.250 $22.750 $32.750
Public Float $125.8 $160.1 $276.4 $1,663.0 $2,099.1
Insider Ownership and Five Percent or 87% 47% 0.1% 0.1%
Greater Holdings as a Percentage of
Total Shares Outstanding
Institutional and Fund Ownership as a 50% 54% 42% 34%
Percent of Public Float (Excluding
insider holdings)
Institutional Ownership as Percent 7% 28% 42% 34%
of Total Shares
Average Daily Trading Volume (2) 11,645 NM 49,262 111,465 60,611
Debt/Total Capital (9/30/94) 31% 13% 26% 32%
Current Dividend Yield 5.4% 4.3% 3.4% 3.6% 5.4%
Relevant Business Characteristics - LEC holdings are - 90% of revenue from - 39% of revenue - Provides telephone
Impacting Valuation geographically telephone operations from high growth service in urban/
dispersed with high - LEC operations long distance suburban
access line growth primarily in Lincoln, operations Connecticut, an
- Long distance Nebraska - 40% of access attractive area
operations being lines in urban/ new competitors
divested suburban areas - High regulatory
- Business will consist environment
primarily of local
phone service after
divestiture
- ------------------------------------------------------------
<FN>
(1) One day prior to announcement of PacifiCorp proposal
(2) Average number of shares traded daily over last twelve months. The PTI volume is
based on one year period leading up to 11/1/94.
</TABLE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
Comparison of Pacific Telecom to Other Large Independent Telephone Companies
- -----------------------------------------------------------------------------------------------------------------------------------
Southern
Pacific Telecom Lincoln Frontier New England
(Dollars in Millions, (PTCM) Telecommunications Corporation Telecommunications
except share price figures) 11/1/94 (1) 3/3/95 (LTEC) (FRO) (SNG)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LTM EBITDA Margin 42% 51% 34% 40%
1994E P/E Multiple (2) 11.8x 15.0x 14.3x 16.3x 12.0x
1995E P/E Multiple (3) 18.1x 23.1x 13.0x 14.4x 11.6x
1995E Adjusted P/E Multiple (4) 18.1x 23.1x -- -- --
1995E AMV/EBITDA Multiple (5) 5.2x 6.2x 6.5x 5.8x 4.4x
1995E AMV/EBITDA Multiple (6) 5.8x 6.9x 6.1x 5.3x 4.1x
1995E Adjusted AMV/EBITDA Multiple (4) 5.8x 6.9x -- -- --
1994 Dividend Payout Ratio 64.3% 49.1% 60.6% 64.2%
5-Year Projected Earnings Growth Rate (7) 18.4% 8.0% 10.0% 5.0%
Research Coverage:
Firms 6 5 17 13
Analysts 7 6 21 17
Major Investment Banks Covering Stock 0 1 5 4
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) One day prior to announcement of PacifiCorp proposal.
(2) EPS estimates are from First Call, Jan. 31, 1995; Pacific Telecom projections are from Pacific Telecom management
(1/15/95 Forecast).
(3) EPS estimates are from First Call, Jan. 31, 1995; Pacific Telecom's earnings from PTI management with 1995 Net Income
adjusted to exclude Alascom earnings and include full year U S WEST acquisition earnings.
(4) Adjusted to exclude Alascom earnings and include a full year of U S WEST CO, OR, and WA acquisition earnings.
(5) 1995 EBITDA figures from selected research reports; Pacific Telecom projections from Pacific Telecom Management.
(6) 1995 EBITDA figures from selected research reports; Pacific Telecom's EBITDA from PTI management with 1995 EBITDA adjusted
to exclude Alascom EBITDA and include full year U S WEST acquisition EBITDA.
(7) Source: I/B/E/S, Jan. 19, 1995; Pacific Telecom growth rate based on PTI management projections from 1995 to 1999 using
pro forma 1995 EPS adjusted to exclude Alascom earnings and include full year U S WEST acquisition earnings.
</TABLE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
Comparison of Pacific Telecom to Other Large Independent Telephone Companies
- -----------------------------------------------------------------------------------------------------------------------------------
Century Telephone
Pacific Telephone Cincinnati Lincoln Southern & Data
Telecom ALLTEL Enterprises Bell C-TEC T-Comm Frontier New England Systems
(Dollars in Millions) (PTCM) (AT) (CTL) (CSN) (CTEX) (LTEC) (FRO) (SNG) (TDS)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Latest Fiscal Year-End 12/31/93 12/31/93 12/31/93 12/31/93 12/31/93 12/31/93 12/31/93 12/31/93 12/31/93
Latest Twelve Months End 09/30/94 09/30/94 09/30/94 09/30/94 09/30/94 09/30/94 09/30/94 09/30/94 09/30/94
LTM Results
- -----------
LTM Revenues $714.7 $2,844.1 $511.6 $1,192.0 $294.7 $193.8 $978.9 $1,707.1 $709.3
LTM EBIT 149.1 611.3 169.4 110.8 47.6 65.4 198.0 364.0 124.6
LTM EBITDA 300.3 943.5 254.9 274.5 119.7 98.0 332.2 687.1 282.6
LTM Net Income 77.0 293.4 84.5 35.3 5.1 35.7 93.2 82.3 46.1
Total Assets (9/30/94) $1,436.1 $4,617.6 $1,611.1 $1,672.9 $708.4 $386.9 $1,631.9 $3,492.3 $2,634.9
Access Lines (thousands)
(12/31/93) 399 1,576 435 848 211 238 932 1,964 356
Cellular Pops (millions)
(12/31/93) 2.0 7.7 7.1 NA NA 0.5 1.7 NA 18.9
Projections
- -----------
1994 Projected EBITDA (1) $265.2 $994.2 $251.2 $318.0 NA $90.1 $341.0 $698.9 $251.0
1995 Projected EBITDA (1) 237.1 1,114.1 292.5 344.0 NA 95.2 374.0 746.0 303.2
LTM EBITDA (EBITDA/Revenues) 42.0% 33.2% 49.8% 23.0% 40.6% 50.6% 33.9% 40.2% 39.8%
FIRST CALL 1994 Projected
Earnings (2) 81.3 303.9 84.4 73.1 NA 36.9 102.4 176.5 52.3
FIRST CALL 1995 Projected
Earnings (2) 52.9 343.3 97.2 81.7 NA 40.4 115.6 181.6 73.2
Valuation
- ---------
Latest Shares Outstanding (3) 39.612 187.599 53.428 65.850 16.510 32.354 73.161 64.411 55.032
Exercisable Options Outstanding 0.000 2.644 2.086 1.326 0.000 0.043 0.085 0.218 0.104
Market Price Per Share ($)
(3/3/95) (4) $24.250 $28.375 $31.125 $21.000 $22.000 $16.250 $22.750 $32.750 $45.000
---------------------------------------------------------------------------------------------------
Market Value of Equity $960.6 $5,398.1 $1.727.9 $1,410.7 $363.2 $526.4 $1,666.3 $2,116.6 $2,481.1
Plus: Short-Term Debt & $22.6 $49.5 $59.9 $64.0 $9.0 $27.0 $3.6 $31.7 $116.5
Current LT Debt
LT Debt, Minority 404.2 1,808.9 638.0 528.2 386.6 48.5 490.1 953.3 536.4
Interest, Redeemable
Preferred Stock
Preferred - Market 0.0 9.3 2.3 0.0 0.3 0.0 22.8 0.0 16.4
Value (Non-Redeemable)
Less: Cash & ST Investments $7.0 $24.6 $17.0 $14.5 $230.1 $16.8 $206.0 $19.9 $60.7
Option Proceeds 0.0 44.0 38.1 25.5 0.0 0.5 1.5 7.5 1.5
-------- -------- -------- -------- ------ ------ -------- -------- --------
Adjusted Market Value $1,380.3 $7,197.3 $2,373.0 $1,962.9 $529.1 $584.6 $1,975.3 $3,074.2 $3,088.2
Debt/Adjusted Market Value 30.9% 26.0% 29.5% 30.2% 74.8% 12.9% 26.1% 32.0% 21.7%
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) 1994E and 1995E EBITDA based on selected research reports except for Pacific Telecom's figures, which are from PTI management;
PTI 1995E EBITDA adjusted to exclude Alascom EBITDA and include full year U S WEST acquisition EBITDA.
(2) Source: First Call (1/31/95); Pacific Telecom's earnings from PTI management. PTI 1995E earnings adjusted to exclude Alascom
earnings and include full year U S WEST acquisition earnings.
(3) C-TEC held a rights offering of 14.9 million shares on Dec. 1, 1994 which was not factored into C-TEC's total shares
outstanding above.
(4) Pacific Telecom price taken before PacifiCorp announcement. (11/1/94)
</TABLE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
Comparison of Pacific Telecom to Other Large Independent Telephone Companies
- -----------------------------------------------------------------------------------------------------------------------------------
Century Telephone
Pacific Telephone Cincinnati Lincoln Southern & Data
Telecom ALLTEL Enterprises Bell C-TEC T-Comm Frontier New England Systems
(PTCM)(1) (AT) (CTL) (CSN) (CTEX) (LTEC) (FRO) (SNG) (TDS)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Share Price (2/13/95
Closing Price) $24.250 $28.375 $31.125 $21.000 $22.000 $16.250 $22.750 $32.750 $45.000
EARNINGS PROJECTIONS
- --------------------
FIRST CALL 1994 Projected EPS (2) $2.05 $1.62 $1.58 $1.11 NA $1.14 $1.40 $2.74 $0.95
FIRST CALL 1995 Projected EPS (2) 1.34 1.83 1.82 1.24 NA 1.25 1.58 2.82 1.33
IBES 1994 Projected EPS (3) $2.05 $1.62 $1.64 $1.11 NA $1.11 $1.37 $2.75 $0.94
IBES 1995 Projected EPS (3) 1.34 1.84 1.89 1.22 NA 1.20 1.80 2.78 1.26
5-Year Projected Earnings
Growth Rate (3) 18.4% 11.0% 12.0% 8.0% NA 8.0% 10.0% 5.0% 30.0%
P/E MULTIPLES
- --------------------
FIRST CALL 1994 Projected EPS 11.81x 17.52x 19.70x 18.92x NA 14.25x 16.25x 11.95x 47.37x
FIRST CALL 1995 Projected EPS 18.14 15.51 17.10 16.94 NA 13.00 14.40 11.61 33.83
IBES 1994 Projected EPS 11.81x 17.52x 18.98x 18.92x NA 14.64x 16.61x 11.91x 47.87x
IBES 1995 Projected EPS 18.14 15.42 16.47 17.21 NA 13.54 12.64 11.78 35.71
EBITDA PROJECTIONS
- --------------------
1994 Projected EBITDA (4) $265.2 $994.2 $251.2 $318.0 $115.8 $90.1 $341.0 $698.9 $251.0
1995 Projected EBITDA (4) 237.1 1,114.1 292.5 344.0 NA 95.2 374.0 746.0 303.2
EBITDA MULTIPLES
- --------------------
1994 Projected EBITDA 5.20x 7.24x 9.44x 6.17x 4.57x 6.49x 5.79x 4.40x 12.30x
1995 Projected EBITDA 5.82 6.46 8.11 5.71 NA 6.14 5.28 4.12 10.19
MULTIPLES -------------------------------------
- -------------------- High Low Average Median
-------------------------------------
FIRST CALL 1994 Projected EPS 47.37 11.95 20.85 17.52
FIRST CALL 1995 Projected EPS 33.83 11.61 17.48 15.51
IBES 1994 Projected EPS 47.87 11.91 20.92 17.52
IBES 1995 Projected EPS 35.71 11.78 17.54 15.42
1994 Projected EBITDA 12.30 4.40 7.05 6.33
1995 Projected EBITDA 10.19 4.12 6.57 6.14
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Pacific Telecom share price taken on 11/1/94. ($24.25)
(2) Source: Jan. 31, 1995 - FIRST CALL; Pacific Telecom's earnings from PTI management with 1995 Net Income adjusted to exclude
Alascom earnings and include full year U S WEST acquisition earnings.
(3) Source: Jan. 19, 1995 - I/B/E/S; Pacific Telecom growth rate based on PTI management projections from 1995 to 1999 using
pro forma 1995 EPS adjusted to exclude Alascom earnings and include full year U S WEST acquisition earnings.
(4) 1995 EBITDA figures from selected research reports; Pacific Telecom projections from PTI management with 1995 EBITDA adjusted
to exclude Alascom EBITDA and include full year U S WEST acquisition EBITDA.
</TABLE>
TAB 6
- ----------------------------------------------------------------------------
6.
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
Consolidated Discounted Cash Flow Valuation
(Dollars in Thousands)
- -----------------------------------------------------------------------------------------------------------------------------------
Terminal Multiple 5.00x 6.00x 7.00x
----------------------- ----------------------- -----------------------
Discount Rate 10.00% 9.00% 10.00% 9.00% 10.00% 9.00%
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
DCF VALUATION 1,406,918 1,465,728 1,608,996 1,677,247 1,811,074 1,888,767
Plus:
Net Proceeds from Alascom Sale $275,000 $275,000 $275,000 $275,000 $275,000 $275,000
Less:
Net Total Debt (12/31/94) ($392,000) ($392,000) ($392,000) ($392,000) ($392,000) ($392,000)
Purchase Price U S WEST Acquisitions ($366,000) ($366,000) ($366,000) ($366,000) ($366,000) ($366,000)
TOTAL EQUITY VALUE $923,918 $982,728 $1,125,996 $1,194,247 $1,328,074 $1,405,767
Fully Diluted Shares Outstanding 39,619,623 39,619,623 39,619,623 39,619,623 39,619,623 39,619,623
APPROXIMATE PTI SHARE PRICE RANGE $23.25 $24.75 $28.50 $30.25 $33.50 $35.50
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Management Projections PACIFIC TELECOM, INC.
Consolidated Company Excluding Discounted Cash Flow Analysis (1)
Planned Acquisitions in 1995 and 1995
and Excluding Alascom Earnings in 1995
Projected Year Ending December 31,
------------------------------------------------------------------ ----------
($-000's) 1995 1996 1997 1998 1999 CAGR
------------------------------------------------------------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Total 474,372 533,767 563,291 594,914 624,493 3.10%
Operating Expenses 258,471 271,107 279,134 289,348 299,044 1.63%
--------- --------- --------- --------- ---------
EBITDA 215,901 262,660 284,157 305,566 325,449 4.67%
Depreciation 92,420 109,308 115,487 123,421 129,940 3.86%
Unlevered Income --------- --------- --------- --------- ---------
Before Taxes 123,481 153,352 168,670 182,145 195,509 5.24%
Income Taxes 49,392 61.341 67,468 72,858 78,204 --
--------- --------- --------- --------- ---------
Unlevered Net Income 74,089 92,011 101,202 109,287 117,305 5.24%
Plus: Depreciation 92,420 109,308 115,487 123,421 129,940 3.86%
Deferred Taxes (1,090) 2,673 (1,844) (5,884) (8,909) --
Less: Capital Expenditures 127,496 117,113 108,690 112,140 105,845 -2.05%
Changes in Working (30,842) (4,334) (7,962) (11,279) (7,395) --
Capital
Unlevered Free Cash Flow 68,765 91,213 114,117 125,963 139,886 8.21%
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
KEY ASSUMPTIONS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Growth
Revenue -- 12.52% 5.53% 5.61% 4.97%
Operating Expenses -- 4.89% 2.96% 3.66% 3.35%
EBITDA -- 21.66% 8.18% 7.53% 6.51%
Unlevered Free Cash Flow -- 32.65% 25.11% 10.38% 11.05%
EBITDA Margin 45.51% 49.21% 50.45% 51.36% 52.11%
Depreciation as a Percent
of Revenue 19.48% 20.48% 20.50% 20.75% 20.81%
Capital Expenditures as a
Percent of Revenue 26.88% 21.94% 19.30% 18.85% 16.95%
Tax Rate 40.00% 40.00% 40.00% 40.00% 40.00%
__________________
<FN>
(1) Source: Management Projections.
</TABLE>
<TABLE>
<CAPTION>
Management Projections PACIFIC TELECOM, INC.
Consolidated Company Excluding Discounted Cash Flow Analysis
Planned Acquisitions in 1995 and 1997 From 1/1/1995 to 12/31/99
and Excluding Alascom Earnings in 1995 ($-000's)
Multiple of Year 5 Operating Cash Flow
------------------------------------------------------------
4.00x 5.00x 6.00x 7.00x
------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
8.00% 420,252 420,252 420,252 420,252 Discounted Cash Flows
885,980 1,107,476 1,328,971 1,550,466 Terminal Value
--------- --------- --------- ---------
1,306,233 1,527,728 1,749,223 1,970,718 Total
4.9 5.8 6.6 7.4 Multiple of 1994E EBITDA
9.00% 408,130 408,130 408,130 408,130 Discounted Cash Flows
846,078 1,057,598 1,269,117 1,480,637 Terminal Value
--------- --------- --------- ---------
1,254,208 1,465,728 1,677,247 1,888,767 Total
4.7 5.5 6.3 7.1 Multiple of 1994E EBITDA
10.00% 396,527 396,527 396,527 396,527 Discounted Cash Flows
Discount 808,313 1,010,391 1,212,469 1,414,548 Terminal Value
Rate --------- --------- --------- ---------
1,204,840 1,406,918 1,608,996 1,811,074 Total
4.5 5.3 6.1 6.8 Multiple of 1994E EBITDA
11.00% 385,414 385,414 385,414 385,414 Discounted Cash Flows
772,553 965,691 1,158,829 1,351,967 Terminal Value
--------- --------- --------- ---------
1,157,966 1,351,104 1,544,242 1,737,381 Total
4.4 5.1 5.8 6.6 Multiple of 1994E EBITDA
12.00% 374,765 374,765 374,765 374,765 Discounted Cash Flows
738,674 923,343 1,108,011 1,292,680 Terminal Value
--------- --------- --------- ---------
1,113,439 1,298,107 1,482,776 1,667,444 Total
4.2 4.9 5.6 6.3 Multiple of 1994E EBITDA
13.00% 364,556 364,556 364,556 364,556 Discounted Cash Flows
706,563 883,203 1,059,844 1,236,485 Terminal Value
--------- --------- --------- ---------
1,071,119 1,247,759 1,424,400 1,601,041 Total
4.0 4.7 5.4 6.0 Multiple of 1994E EBITDA
</TABLE>
TAB 7
- ----------------------------------------------------------------------------
7.
Valuation by Line of Business
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
Valuation By Line of Business
(Dollars in Thousands)
<S> <C>
CS First Boston
Consolidated Operations Enterprise Valuation Range
----------------------------
Local Exchange Companies $800,000 - $950,000
U S WEST Acquisitions - Colorado, Oregon, Washington $350,000 - $400,000
Cellular Operations Net of Minority Interest $225,000 - $275,000
PT Cable and Transmission Services Net of Minority Interest $40,000 - $50,000
Other Businesses $25,000
----------------------------
Consolidated Enterprise Value $1,440,000 - $1,700,000
Plus:
Net Proceeds from Alascom Sale $275,000
Less:
Net Total Debt (12/31/94) ($392,000)
Purchase Price of U S WEST Acquisitions ($366,000)
Total Equity Value $957,000 - $1,217,000
Fully Diluted Shares Outstanding 39,619,623
Approximate PTI Share Price Range $24.25 - $30.75
</TABLE>
TAB 8
- ----------------------------------------------------------------------------
8.
Premiums Paid in Other Acquisitions of Minority Shareholders
by a Majority Shareholder
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
COMPARISON OF PREMIUMS PAID TO MINORITY SHAREHOLDERS BY A MAJORITY SHAREHOLDER
_______________________________________________________________________________________________________________________________
PREMIUM
PERCENT OF PER SHARE TRANS. OVER STOCK PRICE
ANNOUNCEMENT TARGET/ SHARES OWNED PERCENT OFFER/ VALUE PRIOR TO ANNOUNCEMENT
DATE ACQUIROR PRE-TRANSACTION SOUGHT CONSIDER. (MM) 1 DAY 4 WEEKS STATUS
_______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
9/8/94 Contel Cellular Inc./ 90.0% 10.0% $22.50 $253.8 26.8% 20.0% Pending
GTE Corp
8/24/94 Castle & Cooke Homes Inc./ 82.8% 17.2% $14.00 $81.5 20.4% 34.9% Pending
Dole Food Co.
7/29/94 Intergroup Healthcare Corp./ 62.6% 37.4% $65.00 $255.7 49.7% 30.3% Pending
Foundation Health Corp.
7/28/94 Chemical Waste Management/ 78.6% 21.4% $ 9.75 $437.8 21.9% 11.4% Pending
WMX Technologies
6/06/94 Ogden Projects Inc./ 84.2% 15.8% $18.40 $110.3 5.8% 20.6% Completed
Ogden Corporation
5/05/94 General Cable Corp./ 53.7% 46.3% $ 6.00 $35.9 17.1% 11.5% Completed
Wassall PLC
4/26/94 Diamond Shamrock Offshore 87.1% 12.9% $ 4.49 $42.6 -3.0% 5.6% Completed
LP/Burlington Resources
3/01/94 FoxMeyer Corp./National 80.5% 19.5% $15.75 $86.8 2.8% 6.7% Pending
Intergroup Inc.
2/17/94 Scripps Howard Broadcasting/ 86.0% 14.0% $82.80 $115.9 9.3% 9.3% Pending
EW Scripps Co.
1/07/94 Holnam Inc./Holderbank 95.0% 5.0% $7.65 $54.0 13.3% 5.5% Completed
Financiere Gloris Ltd.
10/13/93 Medical Marketing Group/ 54.2% 45.8% $25.00 $156.7 -25.9% -15.3% Completed
Medco Containment
9/20/93 West Point-Pepperell/ 95.0% 5.0% $46.00 $68.0 -7.8% -5.4% Completed
Valley Fashions Corp.
6/17/93 Hadson Energy Resources 66.5% 33.5% $14.00 $31.9 17.8% 16.7% Completed
Corp./Apache Corp.
</TABLE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
COMPARISON OF PREMIUMS PAID TO MINORITY SHAREHOLDERS BY A MAJORITY SHAREHOLDER
_______________________________________________________________________________________________________________________________
PREMIUM
PERCENT OF PER SHARE TRANS. OVER STOCK PRICE
ANNOUNCEMENT TARGET/ SHARES OWNED PERCENT OFFER/ VALUE PRIOR TO ANNOUNCEMENT
DATE ACQUIROR PRE-TRANSACTION SOUGHT CONSIDER. (MM) 1 DAY 4 WEEKS STATUS
_______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
11/13/92 Brand Cos Inc./ 56.0% 44.0% $17.88 $185.0 0.0% 0.0% Completed
Rust International Inc.
8/17/92 PHLCorp, Inc./ 63.1% 36.9% $25.78 $139.9 7.4% 5.8% Completed
Leucadia National Corp.
3/2/92 WR Grace & Co./ 83.4% 16.6% $16.50 $77.3 13.8% 38.9% Completed
Grace Energy Co.
2/6/92 Charter Co. (American 82.0% 18.0% $ 7.20 $47.5 31.6% 41.7% Completed
Financial)/Spelling
Entertainment Inc.
10/29/91 Time Warner Inc./American 82.0% 18.0% $63.11 $1,699.5 23.7% 28.8% Completed
Television and Comm.
9/18/91 Arkla Exploration Co./ 82.0% 18.0% $14.74 $91.2 3.4% 24.1% Completed
Arkla Inc.
9/11/91 Marrion Merrell Dow/ 70.0% 30.0% $45.77 $3,804 35.6% 29.9% Completed
Dow Chemical Co.
9/06/91 P&C Food Markets Inc./ 90.0% 10.0% $34.00 $43.9 3.8% 4.6% Completed
Penn Traffic Co.
7/25/91 Country Lake Foods/ 65.5% 34.5% $15.30 $23.0 17.7% 27.5% Completed
Land O'Lakes Inc.
</TABLE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
COMPARISON OF PREMIUMS PAID TO MINORITY SHAREHOLDERS BY A MAJORITY SHAREHOLDER
_______________________________________________________________________________________________________________________________
PREMIUM
PERCENT OF PER SHARE TRANS. OVER STOCK PRICE
ANNOUNCEMENT TARGET/ SHARES OWNED PERCENT OFFER/ VALUE PRIOR TO ANNOUNCEMENT
DATE ACQUIROR PRE-TRANSACTION SOUGHT CONSIDER. (MM) 1 DAY 4 WEEKS STATUS
_______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6/13/91 Weightronix/ 57.0% 43.0% $19.00 $ 22.0 26.7% 35.4% Completed
Staveley Industries
6/2/91 Hamilton Oil Corp./ 51.7% 48.3% $40.00 $ 524.0 18.5% 31.2% Completed
BHP Holdings Inc.
2/28/91 Air & Water Technologies 82.0% 18.0% $18.70 $ 49.8 18.7% 17.6% Completed
Corp., Metcalf & Eddy
Cos. Inc.
1/03/91 Ocean Drilling & 61.1% 38.9% $19.13 $ 391.8 12.5% 7.8% Completed
Exploration/Murphy Oil
Corp.
8/10/90 Diversicare Corp. of America/ 95.0% 5.0% $ 2.40 $ 27.0 12.7% 101.7% Completed
Diversicare Ltd.
10/23/90 ERC Environmental & Energy
Service Co., Inc./Ogden Corp. 68.1% 31.9% $15.13 $ 36.0 37.6% 44.1% Completed
7/31/90 Freeport-McMoRan Inc./ 81.5% 18.5% $11.04 $ 239.4 37.9% 49.6% Completed
Freeport-McMoRan Oil & Gas
7/19/90 Caesars World Inc. 86.6% 13.4% $22.00 $ 48.4 36.4% 40.8% Completed
Caesars New Jersey Inc.
7/10/90 TVX Broadcast Group/ 83.0% 17.0% $ 9.50 $ 66.0 81.0% 90.0% Completed
Paramount Communications
</TABLE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
COMPARISON OF PREMIUMS PAID TO MINORITY SHAREHOLDERS BY A MAJORITY SHAREHOLDER
_______________________________________________________________________________________________________________________________
PREMIUM
PERCENT OF PER SHARE TRANS. OVER STOCK PRICE
ANNOUNCEMENT TARGET/ SHARES OWNED PERCENT OFFER/ VALUE PRIOR TO ANNOUNCEMENT
DATE ACQUIROR PRE-TRANSACTION SOUGHT CONSIDER. (MM) 1 DAY 4 WEEKS STATUS
_______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7/06/90 Mack Trucks Inc./Renault 60.1% 39.9% $ 6.00 $ 103.7 14.3% 17.0% Completed
Vehicles Industriels
5/17/90 DST Systems/Kansas City 87.1% 12.9% $14.00 $ 34.0 9.8% 36.6% Completed
Southern
4/9/90 PCS, Inc./ 85.6% 14.4% $20.00 $ 42.0 27.0% 29.0% Completed
McKesson Corp.
3/16/90 Esselte Business 78.0% 22.0% $47.64 $ 215.0 10.8% 42.2% Completed
3/4/90 Shearson Lehman Brothers/ 68.4% 31.6% $12.51 $ 368.4 0.1% 6.5% Completed
American Express Co.
2/16/90 National Mines Service/ 51.9% 48.1% $ 8.50 $ 21.0 15.2% 4.6% Completed
Anderson Mavor Investments
1/24/90 Copperweld Corp (Imetal SA)/ 55.6% 44.4% $15.50 $ 78.2 34.8% 21.6% Completed
Imetal SA
11/22/89 Telerate, Inc./Dow Jones 67.0% 33.0% $21.00 $ 657.0 47.4% 41.1% Completed
11/01/89 POP Radio Corp./ 57.0% 43.0% $20.50 $ 33.2 9.3% -11.8% Completed
Heritage Media
10/19/89 Soo Line/Canadian Pacific 55.8% 44.2% $19.50 $ 89.8 11.4% 13.0% Completed
</TABLE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
COMPARISON OF PREMIUMS PAID TO MINORITY SHAREHOLDERS BY A MAJORITY SHAREHOLDER
_______________________________________________________________________________________________________________________________
PREMIUM
PERCENT OF PER SHARE TRANS. OVER STOCK PRICE
ANNOUNCEMENT TARGET/ SHARES OWNED PERCENT OFFER/ VALUE PRIOR TO ANNOUNCEMENT
DATE ACQUIROR PRE-TRANSACTION SOUGHT CONSIDER. (MM) 1 DAY 4 WEEKS STATUS
_______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
9/21/89 Telerate Inc./Dow Jones & 67.0% 33.0% $18.00 $ 657.8 19.0% 10.8% Completed
Co Inc.
7/31/89 HIMONT Inc./Montedison 81.0% 19.0% $49.00 $ 627.2 11.0% 25.6% Completed
6/14/89 Andrews Group Inc./ 57.0% 43.0% $ 7.25 $ 28.3 3.6% 28.8% Completed
MacAndrews & Forbes Holdings
6/09/89 AL Williams Corp./ 70.8% 29.2% $19.89 $ 472.6 11.2% 29.3% Completed
Primerica Corp.
6/08/89 Fisher Scientific Group Inc./ 81.0% 19.0% $20.50 $ 140.0 6.5% 3.8% Completed
Henley Group Inc.
5/24/89 Tele-Communications Inc./ 75.0% 25.0% $31.75 $ 179.4 12.6% 30.9% Completed
Westmarc Communications Inc.
3/15/89 FGIC Corp./General Electric 85.4% 14.6% $24.00 $ 107.0 30.6% 30.6% Completed
Capital Corp.
5/19/89 TGI Friday's Inc./Carlson 80.2% 19.8% $14.50 $ 52.7 9.4% 11.5% Completed
Hospitality Group
4/18/89 American Capital Management/ 82.6% 17.4% $11.50 $ 48.3 17.9% 7.0% Completed
Primerica Corp.
3/10/89 Sizzler Restaurants Intl. 66.0% 34.0% $22.03 $ 102.1 24.1% 22.4% Completed
Inc./Collins Foods Int.
</TABLE>
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
COMPARISON OF PREMIUMS PAID TO MINORITY SHAREHOLDERS BY A MAJORITY SHAREHOLDER
_______________________________________________________________________________________________________________________________
PREMIUM
PERCENT OF PER SHARE TRANS. OVER STOCK PRICE
ANNOUNCEMENT TARGET/ SHARES OWNED PERCENT OFFER/ VALUE PRIOR TO ANNOUNCEMENT
DATE ACQUIROR PRE-TRANSACTION SOUGHT CONSIDER. (MM) 1 DAY 4 WEEKS STATUS
_______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
12/14/88 Henley Manufacturing Corp./ 76.3% 23.7% $90.00 $ 237.0 12.5% 60.7% Completed
New Hampshire Oak
12/14/88 Micro D/Ingram Industries 59.0% 41.0% $12.50 $ 43.9 19.0% 33.3% Completed
12/06/88 Sage Energy Co./KK Amini 69.0% 31.0% $ 5.88 $ 22.0 11.9% 4.4% Completed
(Chairman of Sage)
12/01/88 Interactive Technologies/ 56.0% 44.0% $17.38 $ 33 20.9% 22.0% Completed
Network Security, Inc.
11/15/88 Princeville Corp./ 53.3% 46.7% $15.50 $ 70.0 3.3% 3.3% Completed
Qintex Resorts
11/09/88 First City Industries/ 75.2% 24.8% $13.10 $ 31.0 19.1% 21.9% Completed
First City Development
10/24/88 Copelco Financial Services 58.0% 42.0% $ 8.75 $ 25.0 75.0% 62.6% Completed
Group/Mediq, Inc.
10/13/88 Associated Hosts/ 55.6% 44.4% $11.00 $ 22.0 23.9% 1.1% Completed
Industrial Equity
2/25/88 Certain Teed Corp./ 57.1% 42.9% $47.00 $ 387.0 2.4% 85.2% Completed
Saint-Gobain Investments, Inc.
</TABLE>
TAB 9
_____________________________________________________________________________
9.
VALUATION SUMMARY
<TABLE>
<CAPTION>
PACIFIC TELECOM, INC.
Valuation Summary
(Dollars in Thousands)
<S> <C>
Value Per Share
---------------------------
Public Equity Market $25.50 - $31.00
Discounted Cash Flow Analysis $23.25 - $35.50
Valuation By Line of Business $24.25 - $30.75
Premiums Paid by a Majority Shareholder to Minority
Shareholders of other Public Companies
Average Premium Paid Over Stock Price One $28.50
Day Before Announcement: 18.0%
Average Premium Paid Over Stock Price Four $30.00
Weeks Before Announcement: 24.4%
Value Range $28.00 - $34.00
</TABLE>
TAB 10
_____________________________________________________________________________
10.
ANALYSIS OF THE PROPOSED TRANSACTION
<TABLE>
<CAPTION>
ANALYSIS OF PROPOSED TRANSACTION
--------------------------------
<S> <C> <C>
Proposed Purchase Price $30.00/Share
Implied Equity Value for Total Company $1,188,589
Implied Total Value for Company (Including $1,671,589
Assumption of Net Debt as 12/31/94)
______________________________________________________________________________________________________
Implied Value for Pacific Telecom as a Multiple of:
1995E Revenues $474,372 3.52x
1995E EBITDA $215,901 7.74x
1995E EBIT $123,481 13.54x
1995E Net Income $ 49,976 23.78x
Implied Value for Pacific Telecom as a Multiple of the Following Financial Results
Pro Forma for the US WEST Acquisitions As If They Had Occurred January 1, 1995:
1995E Revenues $505,410 3.31x
1995E EBITDA $237,120 7.05x
1995E EBIT $137,177 12.19x
1995E Net Income $ 52,943 22.45x
</TABLE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
PACIFIC TELECOM, INC.
- --------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
Common Stock, no par value
-------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
5,290,942
-------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
$30.00
-------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
$158,728,260
-------------------------------------------------------------------
5) Total fee paid:
$31,745.65
-------------------------------------------------------------------
/ / Fee paid previously with preliminary materials
* Set forth the amount on which the filing fee is calculated and state
how it was determined.
/X/ Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
$31,745.65
-------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
Schedule 13E-3
-------------------------------------------------------------------
3) Filing Party:
PacifiCorp, PacifiCorp Holdings, Inc., Pacific Telecom, Inc.,
PXYZ Corporation
-------------------------------------------------------------------
4) Date Filed:
April 7, 1995
-------------------------------------------------------------------
PACIFIC TELECOM, INC.
805 Broadway
Vancouver, Washington 98668
___________, 1995
Dear Shareholder:
You are cordially invited to attend the Annual
Meeting of Shareholders of Pacific Telecom, Inc., a Washington
corporation ("Pacific Telecom"), to be held on ____________,
___________, 1995 at ____________________, Washington,
commencing at ______ Pacific Time (the "Annual Meeting").
At the Annual Meeting, you will be asked to consider
and vote upon a proposal to approve the merger (the "Merger")
of Pacific Telecom with a newly formed wholly owned subsidiary
of PacifiCorp Holdings, Inc. ("Holdings"), the owner of
approximately 86.6 percent of the outstanding common stock of
Pacific Telecom ("PTI Common Stock"), pursuant to which Pacific
Telecom will become a wholly owned subsidiary of Holdings and
shareholders other than Holdings ("Minority Shareholders") will
receive $30.00 per share in cash in exchange for their PTI
Common Stock (other than shares as to which dissenters' rights
are perfected). Holdings is a wholly owned subsidiary of
PacifiCorp, an Oregon corporation.
A special committee of the Board of Directors of
Pacific Telecom consisting of four independent directors (the
"Special Committee"), with the advice of its own legal and
financial advisors, has recommended the Merger, and the Merger
has been unanimously adopted and approved by the Board of
Directors of Pacific Telecom. The Special Committee has
received written opinions from Smith Barney Inc. and CS First
Boston Corporation to the effect that the merger consideration
of $30.00 per share to be paid to Minority Shareholders is fair
to such shareholders from a financial point of view. In
addition to the vote required by Washington law, the
affirmative vote of the holders of a majority of the
outstanding shares held by Minority Shareholders is necessary
to approve the Merger.
At the Annual Meeting, you will also be asked to
elect a Board of Directors consisting of ten persons, including
the six current directors and four additional directors
nominated by Holdings, to serve until their respective
successors are duly elected and qualified. The directors so
elected will serve as directors of Pacific Telecom whether or
not the Merger is consummated. Upon the election of such
nominees, a majority of the Board of Directors of Pacific
Telecom will consist of individuals who are designees of
Holdings and directors or officers of PacifiCorp or Holdings.
THE BOARD OF DIRECTORS OF PACIFIC TELECOM RECOMMENDS
THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER AND FOR
THE ELECTION OF THE NOMINEES FOR DIRECTOR.
It is important that your shares be represented at
the Annual Meeting. WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING, WE URGE YOU TO SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD AT YOUR EARLIEST CONVENIENCE IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE. Your shares of PTI Common
Stock will be voted in accordance with the instructions you
have given in your proxy. If you attend the Annual Meeting,
you may vote in person if you wish, even though you have
previously returned your proxy card. Your prompt cooperation
will be greatly appreciated.
Very truly yours,
Charles E. Robinson
Chairman of the Board
PACIFIC TELECOM, INC.
Notice of Annual Meeting of Shareholders
__________, 1995
To the Shareholders of Pacific Telecom, Inc.:
NOTICE IS HEREBY GIVEN that the 1995 Annual Meeting
of Shareholders of PACIFIC TELECOM, INC. ("Pacific Telecom")
will be held at
______________________________________________________, at
_____ on __________, _______________, 1995 for the following
purposes:
(1) to consider and vote upon a proposal to approve
an Agreement and Plan of Merger, pursuant to which (a) PXYZ
Corporation ("Merger Sub"), a Washington corporation and a
wholly owned subsidiary of PacifiCorp Holdings, Inc., a
Delaware corporation ("Holdings"), will be merged with and into
Pacific Telecom (the "Merger") and (b) each outstanding share
of Pacific Telecom's common stock ("PTI Common Stock") owned by
Holdings shall be cancelled, each outstanding share of PTI
Common Stock owned by shareholders other than Holdings
("Minority Shareholders") (other than shares as to which
dissenters' rights are perfected) will be converted into the
right to receive $30.00 per share in cash and each outstanding
share of capital stock of Merger Sub will be converted into one
share of PTI Common Stock;
(2) to elect a board of ten directors, consisting of
the six current directors and four additional directors
nominated by Holdings; and
(3) to transact such other business as may properly
come before the meeting and any adjournments or postponements
thereof.
A copy of the Proxy Statement relating to the Annual
Meeting (which includes, as Exhibit A thereto, a copy of the
Agreement and Plan of Merger) is attached to this notice and
incorporated herein by reference.
Only holders of record of PTI Common Stock at the
close of business on _____________, 1995 will be entitled to
notice of and to vote at the meeting and any adjournments or
postponements thereof. The meeting is subject to adjournment
from time to time as the shareholders present in person or by
proxy determine. In addition to the vote required by
Washington law, the affirmative vote of the holders of a
majority of the outstanding shares of PTI Common Stock held by
Minority Shareholders is necessary to approve the Merger.
As the record and beneficial owner of approximately
86.6 percent of the issued and outstanding shares of PTI Common
Stock, Holdings will have the ability to cause the election of
at least nine of the directors nominated for election.
Holdings has advised Pacific Telecom that it intends to vote
its shares of PTI Common Stock equally in favor of the election
of each of the nominees.
Holders of PTI Common Stock who comply with the
requirements of sections 23B.13.010 through 23B.13.310 of the
Washington Business Corporation Act (the "WBCA") are entitled
to assert dissenters' rights with respect to the proposed
Merger and to obtain payment of the fair value of their shares
if the proposed Merger is consummated. A copy of
sections 23B.13.010 through 23B.13.310 of the WBCA is attached
as Exhibit B to the proxy statement that accompanies this
Notice. See "The Merger--Rights of Dissenting Shareholders" in
the proxy statement.
All shareholders are cordially invited to attend the
meeting in person.
Whether or not you plan to attend, please sign and
return the accompanying form of proxy in the enclosed stamped
envelope. If no instructions are given on the accompanying
form of proxy, the shares represented by the proxy will be
voted at the Annual Meeting FOR approval of the Merger
Agreement, FOR election of the nominees for director and in
accordance with this Proxy Statement on any other business that
may properly come before the Annual Meeting and any
postponement or adjournment thereof. If you do not return the
accompanying form of proxy, your shares will not be voted in
favor of approval of the Merger Agreement and will not be voted
in favor of election of the nominees for director. If you are
present at the Annual Meeting, you may withdraw your proxy and
vote in person. We appreciate your giving this matter your
prompt attention.
By Order of the Board of Directors
Donn T. Wonnell
Vice President and Corporate
Secretary
Vancouver, Washington
_______________, 1995
PACIFIC TELECOM, INC.
805 Broadway
Vancouver, Washington 98668
_______________
PROXY STATEMENT
_______________
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD _______________, 1995
This proxy statement (the "Proxy Statement") is being
furnished to the shareholders of Pacific Telecom, Inc., a
Washington corporation ("Pacific Telecom"), in connection with
the annual meeting of shareholders of Pacific Telecom (the
"Annual Meeting") to be held on ___________, _____________,
1995 at _______ Pacific Time, at ____________________________
________________________________. The accompanying proxy is
being solicited by Pacific Telecom's Board of Directors and
is to be voted at the Annual Meeting and at any adjournments
or postponements thereof.
At the Annual Meeting, holders of shares of common
stock of Pacific Telecom ("PTI Common Stock") will consider and
vote upon (i) a proposal to approve an Agreement and Plan of
Merger, dated as of March 9, 1995 (together with the exhibits
thereto, the "Merger Agreement"), by and among Pacific Telecom,
PacifiCorp Holdings, Inc., a Delaware corporation ("Holdings"),
and PXYZ Corporation, a Washington corporation and a wholly
owned subsidiary of Holdings ("Merger Sub"), and (ii) the
election of ten directors, consisting of the six current
directors and four additional directors nominated by Holdings.
Holdings is a wholly owned subsidiary of PacifiCorp, an Oregon
corporation, and owns approximately 86.6 percent of the
outstanding shares of PTI Common Stock. In connection with the
Merger Agreement, PacifiCorp and Pacific Telecom have entered
into a related agreement dated as of March 9, 1995 (the
"PacifiCorp Agreement"). A copy of the Merger Agreement (which
includes the PacifiCorp Agreement as an exhibit) is attached to
this Proxy Statement as Exhibit A.
_______________
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION
NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
The Merger Agreement provides that Merger Sub will be
merged with and into Pacific Telecom (the "Merger"), with
Pacific Telecom being the surviving corporation after the
Merger. In the Merger, each outstanding share of PTI Common
Stock owned by Holdings will be cancelled, each outstanding
share of PTI Common Stock owned by shareholders other than
Holdings (the "Minority Shareholders") (other than shares as to
which dissenters' rights are perfected) will be converted into
the right to receive a cash payment of $30.00 (the "Merger
Consideration"), and each outstanding share of Merger Sub
common stock ("Merger Sub Stock") will be converted into one
share of PTI Common Stock. Thus, as a result of the Merger,
Pacific Telecom will become a wholly owned subsidiary of
Holdings and the Minority Shareholders will receive the Merger
Consideration, without interest, in exchange for their shares.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT IN CONNECTION
WITH THE SOLICITATION OF PROXIES AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY PACIFIC TELECOM. THIS PROXY STATEMENT DOES
NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION
TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH
SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS PROXY
STATEMENT SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
PACIFIC TELECOM SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF. PACIFIC TELECOM UNDERTAKES NO OBLIGATION TO UPDATE THE
INFORMATION CONTAINED HEREIN SUBSEQUENT TO THE DATE HEREOF.
The approximate date on which this Proxy Statement
and the accompanying proxy are first being mailed to
shareholders is ______________, 1995.
THE DATE OF THIS PROXY STATEMENT IS ______________, 1995.
TABLE OF CONTENTS
Page
----
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . 1
MEETING INFORMATION. . . . . . . . . . . . . . . . . . . . 9
Introduction. . . . . . . . . . . . . . . . . . . . . . . 9
Matters To Be Considered at the Meeting . . . . . . . . . 9
Voting Information. . . . . . . . . . . . . . . . . . . . 9
Solicitation, Revocation and Use of Proxies . . . . . . .10
SPECIAL FACTORS. . . . . . . . . . . . . . . . . . . . . .11
Background of the Merger. . . . . . . . . . . . . . . . .11
Recommendations of the Board of Directors of
Pacific Telecom and the Special Committee. . . . . .22
Opinions of Smith Barney and CS First Boston. . . . . . .25
Opinion of Smith Barney. . . . . . . . . . . . . . .25
Opinion of CS First Boston . . . . . . . . . . . . .33
Reasons of PacifiCorp and Holdings for the Merger . . . .37
Opinion of Financial Advisor to PacifiCorp. . . . . . . .40
Certain Effects of the Merger . . . . . . . . . . . . . .45
Conduct of Business After the Merger. . . . . . . . . . .46
Conduct of Business if the Merger Is Not Consummated. . .46
Regulatory Approvals. . . . . . . . . . . . . . . . . . .47
Interests of Certain Persons in the Merger;
Conflicts of Interest. . . . . . . . . . . . . . . .47
Rights of Dissenting Shareholders . . . . . . . . . . . .48
Certain Federal Income Tax Consequences
of the Merger. . . . . . . . . . . . . . . . . . . .50
Financing the Merger. . . . . . . . . . . . . . . . . . .51
Expenses of the Transaction . . . . . . . . . . . . . . .52
SELECTED FINANCIAL DATA;
PRO FORMA FINANCIAL INFORMATION . . . . . . . . . . . .53
CERTAIN FINANCIAL FORECASTS. . . . . . . . . . . . . . . .57
THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . .67
General . . . . . . . . . . . . . . . . . . . . . . . . .67
Effective Time. . . . . . . . . . . . . . . . . . . . . .67
Conversion of Shares; Surrender of Stock
Certificates; Payment for Shares . . . . . . . . . .67
Representations and Warranties. . . . . . . . . . . . . .69
General. . . . . . . . . . . . . . . . . . . . . . .69
Offers, Proposals and Intention To Sell. . . . . . .69
Covenants . . . . . . . . . . . . . . . . . . . . . . . .70
Indemnification of Officers and Directors . . . . . . . .71
Conditions to the Merger. . . . . . . . . . . . . . . . .72
Waiver, Amendment and Termination . . . . . . . . . . . .73
Fees and Expenses . . . . . . . . . . . . . . . . . . . .74
MARKET PRICE AND DIVIDEND INFORMATION
FOR PTI COMMON STOCK. . . . . . . . . . . . . . . . .74
ELECTION OF DIRECTORS. . . . . . . . . . . . . . . . . . .75
Information as to Nominees for Director . . . . . . . . .75
Information with Respect to Meetings
and Committees . . . . . . . . . . . . . . . . . . .77
Director Compensation . . . . . . . . . . . . . . . . . .77
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . .79
Summary Compensation Table. . . . . . . . . . . . . . . .79
Severance Arrangements. . . . . . . . . . . . . . . . . .80
Retirement Plans . . . . . . . . . . . . . . . . . . . .80
Personnel Committee Report on Executive Compensation. . .82
Overview . . . . . . . . . . . . . . . . . . . . . .82
Compensation Program Components. . . . . . . . . . .82
CEO Compensation . . . . . . . . . . . . . . . . . .84
Performance Graph . . . . . . . . . . . . . . . . . . . .86
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS. . . . . .88
CERTAIN TRANSACTIONS IN PTI COMMON STOCK . . . . . . . . .88
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . .90
INFORMATION CONCERNING HOLDINGS AND PACIFICORP
AND THEIR DIRECTORS AND EXECUTIVE OFFICERS. . . . . .91
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . .97
OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . .97
SHAREHOLDER PROPOSALS. . . . . . . . . . . . . . . . . . .97
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES
EXCHANGE ACT OF 1934. . . . . . . . . . . . . . . . .97
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . .98
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . .98
EXHIBITS
A - Agreement and Plan of Merger
B - Sections 23B.13.010 through 23B.13.310
of the Washington Business Corporation Act
C - Opinion of Smith Barney Inc.
D - Opinion of CS First Boston Corporation
E - Opinion of Salomon Brothers Inc
SUMMARY
The following is a summary of certain information
contained or incorporated by reference in this Proxy Statement.
The following summary is not intended to be complete and is
qualified in its entirety by reference to the more detailed
information contained in this Proxy Statement and the Exhibits
hereto or incorporated herein by reference. Shareholders are
urged to review the entire Proxy Statement carefully.
The Annual Meeting; Record Date; Quorum
The Annual Meeting of Shareholders of Pacific Telecom
will be held on ___________, _____________, 1995 at _________,
Pacific Time, at ____________________________________________
______. Only holders of record of PTI Common Stock at the
close of business on ____________, 1995 are entitled to notice
of and to vote at the Annual Meeting. On that date, there
were _____________ shares of PTI Common Stock outstanding,
with each share entitled to cast one vote with respect to
matters other than the election of directors, as to which
cumulative voting will apply. The presence (in person or
by proxy) of the holders of a majority of the outstanding
shares of the PTI Common Stock is necessary to constitute
a quorum at the Annual Meeting. See "Meeting Information--
Introduction" and "--Voting Information."
Matters To Be Considered at the Meeting; Voting Information;
Vote Required
At the Annual Meeting, shareholders will consider and
vote upon a proposal to approve the Merger Agreement, a copy of
which is attached as Exhibit A to this Proxy Statement and is
incorporated by reference herein. In addition, the
shareholders will be asked to elect ten directors. Under the
Merger Agreement, approval of the Merger Agreement requires the
affirmative vote of the holders of a majority of the
outstanding PTI Common Stock held by Minority Shareholders.
Under the Washington Business Corporation Act (the "WBCA"),
approval of the Merger Agreement also requires the affirmative
vote of the holders of two-thirds of the outstanding PTI Common
Stock. In the election of directors, the holders of PTI Common
Stock have cumulative voting rights. Holdings has advised
Pacific Telecom that it intends to vote for approval of the
Merger Agreement and to vote its shares of PTI Common Stock
equally in favor of the election of each of the nominees for
director. See "Meeting Information--Matters To Be Considered
At The Meeting" and "--Voting Information."
Structure of the Merger
Pursuant to the Merger Agreement, Merger Sub will
merge with and into Pacific Telecom, with Pacific Telecom being
the surviving corporation after the
Merger. Each outstanding share of PTI Common Stock held by
Minority Shareholders (other than shares as to which
dissenters' rights are perfected) will be converted into the
right to receive the Merger Consideration, without interest.
Each outstanding share of PTI Common Stock held by Holdings
will be cancelled without consideration. Each outstanding
share of Merger Sub Stock will be converted into the right to
receive one share of PTI Common Stock. See "The Merger
Agreement--General" and "--Conversion of Shares; Surrender of
Stock Certificates; Payment for Shares."
Recommendations of the Board of Directors of
Pacific Telecom and the Special Committee
A special committee of the Board of Directors,
consisting solely of directors of Pacific Telecom who are not
employees of Pacific Telecom or employees or directors of
PacifiCorp or Holdings or any of their other affiliates (the
"Special Committee"), has unanimously determined, based
primarily upon the opinions of Smith Barney Inc. ("Smith
Barney") and CS First Boston Corporation ("CS First Boston"),
that the Merger Agreement is fair to, and in the best interests
of, the Minority Shareholders. After considering the
recommendation of the Special Committee, the Board of Directors
of Pacific Telecom has determined that the Merger Agreement is
fair to, and in the best interests of, Pacific Telecom and its
shareholders, has unanimously approved and adopted the Merger
Agreement and recommends that the Minority Shareholders vote
FOR the proposal to approve the Merger Agreement. See "Special
Factors--Background of the Merger" and "--Recommendations of
the Board of Directors of Pacific Telecom and the Special
Committee."
Opinions of Financial Advisors
Each of Smith Barney and CS First Boston, both
nationally recognized investment banking firms, has rendered a
written opinion to the Special Committee to the effect that,
subject to the assumptions set forth therein, as of the date of
this Proxy Statement, the Merger Consideration is fair to the
Minority Shareholders, from a financial point of view. The
full text of the written opinions of Smith Barney and CS First
Boston, which set forth the assumptions made, procedures
followed, matters considered and limits of review, are attached
hereto as Exhibits C and D, respectively. MINORITY
SHAREHOLDERS ARE URGED TO AND SHOULD READ SUCH OPINIONS
CAREFULLY AND IN THEIR ENTIRETY. See "Special Factors--
Opinions of Smith Barney and CS First Boston."
Salomon Brothers Inc ("Salomon Brothers"), also a
nationally recognized investment banking firm, has rendered a
written opinion to the effect that, subject to the assumptions
set forth therein, as of March 9, 1995, the Merger
Consideration was fair to PacifiCorp, from a financial point of
view. The opinion does not address the fairness of the Merger
Consideration to the Minority Shareholders. The full text of
the written opinion of Salomon Brothers, which sets forth the
assumptions made, procedures followed, matters considered and
limits of review, is attached hereto as
Exhibit E. SUCH OPINION SHOULD BE READ CAREFULLY AND IN ITS
ENTIRETY. See "Special Factors--Opinion of Financial Advisor
to PacifiCorp."
Reasons of Holdings and PacifiCorp for the Merger
Holdings determined to pursue a merger transaction
with Pacific Telecom for the following reasons: (i) to better
position Holdings and Pacific Telecom to take advantage of
possible synergies between the electric and telecommunications
businesses, without the constraints of actual or perceived
conflicts with the minority interest; (ii) to simplify the
corporate structure and eliminate certain expenses associated
with duplication of functions and Pacific Telecom's reporting
obligations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), with respect to the publicly held
minority interest; (iii) to improve PacifiCorp's earnings per
share growth prospects due to the higher earnings growth
prospects expected in the telecommunications industry as
compared to the electric utility industry; and (iv) to
facilitate more efficient capital allocation decisions between
PacifiCorp, Holdings and Pacific Telecom, which will become
increasingly important in view of Pacific Telecom's planned
acquisition activity. See "Special Factors--Reasons of
PacifiCorp and Holdings for the Merger."
Certain Effects of the Merger
As a result of the Merger, Pacific Telecom will
become a wholly owned subsidiary of Holdings. Upon the
effectiveness of the Merger, shareholders of Pacific Telecom,
other than Holdings, will no longer have any continuing
interest in Pacific Telecom. PTI Common Stock will no longer
be traded on the Nasdaq National Market and the registration of
PTI Common Stock under the Exchange Act, will be terminated.
See "Special Factors--Certain Effects of the Merger."
Interests of Certain Persons in the Merger
The Merger Agreement provides that the directors and
officers of Pacific Telecom at the effective time of the Merger
(the "Effective Time") shall be the initial directors and
officers of Pacific Telecom after the Merger. Holdings has
agreed to cause Pacific Telecom to maintain for the benefit of
current directors and officers of Pacific Telecom, for six
years after the Merger, director and officer liability
insurance and the indemnification rights currently provided for
in articles of incorporation and bylaws of Pacific Telecom and
its subsidiaries. PacifiCorp has also agreed to indemnify
current directors of Pacific Telecom with respect to certain
matters. Dr. Nancy Wilgenbusch is a member of the Board of
Directors of both Pacific Telecom and PacifiCorp. Certain
executive officers of Pacific Telecom are participants in a
severance plan providing for the payment of severance benefits
if their employment is terminated without cause. See "Special
Factors--Interests of Certain Persons in the Merger; Conflicts
of Interest," "The Merger Agreement--Indemnification of
Officers and Directors" and "Executive Compensation--Severance
Arrangements."
Conduct of Business After the Merger
Following consummation of the Merger, it is expected
that the business and operations of Pacific Telecom will be
continued by Pacific Telecom substantially as they are
currently being conducted. Except for the Merger and as
otherwise described in Pacific Telecom's prior filings with the
Securities and Exchange Commission (the "SEC"), neither
Holdings nor PacifiCorp has any current intention to sell or
dispose of all or any material portion of the PTI Common Stock
or the business or assets of Pacific Telecom, and neither
Holdings nor PacifiCorp has any present plans or proposals that
would result in any other extraordinary corporate transaction
such as a merger, reorganization, liquidation, relocation of
operations, sale or transfer of assets involving Pacific
Telecom or any material change in Pacific Telecom's corporate
structure, business or composition of its management. Holdings
will continue to evaluate Pacific Telecom's business and
operations and will make such changes as are deemed
appropriate. Pursuant to the Merger Agreement, (i) the members
of the Board of Directors of Pacific Telecom immediately prior
to the Merger, including the four additional directors proposed
for election by Holdings pursuant to the Merger Agreement, will
be the initial directors of Pacific Telecom following the
Merger and (ii) the officers of Pacific Telecom immediately
prior to the Merger will the be the initial officers of Pacific
Telecom following the Merger. See "Special Factors--Conduct of
Business After the Merger."
Conduct of Business if the Merger is Not Consummated
If the Merger is not consummated, it is expected that
the business and operations of Pacific Telecom will continue to
be conducted substantially as they are currently being
conducted. Pacific Telecom will continue to be controlled by
Holdings, and the Board of Directors of Pacific Telecom will
include the four additional directors nominated by Holdings for
election at the Annual Meeting. In such event, following the
Annual Meeting a majority of the members of the Board of
Directors of Pacific Telecom will consist of individuals who
are designees of Holdings and directors or officers of
PacifiCorp or Holdings. In addition, in such event, Holdings
may purchase additional PTI Common Stock from time to time,
subject to availability at prices deemed acceptable to
Holdings, pursuant to a merger transaction, tender offer, open
market or privately negotiated transactions or otherwise on
terms more or less favorable to the Minority Shareholders than
the terms of the Merger. However, Holdings has made no
determination as to any future transactions if the Merger is
not consummated. See "Special Factors--Conduct of Business if
the Merger is Not Consummated."
Certain Federal Income Tax Consequences of the Merger
The receipt of cash for PTI Common Stock pursuant to
the Merger will be a taxable transaction for federal income tax
purposes under the Internal Revenue Code of 1986, as amended,
and also may be a taxable transaction under applicable state,
local, foreign and other tax laws. See "Special Factors--
Certain Federal Income Tax Consequences of the Merger."
Dissenters' Rights
Under the WBCA, Pacific Telecom's shareholders will
be entitled to dissenters' rights in connection with the
Merger. See "Special Factors--Rights of Dissenting
Shareholders."
Effective Time of the Merger
The Merger will become effective upon the filing of
Articles of Merger with the Secretary of State of the State of
Washington. The filing will occur promptly after all
conditions to the Merger contained in the Merger Agreement have
been satisfied or waived. Pacific Telecom and Holdings
anticipate that the Merger will be consummated immediately
following the Annual Meeting. See "The Merger
Agreement--General" and "--Effective Time."
Payment Agent; Surrender of Stock Certificates
Holdings has designated ________________ as the
payment agent (the "Payment Agent") for the Merger. Promptly
after the Effective Time, the Payment Agent will send to each
Minority Shareholder (other than those shareholders holding
shares as to which dissenters' rights are perfected) a letter
of transmittal advising as to the procedures for surrendering
certificates representing shares of PTI Common Stock in
exchange for the Merger Consideration. Certificates should not
be surrendered until the letter of transmittal is received.
Conditions to Consummation of the Merger
The respective obligations of Pacific Telecom, on one
hand, and Holdings and Merger Sub, on the other hand, to
consummate the Merger are subject to the satisfaction or waiver
at or prior to the Effective Time of the following conditions,
among others: (a) approval of the Merger Agreement by the
holders of a majority of the outstanding shares of PTI Common
Stock held by Minority Shareholders and by the holders of two-
thirds of the outstanding shares of PTI Common Stock; (b) the
absence of any statute, rule, injunction or order making
illegal the consummation of the Merger; (c) the receipt of all
required authorizations, consents and approvals, subject to
certain exceptions; (d) the performance of and compliance with,
in all material respects, all agreements and obligations
contained in the Merger Agreement required to be performed or
complied with at or prior to the Effective Time; (e) the
absence of any governmental action or proceeding seeking to
prohibit consummation of the Merger that is deemed by counsel
more likely than not to be successful; and (f) the correctness
in all material respects of all representations and warranties
of the parties to the Merger Agreement. The obligations of
Holdings and Merger Sub to consummate the Merger are subject to
the satisfaction or waiver of certain additional conditions,
including the absence of any material adverse change with
respect to Pacific Telecom. See "The Merger Agreement--
Conditions of the Merger."
Waiver, Amendment and Termination of the Merger Agreement
Any provision of the Merger Agreement may be waived
at any time by the party entitled to the benefits of that
provision. Except for the provisions relating to
indemnification and insurance for Pacific Telecom's current
directors and officers following the Merger, the Merger
Agreement may be amended or supplemented at any time except
that, after approval of the Merger Agreement by the
shareholders of Pacific Telecom, no amendment may be made that
decreases the Merger Consideration or in any other way
materially adversely affects the Minority Shareholders without
the further approval of such shareholders. See "The Merger
Agreement--Waiver, Amendment and Termination."
The Merger Agreement may be terminated at any time
prior to the Effective Time, before or after approval of the
Merger Agreement by the shareholders of Pacific Telecom:
(a) by mutual consent of Pacific Telecom and Holdings; (b) by
either Pacific Telecom or Holdings if the Effective Time has
not occurred on or before September 30, 1995, subject to
certain exceptions; (c) by either Holdings or Pacific Telecom
if the other party breaches its obligations under the Merger
Agreement in any material respect; (d) by either Holdings or
Pacific Telecom if consummation of the Merger is prohibited by
any final, nonappealable order, decree or injunction; (e) by
Holdings or Pacific Telecom if the shareholders of Pacific
Telecom fail to approve the Merger; and (f) by Holdings or
Merger Sub if the Special Committee or the Board of Directors
of Pacific Telecom shall have withdrawn or modified, in any
manner adverse to Holdings or Merger Sub, its recommendation or
approval of the Merger or the Merger Agreement. See "The
Merger Agreement--Waiver, Amendment and Termination."
Summary Financial Data
The following table sets forth summary selected
historical consolidated financial information for Pacific
Telecom and its subsidiaries for each of the five years in the
period ended December 31, 1994. The following financial
information should be read in conjunction with the historical
consolidated financial statements and notes thereto of Pacific
Telecom included in Pacific Telecom's 1994 Annual Report on
Form 10-K (the "1994 Form 10-K"), which is incorporated herein
by reference.
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------
1994 1993 1992 1991 1990
-------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Operating revenues $ 704,962 $ 702,111 $ 698,175 $ 719,991 $ 677,883
Operating expenses 540,321 560,463 558,701 559,567 522,904
- ------------------------------------------------------------------------------------------
Net operating income 164,641 141,648 139,474 160,424 154,979
- ------------------------------------------------------------------------------------------
Income from continuing
operations 81,399 59,058 67,248 89,536 95,410
Gain (loss) from discontinued
operations (1) -- 60,444 (45,741) (8,431) (5,186)
- ------------------------------------------------------------------------------------------
Net income applicable to
common stock $ 81,399 $ 119,502 $ 21,507 $ 81,105 $ 90,219
- ------------------------------------------------------------------------------------------
Average number of common
shares outstanding 39,612 39,584 39,526 39,477 38,768
Data Per Common Share:
Income from continuing
operations $ 2.05 $ 1.49 $ 1.70 $ 2.27 $ 2.46
Gain (loss) from discontinued
operations -- 1.53 (1.16) (.22) (.13)
- ------------------------------------------------------------------------------------------
Net income $ 2.05 $ 3.02 $ .54 $ 2.05 $ 2.33
- ------------------------------------------------------------------------------------------
Dividends declared and paid $ 1.32 $ 1.32 $ 1.305 $ 1.235 $ 1.13
- ------------------------------------------------------------------------------------------
Book Value $ 16.85 $ 16.13 $ 14.41 $ 15.16 $ 14.31
Balance Sheet Data:
Total assets $1,442,951 $1,482,224 $1,607,289 $1,748,570 $1,787,622
Long-term debt, net of
current maturities 376,997 426,669 571,585 528,391 480,940
Shareholders' equity 667,773 638,711 569,846 598,524 563,906
__________________
<FN>
(1) International Communications Holdings, Inc. ("ICH") had been shown as a discontinued
operation for financial statement reporting purposes through September 1993 when TRT
Communications, Inc. ("TRT"), its major subsidiary, was sold. The remaining investment
in ICH is now reported as a continuing operation. See Note 7 to Consolidated Financial
Statements included in the 1994 Form 10-K and incorporated herein by reference for
information concerning the $60.4 million after-tax gain on the sale of ICH's major
operating subsidiary recorded in 1993 and a $45.7 million after-tax loss recorded in 1992.
Interest expense in 1994 decreased as proceeds from the sale of TRT were used to reduce
outstanding debt.
</TABLE>
Certain Financial Forecasts
Certain forecasts of Pacific Telecom's future
operating performance prepared by management of Pacific
Telecom were furnished to the Special Committee and to
Smith Barney, CS First Boston and Salomon Brothers in
connection with their review of the proposed Merger. Such
forecasts were prepared in the ordinary course of business
and were not prepared in contemplation of the proposed
Merger. Accordingly, such forecasts do not give effect to
the Merger and do not reflect any benefits that might be
realized by Holdings and PacifiCorp upon consummation of
the Merger. Such forecasts have not been updated since the
date of their preparation, involve estimates as to the
future which may or may not prove to be accurate and
reflect numerous assumptions as to matters beyond the
control of Pacific Telecom. Actual results may vary from
those reflected in such forecasts. Pacific Telecom does
not intend to update or publicly revise the forecasts. For
information concerning such forecasts, see "Certain
Financial Forecasts."
Market Price and Dividend
Information for PTI Common Stock
On November 1, 1994, the last full trading day
prior to the public announcement of Holdings' initial offer
to purchase PTI Common Stock at $28.00 per share, the high
and low sales prices reported for shares of PTI Common
Stock on the Nasdaq National Market were $24 3/4 and $23
3/4, respectively, and the last reported sale price was $24
1/4. On March 8, 1995, the last full trading day prior to
the public announcement of the Merger Agreement, the high
and low sale prices reported for shares of PTI Common Stock
on the Nasdaq National Market were $31 1/8 and $29 3/8,
respectively, and the last reported sale price was $31 1/8.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS
FOR THEIR SHARES.
MEETING INFORMATION
Introduction
This Proxy Statement is being furnished to the
shareholders of Pacific Telecom in connection with the
solicitation of proxies by the Board of Directors of
Pacific Telecom from the holders of outstanding shares of
PTI Common Stock for use at the Annual Meeting to be held
on _____________, ______________, 1995 at ______ Pacific
Time, at ___________________________________________, and
at any adjournments or postponements thereof.
Matters To Be Considered at the Meeting
At the Annual Meeting, the shareholders will be
asked to consider and vote upon a proposal to approve the
Merger Agreement. In addition, the shareholders will be
asked to elect ten directors, including the six current
directors and four additional directors nominated by
Holdings.
Voting Information
Holders of record of PTI Common Stock at the
close of business on ___________, 1995 are entitled to vote
at the Annual Meeting. On that date __________ shares of
PTI Common Stock were issued and outstanding and held by
approximately _________ holders of record. Each
outstanding share of PTI Common Stock is entitled to one
vote on all matters other than the election of directors,
as to which cumulative voting will apply as described
below. The presence, in person or by proxy, of the holders
of a majority of the outstanding shares of PTI Common Stock
entitled to vote at the Annual Meeting is necessary to
constitute a quorum for the transaction of business at such
meeting. Abstentions and broker nonvotes are counted for
purposes of determining whether a quorum exists at the
Annual Meeting, but have no effect in determining the
number of votes received by a nominee. However, proxies
that reflect abstentions will have the same effect as a no
vote with respect to the Merger because approval by the
holders of a majority of the outstanding shares held by
Minority Shareholders is required under the Merger
Agreement, as described below.
The Merger cannot be effected unless, among other
conditions, the Merger Agreement is approved by the holders
of a majority of the outstanding shares of PTI Common Stock
held by Minority Shareholders and by the holders of two-
thirds of the outstanding shares of PTI Common Stock. As
of __________, 1995, approximately _____ shares of PTI
Common Stock were held by the Minority Shareholders.
Accordingly, the affirmative vote of ____ shares of PTI
Common Stock held by the Minority Shareholders is a
condition to the obligation of Pacific Telecom to
consummate the Merger.
Holdings, which, as of the date hereof, owns
34,325,181 shares of PTI Common Stock, representing
approximately 86.6 percent of the votes
entitled to be cast, has advised Pacific Telecom that it
intends to vote for approval of the Merger Agreement and to
vote its shares equally in favor of the election of each of
the nominees for director. As of _____________, 1995, the
directors and executive officers of Pacific Telecom,
Holdings and PacifiCorp owned a total of ___________ shares
of PTI Common Stock, consisting of ___ percent of all PTI
Common Stock outstanding.
In the election of directors, the holders of PTI
Common Stock have cumulative voting rights, which means
each shareholder has the right to give one candidate as
many votes as the number of directors multiplied by the
number of his or her shares or to distribute votes among
any number of candidates on the same principle. If the
authority to vote for directors is granted to them, the
persons named on the accompanying form of proxy will have
the discretionary authority to vote on a cumulative basis.
Directors are elected by a plurality of the votes cast by
the holders of shares entitled to vote at the Annual
Meeting if a quorum is present.
Solicitation, Revocation and Use of Proxies
Pacific Telecom will pay the costs of soliciting
proxies from its shareholders and the costs of preparing
and mailing this Proxy Statement, proxy and any other
material furnished to the shareholders by Pacific Telecom
in connection with the Annual Meeting. In addition to the
solicitation of proxies by mail, certain of Pacific
Telecom's directors, officers and employees may solicit
proxies by telephone, telecopy and personal contact,
without separate compensation for such activities. Copies
of solicitation materials will be furnished to fiduciaries,
custodians and brokerage houses for forwarding to
beneficial owners of PTI Common Stock, and such persons
will be reimbursed for their reasonable expenses incurred
in connection therewith. In addition, Georgeson & Company
Inc., 88 Pine Street, Wall Street Plaza, New York, New York
10005 (telephone (212) 440-9800), has been engaged to
solicit proxies on behalf of Pacific Telecom for a fee of
$7,500 plus reasonable out-of-pocket expenses.
Any person giving a proxy in the form
accompanying this Proxy Statement has the power to revoke
it at any time before it is exercised. The proxy may be
revoked by filing with the Secretary of Pacific Telecom an
instrument of revocation or a duly executed proxy bearing a
later date. Such filing shall be made to the attention of
the Secretary of Pacific Telecom by mailing or delivering
such filing to Pacific Telecom's principal executive
offices located at 805 Broadway, Vancouver, Washington
98668. The proxy may also be revoked by affirmatively
electing to vote in person while attending the meeting.
However, a shareholder who attends the meeting need not
revoke his or her proxy and vote in person unless he or she
wishes to do so. All valid proxies will be voted at the
meeting in accordance with the instructions given. If no
instructions are given, the shares represented by the proxy
will be voted at the Annual Meeting FOR approval of the
Merger Agreement, FOR the directors and in accordance with
this Proxy Statement
on any other business that may properly come before the
Annual Meeting and any postponement or adjournment thereof.
SPECIAL FACTORS
Background of the Merger
Since 1973, Pacific Telecom has been a majority-
owned subsidiary of Holdings. As of the date of this Proxy
Statement, Holdings owns approximately 86.6 percent of the
outstanding PTI Common Stock.
During late 1993 and 1994, in connection with its
periodic review of the financial results, operations and
prospects of Holdings' principal subsidiaries, including
Pacific Telecom, management of PacifiCorp and Holdings
began to give increased attention to the technological
developments in the telecommunications industry and the
asset acquisition and disposition strategies of Pacific
Telecom. Telecommunications industry consultants were
retained by PacifiCorp and Pacific Telecom in late 1993 to
provide a technological analysis of the telecommunications
industry, Pacific Telecom's competitive position within the
industry and the technological, regulatory and competitive
risks faced by Pacific Telecom. In November 1993,
management of PacifiCorp and Holdings informed PacifiCorp's
Board of Directors that it planned to review strategic
alternatives with regard to Pacific Telecom and to present
a recommendation to the Board.
From time to time during 1993 and 1994,
PacifiCorp received overtures from various investment
banking firms offering to represent PacifiCorp in
connection with the sale of its investment in Pacific
Telecom, but there was never any indication that any of
those firms represented a prospective buyer, and none of
the firms was retained. In addition, approximately two
years ago, the exact dates being uncertain, PacifiCorp
received separate inquiries from two other telephone
companies asking whether PacifiCorp would consider selling
its investment in Pacific Telecom. Both companies were
advised that PacifiCorp's investment in Pacific Telecom was
not for sale, and no further discussions ensued. In the
summer of 1994, in connection with preliminary discussions
with another utility regarding a possible independent power
project joint venture, representatives of Holdings raised
the possibility of expanding the joint venture to include
its interest in Pacific Telecom. The other utility
indicated that it had no interest in investing in the
telecommunications business, and those discussions were
terminated. Other than the foregoing, neither PacifiCorp
nor Holdings has engaged in any discussions with third
parties regarding a possible sale of Pacific Telecom since
January 1, 1993. See "The Merger Agreement--
Representations and Warranties."
In February 1994, PacifiCorp management, in
conjunction with its presentation of PacifiCorp's five-
year business plan to PacifiCorp's Board of
Directors, presented an analysis of various alternatives
with respect to Pacific Telecom, including the potential
purchase of the minority interest in Pacific Telecom,
maintenance of the status quo and a sale of Pacific
Telecom. PacifiCorp's newly elected Chief Executive
Officer informed the PacifiCorp Board that management had
not yet formulated a recommendation regarding a strategic
plan for PacifiCorp's investment in Pacific Telecom.
On August 15, 1994, PacifiCorp engaged Salomon
Brothers to assist as financial advisor in respect of
PacifiCorp's investment in Pacific Telecom.
During August and September 1994, management of
PacifiCorp and Holdings met with representatives of Salomon
Brothers to discuss strategic alternatives with respect to
Pacific Telecom. During the course of those meetings,
Salomon presented certain background materials relating to
Pacific Telecom. As a result of those meetings, management
of PacifiCorp and Holdings reached the conclusion that
PacifiCorp should retain its investment in Pacific Telecom.
Management of PacifiCorp and Holdings based their
conclusions on several factors, including the higher
earnings growth prospects in the telecommunications
industry than in the electric utility industry, the fact
that other utilities were exploring telecommunications as a
diversification alternative, the perception among the
investment community that there could be beneficial
synergies between electric and telecommunications
businesses and the fact that a cash sale of Pacific Telecom
would generate significant tax liability to Holdings and
that Holdings had no current investment alternative for the
sale proceeds. Once the decision had been made by
management of PacifiCorp and Holdings that Holdings should
retain its investment in Pacific Telecom, it was then
necessary to decide whether to maintain the status quo or
attempt to acquire the minority interest. Management of
PacifiCorp and Holdings concluded that, given the size of
Holdings' investment and anticipated increases in the size
of that investment as a result of Pacific Telecom's
acquisition plans, it was advisable for Holdings to have
greater control over Pacific Telecom, which management of
PacifiCorp and Holdings believed was best accomplished by
acquiring the minority interest. For additional
information concerning the factors leading to the decision
to acquire the minority interest of Pacific Telecom, see
"--Reasons of PacifiCorp and Holdings for the Merger."
On November 1, 1994, the PacifiCorp Board met to
consider management's recommendations with respect to
PacifiCorp's investment in Pacific Telecom. At this
special meeting, presentations were made by PacifiCorp's
management, telecommunications consultants, investment
bankers and legal advisors. After discussion of various
alternatives, PacifiCorp decided that Holdings should
proceed with an offer to acquire the minority interest at
$28.00 per share in cash (the "Initial Offer"). A letter
containing the Initial Offer was sent to Pacific Telecom
late in the day on November 1 and PacifiCorp publicly
announced the Initial Offer on November 2, 1994.
In its press release announcing the Initial
Offer, PacifiCorp noted that the transaction was subject to
the preparation and execution of definitive agreements, the
receipt of regulatory approvals and third-party consents,
and the satisfaction of other conditions customary for such
transactions. PacifiCorp also announced that Salomon
Brothers had been retained as its financial advisor in
connection with the Initial Offer. Pacific Telecom
announced on November 2, 1994 that it had received the
Initial Offer.
On November 7, 1994, the Board of Directors of
Pacific Telecom met to consider the Initial Offer. At that
meeting, the Board of Directors of Pacific Telecom
determined that any proposed business combination between
Pacific Telecom and Holdings should be reviewed and
negotiated by members of the Board of Directors of Pacific
Telecom who were not also officers of Pacific Telecom or
directors of Holdings or its other affiliates.
Accordingly, the Board of Directors of Pacific Telecom
unanimously approved the appointment of the Special
Committee, consisting of Mr. Donald L. Mellish (Chairman),
Mr. Roy M. Huhndorf, Ms. Joyce E. Galleher and the
Honorable Sidney R. Snyder to receive, study, negotiate and
make recommendations to the Board of Directors of Pacific
Telecom concerning the Initial Offer. The Board of
Directors of Pacific Telecom also authorized the Special
Committee to retain legal counsel and financial advisors to
assist the Special Committee in its review and
consideration of the Initial Offer.
Also on November 7, 1994, a lawsuit was filed by
an alleged shareholder of Pacific Telecom seeking to bring
a class action lawsuit on behalf of all shareholders of
Pacific Telecom against Pacific Telecom, PacifiCorp,
Holdings and each member of the Board of Directors of
Pacific Telecom. The plaintiff claimed, among other
things, that the $28.00 per share price offered by Holdings
in the Initial Offer was inadequate and that the members of
the Board of Directors of Pacific Telecom had breached
their fiduciary duty to the Minority Shareholders. On
February 3, 1995, this lawsuit was dismissed, without
prejudice, as premature.
Shortly after its formation, the Special
Committee retained Latham & Watkins as its legal counsel.
Thereafter, the Special Committee and its legal counsel
discussed the procedures to be followed in evaluating the
Initial Offer, including the retention of financial
advisors. After conducting interviews of several
nationally recognized investment banking firms, the Special
Committee retained Smith Barney to serve as financial
advisor to the Special Committee, assist in negotiations
with Holdings and, if requested, render an opinion as to
the fairness, from a financial point of view, of the
consideration to be received by the Minority Shareholders
in the Initial Offer or in any other business combination
involving Pacific Telecom and Holdings. Prior to its
retention by the Special Committee, Smith Barney had
rendered financial advisory services to Pacific Telecom and
financing and underwriting services to PacifiCorp and its
affiliates with respect to matters unrelated to the Initial
Offer. In addition to Smith Barney, CS First Boston was
also retained
by the Special Committee to render, if requested, an
opinion as to the fairness, from a financial point of view,
of the consideration to be received by the Minority
Shareholders in the Initial Offer or any other business
combination involving Pacific Telecom and Holdings.
From mid-November 1994 through January 1995, the
Special Committee and its legal and financial advisors
reviewed certain financial and other information concerning
Pacific Telecom and Holdings. During such period, Smith
Barney and CS First Boston also met with representatives of
Pacific Telecom, and Smith Barney met with representatives
of Holdings on a number of occasions, and reviewed and
discussed, among other things, (i) Pacific Telecom's
business and historical and projected financial
performance, (ii) Pacific Telecom's five-year business
plan, (iii) certain pending and proposed transactions
involving Pacific Telecom, and (iv) the background of the
timing of, and Holdings' reasons for, the Initial Offer.
During discussions with PacifiCorp's financial advisors,
Smith Barney inquired whether the common stock of
PacifiCorp would be available as consideration in any
possible business combination and was informed by Holdings'
financial advisors that the Initial Offer was limited to
cash and that PacifiCorp would not include common stock of
PacifiCorp in the consideration to be received by the
Minority Shareholders. During this period, Smith Barney
and CS First Boston also discussed valuation analyses and
methodologies. On December 22, 1994, Smith Barney and CS
First Boston briefed the Special Committee and its counsel
on the status of the examinations that had been conducted
and Smith Barney briefed them on the results of discussions
with Holdings.
On January 21, 1995, the Special Committee met
with its financial and legal advisors and certain officers
of Pacific Telecom and considered the terms of the Initial
Offer and certain other issues concerning Pacific Telecom
and Smith Barney's discussions with Holdings. The
January 21, 1995 meeting began with a presentation by
certain officers of Pacific Telecom concerning, among other
things, (i) the current and projected future financial
performance of Pacific Telecom, (ii) the long-range
business plan of Pacific Telecom, as described under
"Selected Financial Data; Pro Forma Financial Information"
and "Certain Financial Forecasts," (iii) the effect on
Pacific Telecom's earnings of the pending sale of Alascom,
Inc. ("Alascom") to AT&T Corp. ("AT&T") for $365 million
(the "Alascom Sale"), (iv) the status of several
acquisitions of rural local exchange carriers ("LECs")
which Pacific Telecom was considering for acquisition in
the near-term and (iv) actual and foreseeable competition
to Pacific Telecom in the LEC and cellular businesses.
During this presentation, Pacific Telecom's officers
explained that Pacific Telecom's long-range business plan
contemplated the completion of the disposition by Pacific
Telecom of its non-core businesses, including the
resolution of the Alaska telecommunications market
restructuring through the Alascom Sale, and investment in
rural telecommunications assets. The officers indicated
that Pacific Telecom planned to finance these LEC
acquisitions through (i) redeployment of funds received
from the Alascom Sale and other divestitures
and (ii) obtaining additional debt financing, which was
expected to be available due to Pacific Telecom's low debt-
to-equity ratio relative to peer companies in the same or
similar industries. The Pacific Telecom officers further
explained that Pacific Telecom was in the process of
implementing this plan, as evidenced by the Alascom Sale,
the sale of Pacific Telecom's international division and
certain other assets, and the pending acquisitions (the
"Pending Acquisitions") of certain rural LEC assets in
Colorado, Washington and Oregon from US West
Communications, Inc. ("USWC"). See "Certain Financial
Forecasts." The officers also informed the Special
Committee that Pacific Telecom (i) was planning to submit
bids to acquire certain other rural LECs, (ii) was
discussing possible additional rural LEC acquisitions with
certain other parties and (iii) had factored into its
projected financial results additional acquisitions of then
unidentified rural telecommunications assets as such assets
became available for purchase at assumed dates (all such
acquisitions, other than the Pending Acquisitions, are
referred to collectively as the "Future Acquisitions").
Also at the January 21, 1995 meeting,
representatives of Smith Barney made a preliminary
presentation that included, among other things, (i) a
discussion of the scope and results of Smith Barney's due
diligence review, (ii) a review of the terms of the Initial
Offer, (iii) a discussion of the historical financial
performance of Pacific Telecom and certain transactions
previously effected by Pacific Telecom, (iv) a discussion
of Pacific Telecom's financial information, business plans
and projections provided to the advisors and to the Special
Committee by management of Pacific Telecom, (v) a review of
the valuation methodologies that it was using in connection
with its valuation of the PTI Common Stock and evaluation
of the Initial Offer, (vi) a discussion of the terms of
other recent transactions similar to the Initial Offer,
(vii) an analysis of the historical and projected future
trading price of the PTI Common Stock, and (viii) a
discussion of the financial performance and trading prices
of certain companies comparable to Pacific Telecom.
Representatives of CS First Boston also reviewed the due
diligence investigation conducted and the examination of
the Initial Offer being undertaken by CS First Boston. The
Special Committee then discussed the presentations of
Pacific Telecom management and Smith Barney, as well as the
status of the review being conducted by CS First Boston,
and considered possible alternatives to the Initial Offer,
including, among other things, increasing the amount of the
cash consideration to be received by the Minority
Shareholders, as well as an increase in the cash
consideration coupled with the issuance to each Minority
Shareholder of rights or other similar securities (the
"Rights") that would provide additional consideration to
the Minority Shareholders in the event that Holdings, after
consummating the acquisition of the shares held by the
Minority Shareholders, sold Pacific Telecom to a third
party within a certain period of time. The Rights were
discussed due to a concern expressed by the Special
Committee that Holdings might have the opportunity to
dispose of 100 percent of the PTI Common Stock to a third
party after acquisition of the shares from the Minority
Shareholders. After further discussion, the Special
Committee determined to
seek to improve the Initial Offer by requesting an increase
in the amount of cash to be paid for each share of PTI
Common Stock and by introducing to Holdings the concept of
issuing the Rights. After that discussion, the Special
Committee instructed Smith Barney to discuss with Salomon
Brothers two possible approaches: (i) an increase in the
per share consideration to a price in the "high 30's" and
(ii) a smaller increase in the per share cash consideration
coupled with the Rights.
On January 25, 1995, Smith Barney met with
Salomon Brothers to discuss the terms of the Initial Offer
and informed Salomon Brothers that the Special Committee
desired an increase in the price per share of PTI Common
Stock to be received by the Minority Shareholders to a
price in the "high 30's." Smith Barney and Salomon
Brothers met again on February 3, 1995, at which meeting
Salomon Brothers presented a critique of the Smith Barney
valuation and its own valuation of the shares of PTI Common
Stock held by the Minority Shareholders and the
methodologies and analyses supporting such valuation.
Salomon Brothers stated to Smith Barney that Salomon
Brothers continued to believe that a purchase price of
$28.00 should be acceptable. Following further discussion,
Smith Barney introduced the alternative discussed by the
Special Committee of increasing the amount of the per share
consideration to a price below the "high 30's" and
including the Rights in the consideration to be received by
the Minority Shareholders. Salomon Brothers, after further
consultation with Holdings, indicated that, because
Holdings had no present intention to sell Pacific Telecom,
Holdings did not believe that it was appropriate to issue
the Rights as part of the consideration to be received by
the Minority Shareholders. Salomon Brothers also indicated
that Holdings was not, at that time, prepared to increase
the price for the PTI Common Stock above $28.00 per share.
On February 5, 1995, the Special Committee, its
legal counsel and Smith Barney met to discuss developments
in the negotiations between Smith Barney and Salomon
Brothers since January 21, 1995, to review the discussion
concerning financial analyses between Smith Barney and
Salomon Brothers and to formulate the response of the
Special Committee. At that meeting, Smith Barney
summarized its discussions with Salomon Brothers and
certain differences between the valuation analyses of Smith
Barney and those of Salomon Brothers. Smith Barney
explained that, in its view, Salomon Brothers' valuation of
Pacific Telecom did not take into account sufficiently the
potential positive effect of the Future Acquisitions on
Pacific Telecom's future financial performance and that
Smith Barney and Salomon Brothers had differing views as to
the possible effect of the Pending Acquisitions on Pacific
Telecom's future financial performance. Smith Barney also
indicated that differences between Salomon Brothers'
valuation of the PTI Common Stock (from the perspective of
PacifiCorp) and the valuation of Smith Barney (from the
perspective of the Minority Shareholders of Pacific
Telecom) also resulted, in part, from differing assumptions
concerning the weighted average cost of capital for Pacific
Telecom.
At that meeting, the Special Committee also
discussed contacts on February 5, 1995 between
representatives of the Special Committee and a third party
relating to the third party's possible interest in
acquiring all of the outstanding shares of the PTI Common
Stock, including the shares of the PTI Common Stock held by
Holdings. Because the expression of interest contemplated
the acquisition of all, but not less than all, of the
outstanding PTI Common Stock, the Special Committee
determined to inform the other members of the Board of
Directors of Pacific Telecom of the contacts and instructed
Smith Barney to communicate the substance of the contacts
to Salomon Brothers.
Following further discussions, the Special
Committee also determined to continue negotiations
concerning the appropriate price per share for the PTI
Common Stock held by the Minority Shareholders. The
Special Committee and its advisors also discussed the
possibility of structuring the terms and conditions of any
possible transaction with Holdings in a manner that would
address certain concerns of the Special Committee,
including Holdings' position that Rights should not be
included as part of the consideration to be received by the
Minority Shareholders. After this discussion, the Special
Committee determined that it should propose that any
agreement with Holdings include, among other things, a
representation from Holdings to the effect that neither
Holdings nor PacifiCorp had any current intention to sell
the stock or business of Pacific Telecom to a third party
and an additional representation that neither Holdings nor
PacifiCorp had received any offer or indication of interest
from a third party regarding the purchase of Pacific
Telecom except as disclosed to Pacific Telecom
(collectively, the "Special Representations"). The Special
Committee also agreed that the consummation of any merger
or other transaction between Pacific Telecom and Holdings
should be conditioned upon the affirmative vote of the
holders of a majority of the shares of PTI Common Stock
held by the Minority Shareholders (the "Minority
Shareholder Approval"). Following that discussion, the
Special Committee instructed Smith Barney to contact
Salomon Brothers to discuss an increase of the per share
consideration to $34.00, to request that Holdings consider
the Special Representations and the Minority Shareholder
Approval condition and to inform Salomon Brothers of the
contact from the third party.
Following that meeting, Smith Barney contacted
Salomon Brothers and informed Salomon Brothers of the
contact by the third party and held discussions concerning
the price per share to be received by the Minority
Shareholders and the other matters addressed in the
February 5, 1995 meeting of the Special Committee. During
such discussions, Salomon Brothers indicated that Holdings'
position would not be affected by the third-party
expression of interest, because Holdings did not intend to
dispose of its interest in Pacific Telecom. Although
Salomon Brothers indicated that Holdings would consider the
Special Committee's proposal concerning the Special
Representations and the Minority Shareholder Approval,
Salomon
Brothers indicated that Holdings would not increase the
purchase price to $34.00 per share.
The Special Committee met again on February 6,
1995, during which meeting Smith Barney informed the
Special Committee of the status of negotiations. Following
that meeting, legal counsel to the Special Committee
contacted Mr. William J. Glasgow, then the Chief Executive
Officer of Holdings and the Chief Financial Officer of
PacifiCorp, and, at the instruction of the Special
Committee, informed him that the Special Committee would be
willing to consider a per share consideration of $32.50 in
cash, subject to the negotiation of a merger agreement
which would include the Special Representations and the
Minority Shareholder Approval condition. On February 7,
1995, Mr. Glasgow contacted representatives of Smith Barney
and informed them that, although Holdings desired to
complete a transaction as soon as possible, Holdings was
not prepared to increase significantly the per share
consideration to be received by the Minority Shareholders.
Mr. Glasgow further indicated that the Board of Directors
of Holdings had instructed him to complete negotiations
concerning the material terms of any negotiated transaction
between Pacific Telecom and Holdings as soon as possible
and that, if negotiations were not completed soon, the
Board of Directors of Holdings would convene a meeting to
discuss Holdings' available alternatives. Mr. Glasgow
suggested that representatives of Holdings, the Special
Committee and their respective advisors meet in person as
soon as possible.
The Special Committee held meetings on February
7, 1995 and again on February 8, 1995 with its legal
counsel and Smith Barney and discussed the status of
negotiations and determined that two of the four members of
the Special Committee, accompanied by Smith Barney and
legal counsel, should meet with Mr. Glasgow, Salomon
Brothers and Holdings' legal counsel. A meeting between
Mr. Mellish and Mr. Huhndorf of the Special Committee and
Mr. Glasgow was scheduled for February 15, 1995. At the
February 8, 1995 meeting, the Special Committee also
discussed the possible alternatives that Holdings, in the
event that Holdings and the Special Committee reached an
impasse, could pursue, including the possibility that
Holdings could commence a tender offer for the shares of
PTI Common Stock held by the Minority Shareholders.
The Special Committee met again on February 11,
1995 to prepare for the February 15, 1995 meeting with
Mr. Glasgow and Holdings' other representatives. At the
February 11, 1995 meeting, Smith Barney presented an
updated financial analysis concerning Pacific Telecom and
again reviewed the alternatives that might be available to
Holdings in the event an agreement could not be reached.
On February 15, 1995, Mr. Mellish and
Mr. Huhndorf of the Special Committee met in Seattle,
Washington with Mr. Glasgow and other members of Holdings'
management. Representatives of Smith Barney and the
Special Committee's legal counsel were also present, as
were representatives of Salomon Brothers and legal counsel
for Holdings. In the course of discussions, Mr. Glasgow
expressed Holdings' views concerning the Initial Offer and
Salomon Brothers made a presentation concerning its
valuation analysis and the manner in which its analysis
differed from that of Smith Barney. Salomon Brothers also
provided the Special Committee and its representatives with
a written presentation supporting its analysis. Following
such discussion, Smith Barney distributed to Holdings'
representatives a summary of the differences between the
valuation assumptions of Smith Barney and those of Salomon
Brothers prepared in August 1994 and February 1995. After
additional discussion, the representatives of Holdings
indicated that Holdings continued to believe that the per
share price reflected in the Initial Offer was fair to the
Minority Shareholders, but that they would consider
recommending to the Board of Directors of Holdings an
increase of the consideration to be received by the
Minority Shareholders by $1.00 per share or, perhaps,
slightly more. Holdings' representatives indicated,
however, that in no event would Holdings increase its offer
to the level proposed by the Special Committee. Before
conclusion of the meeting, Holdings' representatives
indicated that, in the event that agreement could not be
reached concerning the per share consideration to be
received by the Minority Shareholders, Holdings would then
consider its alternatives. After this meeting, a
telephonic conference call was held by the full Special
Committee, legal counsel and Smith Barney to review the
discussions with Holdings.
The Special Committee met again with
representatives of Smith Barney and legal counsel on
February 21, 1995 to consider its response to the matters
discussed at the February 15, 1995 meeting. The Special
Committee was informed that Mr. Mellish had spoken with
Mr. Frederick W. Buckman, the Chief Executive Officer of
PacifiCorp, that morning and that Mr. Buckman had stated
that Holdings might be willing to reach an agreement at a
price between $29.25 per share to $29.50 per share of PTI
Common Stock. The members of the Special Committee then
engaged in a discussion as to what price per share they
would be willing
to recommend to the Minority Shareholders. The Special
Committee further discussed the financial analyses with
Smith Barney. After further deliberation, the Special
Committee determined to inform Holdings that, subject to
receipt of fairness opinions from its financial advisors
and the completion of negotiation of an agreement and plan
of merger between Holdings and Pacific Telecom containing
the Special Representations, a requirement of Minority
Shareholder Approval and other terms acceptable to the
Special Committee, the Special Committee was prepared to
favorably consider a transaction involving consideration in
the amount of $30.00 per share.
Following that meeting, representatives of Smith
Barney communicated the Special Committee's position
concerning the proposed consideration, the Special
Representations and the Minority Shareholder Approval
Condition to Mr. Glasgow, who indicated that he would be
willing to recommend a transaction at a $30 price if
agreement could be reached regarding the proposed
representations and the approval condition, as well as the
other terms and conditions of a definitive agreement and
plan of merger.
On February 23, 1995, Holdings provided the
Special Committee and its advisors with a draft agreement
and plan of merger, and, between February 23 and March 8,
1995, legal counsel to Holdings and the Special Committee
negotiated the terms and conditions of the agreement,
including the Special Representations and the requirement
for Minority Shareholder Approval.
On March 3, 1995, a joint meeting of the Board of
Directors of Holdings and the Executive Committee of the
Board of Directors of PacifiCorp (the "Executive
Committee") was held to discuss the status of the
negotiations and to review the draft agreement and plan of
merger and the draft agreement between Pacific Telecom and
PacifiCorp pursuant to which PacifiCorp would make certain
representations and undertake certain obligations with
respect to the Merger. At that joint meeting, Mr. Glasgow,
who had resigned his positions with PacifiCorp and it
affiliates on February 28, 1995, but continued to handle
negotiations with the Special Committee in his capacity as
a consultant to PacifiCorp, reviewed the status of the
negotiations. Counsel to PacifiCorp and Holdings reviewed
the terms and provisions of the draft agreements and
responded to questions of the directors. A representative
of Salomon Brothers made a presentation as to the basis
underlying Salomon Brothers' determination that a $30.00
per share price for PTI Common Stock would be fair to
PacifiCorp and rendered the oral opinion of Salomon
Brothers (subsequently confirmed in writing) to the effect
that such price was fair, from a financial point of view,
to PacifiCorp. Salomon Brothers did not, and was not
requested to, make any recommendation as to the form or
amount of consideration to be paid pursuant to the Merger
Agreement. Salomon Brothers did not address the fairness
to the Minority Shareholders, from a financial point of
view or otherwise, of the consideration to be received by
the Minority Shareholders in the Merger. See "Opinion of
Financial Advisor to PacifiCorp." After discussion, the
Holdings' Board approved the draft agreement and plan of
merger in the form presented to the Board at the meeting,
subject to receipt by the Special Committee of fairness
opinions from Smith Barney and CS First Boston, the
recommendation of the Special Committee that the Board of
Directors of Pacific Telecom approve and adopt the
agreement and plan of merger and the recommendation of the
Board of Directors of Pacific Telecom that the Minority
Shareholders approve the agreement and plan of merger and
the Merger. The Holdings' Board authorized the execution
and delivery of an agreement and plan of merger
substantially in the form presented, subject to the
foregoing conditions and changes as approved by Mr. Buckman
within specified parameters, including that the proposed
merger consideration not exceed $30 per share.
After the conditional approval of the Merger
Agreement by the Holdings Board, the Executive Committee
approved the draft agreement between Pacific Telecom and
PacifiCorp, subject to the same conditions upon which
Holdings' Board approved the draft agreement and plan of
merger, and authorized execution and delivery of an
agreement substantially in the form presented, subject to
changes as approved by Mr. Buckman within the same
parameters specified by the Holdings Board.
At the March 4, 1995 meeting of the Special
Committee, its legal counsel reported on the status of the
negotiations concerning the draft agreement and plan of
merger. The Special Committee also tentatively scheduled
its next meeting for March 8, 1995. From March 3 through
March 8, 1995, counsel for Holdings and counsel for the
Special Committee had a number of discussions to resolve
open issues on the draft agreement and plan of merger and
related matters.
The Special Committee met on the evening of March
8, 1995 and the early morning of March 9, 1995 (Eastern
Standard Time) to consider the draft agreement and plan of
merger and the changes made thereto since March 4, 1994.
That meeting also included presentations from
representatives of Smith Barney, CS First Boston and the
Special Committee's legal counsel. The Special Committee's
legal counsel reviewed the process of the negotiations
which had led to the draft agreement, reviewed the terms
and provisions of the draft agreement and answered
questions of the Special Committee. Certain members of
Pacific Telecom's management then summarized the status of
Pacific Telecom's acquisition program, including the status
and timing of certain possible acquisitions that Pacific
Telecom's management was considering. Representatives of
Smith Barney and CS First Boston each made a presentation
as to their respective valuation analyses of the PTI Common
Stock. See "--Opinions of Smith Barney and CS First
Boston." Following each presentation, the Special
Committee received the oral opinion (subsequently confirmed
in writing) of each of Smith Barney and CS First Boston to
the effect that, as of March 9, 1995, the Merger
Consideration was fair, from a financial point of view, to
the Minority Shareholders.
After further discussion, the Special Committee
concluded, based primarily on the opinions of Smith Barney
and CS First Boston and, in part, on the other factors
described below under "--Recommendations of the Board of
Directors of Pacific Telecom and the Special Committee,"
that the terms of the Merger were fair to, and in the best
interests of, the Minority Shareholders and unanimously
recommended that the Pacific Telecom Board of Directors
(i) approve and adopt the Merger Agreement in the form
presented to the Special Committee at such meeting,
(ii) determine that the Merger was fair to, and in the best
interests of, the Minority Shareholders, and (iii)
recommend that the Minority Shareholders approve the Merger
Agreement and the Merger.
In a meeting of the Board of Directors of Pacific
Telecom held immediately after the meeting of the Special
Committee, the Board of Directors of Pacific Telecom
unanimously approved and adopted the Merger Agreement,
authorized the execution thereof, determined that the
Merger was fair to, and in the best interests of, the
Minority Shareholders, and recommended that the Minority
Shareholders approve the Merger Agreement and the Merger.
The Merger Agreement was executed and delivered
by the respective parties on March 9, 1995, in the form
attached hereto as Exhibit A.
Recommendations of the Board of Directors of Pacific
Telecom and the Special Committee
At a meeting of the Special Committee commencing
on March 8, 1995, the Special Committee unanimously
determined that the Merger Agreement was fair to, and in
the best interests of, the Minority Shareholders and
recommended that the Board of Directors of Pacific Telecom
approve and adopt the Merger Agreement and the transactions
contemplated therein. At a meeting of the Board of
Directors of Pacific Telecom held immediately following the
meeting of the Special Committee, based on the
recommendation of the Special Committee, the Board of
Directors of Pacific Telecom unanimously (i) determined
that the Merger was fair to, and in the best interest of,
the shareholders of Pacific Telecom, (ii) approved and
adopted the Merger Agreement and the transactions
contemplated thereby and authorized the execution, delivery
and performance thereof by Pacific Telecom, and (iii)
resolved to recommend that the shareholders of Pacific
Telecom approve the Merger Agreement and the transactions
contemplated therein. Accordingly, the Board of Directors
of Pacific Telecom recommends that the shareholders of
Pacific Telecom approve the Merger Agreement and the
transactions contemplated thereby.
The Board of Directors of Pacific Telecom
believes that the terms of the Merger Agreement are fair
to, and in the best interests of, Pacific Telecom and its
shareholders. In reaching its conclusion, the Board of
Directors of Pacific Telecom considered the recommendation
of the Special Committee and the factors that were
considered by the Special Committee as set forth below.
The Special Committee, in reaching its conclusion
that the Merger was fair to, and in the best interest of,
the Minority Shareholders and in determining to recommend
approval of the Merger Agreement and the Merger to the
Board of Directors of Pacific Telecom, considered a number
of factors, including, without limitation, the following:
1. The oral and written presentations of Smith
Barney and CS First Boston to the Special Committee on
March 8, 1995 and the written opinions of Smith Barney and
CS First Boston dated March 9, 1995 to the
effect that, as of the date of each such opinion and based
upon and subject to certain matters stated in each such
opinion, the Merger Consideration was fair, from a
financial point of view, to the Minority Shareholders. See
"-- Opinions of Smith Barney and CS First Boston." The
opinions of Smith Barney and CS First Boston, dated as of
the date hereof, are attached hereto as Exhibits C and D,
respectively. The shareholders of Pacific Telecom are
urged to read each such opinion carefully in its entirety.
2. The Special Committee's conclusion that the
Merger Consideration represented the highest price that
Holdings would be willing to pay in acquiring the PTI
Common Stock held by the Minority Shareholders.
3. The terms of the Merger Agreement including,
without limitation, the amount and form of consideration,
the nature of the parties' representations, warranties,
covenants and agreements and the conditions to the
obligations of Holdings and Pacific Telecom. In this
regard, the Special Committee considered significant: (i)
the Minority Shareholder Approval condition to the
consummation of the Merger which requires that the Merger
Agreement be approved by the affirmative vote of the
holders of a majority of the shares of the PTI Common Stock
held by the Minority Shareholders and (ii) the Special
Representations of Holdings and PacifiCorp set forth in the
Merger Agreement and in the PacifiCorp Agreement to the
effect that (A) neither PacifiCorp nor Holdings had any
current plan or intention to sell or otherwise dispose of
any material portion of the PTI Common Stock or the assets
of Pacific Telecom and (B) to the best knowledge of
Holdings and PacifiCorp, neither PacifiCorp nor Holdings
had received any offer or "proposal" (as defined in the
Merger Agreement) to purchase any material portion of the
capital stock or assets of Pacific Telecom. See "The
Merger Agreement--Representations and Warranties."
4. The possibility that, in the absence of a
merger agreement, Holdings could increase its ownership of
the PTI Common Stock in a transaction not approved by
Pacific Telecom or the Special Committee.
5. The fact that the Merger Consideration
represented a 23.7 percent premium over the last reported
sale price of the PTI Common Stock on the day immediately
preceding the announcement of the Initial Offer ($24.25 per
share) and a 7.1 percent premium over the Initial Offer.
The Special Committee did note that the last reported sale
price of the PTI Common Stock on the day immediately
preceding the announcement of the execution of the Merger
Agreement ($31.125 per share) exceeded the Merger
Consideration. The Special Committee understood, based on
Smith Barney's estimate of the number of shares of PTI
Common Stock traded on the Nasdaq National Market between
the announcement of the Initial Offer and March 8, 1995,
that approximately 18.8 percent of such shares reflected a
trading price in excess of $30.00 per share.
6. The Special Committee's knowledge of the
business, financial condition, results of operations and
prospects of Pacific Telecom and the Special Committee's
understanding of the effect thereon of the Alascom Sale,
the Pending Acquisitions, the Future Acquisitions and
certain other transactions recently completed, proposed or
contemplated by Pacific Telecom. See "Certain Financial
Forecasts."
7. The historical trading prices of the PTI
Common Stock. In particular, the Special Committee noted
that the reported trading price of the PTI Common Stock had
not exceeded $30.00 per share during the three year period
prior to the announcement of the Initial Offer.
8. The availability of dissenters' rights to
the Minority Shareholders who vote against approval of the
Merger Agreement and perfect such rights under the
applicable provisions of the WBCA. See "--Rights of
Dissenting Shareholders."
In view of the number and disparate nature of the
factors considered by the Special Committee, the Special
Committee did not assign relative weights to the factors
considered in reaching their conclusions. The Special
Committee did, however, rely primarily upon the
presentations and opinions of Smith Barney and CS First
Boston described in paragraph 1 above.
The members of the Special Committee (as well as
the other directors of Pacific Telecom) are indemnified by
Pacific Telecom under Pacific Telecom's Articles of
Incorporation and Bylaws, related indemnification
contracts, and the applicable provisions of the WBCA (and,
pursuant to the Merger Agreement and the PacifiCorp
Agreement, by Holdings and PacifiCorp) with respect to
their actions in connection with the Merger. See "The
Merger Agreement--Indemnification of Directors and
Officers." As compensation for the services of the members
of the Special Committee, Pacific Telecom has agreed to pay
additional directors' fees of $20,000 to the Chairman of
the Special Committee and $15,000 to each of the other
members of the Special Committee. Pacific Telecom has also
agreed to pay each member of the Special Committee $750 for
each meeting held by the Special Committee and to reimburse
the members of the Special Committee for expenses incurred
by each of them in connection with the Merger. Such
compensation is in addition to the compensation payable to
all directors of the Pacific Telecom, including the
directors comprising the Special Committee. See "Election
of Directors--Director Compensation" and "Security
Ownership of Certain Beneficial Owners and Management."
Opinions of Smith Barney and CS First Boston
Opinion of Smith Barney
Smith Barney was retained by the Special
Committee and Pacific Telecom to act as financial advisor to
the Special Committee in connection with the Merger. In
connection with such engagement, the Special Committee
requested that Smith Barney evaluate the fairness, from a
financial point of view, of the Merger Consideration. On
March 8, 1995, Smith Barney delivered to the Special
Committee an oral opinion (subsequently confirmed in
writing) to the effect that, as of the date of such
opinion and based upon and subject to certain matters stated
therein, the Merger Consideration was fair, from a
financial point of view, to the Minority Shareholders. Smith
Barney has confirmed such opinion by delivery of a written
opinion dated the date hereof. The assumptions made,
matters considered and limitations on the review undertaken
in the March 8, 1995 opinion are substantially the same as
those contained in the opinion dated the date hereof and
attached hereto as Exhibit C.
In arriving at its opinion, Smith Barney
reviewed the Merger Agreement and held discussions with
certain senior officers, directors and other representa-
tives and advisors of Pacific Telecom and the Special
Committee concerning the business, operations and prospects
of Pacific Telecom. Smith Barney participated in
discussions and negotiations among representatives of
Pacific Telecom and Holdings and their financial and legal
advisors. Smith Barney examined certain publicly avail-
able business and financial information relating to Pacific
Telecom and PacifiCorp, as well as certain financial
forecasts and other data for Pacific Telecom that were
provided to Smith Barney by the senior management of
Pacific Telecom. See "Certain Financial Forecasts." Smith
Barney reviewed the financial terms of the Merger as set
forth in the draft Merger Agreement in relation to, among
other things, Pacific Telecom's historical and forecasted
earnings and the capitalization and financial condition of
Pacific Telecom. Smith Barney also considered, to the
extent publicly available, the financial terms of certain
other transactions that Smith Barney deemed comparable to
the Merger and analyzed certain financial and other
publicly available information relating to the businesses
of other companies whose operations Smith Barney
considered comparable to the operations of Pacific Telecom.
In addition to the foregoing, Smith Barney conducted such
other analyses and examinations and considered such other
financial, economic and market criteria as Smith Barney
deemed necessary to arrive at its opinion. Smith Barney
noted that its opinion was necessarily based upon
financial, stock market and other conditions and circumstances
existing and disclosed to Smith Barney as of the date of
its opinion.
In rendering its opinion, Smith Barney assumed
and relied, without independent verification, upon the
accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise
discussed with Smith Barney. With respect to financial
forecasts
and other information provided to or otherwise discussed
with Smith Barney, Smith Barney was informed by the
management of Pacific Telecom that such forecasts and other
information were reasonably prepared on bases reflecting
the best currently available estimates and judgments of the
management of Pacific Telecom as to the expected future
financial performance of Pacific Telecom. In addition,
Smith Barney did not make or obtain an independent
valuation or appraisal of the assets or liabilities
(contingent or otherwise) of Pacific Telecom. No limitations
were imposed by the Special Committee on Smith Barney with
respect to the investigations made or procedures followed
by Smith Barney in rendering its opinion. Smith Barney was
not asked to, and did not, solicit acquisition proposals
from any third parties. A copy of the written materials
provided by Smith Barney and distributed to the Special
Committee in connection with the delivery of its opinion, a
copy of Smith Barney's draft report to the Special
Committee dated February 13, 1995 and a copy of Smith
Barney's written presentation to Salomon Brothers,
PacifiCorp and Holdings dated February 15, 1995, which
summarized certain differences in the valuation
methodologies used by Smith Barney and Salomon Brothers,
have been filed as exhibits to the Rule 13e-3 Transaction
Statement to be filed pursuant to the Exchange Act (the
"Schedule 13E-3") and are available for inspection and
copying at the principal offices of Pacific Telecom during
Pacific Telecom's normal business hours by any Minority
Shareholder or any representative of the Minority
Shareholder that has been so designated in writing. A copy
of such materials shall be provided to any Minority
Shareholder or any representative of the Minority
Shareholder who has been so designated in writing upon
written request and at the expense of the requesting
Minority Shareholder or representative.
The full text of the written opinion of Smith
Barney dated the date hereof, which sets forth the
assumptions made, matters considered and limitations on the
review undertaken, is attached as Exhibit C to this Proxy
Statement and is incorporated herein by reference. Pacific
Telecom's shareholders are urged to carefully read the
attached opinion in its entirety. Smith Barney's opinion is
directed only to the fairness of the Merger Consideration
from a financial point of view and has been provided solely
for the use of the Special Committee in its evaluation of
the Merger, does not address any other aspect of the Merger
and does not constitute a recommendation to any shareholder
of Pacific Telecom as to how such shareholder should vote
at the Annual Meeting. The summary of the opinion of Smith
Barney set forth in this Proxy Statement is qualified in
its entirety by reference to the full text of such
opinion.
In preparing its opinion to the Special
Committee, Smith Barney performed a variety of financial and
comparative analyses, including those described below. The
summary of such analyses does not purport to be a complete
description of the analyses underlying Smith Barney's
opinion. The preparation of a fairness opinion is a
complex analytic process involving various determinations
as to the most appropriate and relevant methods of
financial analyses and the application of those methods to
the particular
circumstances and, therefore, such an opinion is not
readily susceptible to summary description. In arriving at
its opinion, Smith Barney did not attribute any particular
weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Accordingly,
Smith Barney believes that its analyses must be considered
as a whole and that selected portions of its analyses and
factors, without considering all analyses and factors,
could create a misleading or incomplete view of the
processes underlying such analyses and its opinion. In its
analyses, Smith Barney made numerous assumptions with
respect to Pacific Telecom and industry performance,
general business, economic, market and financial conditions
and other matters, many of which are beyond the control of
Pacific Telecom. The estimates contained in such analyses
are not necessarily indicative of actual values or
predictive of future results or values, which may be
significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the
value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, such
analyses and estimates are inherently subject to
substantial uncertainty.
Smith Barney's general approach in its analysis
of the fairness of the Merger Consideration was to utilize
a variety of methodologies to derive theoretical public
market prices for Pacific Telecom and to then add to such
theoretical public market prices a "minority buy-out
premium." Smith Barney derived this minority buy-out
premium by analyzing the premiums over pre-announcement
market prices paid in other transactions involving the
acquisition by majority shareholders of the stock held by
minority shareholders. Smith Barney then applied this
minority buy-out premium to its valuation analyses;
however, as Smith Barney advised the Special Committee, the
minority buy-out premium is only an arithmetic mean, does
not represent a minimum or a maximum for any particular
minority buy-out transaction, and may be higher or lower
with respect to any particular transaction because of
differences in facts and circumstances (the "Minority
Buy-Out Premium"). Smith Barney used, among other valuation
analyses, a historical stock price analysis, a component
valuation analysis, a public market valuation analysis, a
discounted cash flow analysis, a future stock price
analysis, a comparable company analysis and a comparable
transaction analysis. Certain of these methodologies
utilized Pacific Telecom's 1995-1996 forecasts adjusted for
consummation of the Alascom Sale and the Pending
Acquisitions (the "Short-Term Forecasts"), but not adjusted
for the Future Acquisitions. See "Certain Financial
Forecasts." Other methodologies utilized Pacific Telecom's
1995-1999 forecasts as so adjusted (the "Long-Term
Forecasts Without Future Acquisitions") and Pacific
Telecom's 1995-1999 forecasts adjusted for the
consummation of the Alascom Sale, the Pending Acquisitions
and the Future Acquisitions (the "Long-Term Forecasts With
Future Acquisitions" and, together with the Long-Term
Forecasts Without Future Acquisitions, the "Long-Term
Forecasts").
Minority Buy-Out Premium Analysis. Smith Barney
analyzed the premiums paid in approximately 45 selected
transactions of $20 million or more from 1989 through 1994
in which the majority shareholder purchased between
5 percent and 50 percent of the company's outstanding
shares of common stock from the minority shareholders,
based on stock prices four weeks prior to the announcement
of such transaction as compared to the final per share
offer price. The median premium for such transactions with
cash merger consideration was 24.8 percent, and for all
such transactions with various forms of merger
consideration, the median premium was 25 percent. Applying
these premiums to the price of a share of PTI Common Stock
four weeks before announcement of the transaction, Smith
Barney derived an implied valuation range of $30.74 to
$30.78 per share.
Smith Barney also performed a similar analysis
based on the premium of the final per share offer price of
such transactions compared to the initial per share offer
price in such transactions. The median premium for such
transactions with cash merger consideration was 10 percent,
and for all such transactions with various forms of merger
considerations, the median premium was 4.4 percent.
Applying these premiums to the Initial Offer price for a
share of PTI Common Stock, Smith Barney derived an implied
valuation range for PTI Common Stock of $29.24 to $30.79
per share. Finally, applying these premiums both to the
price of a share of PTI Common Stock four weeks before
announcement of the transaction and to the Initial Offer
price, Smith Barney derived an implied valuation range for
PTI Common Stock of $30.01 to $30.76 per share.
Historical Stock Price Analysis. Smith Barney
analyzed the prices at which shares of Pacific Telecom's
Common Stock traded after the date of announcement of the
Initial Offer through March 3, 1995. This analysis showed
that 81.2 percent of traded shares of PTI Common Stock
traded during such period at or under $30.00 per share and
18.8 percent of traded shares of PTI Common Stock traded
during such period at over $30.00 per share. The weighted
average of daily closing prices during this period was
$29.88. Smith Barney noted that during the three year
period prior to the date of announcement of the Initial
Offer, the highest price per share of PTI Common Stock was
$28.75.
Smith Barney also analyzed the trading activity
in PTI Common Stock in the last hour and last 15 minutes of
each of the 20 trading days prior to March 9, 1995. On 10
of those days, 50 percent or more of the shares traded were
traded within the last hour of the trading day; on six of
those days, 75 percent or more of the shares traded were
traded within the last hour; and on five of those days, 50
percent or more of the shares traded were traded within the
last 15 minutes. The share price rose or remained the same
during the last trading hour on 19 of the 20 trading days.
Valuations Using Short-Term Forecasts
Component Valuation Analysis. Based on
Pacific Telecom's Short-Term Forecasts, Smith Barney
analyzed Pacific Telecom's public market value as the
aggregate of the 1996 estimated value of the following
lines of business of Pacific Telecom: LEC properties,
cellular properties and North Pacific Cable. The results
of this analysis were adjusted for the Alascom Sale and the
Pending Acquisitions, but not adjusted for the Future
Acquisitions. The analysis resulted in a valuation range
for Pacific Telecom of $22.48 to $26.93 and, after applying
a Minority Buy-Out Premium of 25 percent, of $28.10 to
$33.67 per share of PTI Common Stock.
Public Market Valuation Analysis. Smith
Barney also analyzed Pacific Telecom's equity market value,
enterprise value, net income, dividend yield and earnings
before interest, taxes, depreciation and amortization
("EBITDA") implied by various values of a share of PTI
Common Stock. Under this analysis, the Merger
Consideration resulted in multiples of: (i) Pacific Telecom's
forecasted calendar 1996 net income of 17.0x; (ii) Pacific
Telecom's forecasted 1996 EBITDA of 6.4x; and (iii) a
dividend yield on PTI Common Stock of 4.4 percent. The Public
Market Valuation Analysis resulted in a valuation of $24.00
to $28.00 per share of PTI Common Stock and, adjusted for a
Minority Buy-Out Premium of 25 percent, resulted in a
valuation range of between $30.00 and $35.00 per share.
The Component Valuation Analysis (adjusted for a
Minority Buy-Out Premium of 25 percent) and the Public
Market Valuation Analysis together resulted in a valuation
range for Pacific Telecom of $29.05 to $34.33 per share of
PTI Common Stock.
Valuations Using Long-Term Forecasts
Discounted Cash Flow Analysis. Smith Barney
performed a discounted cash flow analysis of the projected
free cash flow of Pacific Telecom for the second half of
1995 and the years 1996 through 1999, assuming, among other
things, discount rates of 8.0 percent to 10.0 percent and
terminal multiples of EBITDA of 5.50x to 6.25x. Utilizing
these assumptions and based on Pacific Telecom's Long-Term
Forecasts Without Future Acquisitions, Smith Barney
arrived at estimated ranges of equity values per share of PTI
Common Stock, and summarized these values at a range of
between approximately $27.66 to $30.64. After applying a
Minority Buy-Out Premium of 25 percent, Smith
Barney arrived at estimated ranges of equity values per
share of between approximately $34.57 to $38.30. Using
Pacific Telecom's Long-Term Forecasts With Future
Acquisitions, and applying the same discount rate and terminal
multiple assumptions, Smith Barney arrived at estimated
ranges of equity values per share of PTI Common Stock, and
summarized these values at a range of between
approximately $28.87 to $32.56. After applying a Minority
Buy-Out Premium of 25 percent, Smith Barney arrived at
estimated ranges of equity values per share of between
approximately $36.08 to $40.71.
Present Value of Future Stock Price. Smith
Barney also analyzed the present value of the future stock
price and discounted dividend stream of a share of PTI
Common Stock, assuming discount rates of 11.5 percent to
13.5 percent, multiples of 1999 projected earnings per
share ("EPS") of 15.0x to 17.0x and dividends as projected
by Pacific Telecom. Utilizing these assumptions and based
on the Long-Term Forecasts Without Future Acquisitions,
Smith Barney arrived at estimated ranges of equity values
per share of PTI Common Stock, and summarized these values
at a range of between approximately $26.90 and $29.52.
After applying a Minority Buy-Out Premium of 25 percent,
Smith Barney arrived at estimated ranges of equity values
per share of PTI Common Stock of between approximately
$32.42 and $35.66. Using the Long-Term Forecasts With
Future Acquisitions, and applying the same discount rate,
terminal multiple and dividend assumptions, Smith Barney
arrived at estimated ranges of equity values per share of
PTI Common Stock, and summarized these values at a range of
between approximately $29.11 and $31.97. After applying a
Minority Buy-Out Premium of 25 percent to the present value
of the future stock price, Smith Barney arrived at
estimated ranges of equity values per share of between
approximately $35.17 to $38.72.
The Discounted Cash Flow Analysis and the
Present Value of Future Stock Price Analysis together resulted
in an average valuation range for PTI Common Stock of
between approximately $27.28 to $30.08 per share and, after
applying a Minority Buy-Out Premium of 25 percent, of
$33.50 to $36.98 per share of PTI Common Stock using the
Long-Term Forecasts Without Future Acquisitions. Using the
Long-Term Forecasts With Future Acquisitions, the combined
analyses resulted in an average valuation range for PTI
Common Stock of between approximately $28.99 to $32.27 and,
after applying a Minority Buy-Out Premium of 25 percent, of
between approximately $35.63 and $39.71 per share.
Comparable Company Analysis. Using publicly
available information, Smith Barney analyzed, among other
things, the market values and trading multiples of
regional Bell operating companies ("RBOCs") and selected
independent LECs, including Ameritech Corporation, Bell
Atlantic Corporation, BellSouth Corporation, GTE
Corporation, NYNEX Corporation, Pacific Telesis Group,
Southwestern Bell Corporation and US WEST, Inc. (the "RBOCs
& GTE"), Lincoln Telecommunications Company, Southern New
England Telecommunications Corporation and Telephone & Data
Systems, Inc. (the "Lower Growth Independents"), and ALLTEL
Corporation, Century Telephone Enterprises, Inc.,
Cincinnati Bell, Inc., Frontier Corporation and Citizens
Utilities Company (the "Higher Growth Independents" and,
together with the RBOCs & GTE and the Lower Growth
Independents, the "Comparable Companies"). Smith Barney
compared current stock prices to projected calendar 1994
and 1995 EPS of the Comparable Companies. The projected
calendar 1994 and 1995 multiples of stock prices to EPS
("Price-Earnings Multiples") of the RBOCs & GTE were
between 10.7x and 14.7x (with a mean of 13.6x and a median of
13.9x) and between 10.9x and 13.5x (with a mean of 12.6x
and a median of 12.9x), respectively. The projected
calendar 1994 and 1995 Price-Earnings Multiples of the
Lower Growth Independents were between 6.9x and 14.5x (with
a mean of 11.2x and a median of 12.0x) and between 7.1x and
13.5x (with a mean of 10.8x and a median of 11.7x),
respectively. The projected calendar 1994 and 1995 Price-
Earnings Multiples of the Higher Growth Independents were
between 15.5x and 23.0x (with a mean of 19.2x and a median
of 18.7x) and between 14.2x and 17.5x (with a mean of 16.0x
and a median of 15.9x), respectively. The pre-announcement
projected calendar 1995 and 1996 Price-Earnings Multiples
of Pacific Telecom were 12.2x and 15.6x, respectively. The
Merger Consideration equated to multiples of Pacific
Telecom's forecasted calendar 1995 and 1996 net income of
23.8x and 17.0x, respectively.
Smith Barney also compared the enterprise values
to, among other things, forecasted calendar 1995 EBITDA.
The multiples of forecasted calendar 1995 EBITDA of the
RBOCs & GTE were between 4.3x to 5.9x (with a mean of 5.1x
and a median of 5.1x). The multiples of forecasted 1995
EBITDA of the Lower Growth Independents were between 3.5x
to 5.7x (with a mean of 4.5x and a median of 4.4x). The
multiples of forecasted 1995 EBITDA of the Higher Growth
Independents were between 5.3x to 7.9x (with a mean of 6.4x
and a median of 5.6x). The median multiple of forecasted
1995 EBITDA of the Lower Growth Independents and Higher
Growth Independents was 5.6x. Pacific Telecom's pre-
announcement multiple of forecasted calendar 1995 EBITDA
was 5.7x, and the multiple of forecasted calendar 1995
EBITDA as of March 3, 1995, was 6.6x. The Merger
Consideration equated to a multiple of Pacific Telecom's
forecasted calendar 1995 EBITDA of 7.8x and a multiple of
forecasted calendar 1996 EBITDA of 6.4x.
Smith Barney compared the profit margins,
historic revenue growth and forecasted EPS growth of the
Comparable Companies with those of Pacific Telecom. All
forecasted net income estimates for the Comparable
Companies were based on the consensus estimates of selected
investment banking firms, and all forecasted net income
estimates for Pacific Telecom were based on forecasts of
Pacific Telecom's management. All multiples were based on
closing stock prices as of March 3, 1995.
Smith Barney also analyzed the market value of
certain cellular companies, the most comparable of which
were U.S. Cellular, CommNet Cellular Inc. and Centennial
Cellular, to arrive at a range of values per POP of $81.90
to $141.30.
Selected Merger and Acquisition Transaction
Analysis. Using publicly available information, Smith
Barney analyzed the implied transaction multiples in the
following selected merger and acquisition transactions
involving LECs and cellular companies: ALLTEL
Corporation/Citizens Utilities Company, GTE Telephone Ops.-
Access Lines/Citizens Utilities Company, GTE-Georgia
Telephone Operations/ALLTEL Corporation, Central Telephone Co.
of OH/Century Telephone Enterprises, Centel-MN,IA/Rochester
Telephone Corp., Centel-Iowa/Rochester Telephone Corp. and
Centel-MN/Rochester Telephone Corp. (the "Selected LEC
Acquisitions") and Centel Corp./Sprint Corp., SLT
Communications Inc./ALLTEL Corporation, San Marcos Telephone
and SM Telecorp./Century Telephone Enterprises and Contel
Corp./GTE Corporation (the "Selected LEC and Cellular
Acquisitions"). The mean and median multiples of latest 12
months' EBITDA as of the announcement date of the Selected
LEC Acquisitions were 8.6x and 9.0x, respectively. The
mean and median multiples of latest 12 months' EBITDA as of
the announcement date of the transaction for Selected LEC
and Cellular Acquisitions were 12.0x and 11.8x,
respectively.
Using information provided by Pacific Telecom,
Smith Barney also analyzed the following private LEC
acquisitions: US WEST Colorado/Pacific Telecom, US WEST
Montana/Consortium, US WEST Wyoming/Consortium, US WEST
Oregon/Pacific Telecom, US WEST Washington, Pacific
Telecom, Northwest/Pacific Telecom, Missouri
Telephone/ALLTEL, ATU/Pacific Telecom, and acquisitions of
several other small rural privately held LECs, certain of
which were acquired by Pacific Telecom, including Urban,
Volcano, ATU, Viroqua, Lakeshore, North-West Telephone
Company, Turtle Lake Telephone Company, Postville Telephone
Company, Thorp Telephone Company, Delta, Minot, Wayside
Telecom, Inc., Farmers, Mid-Plains, Northland, Missouri,
Arizona, Helix Telephone, Casco Telephone Company and Rib
Lake Cellular (the "Private LEC Transactions"). The mean
and median midpoint multiples of EBITDA for the Private LEC
Transactions were 9.2x and 9.1x, respectively.
No company, transaction or business used in the
comparable company and selected merger and acquisition
transactions analyses as a comparison is identical to
Pacific Telecom or the Merger. Accordingly, an analysis of
the results of the foregoing is not entirely mathematical;
rather, it involves complex considerations and judgments
concerning differences in financial and operating
characteristics and other factors that could affect the
acquisition or public trading value of the comparable companies
or the business segment or company to which they are being
compared.
Other Factors and Comparative Analyses. In
rendering its opinion, Smith Barney considered certain
other factors and conducted certain other comparative
analyses, including, among other things, a review of
Pacific Telecom's historical and forecasted financial
results.
Pursuant to the terms of Smith Barney's
engagement, Pacific Telecom has agreed to pay Smith Barney for
its services in connection with the Merger an aggregate
financial advisory fee of $1,500,000, with $250,000 paid at
the commencement of the engagement, $750,000 paid upon
delivery of its opinion and $100,000 paid each month for
five months. Pacific Telecom also has agreed to reimburse
Smith Barney for travel and other out-of-pocket
expenses incurred by Smith Barney in performing its
services, including the reasonable fees and expenses of its
legal counsel, which out-of-pocket expenses are limited to
a maximum of $40,000, and to indemnify Smith Barney and
related persons against certain liabilities, including
liabilities under the federal securities laws, arising out
of Smith Barney's engagement.
Smith Barney has advised the Special Committee
that it has in the past provided financial advisory and
investment banking services to Pacific Telecom and has
received fees for the rendering of such services. Smith
Barney has also provided certain investment banking
services to PacifiCorp related to the underwriting of
certain debt and equity securities and has received fees
for the rendering of such services. In addition, Smith
Barney and its affiliates (including The Travelers Inc. and
its affiliates) may maintain business relationships with
Pacific Telecom, PacifiCorp and their affiliates.
Smith Barney is a nationally recognized
investment banking firm and was selected by the Special
Committee based on Smith Barney's experience and expertise.
Smith Barney regularly engages in the valuation of
businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, competitive bids,
secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and
other purposes.
Opinion of CS First Boston
CS First Boston was retained by the Special
Committee by the Special Committee and Pacific Telecom to
render an opinion in connection with the Merger. CS First
Boston is an internationally recognized investment banking
firm and was selected by the Special Committee based on CS
First Boston's experience and expertise. As part of its
investment banking business, CS First Boston is regularly
engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other
purposes.
In connection with CS First Boston's engagement,
the Special Committee requested that CS First Boston
evaluate the fairness, from a financial point of view, to
the Minority Shareholders of the Merger Consideration. On
March 8, 1995, CS First Boston rendered to the Special
Committee its oral opinion (subsequently confirmed in
writing) to the effect that, as of such date, the Merger
Consideration was fair to the Minority Shareholders from a
financial point of view.
In arriving at its opinion, CS First Boston (i)
reviewed the draft Merger Agreement and certain publicly
available business and financial information relating to
Pacific Telecom, (ii) reviewed certain other information,
including financial forecasts, provided by Pacific Telecom,
(iii)
met with management of Pacific Telecom to discuss the
business and prospects of Pacific Telecom, (iv) considered
certain financial and stock market data of Pacific Telecom
and compared that data with similar data for other publicly
held companies in businesses similar to those of Pacific
Telecom, (v) considered the financial terms of certain
other business combinations and other transactions recently
effected and (vi) considered such other information,
financial studies, analyses and investigations and
financial, economic and market criteria which CS First
Boston deemed relevant.
In connection with its review, CS First Boston
did not assume any responsibility for independent
verification of any of the information provided to or
otherwise reviewed by CS First Boston and relied upon its
being complete and accurate in all material respects. With
respect to financial forecasts, CS First Boston assumed
that they were reasonably prepared on bases reflecting the
best currently available estimates and judgments of
management of Pacific Telecom as to the future financial
performance of Pacific Telecom. In addition, CS First
Boston did not make an independent evaluation or appraisal
of the assets or liabilities (contingent or otherwise) of
Pacific Telecom, nor was CS First Boston furnished with any
such evaluations or appraisals. CS First Boston was not
requested to, and did not, participate in any negotiations
with Holdings or PacifiCorp and their respective
representatives regarding the Merger, or solicit third
party indications of interest in acquiring all or any part
of Pacific Telecom. CS First Boston's opinion is
necessarily based on information available to it and
financial, economic, market and other conditions and
circumstances as they existed and could be evaluated on the
date of its opinion. Although CS First Boston evaluated
the fairness of the Merger Consideration to the Minority
Shareholders from a financial point of view, CS First
Boston was not asked to and did not recommend the specific
consideration payable in the Merger. No limitations were
imposed by the Special Committee on CS First Boston with
respect to the investigations made or procedures followed
by CS First Boston. A copy of the written materials
provided by CS First Boston and distributed to the Special
Committee in connection with the delivery of its opinion
has been filed as an exhibit to the Schedule 13E-3 and is
available for inspection and copying at the principal
offices of Pacific Telecom during Pacific Telecom's normal
business hours by any Minority Shareholder or any
representative of the Minority Shareholder who has been so
designated in writing. A copy of such materials shall be
provided to any Minority Shareholder or representative of a
Minority Shareholder who has been so designated in writing
upon written request and at the expense of the requesting
Minority Shareholder or representative.
The full text of CS First Boston's written
opinion, dated the date hereof, which sets forth the
assumptions made, matters considered and limitations on the
review undertaken, is attached as Exhibit D to this Proxy
Statement and is incorporated herein by reference.
Minority Shareholders are urged to read this opinion
carefully in its entirety. CS First Boston's opinion is
directed only to the fairness of the Merger Consideration
to be received by
the Minority Shareholders from a financial point of view,
does not address any other aspect of the Merger and does
not constitute a recommendation to any shareholder as to
how such shareholder should vote on the proposed Merger.
The summary of the opinion of CS First Boston set forth in
this Proxy Statement is qualified in its entirety by
reference to the full text of such opinion.
In determining the appropriate fair value for PTI
Common Stock, CS First Boston analyzed Pacific Telecom
using, among others, the following valuation methodologies:
(i) estimated value of Pacific Telecom in the public equity
market as if it were widely held with broad institutional
ownership without a controlling shareholder; (ii)
discounted cash flow analyses; (iii) valuation by line of
business; and (iv) premiums paid by a majority shareholder
to minority public shareholders of other companies. In its
analyses, CS First Boston used Pacific Telecom's forecasts
for the fiscal years ended December 31, 1995 to December
31, 1999, adjusted for the Pending Acquisitions. See
"Certain Financial Forecasts." CS First Boston, in
performing the aforementioned valuation methodologies,
developed a range of values for PTI Common Stock which does
not include any of the benefits that would arise from a
combination with or acquisition by another party, including
PacifiCorp, resulting in a change in control of Pacific
Telecom.
Public Market Equity Valuation. CS First Boston
reviewed and compared certain historical and projected
financial, operating and stock market information of
Pacific Telecom to certain other comparable large publicly-
traded independent telephone companies. Although Pacific
Telecom is currently publicly traded, the purpose of this
analysis was to estimate the value at which PTI Common
Stock might trade if they were widely held instead of
approximately 87 percent owned by Holdings and Pacific
Telecom were more closely followed by the investment
research community as a result of broader institutional
ownership. In performing this analysis, CS First Boston
compared Pacific Telecom to Frontier Corporation (formerly
Rochester Telephone Corporation), Lincoln
Telecommunications Company and Southern New England
Telecommunications, as well as other comparable companies.
In its analysis, CS First Boston considered the impact of
the discontinued Alascom earnings and the Pending
Acquisitions on Pacific Telecom's future earnings growth.
This analysis indicated a value range for PTI Common Stock
of approximately $25.50 to $31.00 per share. No company
used in this analysis was identical to Pacific Telecom.
The analysis necessarily involved complex considerations
and judgments concerning differences in financial and
operating characteristics of the companies.
Discounted Cash Flow Analysis. CS First Boston
performed discounted cash flow analyses of the projected
free cash flow of Pacific Telecom for the fiscal years
ended December 31, 1995 through December 31, 1999, based
upon certain operating and financial assumptions, forecasts
and other information provided by Pacific Telecom's
management, adjusted for the sale of Alascom and the
Pending Acquisitions. The forecasts provided to
CS First Boston for Pacific Telecom were through the fiscal
year periods ended December 31, 1999. For purposes of such
analysis, CS First Boston utilized discount rates of 10
percent and 9 percent and applied operating cash flow
multiples of 5x, 6x and 7x to 1999 estimated earnings
before interest, taxes, depreciation and amortization to
arrive at a terminal value for Pacific Telecom. This
analysis indicated a valuation range for Pacific Telecom of
approximately $23.25 to $35.50 per share of PTI Common
Stock. The analysis necessarily involved complex
considerations and judgments concerning differences in
financial and operating characteristics of the companies.
Valuation by Line of Business. CS First Boston
analyzed Pacific Telecom by the following lines of
business: local exchange companies, Pending Acquisitions,
cellular telephone operations, cable and transmission
services and other businesses. CS First Boston's valuation
of Pacific Telecom's local exchange business employed
comparable publicly-traded companies and discounted cash
flow analyses. In valuing Pacific Telecom's cellular
interests, CS First Boston relied principally on a per
"POP" (population equivalent) valuation applied to each
individual market, based on comparable publicly-traded
cellular telephone companies. CS First Boston's valuation
of the cable and transmission business was based both on a
book value analysis and a discounted cash flow analysis.
In addition to valuing these lines of business, CS First
Boston included the net proceeds from the sale of Alascom
and deducted net total debt and the purchase price of the
Pending Acquisitions to arrive at an overall equity value
range for Pacific Telecom. This analysis indicated a per
share valuation range of approximately $24.25 to $30.75 per
share of PTI Common Stock. The analysis necessarily
involved complex considerations and judgments concerning
differences in financial and operating characteristics of
the companies.
Premiums Paid by a Majority Shareholder to
Minority Shareholders of other Public Companies. CS First
Boston also analyzed premiums paid to public minority
shareholders of other companies by a majority shareholder.
This analysis indicated an average of premiums paid over
the stock price four weeks prior to the initial
announcement of the proposed transaction of approximately
24 percent, which implied a price per share of PTI Common
Stock held by the Minority Shareholders of $30.00. The
analysis indicated an average of premiums paid over the
stock price one day prior to such announcement of
approximately 18 percent, which implied a price per share
of PTI Common Stock of $28.50.
Based on these analyses, and other analyses and
criteria it deemed relevant, CS First Boston arrived at a
valuation range of $28.00 to $34.00 per share for PTI
Common Stock. None of the analyses summarized above were
necessarily indicative of the appropriate price per share
for Holdings to purchase PTI Common Stock from the Minority
Shareholders. Based on the analyses described above, CS
First Boston delivered a written fairness opinion to the
Special Committee that, [as of the date of the Merger
Agreement,] the Merger Consideration to be received by the
Minority
Shareholders in the Merger was fair to such shareholders,
from a financial point of view.
The summary set forth above does not purport to
be a complete description of CS First Boston's valuation
summary or of the analyses performed by CS First Boston.
The preparation of such a summary necessarily is not
susceptible to partial analysis or summary description.
The fact that any specific analysis has been referred to in
the summary above is not meant to indicate that such
analysis was given greater weight than any other analysis.
In performing its analyses, CS First Boston made numerous
assumptions with respect to industry performance, general
business and economic conditions and other matters, many of
which are beyond the control of Pacific Telecom. The
analyses performed by CS First Boston are not necessarily
indicative of actual future values or actual future
results, which may be significantly more or less favorable
than suggested by such analyses. The analyses do not
purport to be appraisals or to reflect the prices at which
a company might actually be sold or the prices at which any
securities may trade at the present time or at any time in
the future. The projections used by CS First Boston are
based on numerous variables and assumptions which are
inherently unpredictable and must be considered not certain
of occurrence as projected. Accordingly, actual results
could vary significantly from those set forth in such
projections.
Pursuant to the terms of CS First Boston's
engagement, Pacific Telecom paid CS First Boston for its
services in connection with the Merger a fee of $500,000,
with $200,000 paid at the commencement of the engagement
and $300,000 paid upon delivery of its March 9, 1995
opinion. Pacific Telecom has also agreed to reimburse CS
First Boston for its out of pocket expenses, including
reasonable fees and expenses of legal counsel, of up to
$40,000, and to indemnify CS First Boston and certain
related persons or entities against certain liabilities,
including liabilities under the federal securities laws,
relating to or arising out of its engagement.
In the ordinary course of its business, CS First
Boston and its affiliates may actively trade the debt and
equity securities of both Pacific Telecom and Holdings for
their own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position
in such securities. In the past, CS First Boston has
provided certain investment banking services to Pacific
Telecom and has received customary fees for such services.
Reasons of PacifiCorp and Holdings for the Merger
As indicated above, Holdings owns approximately
86.6 percent of the outstanding shares of PTI Common Stock.
The purpose of the Merger is for Holdings to acquire
beneficial ownership of the remaining shares of PTI Common
Stock. For additional information concerning the factors
leading to
the decision by Holdings to make its merger proposal, see
"--Background of the Merger."
Holdings determined to pursue a merger
transaction with Pacific Telecom for the following reasons:
(i) to better position Holdings and Pacific Telecom to take
advantage of possible synergies between the electric and
telecommunications businesses, without the constraints of
actual or perceived conflicts with the minority interest;
(ii) to simplify the corporate structure and eliminate
certain expenses associated with duplication of functions
and Pacific Telecom's reporting obligations under the
Exchange Act with respect to the publicly held minority
interest; (iii) to improve PacifiCorp's earnings per share
growth prospects due to the higher earnings growth
prospects expected in the telecommunications industry as
compared to the electric utility industry; and (iv) to
facilitate more efficient capital allocation decisions
between PacifiCorp, Holdings and Pacific Telecom, which
will become increasingly important in view of Pacific
Telecom's planned acquisition activity.
Prior to making the Initial Offer, Holdings
considered alternative structures for acquiring Pacific
Telecom's minority interest, including (i) the acquisition
of PTI Common Stock directly from the Minority Shareholders
for cash, (ii) the acquisition of shares of PTI Common
Stock from the Minority Shareholders in exchange for common
stock of PacifiCorp ("PacifiCorp Common Stock"); and (iii)
the acquisition of PTI Common Stock from the Minority
Shareholders for a combination of cash and PacifiCorp
Common Stock. Holdings considered acquiring PTI Common
Stock from the Minority Shareholders by means of an open
market purchase program or through a tender offer, in
either case to be followed by a second step merger to
acquire the remaining shares. Holdings also considered a
one-step merger or statutory share exchange transaction.
Holdings opted for a structure involving an
agreement negotiated with a special committee of
independent Pacific Telecom directors. The primary
consideration in choosing to pursue a negotiated agreement
over a unilateral transaction was that PacifiCorp and
Holdings believed it was important to demonstrate a
procedurally fair, arm's length negotiation process in
establishing fairness to the Minority Shareholders.
Holdings elected to pursue a cash transaction
instead of a transaction involving PacifiCorp Common Stock
primarily because of its relative simplicity. A
structure involving issuance of PacifiCorp Common Stock
presented issues with respect to regulatory approval by
public utility regulatory authorities and would have
required registration with the SEC of the PacifiCorp Common
Stock to be issued, which could have resulted in delays in
consummating the transaction and significant additional
expense. In addition, the various structures involving
PacifiCorp Common Stock, except where Pacific Telecom
merged into Holdings, posed an unacceptable risk that
Holdings would recognize gain as a result of the
transaction. A structure in which Pacific Telecom merged
into Holdings was unacceptable because Holdings would have
to assume Pacific Telecom's liabilities.
Holdings elected to pursue the Merger at this
time because of the belief of PacifiCorp and Holdings that,
in view of Pacific Telecom's recent and planned acquisition
activity, which will result in their increased exposure to
the telecommunications business, it is an appropriate time
for Holdings to have greater control over Pacific Telecom.
Each of PacifiCorp and Holdings has concluded
that the Merger is fair to the Minority Shareholders based
on the following factors:
1. The recommendations of and approvals by both the
Special Committee and the Board of Directors of Pacific
Telecom described under "--Recommendations of the Board of
Directors of Pacific Telecom and the Special Committee,"
receipt of which was a condition to the fairness
determination of PacifiCorp and Holdings.
2. The receipt by the Special Committee of the
opinions of Smith Barney and CS First Boston that the
Merger Consideration is fair to the Minority Shareholders,
from a financial point of view, based on and subject to the
assumptions and qualifications set forth in such opinions,
which was also a condition to the fairness determination of
PacifiCorp and Holdings.
3. The fact that the principal terms of the Merger
were established through arm's-length negotiation with the
Special Committee and its legal and financial advisors.
4. The fact that during the negotiations of the
Merger Agreement, the interests of the Minority
Shareholders were represented by the Special Committee and
its independent legal and financial advisors and the
interests of PacifiCorp and Holdings were represented by
their legal and financial advisors; and
5. The fact that consummation of the Merger is
conditioned upon approval by the holders of a majority of
the outstanding shares of PTI Common Stock held by the
Minority Shareholders.
In addition to the other factors considered by
PacifiCorp and Holdings in concluding that the Merger is
fair to the Minority Shareholders, PacifiCorp and Holdings
adopted the conclusion and analysis of the Special
Committee and the Board of Directors of Pacific Telecom,
set forth under the heading "--Recommendations of the Board
of Directors of Pacific Telecom and the Special Committee"
above, that the Merger is fair to and in the best interests
of the Minority Shareholders. PacifiCorp and Holdings did
not attach relative weights to the specific factors
considered in reaching their conclusions as to the fairness
of the Merger, although it considered the arm's length
negotiations between the parties, the receipt by the
Special Committee
of the opinions of Smith Barney and CS First Boston and the
recommendation of the Special Committee to be the most
significant factors.
Opinion of Financial Advisor to PacifiCorp
PacifiCorp retained Salomon Brothers to render an
opinion to PacifiCorp's Board of Directors concerning the
fairness to PacifiCorp of the Merger Consideration.
Salomon Brothers was not engaged to represent the interests
of the Minority Shareholders. See "--Opinions of Smith
Barney and CS First Boston." Salomon Brothers rendered an
opinion to PacifiCorp's Board of Directors on March 9,
1995, the date of the Merger Agreement, to the effect that,
as of such date, the consideration per share to be paid to
the Minority Shareholders in connection with the Merger was
fair to PacifiCorp from a financial point of view. The
opinion confirmed the oral opinion given by Salomon
Brothers on March 3, 1995 (at the meeting at which such
Board approved the Merger, subject to certain conditions,
including approval by Pacific Telecom's Board of
Directors). Salomon did not deliver to PacifiCorp's Board
of Directors any written report to accompany its fairness
opinion. At an earlier Board meeting, Salomon had provided
written materials that covered Salomon's methods of
analyzing Pacific Telecom but did not set forth any
valuation ranges or address the Merger Consideration (which
had not been negotiated at the time of such meeting). No
limitations were imposed by the PacifiCorp Board of
Directors upon Salomon Brothers with respect to the
investigations made or the procedures followed by Salomon
Brothers in rendering its opinion, although, given the
nature of Salomon's engagement, Salomon did not solicit
alternative purchasers for Pacific Telecom or the shares
owned by the Minority Shareholders. Salomon Brothers did
not, and was not requested by the Board of Directors of
Pacificorp to, make any recommendation as to the form or
amount of consideration to be paid pursuant to the Merger
Agreement.
The full text of Salomon Brothers' fairness
opinion, which sets forth the assumptions made, general
procedures followed, matters considered and limits on the
review undertaken, is attached as Exhibit E to this Proxy
Statement. The Salomon Brothers opinion is only for the
use of the Board of Directors of PacifiCorp and is directed
only to the fairness, from a financial point of view, to
Pacificorp of the Merger Consideration and does not cover
any other aspect of the Merger. In particular, the opinion
does not address the fairness to the Minority Shareholders,
from a financial point of view or otherwise, of the
consideration to be received by the Minority Shareholders
in the Merger, or constitute a recommendation to any
shareholder of Pacific Telecom in respect of the Merger.
The summary of Salomon Brothers' opinion set forth below is
qualified in its entirety by reference to the full text of
such opinion attached as Exhibit E hereto. The opinion
should be read in its entirety.
In connection with rendering its opinion, Salomon
Brothers reviewed drafts of the Merger Agreement provided
to Salomon Brothers and assumed that the definitive Merger
Agreement would not differ in any material respect from
such drafts. Salomon Brothers also reviewed certain
publicly available business and financial information
relating to Pacific Telecom, as well as certain other
information, including financial forecast information
prepared by Pacific Telecom, provided to Salomon Brothers
by PacifiCorp. See "Certain Financial Forecasts." Salomon
Brothers discussed the past and current operations and
financial condition and prospects of Pacific Telecom with
its senior management and senior management of PacifiCorp.
Salomon Brothers also considered certain publicly available
information with respect to other companies and businesses
that Salomon Brothers believed to be comparable to Pacific
Telecom and publicly available information with respect to
transactions involving the sale of other companies or
businesses that Salomon Brothers believed to be relevant to
its analysis. Salomon Brothers also considered such other
information, financial studies, analyses, investigations
and financial, economic, market and trading criteria which
Salomon Brothers deemed relevant.
In its review and analyses and in arriving at its
opinion, Salomon Brothers assumed and relied upon the
accuracy and completeness of the information reviewed by it
for the purpose of the opinion, and Salomon Brothers did
not assume any responsibility for independent verification
of such information or for any independent evaluation or
appraisal of the assets of Pacific Telecom. Salomon
Brothers also took into account its assessment of general
economic, market and financial conditions, as well as its
experience in connection with similar transactions. With
respect to Pacific Telecom's financial forecast
information, Salomon Brothers assumed that it had been
reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the
management of Pacific Telecom, as to the future financial
performance of Pacific Telecom and Salomon Brothers
expressed no opinion with respect to such forecast
information or the assumptions on which it was based.
Salomon Brothers' opinion was necessarily based solely upon
information available to it and business, market, economic
and other conditions as they existed on, and could be
evaluated as of, the date of Salomon Brothers' opinion and
does not address the underlying business decision of
PacifiCorp to effect the Merger or constitute a
recommendation to any holder of shares of PTI Common Stock
as to how such holder should vote with respect to the
Merger.
The following is a summary of the analyses
undertaken by Salomon Brothers in connection with Salomon
Brothers rendering its opinion to the Board of Directors of
PacifiCorp on March 9, 1995.
Comparable Public Company Methodology
The comparable public company methodology assessed
the fairness of the Merger Consideration to PacifiCorp by
analyzing how selected
companies exhibiting comparable operating and financial
characteristics were valued in the public market. Salomon
Brothers identified the following independent telephone
companies as being comparable to Pacific Telecom: ALLTEL
Corporation, Cincinnati Bell, Inc., Frontier Corporation,
Lincoln Telecommunications Company and Southern New England
Telecommunications (collectively, the "Comparable Group").
Salomon Brothers analyzed the following financial measures
of the Comparable Group based on publicly available
financial data of such companies: ratio of the stock price
trading level to earnings; and the ratios of "firm value"
(defined as equity market value adjusted by adding long-
term debt, preferred stock and minority interest less cash
and marketable securities) to revenues, EBITDA and EBIT.
Segment Approach
General. Salomon Brothers derived the implied
value of Pacific Telecom's access lines by computing the
value of Pacific Telecom's non-access line businesses and
subtracting that computed value from Pacific Telecom's
aggregate firm value, adjusted for the after-tax proceeds
from the Alascom Sale. Pacific Telecom's non-access line
businesses include cellular telephone services and the
provision of submarine fiber optic cable capacity between
the United States and Japan.
For Pacific Telecom's cellular business, Salomon
Brothers reviewed and compared the financial and market
performance in respect of Pacific Telecom to the following
group of publicly traded cellular communications companies:
AirTouch Communications, Cellular Communications, Inc.,
Centennial Cellular Corp., LIN Broadcasting Corporation,
United States Cellular Corporation PriCellular Corporation,
and Vanguard Cellular Systems, Inc. Salomon Brothers
examined certain publicly available financial data of this
group of companies, including multiples of firm value to
revenues, EBITDA, net number of United States persons
represented by the interests owned and subscribers. Also,
Salomon Brothers reviewed the acquisition price "per POP"
in connection with the acquisition of selected cellular
telephone companies and properties from 1988 through 1994.
For Pacific Telecom's cable business, Salomon Brothers
valued such business at 90 percent of its attributable book
value. The analysis of the businesses of Pacific Telecom
other than the local telephone exchange business thus
implied a value for the local exchange business in light of
the Merger Consideration.
Comparable Local Exchange Business Approach.
Salomon Brothers analyzed the implied value of the local
exchange business in the Merger Consideration by examining
how the local telephone exchange business of selected
companies exhibiting comparable operating and financial
characteristics were valued in the public market. For such
analysis, Salomon Brothers examined the local exchange
business for the Comparable Group and the following
regional Bell operating companies ("RBOCs"): Ameritech
Corporation, Bell Atlantic Corporation, BellSouth
Corporation, NYNEX Corporation, Pacific Telesis Group, SBC
Communications and US WEST Communications, Inc. Salomon
Brothers analyzed the following financial measures of the
local exchange business for the Comparable Group and the
RBOCs based on publicly available financial data of such
companies: revenue per access line; EBITDA per access
line; 1991-1993 compound annual growth rate of revenues and
access lines; and ratio of EBITDA and EBIT to revenues.
For the Comparable Group, Salomon Brothers also examined
the firm value of the local telephone exchange business of
the Comparable Group and the ratio of such firm value to
revenues, EBITDA, EBIT and access lines.
Discounted Cash Flow Approach. Salomon Brothers
also used the discounted cash flow ("DCF") approach to
value the local telephone exchange business of Pacific
Telecom. The DCF estimated the value of the local
telephone exchange business by first projecting the
unleveraged free cash flows available from the local
telephone exchange business over five years and the
terminal value for the local telephone exchange business at
the end of that period, and then discounting both the
projected free cash flows and the terminal value back to
the present at an appropriate discount rate. The range of
terminal values was calculated by applying certain
multiples to Pacific Telecom's estimated 1999 EBITDA, and
then analyzed relative to Pacific Telecom's estimated 1999
revenues, 1999 EBIT, 1999 net income assuming Pacific
Telecom was not leveraged and 1999 net income assuming a
certain level of leverage, in each case with respect to the
local telephone exchange business. The forecasted income
statement and cash flow information was provided to Salomon
Brothers by PacifiCorp management and prepared by Pacific
Telecom's management. See "Certain Financial Forecasts."
The discount rates utilized as part of the DCF
analysis were calculated using the capital asset pricing
model, which calculates the expected rate of return offered
in the capital markets by equivalent-risk assets. This
financial analysis takes into account the level of
systematic risk associated with a company's stock price
(the beta) and the market-weighted ratio of debt to equity.
Salomon Brothers used betas of the Comparable Group as a
benchmark to estimate systematic risk. The beta selected
was comparable to the betas of the Comparable Group.
Comparable Transaction Approach. The comparable
transaction approach to assessing the firm value of the
local telephone exchange business of Pacific Telecom
assessed the valuation multiples exhibited in other
transactions involving telephone companies. Specifically,
Salomon Brothers reviewed the following transactions:
Citizens Utilities Company/GTE Corporation (announced
1993), ALLTEL Corporation/GTE Corporation (announced 1993),
Sprint Corporation/Centel Corporation (announced 1992),
Century Telephone Enterprises, Inc./Centel Corporation--
Ohio (1991) Rochester Telephone Corporation/Centel
Corporation--Iowa and Minnesota (1991) and GTE
Corporation/Contel Corporation (1990). In analyzing this
group of transactions, Salomon Brothers examined the
following valuation and performance benchmarks based on
publicly available data: the ratio of firm value of the
acquired local exchange operations to revenues, EBITDA,
EBIT and access lines; revenues, EBITDA and EBIT per access
lines and the ratio of revenues to EBITDA and EBIT.
Comparable Transaction Methodology
Salomon Brothers reviewed the premiums paid to
non-control public interests in numerous going private
transactions occurring between September 1985 and
June 1994, which transactions involved acquisitions through
the payment of cash or stock. In reviewing these
transactions, Salomon Brothers examined the stock price one
month before the relevant transaction was announced and one
day before the relevant transaction was announced,
respectively.
Summary
No company or transaction used in the comparable
company or comparable transaction analyses summarized above
is identical to Pacific Telecom or the Merger.
Accordingly, any such analysis of the value of the Merger
involves complex considerations and judgments concerning
differences in the potential financial and operating
characteristics of the comparable companies and other
factors in relation to the trading and acquisition values
of the comparable companies and publicly announced
transactions.
The foregoing summary does not purport to be a
complete description of the analyses performed by Salomon
Brothers. The preparation of financial analyses and
fairness opinions is a complex process and is not
necessarily susceptible to partial analysis or summary
description. Salomon Brothers believes that its analyses
(and the summary set forth above) must be considered as a
whole, and that selecting portions of such analyses and of
the factors considered by Salomon Brothers, without
considering all such analyses and factors, could create an
incomplete view of the processes underlying the analyses
conducted by Salomon Brothers and its opinion. Salomon
Brothers made no attempt to assign specific weights to
particular analyses. In performing its analyses, Salomon
Brothers made numerous assumptions with respect to industry
performance, general business, financial, market and
economic conditions and other matters, many of which are
beyond the control of Pacific Telecom. Any estimates
contained in Salomon Brothers' analyses are not necessarily
indicative of actual values or actual future results, which
may be significantly more or less favorable than as set
forth therein. Estimates of values of companies do not
purport to be appraisals or necessarily reflect the prices
at which companies may actually be sold or the prices at
which securities may trade at the present time or any time
in the future. Actual values of companies and trading
prices of securities depend on several factors, including
industry events, general economic, market and
interest rate conditions and other factors which generally
influence the price of securities.
Salomon Brothers is an internationally recognized
investment banking firm engaged in, among other things, the
valuation of businesses and their securities in connection
with mergers and acquisitions, restructurings, leveraged
buyouts, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and
other purposes. The PacifiCorp Board of Directors retained
Salomon Brothers based on Salomon Brothers' expertise in
the valuation of companies, as well as its familiarity with
Pacific Telecom's industry.
Salomon Brothers has previously rendered
investment banking and financial advisory services to
PacifiCorp and certain of its affiliates (including Pacific
Telecom), in each case for which Salomon Brothers received
customary compensation. In the ordinary course of its
business, Salomon Brothers actively trades the debt and/or
equity securities of PacifiCorp and certain of its
affiliates (including Pacific Telecom) for Salomon
Brothers' own account and for the accounts of its customers
and, accordingly, may at any time hold a long or short
position in such securities.
Pursuant to an engagement letter dated August 15,
1994, PacifiCorp has agreed to pay Salomon Brothers a fee
of $800,000, $150,000 of which has been paid and $650,000
of which is payable upon the consummation of the Merger.
PacifiCorp also has agreed to reimburse Salomon Brothers
for certain expenses incurred in connection with its
engagement and to indemnify Salomon Brothers and certain
related persons against certain liabilities and expenses
relating to or arising out of its engagement, including
certain liabilities under the federal securities laws.
The opinion of Salomon Brothers was one of many
factors taken into consideration by the Board of Directors
of PacifiCorp in making its determination to approve the
Merger. The opinion of Salomon Brothers does not address
the relative merits of the Merger as compared to any
alternative business strategies that might exist for
PacifiCorp or the effect of any other transaction in which
PacifiCorp might have engaged.
Certain Effects of the Merger
If the Merger is approved, at the Effective Time,
the Minority Shareholders will cease to be shareholders of
Pacific Telecom and will not share in the future earnings
or growth of Pacific Telecom. Instead, each Minority
Shareholder (other than those shareholders holding shares
as to which dissenters' rights are perfected) will be
entitled to receive the Merger Consideration in exchange
for their shares of PTI Common Stock upon surrender of
their stock certificates.
As a result of the Merger, Pacific Telecom will
become a wholly owned subsidiary of Holdings, the
registration of Pacific Telecom's Common Stock under the Exchange
Act, will be terminated and PTI Common Stock will cease to
be reported on the Nasdaq National Market. If Holdings
determines to terminate Pacific Telecom's public medium-
term note program, Pacific Telecom will cease to file
annual and quarterly reports with the SEC.
Conduct of Business After the Merger
Holdings has no specific plans or proposals for
Pacific Telecom following the Merger. It is currently
expected that, following the Merger, the business and
operations of Pacific Telecom will be continued by Pacific
Telecom substantially as they are currently being
conducted. Holdings will continue to evaluate Pacific
Telecom's business and operations following the Merger and
will make such changes as are deemed appropriate. Pursuant
to the Merger Agreement, the members of the Board of
Directors of Pacific Telecom immediately prior to the
Merger, including the four additional directors proposed
for election by Holdings, will be the initial directors of
Pacific Telecom immediately following the Merger, and the
officers of Pacific Telecom immediately prior to the Merger
will be the initial officers of Pacific Telecom following
the Merger.
Except for the Merger and as otherwise described
in Pacific Telecom's prior filings with the SEC, neither
PacifiCorp nor Holdings has any present intention to sell
any material portion of the PTI Common Stock or any
material portion of the business or assets of Pacific
Telecom, and neither PacifiCorp nor Holdings has any
present plans or proposals that would result in an
extraordinary corporate transaction such as a merger,
reorganization, liquidation, relocation of operations or
sale or transfer of assets involving Pacific Telecom, or
any of its subsidiaries, or any material changes in Pacific
Telecom's corporate structure, business or composition of
its management.
Conduct of Business if the Merger Is Not Consummated
If the Merger is not consummated, it is expected
that the business and operations of Pacific Telecom will
continue to be conducted substantially as they are
currently being conducted. Pacific Telecom will continue
to be controlled by Holdings, and the Board of Directors of
Pacific Telecom will include the four additional directors
nominated by Holdings for election at the Annual Meeting.
Accordingly, following the Annual Meeting a majority of the
members of the Board of Directors of Pacific Telecom will
consist of individuals who are designees of Holdings and
directors or officers of PacifiCorp or Holdings.
If the Merger is not consummated, Holdings may
purchase additional PTI Common Stock from time to time,
subject to availability at prices deemed acceptable to
Holdings, pursuant to a merger transaction, tender offer,
open market or privately negotiated transactions or
otherwise on
terms more or less favorable to the Minority Shareholders
than the terms of the Merger. However, Holdings has made
no determination as to any future transactions if the
Merger is not consummated.
Regulatory Approvals
Pacific Telecom does not believe that any material
federal or state regulatory approvals, filings or notices
are required in connection with the Merger other than (i)
such approvals, filings or notices required pursuant to
federal and state securities laws and (ii) the filing of
articles of merger with the Secretary of State of the State
of Washington.
Interests of Certain Persons in the Merger; Conflicts of
Interest
Dr. Nancy Wilgenbusch is a member of the Board of
Directors of both Pacific Telecom and PacifiCorp.
Certain executive officers of Pacific Telecom are
participants in the Pacific Telecom Executive Officer
Severance Plan, pursuant to which participants who are
involuntarily terminated other than for cause are eligible
to receive a severance payment equal to twice the
executive's total cash compensation during the last full
calendar year. See "Executive Compensation--Severance
Arrangements."
The Merger Agreement provides that the directors
and officers of Pacific Telecom at the Effective Time of
the Merger shall be the directors and officers of Pacific
Telecom after the Merger, until their respective successors
are duly elected or appointed and qualified.
For a discussion of the indemnification of, and
insurance for, directors and officers of Pacific Telecom,
see "The Merger Agreement--Indemnification of Officers and
Directors."
For a discussion of the financial advisory fees
payable to each of Smith Barney, CS First Boston and
Salomon Brothers, and information regarding their
relationships with Pacific Telecom, Holdings and
PacifiCorp, see "--Opinions of Smith Barney and CS First
Boston" and "--Opinion of Financial Advisor to PacifiCorp."
For a description of directors' fees payable to
members of the Special Committee, see "--Background of the
Merger."
See "Security Ownership of Certain Beneficial
Owners and Management" for information concerning ownership
of PTI Common Stock by directors and executive officers of
Pacific Telecom and "Information Concerning PacifiCorp and
Holdings and Their Directors and Officers" for information
regarding ownership of PTI Common Stock by directors and
executive officers of Holdings and PacifiCorp.
In connection with the resignation of his
positions with PacifiCorp and its affiliates, Mr. William
J. Glasgow entered into a consulting agreement with
PacifiCorp pursuant to which he has provided, and will
continue to provide, consulting services in connection with
various matters, including the Merger. See--"Background of
the Merger." The fees payable to Mr. Glasgow under the
consulting agreement are not specifically related to
performance of services in connection with the Merger.
Rights of Dissenting Shareholders
Pursuant to Sections 23B.13.010 through 23B.13.310
of the WBCA, any Minority Shareholder who gives proper
notice and who does not vote in favor of the Merger will,
upon proper demand, have the right under the WBCA to obtain
payment of the fair value of his or her shares of PTI
Common Stock. Any Minority Shareholder electing to
exercise dissenters' rights must file a written notice of
this intent with Pacific Telecom, attention of the
Secretary, at 805 Broadway, Vancouver, Washington 98668,
prior to the vote, and must not vote his or her shares in
favor of the Merger. As provided in Section 23B.13.030 of
the WBCA, a shareholder whose shares are held in a broker-
age account or by some other nominee must either have the
record holder of the shares file the dissenters' notice on
the shareholder's behalf or obtain the written consent of
the record holder and file the shareholder's dissenters'
notice. These documents must be filed with the Secretary
of Pacific Telecom prior to the vote on the Merger. A
beneficial shareholder of PTI Common Stock who chooses to
exercise dissenters' rights must exercise such rights with
respect to all shares of PTI Common Stock either
beneficially held by such shareholder or over which such
shareholder has power to direct the vote. A VOTE IN FAVOR
OF THE MERGER WILL CONSTITUTE A WAIVER OF DISSENTERS'
RIGHTS. A VOTE AGAINST THE MERGER WILL NOT SATISFY THE
REQUIREMENT THAT WRITTEN NOTICE BE FILED WITH PACIFIC
TELECOM IN ORDER TO ASSERT DISSENTERS' RIGHTS.
For the purpose of dissenters' rights, the fair
value of shares will be their value immediately prior to
the effectiveness of the Merger, excluding any appreciation
or depreciation in anticipation of the Merger unless
exclusion would be inequitable. Minority Shareholders
considering exercising their dissenters' rights should
recognize that the fair value of their shares of PTI Common
Stock as determined under Sections 23B.13.010 through
23B.13.310 of the WBCA could be more than, the same as or
less than the amount that such Minority Shareholders are
entitled to receive pursuant to the Merger Agreement if
they do not seek appraisal of their shares of PTI Common
Stock.
If the Merger is approved by the requisite vote of
shareholders, Pacific Telecom will, within ten days
following the effectiveness of the Merger, mail a notice to
each Minority Shareholder who gave Pacific Telecom
due notice of his or her intention to demand payment and
who did not vote in favor of the Merger. The notice will
provide, among other things: (i) the form of payment
demand (including the date of the first announcement to the
news media or to the shareholders of the terms of the
Merger), (ii) where the payment demand must be delivered,
(iii) when and where the certificates for certificated
shares must be deposited, and (iv) the date by which
Pacific Telecom must receive the payment demand. A
Minority Shareholder who fails to make a timely or proper
demand for payment (including the deposit of certificates)
in accordance with the notice is not entitled to payment
under the WBCA for his or her shares. A Minority
Shareholder who fails to certify that he or she acquired
beneficial ownership of the shares prior to the date of the
first announcement of the terms of the Merger to the news
media or to shareholders may not receive immediate payment
for his or her shares, as described below with respect to
After Acquired Shares.
Except with respect to those Minority Shareholders
who held After-Acquired Shares (as defined below), Pacific
Telecom will remit, within 30 days of the later of the date
of effectiveness of the Merger or the date the payment
demand is received, to all Minority Shareholders who made
proper demand, an amount that Pacific Telecom estimates to
be the fair value of their Pacific Telecom shares, together
with any interest that has accrued from the effective date
of the Merger until the date of payment. The remittance
will be accompanied by certain financial information of
Pacific Telecom, an explanation of how the fair value of
the shares was estimated and an explanation of how the
accrued interest was calculated. If Pacific Telecom fails
so to remit or if the dissenting Minority Shareholder
believes the amount remitted is less than the fair value of
his or her shares, the dissenting Minority Shareholder may
send Pacific Telecom his or her own estimate of the fair
value of the shares and amount of accrued interest due and
demand payment of the deficiency. The dissenting Minority
Shareholder must notify Pacific Telecom in writing of his
or her estimate within 30 days after the date Pacific
Telecom mails its remittance, if any. If Pacific Telecom
and the dissenting Minority Shareholder are unable to agree
on a fair value within 60 days after the receipt of a
demand for payment of a deficiency, Pacific Telecom will
petition that the fair value of the shares and interest
thereon be determined by an appropriate court.
If a dissenting Minority Shareholder acquired his
or her shares of PTI Common Stock after the date set forth
in the dissenters' notice as the date of the first
announcement of the terms of the Merger to the news media
or to the shareholders ("After-Acquired Shares"), Pacific
Telecom may elect to withhold the payment described in the
preceding paragraph and to offer to pay fair value for the
After-Acquired Shares subject to such dissenting Minority
Shareholder's agreement to accept payment as satisfaction
in full of the dissenting claim. Pacific Telecom will send
with its offer an explanation of how the fair value of the
After-Acquired Shares was estimated and how the accrued
interest was calculated. If the dissenting Minority
Shareholder believes that the amount offered is less than
the fair value of his or her After-
Acquired Shares, the dissenting Minority Shareholder may
send Pacific Telecom his or her own estimate of the fair
value of the After-Acquired Shares and amount of accrued
interest due. The dissenting Minority Shareholder must
notify Pacific Telecom in writing of his or her estimate
within 30 days after the date Pacific Telecom makes its
offer. If Pacific Telecom and the dissenting Minority
Shareholder are unable to agree on a fair value for the
After-Acquired Shares within 60 days after the receipt of
the dissenting Minority Shareholder's estimate of the fair
value of the After-Acquired Shares, Pacific Telecom will
petition that the fair value of the After-Acquired Shares
and interest thereon be determined by an appropriate court.
With respect to a judicial proceeding commenced by
Pacific Telecom to determine the fair value of the shares
and interest thereon with respect to any shares of PTI
Common Stock (including After-Acquired Shares), the court
will determine the costs of such proceeding and will assess
such costs against Pacific Telecom, except that the court
may assess such costs against one or more of the dissenting
Minority Shareholders party to such proceeding, in amounts
the court finds equitable, to the extent that such court
finds that the dissenting Minority Shareholder acted
arbitrarily, vexatiously or not in good faith in demanding
payment.
The foregoing summary is not, and does not purport
to be, a complete statement of dissenters' rights and is
qualified in its entirety by reference to Sections
23B.13.010 through 23B.13.310 of the WBCA, a copy of which
is attached to this Proxy Statement as Exhibit B.
Certain Federal Income Tax Consequences of the Merger
The following is a summary of certain federal
income tax consequences of the Merger to Minority
Shareholders. This summary does not purport to discuss all
tax consequences of the Merger to all Minority
Shareholders. In particular, the summary does not discuss
the tax consequences of the Merger to any Minority
Shareholder that is an insurance company, tax-exempt
organization, financial institution, foreign person or
broker dealer or who acquired his or her shares upon the
exercise of options or otherwise as compensation.
The receipt of cash by a shareholder of Pacific
Telecom in exchange for PTI Common Stock pursuant to the
Merger will be a taxable transaction for federal income tax
purposes and may also be a taxable transaction under
applicable state, local, foreign or other tax laws. In
general, a shareholder will recognize a gain or loss equal
to the difference, if any, between the amount of cash
received for his or her stock in the Merger (i.e., $30 per
share) and the shareholder's adjusted tax basis in such
stock. A shareholder will recognize such gain or loss as
of the Effective Time. In general, such gain or loss will
be a capital gain or loss, provided the stock is a capital
asset in the hands of the holder at the Effective Time, and
will be
long-term capital gain or loss if the stock has been held
for more than one year at such time.
Holdings or the Payment Agent will be required to
withhold 31 percent of the gross proceeds payable to a
shareholder or other payee in the Merger unless the
shareholder or payee provides in a properly completed
substitute Form W-9 his or her taxpayer identification
number and certifies under penalties of perjury that such
number is correct and that the shareholder is not subject
to backup withholding, unless an exemption applies under
applicable law and regulations. Therefore, unless such an
exemption exists and is demonstrated in a manner
satisfactory to Holdings or its Payment Agent in accordance
with the instructions that will accompany the substitute
Form W-9, each shareholder should complete and sign the
substitute Form W-9 that will be made available to the
shareholder with the letter of transmittal, so as to
provide the information and certification necessary to
avoid backup withholding. See "The Merger Agreement--
Conversion of Shares; Surrender of Stock Certificates;
Payment for Shares."
EACH SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR WITH RESPECT TO THE FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER IN HIS OR HER INDIVIDUAL CIRCUMSTANCES AND
WITH RESPECT TO THE STATE, LOCAL OR OTHER INCOME TAX
CONSEQUENCES OF THE MERGER. FURTHER, ANY SHAREHOLDER WHO
IS A CITIZEN OF A COUNTRY OTHER THAN THE UNITED STATES
SHOULD CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO
THE TAX TREATMENT IN SUCH COUNTRY OF THE MERGER AND WITH
RESPECT TO THE QUESTION OF WHETHER THE TAX CONSEQUENCES
DESCRIBED ABOVE MAY BE ALTERED BY REASON OF THE PROVISIONS
OF THE INTERNAL REVENUE CODE APPLICABLE TO FOREIGN PERSONS
OR THE PROVISIONS OF ANY TAX TREATY APPLICABLE TO SUCH
SHAREHOLDER.
Financing the Merger
If the Merger is consummated, the total amount of
the Merger Consideration to be paid to Minority
Shareholders and estimated fees and expenses payable by
Holdings and PacifiCorp will be approximately $160 million.
Holdings plans to borrow those funds pursuant to the $350
million Credit Agreement dated as of ____________, 1995
between Holdings and Morgan Guaranty Trust Company of New
York, as Agent. Revolving borrowings under the Credit
Agreement may not exceed a term of six months, are
unsecured and will bear variable interest at rates based on
bids from participating banks, certain prime rates,
interbank borrowing rates or certificate of deposit rates.
Available funds under the Credit Agreement at
______________, 1995 were $___________. Holdings plans to
repay such borrowings out of its cash flow, which consists
primarily of dividends from its subsidiaries, including
Pacific Telecom.
Although Holdings will have the ability to change
the amount and timing of dividends paid by Pacific Telecom
following the Merger, Holdings presently intends that
Pacific Telecom will continue to pay approximately the same
aggregate amount of dividends to Holdings as it is
currently paying to all shareholders.
Expenses of the Transaction
The following is an estimate of the costs and
expenses incurred or expected to be incurred in connection
with the Merger.
<TABLE>
<CAPTION>
<S> <C>
SEC Filing Fees . . . . . . . . . . . . . . $ 31,746
Legal Fees and Expenses(1). . . . . . . . . 850,000
Investment Banking Fees and Expenses(2) . . 3,000,000
Printing and Mailing. . . . . . . . . . . . 100,000
Special Committee Directors' Fees(3). . . . 150,000
Accounting Fees and Expenses. . . . . . . . 15,000
Miscellaneous . . . . . . . . . . . . . . . 15,000
Total. . . . . . . . . . . . . . . . . $ 4,161,746
Under the Merger Agreement, all costs and expenses incurred
by Pacific Telecom, Holdings, PacifiCorp and Merger Sub
will be paid by the party that has incurred such costs and
expenses, whether or not the Merger is consummated.
_______________
<FN>
(1) Includes fees of counsel for PacifiCorp, Holdings and
Pacific Telecom and counsel for the Special Committee.
(2) Includes fees of Salomon Brothers, Smith Barney and CS
First Boston. See "--Opinion of Financial Advisor to
PacifiCorp" and "--Opinions of Smith Barney and CS
First Boston."
(3) Members of the Special Committee will receive
additional directors' fees of $15,000, except for the
Chairman who will receive $20,000, plus $750 for each
meeting of the Special Committee attended.
</TABLE>
SELECTED FINANCIAL DATA;
PRO FORMA FINANCIAL INFORMATION
Selected Financial Data
The following table sets forth selected historical
consolidated financial information for Pacific Telecom and
its subsidiaries for each of the five years in the period
ended December 31, 1994, which has been derived from the
consolidated financial statements of Pacific Telecom that
have been audited by Deloitte & Touche LLP, independent
accountants. The following financial information should be
read in conjunction with the historical consolidated
financial statements and notes thereto of Pacific Telecom
included in the 1994 Form 10-K and incorporated herein by
reference. See "Incorporation of Certain Documents by
Reference."
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------
1994 1993 1992 1991 1990(1)
--------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Operating revenues $ 704,962 $ 702,111 $ 698,175 $ 719,991 $ 677,883
Operating expenses 540,321 560,463 558,701 559,567 522,904
- -------------------------------------------------------------------------------------
Net operating income 164,641 141,648 139,474 160,424 154,979
Interest expense (34,754) (44,273) (52,140) (54,955) (39,500)
Gain on sale of subsidiaries and
investments (2) 2,073 1,340 28,601 28,262 18,548
Other income (expense), net (3) (9,795) (15,811) (16,161) (13,302) 3,444
- -------------------------------------------------------------------------------------
Income before income taxes 122,165 82,904 99,774 120,429 137,471
Income taxes 40,766 23,846 32,526 30,893 42,061
- -------------------------------------------------------------------------------------
Income from continuing
operations 81,399 59,058 67,248 89,536 95,410
Gain (loss) from discontinued
operations (4) -- 60,444 (45,741) (8,431) (5,186)
- -------------------------------------------------------------------------------------
Net income 81,399 119,502 21,507 81,105 90,224
Preferred dividends -- -- -- -- 5
- -------------------------------------------------------------------------------------
Net income applicable to
common stock $ 81,399 $ 119,502 $ 21,507 $ 81,105 $ 90,219
- -------------------------------------------------------------------------------------
Average number of common
shares outstanding 39,612 39,584 39,526 39,477 38,768
Data Per Common Share:
Income from continuing
operations $ 2.05 $ 1.49 $ 1.70 $ 2.27 $ 2.46
Gain (loss) from discontinued
operations -- 1.53 (1.16) (.22) (.13)
- --------------------------------------------------------------------------------------
Net income $ 2.05 $ 3.02 $ .54 $ 2.05 $ 2.33
- --------------------------------------------------------------------------------------
Dividends declared and paid $ 1.32 $ 1.32 $ 1.305 $ 1.235 $ 1.13
- --------------------------------------------------------------------------------------
Book Value $ 16.85 $ 16.13 $ 14.41 $ 15.16 $ 14.31
Balance Sheet Data:
Total assets $1,442,951 $1,482,224 $1,607,289 $1,748,570 $1,787,622
Net assets of discontinued
operations -- -- 99,195 153,070 153,996
Long-term debt, net of
current maturities 376,997 426,669 571,585 528,391 480,940
Shareholders' equity 667,773 638,711 569,846 598,524 563,906
- --------------------------------------------------------------------------------------
(Footnotes on following page)
<FN>
(1) In August 1990, Pacific Telecom acquired North-West Telecommunications, Inc.
("North-West") for $272 million. Through North-West, Pacific Telecom acquired four LECs with
approximately 64,500 access lines and ownership interests in certain cellular properties.
Interest expense increased in 1991 due to additional interest expense incurred as a
result of amounts borrowed to acquire North-West.
(2) The gain on sale of subsidiaries and investments included, in 1994, a $2.3 million pre-
tax gain on the sale of PTI Harbor Bay, Inc. and Upsouth Corporation. The gain in
1993 included the sale of a cellular property in Washington. The gains in 1992 included
a $21.4 million gain on the sale of Catalina Marketing Corporation common stock and a
$7.2 million gain from cellular property sales and exchanges. The gains in 1991
included a $22.2 million gain on the sale of TU International, Inc. and a $6.1 million
gain on the sales of cellular interests. The gain in 1990 included the $18.5 million gain
from the sale of Petroleum Communications, Inc. These transactions had an after-tax
earnings per share effect of $.02 per share in 1994, $.02 per share in 1993, $.45 per share
in 1992, $.54 per share in 1991 and $.36 per share in 1990.
(3) The increase in other expense in 1991 resulted from a $5.9 million increase in noncore
business valuation adjustments and an $8.8 million decrease in interest income. Pacific
Telecom recognized interest income in 1990 related to the funds advanced to Holdings
for the North-West acquisition, the settlement of a dispute with an Alaska LEC and a
favorable resolution of income tax audit issues.
(4) ICH had been shown as a discontinued operation for financial statement reporting
purposes through September 1993 when TRT was sold. The remaining investment in
ICH is now reported as a continuing operation. See Note 7 to Consolidated Financial
Statements included in the 1994 Form 10-K and incorporated herein by reference for
information concerning the $60.4 million after-tax gain on the sale of ICH's major
operating subsidiary recorded in 1993 and a $45.7 million after-tax loss recorded in 1992.
Interest expense in 1994 decreased as proceeds from the sale of TRT were used to
reduce outstanding debt.
</TABLE>
Pro Forma Financial Information
The following unaudited pro forma consolidated
balance sheet as of December 31, 1994 reflects Pacific
Telecom's consolidated financial position excluding the assets
and liabilities of Alascom and including the local exchange
assets acquired in Colorado and to be acquired in Oregon and
Washington. Pacific Telecom signed a definitive agreement on
September 30, 1994 to sell the stock of Alascom to AT&T for
$365 million (including the $75 million transition payment
received in July 1994). Pacific Telecom closed the purchase of
assets in Colorado from USWC on February 15, 1995 for $200
million and expects to close the purchase of assets in Oregon
and Washington for approximately $180 million before the end of
1995 after the receipt of certain regulatory approvals and
subject to certain purchase price adjustments at closing. The
pro forma balance sheet assumes the sale and purchases occurred
on December 31, 1994.
The unaudited pro forma consolidated balance sheet
and related notes should be read in conjunction with Pacific
Telecom's consolidated financial statements and related notes
for the year ended December 31, 1994 contained in the 1994 Form
10-K, which is incorporated herein by reference.
<TABLE>
<CAPTION>
Pro Forma Consolidated Balance Sheet
(Unaudited, in millions)
Historical (a) (b) US WEST Pro forma
Consolidated Historical Elimination Sale of Asset Consolidated
December 31, 1994 PTI Alascom Reversal Alascom Acquisitions PTI
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets $ 214.3 $ (82.7) $ 13.1 $260.0 $(265.5)(c) $139.2
Investments 123.6 (0.1) 204.4 (204.4) (4.0) 119.5
Net plant in service 825.5 (185.5) - - 237.1 877.1
Intangible and other assets 279.6 (7.4) - - 182.3 454.5
Total assets $1,443.0 $(275.7) $217.5 $ 55.6 $ 149.9 $1,590.3
Liabilities and Capitalization
Current liabilities $ 175.1 $(69.9) $ 21.0 $ 5.9 $ - $ 132.1
Long-term debt 377.0 - - - 118.6(c) 495.6
Deferred income taxes and
unamortized investment
tax credits 109.8 (1.8) - - (16.8) 91.2
Other long-term liabilities 113.3 (7.5) - (30.0) 48.1 123.9
Shareholders' equity 667.8 (196.5) 196.5 79.7 - 747.5
-------- -------- -------- -------- -------- ----------
Total liabilities and
capitalization $1,443.0 $(275.7) $217.5 $ 55.6 $149.9 $1,590.3
Notes to Pro Forma Consolidated Balance Sheet (Unaudited)
Pro forma Adjustments -- The accompanying pro forma consolidated balance
sheet as of December 31, 1994 consists of the historical balance sheet of
Pacific Telecom (after elimination of affiliated transactions and interest), less
the historical balance sheet of Alascom, plus the assets purchased in
Colorado and an estimate for the assets to be purchased in Oregon and
Washington and certain liabilities related to these acquisitions, plus certain
pro forma adjustments described below:
a. Affiliated balances between Pacific Telecom and its subsidiaries and
Alascom eliminated in the consolidation process were restored on the
pro forma balance sheet. The affiliated balances between Pacific
Telecom and Alascom were added to Pacific Telecom's investment in
Alascom. The affiliated balances between the other Pacific Telecom
subsidiaries and Alascom were reclassified to the proper nonaffiliated
line item.
b. Cash proceeds of $260 million to be received at closing the sale of
Alascom and the $30 million deposit in "Other long-term liabilities"
received in October 1994 were offset by Pacific Telecom's investment
in Alascom, income tax liability from the gain on the sale and net
gain on sale. The actual gain to be realized on the sale will be lower
than indicated on the pro forma balance sheet as Pacific Telecom's
basis in Alascom will increase as Alascom's earnings are recognized
and affiliated account balances change between December 31, 1994
and closing.
c. Cash proceeds received from the sale of Alascom have been applied
to the purchase of assets from USWC. Amounts needed for the
purchases in excess of the Alascom proceeds and cash on hand were
assumed to be borrowed on a long-term basis.
</TABLE>
CERTAIN FINANCIAL FORECASTS
General. The financial forecast set forth below was
derived from Pacific Telecom's internal five year business
plan, which was prepared by Pacific Telecom's management and
presented to its Board of Directors in early February 1995 as
part of the board's normal review and oversight procedures.
The five year business plan was prepared in the ordinary course
of Pacific Telecom's business and was not prepared in
contemplation of the Merger. Accordingly, the financial
forecast does not give effect to the proposed Merger and does
not reflect any benefits that might be realized by Holdings and
PacifiCorp upon consummation of the Merger. Copies of the five
year business plan were provided to each of Salomon Brothers,
Smith Barney and CS First Boston in connection with their
engagements by PacifiCorp or Pacific Telecom, as the case may
be.
Certain Important Caveats and Limitations. Financial
forecasts involve estimates as to the future which,
notwithstanding the fact that they are presented with numeric
specificity, may or may not prove to be accurate. The
financial forecast set forth below reflects numerous
assumptions as to industry performance, general business and
economic conditions, regulatory and legal requirements, taxes
and other matters, many of which are beyond the control of
Pacific Telecom. Similarly, these materials assume certain
future business decisions which are subject to change. Among
other things, the financial forecast assumes the ability of
Pacific Telecom to consummate future acquisitions in the rural
telecommunications business which have not been identified. As
discussed elsewhere in this Proxy Statement and in the 1994
Form 10-K incorporated herein by reference, Pacific Telecom is
actively seeking acquisitions which could occur earlier or
later than forecasted, or not at all. Moreover, Deloitte &
Touche LLP, independent auditors for Pacific Telecom, have not
examined, compiled or applied agreed-upon procedures to the
financial forecast set forth below and, consequently, assume no
responsibility therefor. In addition, no other independent
expert has reviewed any of these materials.
There can be no assurance that the results predicted
by the financial forecast set forth below will be realized.
Actual results will vary from those represented by the
financial forecast, and those variations may be material. The
inclusion of the financial forecast should not be regarded as a
representation by Pacific Telecom or any other person that the
forecasted results will be achieved. Recipients of this Proxy
Statement are cautioned to consider carefully the foregoing and
the notes and assumptions set forth below while reviewing the
financial forecast. In addition, Pacific Telecom has not
updated the forecast to reflect developments occurring after
January 21, 1995, the date the forecast was prepared. Pacific
Telecom does not intend to update or publicly revise the
forecast.
Background. Pacific Telecom completed the acquisition of
local exchange assets in Colorado from USWC in February 1995
and anticipates completing the acquisition of additional local
exchange assets from USWC in Oregon and Washington before the
end of 1995. In addition, Pacific Telecom has an agreement
to sell the stock of Alascom to AT&T. Pacific Telecom
anticipates closing this sale during the first half of 1995.
Financial forecast information reflecting these transactions
and other material transactions enumerated under "Summary of
Significant Forecast Assumptions" are presented below. See
Item 1. "Business--Telecommunications Operations--Alaska
Market Restructuring" and Note 16 "Pending Sale of Alascom,
Inc." of the notes to the consolidated financial statements
contained in the 1994 Form 10-K, which is incorporated herein
by reference, for additional information relating to the
pending sale of Alascom. See Item 1. "Business--
Telecommunications, Operations--Local Exchange Companies"
contained in the 1994 Form 10-K, which is incorporated herein
by reference, for additional information relating to the
acquisitions of local exchange assets from USWC.
Forecast Consolidated Statements of Income
<TABLE>
<CAPTION>
Forecast
Historical ------------------------------------------
Year Ending December 31, 1994 1995 1996 1997 1998 1999
- --------------------------------------------------------------------------------------
(Unaudited, in millions except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Local network service $ 97.0 $121.6 $152.5 $159.6 $181.3 $190.7
Network access service 168.5 256.5 317.9 328.5 368.2 376.0
Long distance and private
line service 330.2 112.6 -- -- -- --
Cellular and other 109.3 118.8 136.4 151.2 168.3 183.1
----- ----- ----- ----- ----- -----
Total operating revenues 705.0 609.5 606.8 639.3 717.8 749.8
----- ----- ----- ----- ----- -----
Operating expenses:
Plant support 144.3 124.8 108.2 112.5 123.0 126.7
Depreciation and amortization 100.9 106.2 129.7 136.3 157.1 164.0
Access expense 92.9 38.0 -- -- -- --
Other operating expense 53.9 53.6 56.0 58.6 65.1 67.7
Customer operations 72.8 63.8 59.1 61.0 66.6 69.2
Administrative support 75.6 75.8 70.4 69.9 72.0 73.5
----- ----- ----- ----- ----- -----
Total operating expenses 540.4 462.2 423.4 438.3 483.8 501.1
----- ----- ----- ----- ----- -----
Operating income 164.6 147.3 183.4 201.0 234.0 248.7
----- ----- ----- ----- ----- -----
Other income (expense):
Interest expense (34.8) (38.4) (58.7) (57.1) (65.0) (60.0)
Gain on sale of Alascom -- 75.2 -- -- -- --
Other (7.6) (4.0) (6.3) (4.6) (2.6) 0.8
----- ----- ----- ----- ----- -----
Total other income
(expense)--net (42.4) 32.8 (65.0) (61.7) (67.6) (59.2)
----- ----- ----- ----- ----- -----
Income before income taxes 122.2 180.1 118.4 139.3 166.4 189.5
Income taxes 40.8 41.6 46.0 54.4 65.7 75.2
----- ----- ----- ----- ----- -----
Net income $ 81.4 $138.5 $ 72.4 $ 84.9 $100.7 $114.3
Net income per share $ 2.05 $3.50 $1.83 $2.14 $2.54 $2.88
</TABLE>
Forecast Consolidated Balance Sheets
<TABLE>
<CAPTION>
Forecast
Historical ------------------------------------------------
December 31, 1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------
(Unaudited, in millions)
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash $ 9.9 $ 6.5 $ 6.5 $ 6.5 $ 6.5 $ 6.5
Accounts receivable 110.8 56.8 60.8 62.5 65.1 67.1
Inventory -- North
Pacific Cable 62.8 54.2 45.3 36.5 23.3 14.5
Material and supplies 14.8 11.5 21.7 22.1 28.7 29.0
Other 16.0 11.1 11.2 11.3 11.4 11.5
-------- -------- -------- -------- -------- --------
Total current assets 214.3 140.1 145.5 138.9 135.0 128.6
Investments 123.6 120.0 121.6 123.8 130.0 140.2
Net plant in service 825.5 1,050.7 1,086.3 1,174.0 1,177.3 1,145.4
Intangible and other assets 279.6 543.6 527.9 576.2 557.3 535.6
-------- -------- -------- -------- -------- --------
Total assets $1,443.0 $1,854.4 $1,881.3 $2,012.9 $1,999.6 $1,949.8
Liabilities and Capitalization
Current liabilities:
Currently maturing
long-term debt $ 15.6 $ 6.9 $ 7.0 $ 7.2 $ 18.2 $ 8.0
Notes payable 21.7 121.4 111.0 90.4 73.2 26.4
Accounts payable 69.5 60.3 60.1 60.6 60.9 61.1
Other 68.3 45.7 52.9 53.4 58.6 59.2
-------- -------- -------- -------- -------- --------
Total current liabilities 175.1 234.3 231.0 211.6 210.9 154.7
Long-term debt 377.0 666.5 675.4 800.7 746.0 701.0
Deferred income taxes and
unamortized investment
tax credits 109.8 115.5 116.3 118.2 113.3 106.8
Other long-term liabilities 113.3 84.2 85.3 79.0 81.4 82.9
Shareholders' equity 667.8 753.9 773.3 803.4 848.0 904.4
-------- -------- -------- -------- -------- --------
Total liabilities and
capitalization $1,443.0 $1,854.4 $1,881.3 $2,012.9 $1,999.6 $1,949.8
</TABLE>
Forecast Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Forecast
Historical -----------------------------------------------
Year Ending December 31, 1994 1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------------------
(Unaudited, in millions)
<S> <C> <C> <C> <C> <C> <C>
Cash Flows from Operating
Activities:
Net income $ 81.4 $138.5 $ 72.4 $ 84.9 $100.7 $114.3
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 107.8 113.5 137.0 143.5 163.7 170.6
Deferred income taxes and
investment tax
credits, net (62.3) (1.1) 3.4 4.3 (2.4) (3.9)
Gain on sale of Alascom -- (75.2) -- -- -- --
Other 14.4 (13.1) (8.9) (7.8) (7.9) (8.0)
------ ------ ------ ------ ------ ------
Net cash provided by
operating activities 141.3 162.6 203.9 224.9 254.1 273.0
------ ------ ------ ------ ------ ------
Cash Flows from Investing
Activities:
Construction expenditures (148.2) (127.5) (153.8) (115.9) (142.8) (119.0)
Cost of assets acquired -- (625.7) -- (165.6) -- --
Investments in and advances
to affiliates (4.7) (2.7) 4.0 5.9 5.4 5.5
Proceeds from sales of assets 122.6 261.6 0.4 0.4 0.4 0.4
------ ------ ------ ------ ------ ------
Net cash used by investing
activities (30.3) (494.3) (149.4) (275.2) (137.0) (113.1)
------ ------ ------ ------ ------ ------
Cash Flows from Financing
Activities:
Increase (decrease) in
short-term debt (3.2) 74.7 (10.4) (20.6) (17.2) (46.8)
Proceeds from issuance of
long-term debt 8.0 436.2 14.9 165.5 10.2 --
Dividends paid (52.3) (52.3) (53.1) (54.6) (56.3) (57.9)
Payments of long-term debt (58.5) (129.3) (5.9) (40.0) (53.8) (55.2)
------ ------ ------ ------ ------ ------
Net cash provided (used)
by financing activities (106.0) 329.3 (54.5) 50.3 (117.1) (159.9)
------ ------ ------ ------ ------ ------
Increase (Decrease) in Cash
and Temporary Cash
Investments 5.0 (2.4) -- -- -- --
Cash and Temporary Cash
Investment at Beginning
of Year 4.9 8.9 6.5 6.5 6.5 6.5
------ ------ ------ ------ ------ ------
Cash and Temporary Cash
Investments at End of Year $ 9.9 $ 6.5 $ 6.5 $ 6.5 $ 6.5 $ 6.5
</TABLE>
Summary of Accounting Policies and
Significant Assumptions for the Financial Forecast
1. Summary of Significant Accounting Policies -- The forecast
financial statements have been prepared using accounting
principles and policies generally consistent with those
used by Pacific Telecom in its historical financial
presentations for the year ended December 31, 1994. See
Note 1. "Summary of Significant Accounting Policies" in
the notes to the consolidated financial statements
contained in the 1994 Form 10-K, which is incorporated
herein by reference.
2. Summary of Significant Forecast Assumptions
a. General Assumptions -- As noted above, the financial
forecast was prepared as part of Pacific Telecom's
normal budgeting process, assuming Pacific Telecom
would remain an 86.6 percent owned subsidiary of
Holdings for the entire forecasted period. The
forecast was prepared prior to the completion of the
1994 consolidated financial statements and,
therefore, the initial basis for the financial
forecast was not the historical statements for 1994.
Variations from historical 1994 results and balances
in the forecast's initial basis do not have a
material effect on the information presented in the
five-year forecast.
b. Disposition of Alascom, Inc. -- The forecast assumes
that Pacific Telecom will close the sale of Alascom
to AT&T at the end of May 1995. After-tax proceeds
from the sale were estimated at $256 million.
Management has assumed that Pacific Telecom will
recognize a $74 million after-tax gain from the sale.
Proceeds will be used to finance the acquisitions of
assets from USWC in Colorado, Oregon and Washington.
(See "Acquisition Assumptions" below.) Alascom's
results of operations are included in the 1994
historical amounts and the 1995 forecast through May
1995 as follows (in millions):
1994 1995
Actual Forecast
------- --------
Operating Revenues $343.5 $135.1
Operating Expenses 262.8 111.3
Operating Income $ 80.7 $ 23.8
EBITDA* $115.4 $ 37.6
* EBITDA - Earnings before interest, taxes,
depreciation and amortization.
c. Acquisition Assumptions -- Pacific Telecom closed the
acquisition of local exchange assets from USWC in
Colorado in February 1995 at a purchase price of $200
million. In the forecast, management has assumed
that substantially all of the purchase price was
borrowed at an average interest rate of 6.5 percent
to fund the acquisition. These borrowings were
assumed to be repaid at the end of May 1995 with
proceeds from the sale of Alascom. In the forecast,
the purchase of the USWC assets in Oregon and
Washington was assumed to close at the end of June
1995 at a final adjusted purchase price of $170
million. Management has assumed Pacific Telecom
would borrow an additional $106 million to complete
the funding for the purchase of these local exchange
assets at an assumed average interest rate of 6.5
percent. This interest rate assumes financing
through short-term, floating-rate debt. In 1993,
Pacific Telecom lowered its debt balances by retiring
debt with proceeds received from the sale of Pacific
Telecom's international operations. The actual
timing of the closings for the Oregon and Washington
asset acquisitions is dependent upon the receipt of
certain regulatory approvals, a process over which
Pacific Telecom has no control. Consequently, the
closings may occur later than anticipated.
The five-year forecast also assumes that Pacific
Telecom will acquire additional local exchange assets
serving access lines in rural and suburban areas for
$268 million and $166 million in cash at the end of
1995 and 1997, respectively. The forecast assumes
that the financial results from operations of these
unidentified acquisitions will be similar to other
known acquisition opportunities that Pacific Telecom
is currently evaluating. Long and short-term
borrowings with an assumed average interest rate of
8.1 percent are assumed to be used to finance the
acquisitions. Should Pacific Telecom not be
successful in completing these unidentified
acquisitions, forecast amounts would be (in
millions):
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Operating Revenues $609.5 $533.8 $563.3 $594.9 $624.5
Operating Income 147.3 153.4 168.7 182.1 195.5
Net Income 138.5 69.7 80.5 92.5 103.9
EBITDA 253.5 262.7 284.1 305.6 325.4
Debt 526.8 510.6 474.0 427.9 363.4
Equity 753.9 770.6 796.4 832.6 878.7
Cash Provided by
Operations 162.6 182.0 193.8 207.1 220.7
Construction Expenditures 127.5 117.1 108.7 112.1 105.8
</TABLE>
d. Access Line Growth -- Management has assumed that
internal access line growth of between 4.5 percent
and 5.0 percent, annually for its combined local
exchange operations, will continue throughout the
five-year forecast. Pacific Telecom has experienced
this level of access line growth for the past six
years.
e. Operating Revenues and Expenses -- For Pacific
Telecom's existing local exchange operations, the
operating revenues and expenses have been estimated
for the next five years using projections of
historical results, adjusted for access line growth,
the effects of increases due to assumed general
inflation of 3.0 percent to 3.5 percent, annually and
certain planned operating efficiencies. Management
has assumed that the regulatory environment in which
it operated in 1994 will continue to exist through
1999 and that competition within its service areas
will not increase significantly. Management has
assumed that future legislative changes regarding the
telecommunications regulatory structure will not
abandon interstate support for the higher cost rural
areas. To the extent there are changes in the
support mechanisms, management has assumed that
Pacific Telecom can successfully pursue rate
rebalancing on a revenue neutral basis. Although the
five-year forecast assumptions do not include new
revenues that might arise from technological changes,
management has assumed that future technological
changes may result in opportunities to develop new
services which will generate additional revenues to
help offset changes, if any, in the high cost support
mechanisms that Pacific Telecom may not recover
through rate rebalancing from interstate to state
jurisdictions. For the areas served by the newly
acquired local exchange assets, revenue estimates are
based on the number of access lines served by the
assets and an estimate of the minutes of use those
lines would generate. The resulting usage estimate
is then multiplied by the rate element assumed to be
adopted by Pacific Telecom at the closing of the
acquisitions. This rate element is based either on
estimated revenue requirement calculations or on
existing rates for the entity selling the assets.
The forecast assumes no material revenue increases as
a result of rate case activity. Any adjustments to
rates resulting from the current rate proceeding in
Wisconsin or in the rate proceeding scheduled for
Colorado in three years are assumed to be revenue
neutral.
Operating expenses for the acquired assets were
developed by estimating the necessary staffing
requirements to support their unique service and
geographic territories. In addition, expenses were
estimated based upon Pacific Telecom's experience as
a local telephone service provider in similar
geographic areas and its experiences in completing
similar acquisitions of comparable size.
f. Construction Expenditures -- Management has assumed a
normal managed construction program to replace and
upgrade property as needed due to retirement or
obsolescence with expenditures of $92.6 million in
1995, $97.3 million in 1996, $92.9 million in 1997,
$96.3 million in 1998 and $92.2 million in 1999. In
the areas where Pacific Telecom plans to acquire
additional local exchange assets, management has
assumed that construction expenditures will be
necessary to upgrade systems to meet service
requirements established by governing regulatory
authorities and to meet the service standard
maintained by Pacific Telecom. These expenditures
are assumed to total $34.9 million in 1995, $56.5
million in 1996, $23.0 million in 1997, $46.5 million
in 1998 and $26.8 million in 1999.
g. North Pacific Cable --The forecast assumes that
Pacific Telecom will be successful in either selling
the remaining capacity on the North Pacific Cable, or
using its available, unsold capacity to develop a
business in the international high-quality television
transmission market. The North Pacific Cable
experienced an outage in February 1995 after this
financial forecast was prepared. While the cable
system has returned to operation, the cause of the
outage is still under investigation. The results of
that investigation may have an impact on Pacific
Telecom's ability to fully recover its remaining
$62.8 million investment in the North Pacific Cable.
h. Cellular Operations -- Cellular operations were
assumed to grow consistent with the cellular
industry's customer penetration estimates. Customer
growth was assumed to average 24 percent annually
over the next five years. Management plans to manage
its pricing structure and vertical service offerings
to stabilize average monthly customer revenue. The
forecast assumes no expenditures for pursuit or
integration of Personnel Communications Systems
("PCS") licenses. Management has assumed that the
impact of competition by PCS providers will be
minimal in the five-year forecast period due to
delays in the bidding process and the time required
by the successful bidders to build competing PCS
systems. In the interim, management intends to
digitize part of its cellular network to reduce its
unit cost structure so that its cellular operations
can be cost competitive with other wireless options.
The forecast assumed ongoing ownership of
noncontrolled properties and no impairment of
cellular investments.
However, in those cellular markets where Pacific
Telecom owns a minority interest, managing cellular
operations to avoid such impairments is beyond
Pacific Telecom's control.
i. Interest Rates -- Management has assumed that it can
borrow funds to finance its acquisition and
construction programs and repay outstanding debt as
it matures using internally generated funds and funds
available under its existing unissued Series B
Medium-Term Note program ($75.5 million unissued at
December 31, 1994), a new $150 million Series C
Medium-Term Note program commencing at the end of
1995 and the $300 million revolving credit agreement.
Interest rates on borrowings to fund the acquisitions
of local exchange assets are enumerated in "Note 2c"
above. Management has assumed that the weighted
average interest rate on its outstanding floating and
fixed rate debt at December 31, 1994 of 7.6 percent
can be maintained though the five-year forecast
period for debt other than debt incurred for newly
acquired assets.
j. Income Taxes -- The statutory federal income tax rate
was assumed to remain at 35 percent throughout the
forecast period. In the 1995 forecast, the effective
tax rate was estimated at 23.1 percent. This rate is
low because Pacific Telecom's assumed tax basis in
Alascom at closing is expected to be slightly less
than the selling price of the Alascom stock. Pacific
Telecom's basis in Alascom increased as a result of
the FCC ordered transition payments of $150 million
by AT&T to Alascom.
k. Average Shares Outstanding and Dividend Payments --
No equity issuances have been assumed during the
forecast period. Earnings per share were calculated
based on 39,620,000 average shares outstanding for
each forecast year. The financial forecast for
dividend payments assumed no increase in the dividend
during 1995, a $.02 per share increase in 1996 and
$.04 per share increases each year for 1997, 1998 and
1999.
THE MERGER AGREEMENT
General
Pacific Telecom has entered into the Merger Agreement
attached to this Proxy Statement as Exhibit A with Holdings and
Merger Sub, pursuant to which Merger Sub will be merged with
and into Pacific Telecom with Pacific Telecom as the
corporation surviving the Merger. Merger Sub is a Washington
corporation with its principal executive offices located at 700
NE Multnomah, Suite 1600, Portland, Oregon 97232. Merger Sub
was incorporated by Holdings as a wholly owned subsidiary to
effect the Merger, and it is not anticipated that Merger Sub
will conduct any business prior to the Merger. See
"Information Concerning Holdings and PacifiCorp and Their
Directors and Executive Officers" for information about
Holdings and PacifiCorp.
At the time Pacific Telecom, Holdings and Merger Sub
entered into the Merger Agreement, PacifiCorp and Pacific
Telecom also entered into the PacifiCorp Agreement pursuant to
which PacifiCorp made certain representations and warranties
and agreed to undertake certain obligations with respect to the
Merger.
The following description is a summary of the
material provisions of the Merger Agreement and the PacifiCorp
Agreement, does not purport to be complete and is qualified in
its entirety by reference to the Merger Agreement, a copy of
which is attached as Exhibit A to this Proxy Statement and is
incorporated herein by reference. A copy of the PacifiCorp
Agreement is included as Exhibit A to the Merger Agreement.
Shareholders are urged to read carefully the Merger Agreement
and the PacifiCorp Agreement.
Effective Time
At the Effective Time, which will occur as soon as
practicable following the satisfaction or waiver of certain
conditions, as described below, Merger Sub will merge with and
into Pacific Telecom with Pacific Telecom being the surviving
corporation after the Merger, each outstanding share of PTI
Common Stock held by Holdings will be cancelled, each
outstanding share of PTI Common Stock held by the Minority
Shareholders will be converted into the right to receive the
Merger Consideration and each outstanding share of Merger Sub
Stock will be converted into one share of PTI Common Stock.
Thus, after the Merger, Pacific Telecom will be a wholly owned
subsidiary of Holdings and the Minority Shareholders will have
no continuing interest in Pacific Telecom.
Conversion of Shares; Surrender of Stock Certificates; Payment
for Shares
As a result of the Merger, each share of PTI Common
Stock held by a Minority Shareholder at the Effective Time
(other than shares as to which
dissenters' rights are perfected) will be converted into the
right to receive $30.00 in cash.
Promptly after the Effective Time, there will be sent
to each Minority Shareholder of record (other than those
shareholders holding shares as to which dissenters' rights are
perfected) a letter of transmittal advising such shareholder of
the procedures for surrendering the certificates representing
shares of PTI Common Stock to the Payment Agent designated by
Holdings in accordance with the Merger Agreement. At or prior
to the Effective Time, Holdings shall cause the Payment Agent
to receive the funds necessary to make the payments of the
Merger Consideration to Minority Shareholders, which funds may
not be used for any other purpose.
To receive the Merger Consideration, each shareholder
will be required to surrender to the Payment Agent the
shareholder's stock certificate or certificates, together with
a duly executed letter of transmittal and related
documentation. Certificates should not be surrendered until
the letter of transmittal is received.
If payment is to be made to a person other than the
one in whose name the certificate surrendered is registered, it
will be a condition of such payment that the stock certificate
surrendered is properly endorsed or otherwise in proper form
for transfer and that the person requesting such payment shall
pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of the
certificate surrendered or establish to the satisfaction of the
Payment Agent that such taxes have been paid or are not
applicable. Other than as described above, no service charges,
brokerage commissions or transfer taxes will be payable by
Minority Shareholders in connection with the surrender of their
shares of PTI Common Stock. No interest will be paid or
accrued on the cash payable upon surrender of the certificate
or certificates, and after the Effective Time no dividends will
be paid to, or accrued for the benefit of, former holders of
PTI Common Stock. From and after the Effective Time, holders
of certificates formerly representing PTI Common Stock will
cease to have any rights with respect to such shares, except
the right to receive the amount of cash into which such shares
were converted in the Merger and any rights provided by law.
Upon the surrender and exchange of a certificate to
the Payment Agent, the holder will be paid the amount of cash
to which such holder is entitled under the Merger Agreement,
less any amount required to be withheld under applicable
federal income tax withholding regulations. A shareholder who
is a U.S. citizen and resident (other than a corporation) may
be able to avoid such withholding with respect to payment for
his or her shares by providing the Payment Agent with a correct
taxpayer identification number in accordance with the
instructions in the letter of transmittal. See "Special
Factors--Certain Federal Income Tax Consequences of the Merger."
Representations and Warranties
General
The Merger Agreement contains representations and
warranties by each of Pacific Telecom, Holdings and Merger Sub
with respect to, among other things, corporate organization,
corporate authority, the absence of required consents and
approvals and the nonoccurrence of defaults under existing
agreements and the accuracy and completeness of information to
be supplied by such party for inclusion in this Proxy Statement
and the Schedule 13E-3.
The Merger Agreement contains additional
representations of Pacific Telecom with respect to, among other
things, its capitalization, the accuracy of information
contained in and compliance with applicable requirements with
respect to its prior filings with the SEC, the absence of
certain material adverse changes since September 30, 1994, the
absence of any fees payable to brokers or finders other than as
disclosed therein and the receipt by the Special Committee of
opinions regarding the fairness of the Merger Consideration,
from a financial point of view, to Minority Shareholders. The
Merger Agreement also contains a representation by Holdings
that it has available to it the funds necessary to consummate
the Merger. The Merger Agreement also contains a
representation that Holdings and Merging Sub have determined
that the Merger is fair to the Minority shareholders.
The PacifiCorp Agreement contains representations and
warranties of PacifiCorp with respect to, among other things,
corporate organization, corporate authority, the absence of
required consents and approvals and the accuracy and
completeness of information to be supplied by it for inclusion
in this Proxy Statement and the Schedule 13e-3. The PacifiCorp
Agreement also contains a representation that PacifiCorp has
determined that the Merger is fair to the Minority
Shareholders.
Offers, Proposals and Intention To Sell
The Merger Agreement contains a representation by
Holdings that, since January 1, 1993, to the best of its
knowledge after due inquiry, none of PacifiCorp, Holdings or
Merger Sub has received any "proposal" or offer to purchase, or
solicited any proposal or offer to purchase, any material
portion of the stock or assets of Pacific Telecom, other than
transactions previously disclosed in Pacific Telecom's filings
with the SEC. For purposes of that representation, a
"proposal" may have been either written or oral, but must have
included a proposed or suggested price or possible range of
prices and, if made on behalf of a corporation, must have been
made by a responsible officer or representative of that
corporation. In the Merger Agreement, Holdings also represents
that neither it nor PacifiCorp has any current plan or intent
to sell or otherwise dispose of any
material portion of the stock or assets of PTI, other than
transactions disclosed in Pacific Telecom's prior filings with
the SEC. The PacifiCorp Agreement contains identical
representations made by PacifiCorp.
Covenants
The Merger Agreement contains mutual covenants
pursuant to which Holdings, Pacific Telecom and Merger Sub have
agreed to use their respective best efforts to obtain any
necessary consents, permits, authorizations, approvals and
waivers to permit consummation of the Merger and to cooperate
in determining the need for and in making or obtaining any
required filings, consents, permits, authorizations, approvals
and waivers. Holdings and Pacific Telecom have also agreed to
give prompt notice to the other of (i) any claims, actions,
proceedings or investigations commenced or, to the best
knowledge of the notifying party, threatened, involving or
affecting the notifying party or its assets that relate to the
Merger, (ii) the occurrence or failure to occur of any event
that would be likely to cause any representation or warranty of
the notifying party contained in the Merger Agreement to be
inaccurate in any material respect; and (iii) any material
failure of the notifying party to comply with or satisfy any
covenant or condition under the Merger Agreement. The
PacifiCorp Agreement contains similar covenants on the part of
PacifiCorp.
Pacific Telecom has agreed, subject to certain
specified exceptions or except as approved in writing by
Holdings, to conduct its business and the business of its
subsidiaries prior to the Effective Time in the ordinary course
and consistent with past practice and that, during the period
prior to the Merger, neither it nor any of its subsidiaries
will (i) propose or adopt any amendments to their articles of
incorporation or bylaws or make any change in Pacific Telecom's
board of directors except to increase the size of the board to
accommodate the nominees of Holdings; (ii) issue, sell or
repurchase any shares of their capital stock; or other
securities; enter into any agreement, understanding or
arrangement with respect to the issuance, purchase or voting of
shares of their capital stock, or adjust, split, combine or
reclassify any securities or make any other changes in capital
structure; (iii) declare, set aside or pay any dividend or make
any other distribution with respect to Pacific Telecom's
capital stock, other than regular quarterly cash dividends not
to exceed $.33 per share; (iv) grant any severance or
termination pay (other than pursuant to policies or agreements
in effect on the date of the Merger Agreement) or increase
benefits payable under severance or termination pay policies in
effect on the date of the Merger Agreement; or (v) except for
salary increases or other employee benefit arrangements made in
the ordinary course of business, adopt or amend any employee
benefit plan, agreement or arrangement. Pacific Telecom has
also agreed (i) not to solicit, initiate or encourage
submission of proposals or offers from any person relating to
an acquisition of all or a substantial portion of the assets of
or equity interest in Pacific Telecom or any of its
subsidiaries (other than sales of insubstantial assets in the
ordinary course of business or sales disclosed in prior filings
with the SEC) or
business combination with PTI or any of its subsidiaries or,
subject to fiduciary duties under applicable law as advised by
counsel, participate in any negotiations regarding or furnish
to any other person any information with respect to or
otherwise cooperate in any way with any person with respect to
any such proposal or offer; (ii) not to settle or compromise
any claim for dissenters' rights without the prior written
consent of Holdings; (iii) to give and to cause its
subsidiaries to give to Holdings and Merger Sub and their
respective representatives full access to the premises, books
and records of Pacific Telecom and its subsidiaries and such
other information reasonably requested by Holdings; and (iv) to
take all actions requested by Holdings to cause to be elected
to Pacific Telecom's Board of Directors the nominees designated
by Holdings.
Holdings has agreed to honor, in accordance with its
terms as in effect on the date of the Merger Agreement, the
Pacific Telecom Executive Officer Severance Plan. Holdings has
also agreed not to take any action to cause Pacific Telecom to
make any dividend or other distribution to Holdings with
respect to Holdings' PTI Common Stock otherwise than in
accordance with Pacific Telecom's existing dividend policies.
The PacifiCorp Agreement contains the same covenant with
respect to Pacific Telecom dividends on the part of PacifiCorp.
Indemnification of Officers and Directors
The Merger Agreement provides that Pacific Telecom
will maintain, and that Holdings agrees to cause Pacific
Telecom to maintain, for six years after the Effective Time,
for the benefit of current directors and officers of Pacific
Telecom, (i) director and officer liability insurance providing
at least the same amounts and coverage as the policies
currently in effect; provided, however, that if the cost of
maintaining such insurance exceeds the current cost related to
providing such insurance by more than twice the current cost of
such insurance, Pacific Telecom will maintain such insurance
with the maximum amount of coverage obtainable at twice such
current cost, and (ii) all rights to indemnification existing
in favor of the current directors and officers of Pacific
Telecom and its subsidiaries as provided in their respective
articles of incorporation or bylaws in effect on the date of
the Merger Agreement, in each case with respect to acts or
omissions occurring before the Effective Time (and certain
Merger related events occurring thereafter).
Pursuant to the PacifiCorp Agreement, PacifiCorp has
agreed to indemnify the current officers and directors of
Pacific Telecom with respect to acts or omissions occurring
before the Effective Time (and certain Merger related events
occurring thereafter) to the full extent a corporation is
permitted under Washington law to indemnify its own directors
and officers.
Conditions to the Merger
The respective obligations of Holdings and Merger
Sub, on the one hand, and Pacific Telecom, on the other hand,
to consummate the Merger are subject to certain conditions,
including the following: (i) approval of the Merger Agreement
and the Merger by the affirmative vote of a majority of the
outstanding shares of PTI Common Stock held by Minority
Shareholders and by two-thirds of the outstanding shares of PTI
Common Stock and (ii) consummation of the Merger not being
prohibited by any order or injunction and the absence of any
legal action, statute or rule that would make illegal the
consummation of the Merger.
The obligation of Pacific Telecom to consummate the
Merger is subject to the satisfaction or waiver of certain
additional conditions, including that (i) the representations
and warranties of Holdings and Merger Sub in the Merger
Agreement shall be correct in all material respects on the date
of the Merger Agreement and on the Closing Date (as defined in
the Merger Agreement), Holdings and Merger Sub have performed
in all material respects their obligations to be performed
under the Merger Agreement at or prior to the Effective Time
and Pacific Telecom shall have received certificates to that
effect executed on behalf of Holdings and Merger Sub by an
executive officer; (ii) the representations and warranties of
PacifiCorp in the PacifiCorp Agreement shall be correct in all
material respects on the date of the Merger Agreement and on
the Closing Date, PacifiCorp has performed in all material
respects its obligations to be performed under the PacifiCorp
Agreement at or prior to the Effective Time and Pacific Telecom
shall have received a certificate to that effect executed on
behalf of PacifiCorp by an executive officer; (iii) no
governmental action or proceeding shall have been commenced
seeking to prohibit the consummation of the Merger that in the
opinion of the Special Committee's counsel is more likely than
not to be successful and (iv) Pacific Telecom shall have
obtained all consents, approvals, permits
and authorizations required to be obtained in connection with
the Merger, except those that the failure to obtain would not
have a material adverse effect on the business, operations,
financial condition or prospects of Pacific Telecom and its
subsidiaries, taken as a whole.
The obligations of Holdings and Merger Sub to
consummate the Merger are subject to certain additional
conditions, including that (i) the representations and
warranties of Pacific Telecom are correct in all material
respects on the date of the Merger Agreement and on the Closing
Date, Pacific Telecom has performed in all material respects
its obligations to be performed under the Merger Agreement at
or prior to the Effective Time and Holdings and Merger Sub
shall have received a certificate to that effect executed on
behalf of Pacific Telecom by an executive officer; (ii) no
governmental action or proceeding shall have been commenced
seeking to prohibit the consummation of the Merger that in the
opinion of Holdings' counsel is more likely than not to be
successful; (iii) Holdings and Merger Sub shall have obtained
all consents, approvals, permits and authorizations required to
be obtained in connection with the Merger, except those that
the failure to obtain would not have a material adverse effect
on the business, operations, financial condition or prospects
of Pacific Telecom and its subsidiaries, taken as a whole; and
(iv) except as disclosed to Holdings prior to the date of the
Merger Agreement or in filings with the SEC, there shall not
have been any change or event since September 30, 1994 that has
resulted or may result in a material adverse change with
respect to Pacific Telecom and its subsidiaries, taken as a
whole.
It will not be known until immediately prior to the
Effective Time whether all of the above conditions will have
been satisfied. As described below, each of the parties to the
Merger Agreement may, at its option, waive compliance with any
condition of its obligation to consummate the Merger.
Waiver, Amendment and Termination
Any provision of the Merger Agreement may be waived
at any time by the party that is, or whose shareholders are,
entitled to the benefits of that provision. Except for the
provisions relating to indemnification and insurance with
respect to Pacific Telecom's directors and officers following
the Merger, the Merger Agreement may be amended or supplemented
at any time, except that, after approval by the shareholders of
Pacific Telecom, no amendment may be made that decreases or
changes the form of the Merger Consideration or that in any
other way materially adversely affects the rights of the
Minority Shareholders (other than a termination of the Merger
Agreement) without the further approval of the Minority
Shareholders. Any waiver, amendment or supplement must be in
writing and signed by the party or parties intending to be
bound thereby.
The Merger Agreement may be terminated at any time
prior to the Effective Time, before or after the approval of
the shareholders of Pacific Telecom, (i) by mutual consent of
the respective Boards of Directors of Pacific Telecom and
Holdings; (ii) by Holdings or Pacific Telecom if the Merger has
not been consummated by September 30, 1995 (provided the
terminating party's failure to fulfill any obligation under the
Merger Agreement may not have been a significant cause of the
failure to consummate the Merger); (iii) by Holdings or Pacific
Telecom if the other party shall have materially breached any
representation or warranty or failed to comply in any material
respect with any covenant under the Merger Agreement; (iv) by
Holdings or Pacific Telecom if the consummation of the Merger
is prohibited by any final, nonappealable order, decree or
injunction; (v) by Holdings or Pacific Telecom if the
shareholders of Pacific Telecom fail to approve the Merger
Agreement and the Merger; and (vi) by Holdings or Merger Sub if
the Special Committee or the Board of Directors of Pacific
Telecom shall have withdrawn or modified, in any manner adverse
to Holdings or Merger Sub, its recommendation or approval of
the Merger or the Merger Agreement. See "Special Factors--
Conditions to the Merger" for conditions to the obligations of
the parties to consummate the Merger.
Fees and Expenses
The Merger Agreement provides that all costs and
expenses incurred in connection with the transactions
contemplated thereby will be paid by the party incurring such
expenses, whether or not the Merger is consummated.
MARKET PRICE AND DIVIDEND INFORMATION
FOR PTI COMMON STOCK
PTI Common Stock is traded over the counter under
Nasdaq National Market Symbol PTCM. As of _____________, 1995,
there were __________ shareholders of record.
The following table shows the high and low sale
prices for PTI Common Stock as reported by the Nasdaq National
Market and cash dividends declared for each period indicated.
On November 2, 1994, PacifiCorp and Pacific Telecom announced
the Initial Offer. The high and low sale prices on November 1,
1994 were $24 3/4 and $23 3/4, respectively, and the last
reported sale price was $24 1/4. On March 9, 1995, Pacific
Telecom announced the signing of the Merger Agreement. On
March 8, 1995, the high and low sale prices were $31 1/8 and
$29 3/8, respectively and the last reported sale price was $31
1/8. Shareholders are urged to consult publicly available
sources for current market quotations for their shares.
Quarterly High and Low Sale Prices
<TABLE>
<CAPTION
Quarterly
High Low Dividend
<S> <C> <C> <C>
1995
First Quarter $31 5/8 $29 1/2 $.33
1994
First Quarter 27 22 1/2 .33
Second Quarter 25 3/8 20 3/4 .33
Third Quarter 26 3/4 21 .33
Fourth Quarter 30 3/4 22 3/4 .33
1993
First Quarter 24 3/4 22 1/2 .33
Second Quarter 24 21 .33
Third Quarter 28 3/4 23 .33
Fourth Quarter 28 1/2 24 1/2 .33
</TABLE>
Pacific Telecom's ability to pay dividends on PTI
Common Stock is subject to restrictions under various loan
agreements. At _____________, 1995, approximately $__________
was available for the payment of dividends.
ELECTION OF DIRECTORS
At the Annual Meeting, ten directors are to be
elected to serve until their successors have been duly elected
and qualified, including four new directors proposed for
election by Holdings.
All properly executed proxies will be voted, unless
otherwise specified, for the nominees listed below. If events
not now known or anticipated make any of the nominees unable to
serve, the proxies will be voted, at the discretion of the
holders thereof, for other nominees supported by the management
of Pacific Telecom in lieu of those unable to serve.
The persons named in the proxy will vote your PTI
Common Stock for the election of the persons listed below to
serve as directors unless contrary instructions are received.
The directors will be elected to hold office until their
successors are elected and qualified. The following table
shows, as to each nominee, his or her name, age, other
positions and offices with Pacific Telecom, principal
occupation or employment for the past five years and the year
first elected a director of Pacific Telecom. See "Security
Ownership of Certain Beneficial Owners and Management" for
information concerning stock ownership by directors.
Information as to Nominees for Directors
The Board of Directors recommends a vote FOR the
election of these nominees as directors.
Current Directors
<TABLE>
<CAPTION>
Director
Name Age Principal Occupation Since
- ---- --- -------------------- --------
<S> <C> <C> <C>
Joyce E. Galleher+ 65 Secretary-Treasurer of JODI (real 1982
estate, equipment leasing),
Poulsbo, Washington
Roy M. Huhndorf*+ 54 President and Chief Executive 1991
Officer of Cook Inlet Region, Inc.
(native regional corporation),
Anchorage, Alaska
Donald L. Mellish*+ 67 Director and Chairman of the 1992
Executive Committee of the National
Bank of Alaska, Anchorage, Alaska
Charles E. Robinson* 61 Chairman, Chief Executive Officer 1982
and President of Pacific Telecom;
Chairman and Chief Executive
Officer from October 1990 to
December 1992; President and Chief
Executive Officer from April 1985
to October 1990; Chairman, Chief
Executive Officer and President of
Alascom, Inc.
Sidney R. Snyder+ 68 President, Sid's Super Market, 1973
Inc.; Washington State Senator,
Olympia, Washington
Nancy Wilgenbusch 47 President, Marylhurst College, 1990
Portland, Oregon; Director,
PacifiCorp
Holdings Nominees
Michael C. Henderson 48 President of Holdings since March
1995; Senior Vice President of
Holdings (1994-March 1995);
Director, President and Chief
Operating Officer (since 1993),
Executive Vice President (1992-
1993) and Senior Vice President
(1991-1992) of PacifiCorp Financial
Services, Inc.; Chief Executive
Officer of Crescent Foods, Inc.,
Seattle, Washington, 1986-1990
Nolan E. Karras 50 Investment Adviser, Karras &
Associates, Inc., an investment
advisory firm, Roy, Utah; Director,
PacifiCorp; Director, Holdings
Paul M. Lorenzini 54 Senior Vice President of PacifiCorp
since May 1994; President (1992-
1994) and Vice President (1989-
1992) of Pacific Power & Light
Company, formerly a division of
PacifiCorp
Verl R. Topham 60 Director, Senior Vice President and
General Counsel of PacifiCorp since
May 1994; President, Utah Power &
Light Company, formerly a division
of PacifiCorp, 1989-1994
______________________________
<FN>
* Member of the Executive Committee
+ Member of the Special Committee
</TABLE>
Information with Respect to Meetings and Committees
The Board of Directors has an Audit Committee and a
Personnel Committee, but does not have a nominating committee
or a compensation committee. The Audit Committee reviews the
independence of Pacific Telecom's independent auditors, the
work of internal auditors, the adequacy of internal controls,
the quality of financial reporting, accounting estimates
involving the use of significant management judgment and
Pacific Telecom's construction program. It also meets with the
independent auditors from time to time to discuss their audit
plans and to review their audit reports and findings. The
members of the Audit Committee are Messrs. Mellish and Snyder
and Dr. Wilgenbusch. Dr. Wilgenbusch is the chairperson of the
Audit Committee, which met four times in 1994.
The Personnel Committee of the Board of Directors
makes recommendations to the Board of Directors on compensation
issues, including salary levels for officers and management
compensation plans, and administers executive compensation
plans as authorized by the Board. The Committee currently
consists of three directors, Ms. Galleher and Messrs. Snyder
and Huhndorf, none of whom is a current or former officer or
employee of Pacific Telecom or any of its subsidiaries or
PacifiCorp or any of its subsidiaries. The Chairman of the
Personnel Committee, Mr. Huhndorf, attends meetings of the
PacifiCorp personnel committee in order to ensure coordination
of compensation decisions among PacifiCorp's business units.
The Personnel Committee met three times in 1994. See
"Executive Compensation--Personnel Committee Report on
Executive Compensation."
Each director attended at least 75 percent of the
aggregate of the meetings of the Board and the committees of
which they were members.
Director Compensation
Pacific Telecom's directors, other than Mr. Robinson,
are each paid $12,000 per year, $750 per board meeting and $900
for the chairperson or $750 for committee members for committee
meetings. In 1994, there were six meetings of the Board of
Directors. For information regarding additional compensation
paid to the members of the Special Committee, see "Special
Factors--Background of the Merger."
Under Pacific Telecom's Non-Employee Director Stock
Compensation Plan, directors of Pacific Telecom who are not
employees of Pacific Telecom or any of its subsidiaries or of
PacifiCorp or any of PacifiCorp's subsidiaries are awarded
approximately $37,500 worth of Pacific Telecom's Common Stock
every five years. Non-employee directors having fewer than
five years of service remaining before reaching retirement age
receive stock awards equivalent to approximately $7,500 for
each remaining year. The director's right to receive the stock
awarded under this provision of the plan accrues over the five-
year period following the award or shorter period to retirement
and unaccrued shares are forfeited if the recipient ceases to
be a director prior to the end of the five-year period.
Accrued shares vest upon the director's retirement and are
subject to forfeiture prior to retirement if the director (i)
fails to attend at least 50 percent of the meetings of the
Board of Directors or committee of which the director is a
member, (ii) is removed by the Board of Directors for cause, or
(iii) becomes a director of or is otherwise employed by a
competing entity. The shares awarded under the plan are
purchased in the open market with funds supplied by Pacific
Telecom, and the certificates representing the shares and the
dividends earned on the shares are then held by Pacific Telecom
until the shares vest. No awards were made pursuant to this
plan during 1994.
EXECUTIVE COMPENSATION
The following table sets forth information concerning
compensation for services in all capacities to Pacific Telecom
and its subsidiaries for fiscal years ended December 31, 1994,
1993 and 1992 of those persons who were, at December 31, 1994,
the Chief Executive Officer of Pacific Telecom and the other
four most highly compensated executive officers of Pacific
Telecom.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------- --------------------------------------------
Other Restricted Long-Term All
Annual Annual Stock Incentive Other
Name and Principal Position Salary Bonus Compensation(1) Award Payouts Compensation(2)
- --------------------------- ------ ------ --------------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles E. Robinson, 1994 $403,500 $322,800 $ -- $87,294(3) $ -- $10,691
President, Chief Executive 1993 387,500 232,500 -- 85,500(4) 185,865(5) 12,611
Officer and Chairman of 1992 375,000 -- -- -- 380,419(5) 12,006
the Board of Directors
James H. Huesgen, 1994 194,202 145,940 -- 55,125(3) -- 9,051
Executive Vice President and 1993 184,200 96,700 -- -- 111,967(5) 9,691
Chief Financial Officer 1992 175,850 -- 1,528 -- 209,696(5) 10,268
Donn T. Wonnell, 1994 154,103 83,351 -- 44,100(3) -- 8,726
Vice President and 1993 145,601 54,600 -- -- 53,742(5) 8,383
Corporate Secretary 1992 134,800 -- -- -- 42,762(5) 8,718
Donald A. Bloodworth, 1994 127,861 47,944 356 22,050(3) -- 8,511
Vice President, Revenue 1993 83,370 46,000 -- -- 22,392(5) 4,518
Requirements and Controller 1992 -- -- -- -- -- --
Wesley E. Carson, 1994 117,65 844,119 10 22,050(3) -- 8,433
Vice President, 1993 111,45 141,800 -- -- 35,001(5) 6,416
Human Resources 1992 101,050 -- -- -- 23,028(5) 6,536
___________________
<FN>
(1) Amounts shown for 1994 include (a) $10 of interest earned on deferred compensation
accounts in excess of 120 percent of the applicable federal long-term rate for each of
Messrs. Bloodworth and Carson, and (b) $346 in tax reimbursement for Mr. Bloodworth.
(2) Amounts shown for 1994 include (a) contributions to defined contribution plans of $7,500 for
each of Messrs. Robinson, Huesgen, Wonnell, Bloodworth and Carson, and (b) premiums on
term life insurance policies of $3,191, $1,551, $1,226, $1,011 and $933 for Messrs. Robinson,
Huesgen, Wonnell, Bloodworth and Carson, respectively.
(3) Restricted stock grants made in connection with the 1994 restatement of Pacific Telecom's
Long-Term Incentive Plan (the "Restated Plan"). Dividends are payable with respect to such
shares from the date of grant. At December 31, 1994, the aggregate value of all restricted
stock holdings held by Messrs. Robinson, Huesgen, Wonnell, Bloodworth and Carson, based
on the market value of the shares at December 31, 1994, without giving effect to the
diminution of value attributable to the restrictions on such stock, were $106,890, $67,500,
$54,000, $27,000 and $27,000, respectively.
(4) Restricted stock grant made in connection with the 1993 restatement of PacifiCorp's Long-
Term Incentive Plan, in which Mr. Robinson is a participant. Dividends are payable with
respect to such shares from the date of grant.
(5) Prior to its restatement, Pacific Telecom's Long-Term Incentive Plan had a four-year
performance cycle ending December 31, 1992. For that performance cycle, the performance
criteria were relative return on equity compared to an industry composite and earnings per
share growth. In connection with the adoption of the Restated Plan, Pacific Telecom
terminated the performance cycle that was to end December 31, 1994 and made prorated
awards in December 1993 for that performance cycle. The performance objectives for that
performance cycle were earnings per share growth and return on equity compared to a five-
year Treasury Bond rate.
</TABLE>
Severance Arrangements
Pacific Telecom adopted an Executive Officer
Severance Plan effective January 1, 1994 under which certain
executive officers of Pacific Telecom, including Messrs.
Robinson, Huesgen, Wonnell and Carson, will receive a severance
payment equal to twice the executive's total cash compensation
during the last full calendar year if their employment is
terminated. The severance payment will be made to the
executive in 24 equal monthly payments following the date of
the termination of his employment, and the payments may be
terminated by Pacific Telecom if the executive accepts
employment with a competitor of Pacific Telecom or its
affiliates. The plan does not apply to the termination of an
executive for reasons of normal retirement, death or total
disability, or to a termination for cause or, subject to
certain exceptions, voluntary termination. "Voluntary
termination" does not include voluntary termination by an
executive due to a change in reporting relationship, a material
change in authority or a change in control of the ownership of
Pacific Telecom that results in a change in position that is
detrimental to the executive officer, unless such change in
reporting relationship, authority or control is agreed to by
the executive officer. Under the plan, "cause" for termination
includes any act by an executive that is materially contrary to
the best interests of Pacific Telecom or its affiliates and the
willful and continued failure by an executive to devote his
full business time and efforts to the business affairs of
Pacific Telecom or its affiliates. In October 1994, the
termination date of the plan was extended from December 31,
1995 to December 31, 1997.
Retirement Plans
Pacific Telecom and many of its subsidiaries have
adopted a noncontributory defined benefit retirement plan
("Retirement Plan") for their employees (other than employees
subject to collective bargaining agreements that do not provide
for coverage). Certain of Pacific Telecom's executive
officers, including Messrs. Robinson, Huesgen and Wonnell, are
also eligible to participate in PacifiCorp's nonqualified
Supplemental Executive Retirement Plan ("SERP"). The plans
provide benefits at retirement payable for life based on length
of service with Pacific Telecom or its subsidiaries and average
pay in the 60 consecutive months of highest pay out of the last
120 months. Actuarially equivalent alternative forms of
benefits are also available at the participant's election.
Retirement benefits are reduced to reflect Social Security
benefits. For participants in both plans, pay includes salary
and bonuses, as reflected in the Summary Compensation Table.
For participants in the Retirement Plan only, pay includes
base salary plus bonuses up to 10 percent of base pay, reduced
by any nonqualified salary reductions elected by the employee.
Accrued benefits are completely unvested until an employee has
five years of service or reaches age 65, when the benefits
become 100 percent vested. The SERP provides a normal
retirement benefit of 65 percent of final average pay reduced
by the amount of Social Security benefits and certain other
retirement benefits. SERP participants are eligible to receive
full benefits after age 62 with 30 years of service or at age
65 with at least 15 years of service. Participants in the SERP
are also entitled to receive reduced benefits upon early
retirement after age 55 and at least five years of service.
The following table shows the estimated annual
retirement benefit payable upon normal retirement at age 65 as
of January 1, 1995. Amounts in the table reflect payments from
the Retirement Plan and the SERP combined.
<TABLE>
<CAPTION>
Final Average
Annual Pay at Years of Credited Service
Retirement Date 5 15 25 30
--------------- ---------------------------------------------
<S> <C> <C> <C> <C>
$ 200,000 $ 43,333 $130,000 $130,000 $130,000
400,000 86,667 260,000 260,000 260,000
600,000 130,000 390,000 390,000 390,000
800,000 173,333 520,000 520,000 520,000
1,000,000 216,667 650,000 650,000 650,000
_______________
<FN>
(1) The benefits shown in the table above assume that the individual will remain in
the employ of Pacific Telecom until normal retirement at age 65 and that the plans
will continue in their present form. Amounts shown above do not reflect the
Social Security offset.
(2) The number of credited years of service used to compute benefits under the
Retirement Plan for Messrs. Robinson, Huesgen and Wonnell are 30, 11 and 4,
respectively.
</TABLE>
Messrs. Bloodworth and Carson are accruing benefits
only under the Retirement Plan. The following table shows the
estimated annual benefits payable under the Retirement Plan
upon normal retirement at age 65 as of January 1, 1995:
<TABLE>
<CAPTION>
Pension
Qualified Years of Credited Service
Salary 10 15 20 25 30
-------- ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 8,065 $ 12,097 $ 16,130 $ 20,162 $ 24,194
100,000 17,815 26,722 35,630 44,537 53,444
150,000 27,565 41,347 55,130 68,912 82,694
_______________
<FN>
(1) Amounts shown above reflect Social Security Covered Compensation for a
participant turning age 65 in 1995. The number of credited years of service used to
compute benefits under the Retirement Plan for Messrs. Bloodworth and Carson
are 6 and 13, respectively.
(2) 1994 pension qualified salaries used to compute Retirement Plan benefits for
Messrs. Bloodworth and Carson were $140,635 and $129,415, respectively.
</TABLE>
Personnel Committee Report on Executive Compensation
The Personnel Committee of the Board of Directors of
Pacific Telecom has furnished the following report on executive
compensation. The following report shall not be deemed
incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing
under the Securities Act of 1933 or the Exchange Act, except to
the extent that Pacific Telecom specifically incorporates this
information by reference, and shall not otherwise be deemed
filed under such acts.
Overview
The Personnel Committee's (the "Committee") executive
compensation policies are designed to retain and to fairly
compensate quality executives who will manage Pacific Telecom's
business effectively for the benefit of its shareholders. To
assist Pacific Telecom in achieving those ends, the Committee
retains the services of a national consulting firm with special
expertise in compensation matters to assist in the design and
monitoring of compensation arrangements that are fair and
competitive for the executives and consistent with the
objectives of the shareholders. The Committee believes that
Pacific Telecom's compensation plans achieve an appropriate
balance between incentives for long-term success and those
related to annual goals, which are intended, over time, to
result in sustained earnings and dividend growth.
Qualifying compensation for deductibility under
Section 162(m) of the Internal Revenue Code, which limits to $1
million the annual deduction by a publicly held corporation of
compensation paid to any executive except with respect to
certain forms of incentive compensation that qualify for
exclusion, is one of many factors that Pacific Telecom
considers in designing its incentive compensation arrangements.
Pacific Telecom views the objectives outlined above as more
important than compliance with the technical requirements
necessary to exclude compensation from the deductibility limits
of Section 162(m). Nevertheless, Pacific Telecom anticipates
that the amount of compensation in excess of the deductibility
limits of Section 162(m) for all executive officers as a group
will not be material.
Compensation Program Components
Pacific Telecom has developed an executive
compensation system with three principal elements: (i) base
salary, (ii) annual incentive compensation and (iii) long-term
incentive compensation. The Committee, assisted by its
consultant, reviews base salary levels annually and recommends
appropriate changes for each executive officer. In connection
with this process, the Committee evaluates total compensation
of executives in relation to telecommunications and general
industry companies of similar size as measured by revenues.
Companies used for the competitive compensation analysis are
not restricted to those included
in the preparation of the performance graph set forth below,
but include over 80 percent of the companies identified. The
Committee believes that a broader range of companies is more
representative of the labor market in which Pacific Telecom
must compete for executive talent.
The Committee seeks to establish target cash
compensation at median competitive levels. During 1994, the
Committee recommended base salary increases for all executive
officers of Pacific Telecom. The Committee believed, based on
its review of data from general industry and telecommunications
companies, that increases were justified because total cash
compensation levels (base salary plus incentives) for the
executive group as a whole fell below competitive levels. The
Committee considered factors such as the nature, complexity and
diversity of Company operations, the duties and
responsibilities of each executive position and the relevance
of the comparative data and weighted those factors in making
individual determinations as to the appropriate amount of total
cash compensation.
As part of placing a significant element of the
compensation package for executive officers of Pacific Telecom
at risk, executive officers of Pacific Telecom are eligible to
participate in the annual short-term Executive Bonus Plan. The
creation of this "at risk" portion of executive compensation is
intended to align compensation with shareholder interests.
Certain executive officers of Pacific Telecom as determined by
the Committee, including the executive officers named in the
Summary Compensation Table below, are eligible to participate
in this plan, which provides for cash awards based on
achievement of business performance objectives. Guideline
bonus percentages ranging from 15 percent to 40 percent of
salary are established for each participant and are based on a
subjective assessment of the relative impact of each position
on Company growth and profitability. Under the Executive Bonus
Plan, payments are calculated by multiplying the guideline
bonus percentages by a performance factor tied to (a) Pacific
Telecom's return on average shareholder equity for the current
year in relation to the five-year Treasury Bond rate and (b)
the compound annual growth rate in Pacific Telecom's net
income. For 1994 performance, however, the Committee
determined to modify the plan and use subjective measures.
Based on a recommendation by PacifiCorp, in December 1993 the
Committee recommended that 1994 awards be determined without
regard to the measures set forth in the Executive Bonus Plan,
which recommendation was approved by the Board. Accordingly,
incentive awards in 1994 were based on a subjective assessment
of Pacific Telecom's performance. The Alaska
telecommunications market restructuring was the most
significant business issue facing Pacific Telecom and, during
1994, management negotiated with AT&T an agreement for the
Alascom Sale that effectively resolves those issues in a manner
favorable to Pacific Telecom. In recognition of this
accomplishment, the Board approved incentive awards that
recognized each executive's contributions to Pacific Telecom's
achievements in 1994.
Executive officers of Pacific Telecom and its
subsidiaries are also eligible to participate in Pacific
Telecom's Long-Term Incentive Plan 1994
Restatement (the "Restated Plan"). The Restated Plan is
designed to provide stock-based incentives in the form of
annual grants of restricted stock coupled with a requirement
that participants invest their own personal resources in the
stock of Pacific Telecom or PacifiCorp. The Committee believes
the Restated Plan aligns the interests of executive employees
more closely with those of shareholders, provides greater
opportunity to link grant size to achievement of performance
and increases Pacific Telecom's ability to retain key
employees. The Restated Plan provides for grants of restricted
stock based on past performance rather than target awards for
future performance cycles. The Restated Plan provides that the
Committee may vary the grants each year based on a subjective
assessment of Pacific Telecom's overall performance in relation
to long-term goals and plans. In determining the individuals
to whom awards will be made and the amounts of the grants, the
Committee considers criteria such as the following: (i) total
shareholder return relative to peer companies; (ii) earnings
per share growth over time relative to peer companies; (iii)
achievement of long-term goals, strategies and plans; and
(iv) maintenance of competitive position. Shares awarded under
the Restated Plan are subject to such terms, conditions and
restrictions as may be determined by the Committee to be
consistent with the purpose of the Restated Plan and the best
interests of Pacific Telecom. The restrictions may include,
without limitation, stock transfer restrictions and forfeiture
provisions designed to facilitate the achievement by
participants of specified stock ownership goals.
Grants totalling 10,163 shares were made in February
1994 to six executive officers of Pacific Telecom. Grants made
to the executive officers named in the Summary Compensation
Table are reflected in the Summary Compensation Table. The
principal factor considered by the Committee in selecting the
participants and determining the level of grants in February
1994 was the Committee's subjective assessment of the potential
impact of each position on corporate strategy, policies and
investment and business decisions relating to the long-term
direction of Pacific Telecom. The Committee also took into
consideration competitive practices for positions at similar
levels in the industry and at PacifiCorp, the termination of
existing cycles under the Long-Term Incentive Plan, the fact
that prorated awards were made with respect to the performance
cycle that would have ended December 31, 1994 under the pre-
restatement plan and Pacific Telecom's strong financial
performance and success in attaining its long-term goals during
1993.
CEO Compensation
For 1994, the Committee approved a base salary
increase for Mr. Robinson of 4.3 percent based upon various
factors, including an assessment of Pacific Telecom's
performance as measured by return on equity and the successful
negotiations relating to the Alascom Sale, a recommendation by
the PacifiCorp personnel committee, consideration of
competitive pay data, and a subjective assessment of Mr.
Robinson's performance, including recognition that he played a
key role in guiding the negotiations with AT&T in connection
with the Alascom Sale.
Mr. Robinson's 1994 award under the Executive Bonus
Plan was also determined based on an assessment of Pacific
Telecom's return on equity performance and the Alascom Sale.
The number of shares of restricted stock awarded to Mr.
Robinson pursuant to the Restated Plan was determined on the
same basis as for other executive officers of Pacific Telecom,
as described above, also taking into account restricted stock
granted to him by PacifiCorp pursuant to the PacifiCorp Long-
Term Incentive Plan, described below, such that his total
restricted stock award was comparable to median competitive
levels.
Executive officers of Pacific Telecom, who are
designated by the personnel committee of PacifiCorp, are also
eligible to participate in the PacifiCorp long-term incentive
plan. Mr. Robinson is a participant in this plan, and the
costs of his participation are borne by Pacific Telecom. The
PacifiCorp plan, like the Restated Plan, provides for annual
grants of restricted stock coupled with a requirement that
participants invest their own personal resources in Common
Stock of PacifiCorp or Pacific Telecom. No grants were made
under the PacifiCorp plan during 1994.
Personnel Committee
Roy M. Huhndorf
Joyce E. Galleher
Sidney R. Snyder
Performance Graph
COMPARISON OF FIVE-YEAR CUMULATIVE
TOTAL RETURN AMONG PACIFIC TELECOM,
S&P 500 INDEX AND COMPANY PEER GROUP
The following performance graph shall not be deemed
incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing
under the Securities Act of 1933 or the Exchange Act, except to
the extent that Pacific Telecom specifically incorporates this
information by reference, and shall not otherwise be deemed
filed under such acts.
The following graph provides a comparison of the
annual percentage change in Pacific Telecom's cumulative total
shareholder return on its Common Stock, with the cumulative
total return of the S&P 500 Index and a peer group consisting
of the Dow Jones Telephone Systems Index plus certain
additional companies not included in that index. The companies
included in the Dow Jones Telephone Systems Index and the
additional companies included in Pacific Telecom's peer group
are listed below. The comparison assumes $100.00 was invested
on December 31, 1989 in Pacific Telecom's Common Stock and in
each of the foregoing indices and assumes the reinvestment of
dividends.
PACIFIC TELECOM, INC.
Comparison of Five-Year Cumulative Total Return
1989-1994
Performance Graph
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PTI $100 112.24 120.73 122.38 137.16 166.67
S&P 500 $100 96.89 126.28 135.88 149.52 151.55
Peer Group $100 90.10 98.90 110.19 129.72 116.42
</TABLE>
<TABLE>
<CAPTION>
* Dow Jones Telephone System Index Additional Companies
- ---------------------------------- --------------------
<S> <C>
AirTouch Communications C-TEC Corporation
NEXTEL Communications Inc. Century Telephone Enterprises, Inc.
Vanguard Cellular Systems Inc. Citizens Utilities Company
GTE Corporation Lincoln Telecommunications Company
MCI Communications Corporation Frontier Corporation
Sprint Corporation Telephone & Data Systems, Inc.
ALLTEL Corporation
Ameritech Corporation
Bell Atlantic Corporation
Bellsouth Corporation
Cincinnati Bell, Inc.
NYNEX Corporation
Pacific Telesis Group
Southern New England Telecommunications Corporation
Southwestern Bell Corporation
US WEST, Inc.
</TABLE>
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
PacifiCorp provides certain corporate services to
Pacific Telecom, at PacifiCorp's cost, under a Management
Services Agreement. In addition, an indirect subsidiary of
PacifiCorp provides certain air transportation services to
Pacific Telecom and its subsidiaries. For the year ended
December 31, 1994, billings to Pacific Telecom under these
agreements totaled $1,702,000. During 1994, a subsidiary of
PacifiCorp also billed Pacific Telecom $884,000, primarily for
computer hardware lease payments, and PacifiCorp billed Pacific
Telecom $126,000 for pole contact rental.
Pacific Telecom provides certain computer services to
PacifiCorp. During 1994, Pacific Telecom billed PacifiCorp
$197,000 for these services.
Pursuant to the terms of an intercompany borrowing
arrangement, from time to time Pacific Telecom and Holdings
make open account advances to each other. Advances are
evidenced by notes, payable on demand, and bear interest at a
short-term market rate. No advances were made from Holdings to
Pacific Telecom during 1994. The daily weighted average
balance of advances to Holdings was $15,309,000 during 1994,
with a weighted average interest rate of 5.1 percent. No
advances to Holdings were outstanding on December 31, 1994.
Pacific Telecom joins with PacifiCorp in filing a consolidated
federal income tax return along with unitary state income tax
returns. Pacific Telecom paid $37,696,288 to PacifiCorp for
Pacific Telecom's 1993 federal and state income taxes and will
pay an estimated $101,500,000 to PacifiCorp for Pacific
Telecom's 1994 federal and state income taxes.
For a description of the Merger Agreement, see "The
Merger Agreement."
CERTAIN TRANSACTIONS IN PTI
COMMON STOCK
Since January 1, 1993, Pacific Telecom has purchased
an aggregate of 261,946 shares of PTI Common Stock. Of those
shares, (i) 42,358 shares were acquired between April 1993 and
February 1994 in connection with grants of restricted stock
under the Pacific Telecom Non-Employee Director Stock
Compensation Plan and the Restated LTIP pursuant to which
shares awarded are purchased in the open market with funds
supplied by Pacific Telecom, and the certificates representing
the shares are registered in the name of the recipient and held
by Pacific Telecom until the shares vest; (ii) 181,500 shares
were acquired between May 1993 and July 1993 in the open market
in connection with an acquisition by Pacific Telecom of an LEC
in the Midwest and the shares were then issued to the
shareholders of the acquired entity in a merger transaction;
(iii) 8,188 shares were purchased between December 1, 1993 and
February 15, 1994 in connection with an odd-lot tender offer
program announced in November 1993
pursuant to which Pacific Telecom offered to acquire shares of
PTI Common Stock from holders of fewer than 100 shares of PTI
Common Stock as of November 12, 1993; and (iv) 29,900 shares
were purchased from the trustee of the PacifiCorp K Plus
Employee Savings and Stock Ownership Plan in January 1995.
The prices paid for the foregoing acquisitions of PTI
Common Stock ranged from $22.00 on April 29, 1993 to $30.00 on
January 26, 1995. The average purchase price for each
quarterly period since January 1, 1993 was as follows:
1995 Average Price
First Quarter $30.00
1994
First Quarter $25.53
Second Quarter --
Third Quarter --
Fourth Quarter --
1993
First Quarter --
Second Quarter $22.34
Third Quarter $23.25
Fourth Quarter $25.465
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information
regarding the beneficial ownership, as of _______________,
1995, of PTI Common Stock and Common Stock of PacifiCorp by
(i) each director of Pacific Telecom, (ii) each of the
executive officers named in the Summary Compensation Table and
(iii) all executive officers and directors of Pacific Telecom
as a group. As of _____________, 1995, each of the directors
and executive officers identified below and all executive
officers and directors of Pacific Telecom as a group owned less
than 1 percent of PTI Common Stock and less than 1 percent of
the Common Stock of PacifiCorp. No person is known by Pacific
Telecom to be the beneficial owner of more than 5 percent of
PTI Common Stock, except that, as of ____________, 1995,
Holdings was the beneficial owner of 34,325,181 shares,
representing approximately 86.6 percent, of PTI Common Stock.
The principal business address of Holdings is 700 NE Multnomah,
Suite 1600, Portland, Oregon 97232.
<TABLE>
<CAPTION>
Number of Number of
Shares of Shares of
Pacific Telecom PacifiCorp
Beneficial Owner Common Stock(1) Common Stock(1)
---------------- --------------- ---------------
<S> <C> <C>
Joyce E. Galleher. . . . . . . . . . . . 5,284 100
Roy M. Huhndorf. . . . . . . . . . . . . 2,472 100
Donald L. Mellish. . . . . . . . . . . . 5,084 3,000
Charles E. Robinson. . . . . . . . . . . 78,766 9,767
Sidney R. Snyder . . . . . . . . . . . . 7,769 --
Nancy Wilgenbusch. . . . . . . . . . . . 2,711 5,687
James H. Huesgen . . . . . . . . . . . . 27,676 2,978
Donn T. Wonnell. . . . . . . . . . . . . 9,917 995
Donald A. Bloodworth . . . . . . . . . . 6,143 2,312
Wesley E. Carson . . . . . . . . . . . . 5,817 1,249
All executive officers and directors as a group (12 persons)180,49834,119
____________________
<FN>
(1) Includes ownership of (a) shares held by family members even though beneficial ownership of
such shares may be disclaimed, (b) shares granted and subject to vesting as to which the
individual has voting but not investment power under one or more of the stock-based
compensation plans of Pacific Telecom or PacifiCorp and (c) shares held for the account of such
persons under the PacifiCorp Compensation Reduction Plan.
</TABLE>
INFORMATION CONCERNING HOLDINGS AND PACIFICORP
AND THEIR DIRECTORS AND EXECUTIVE OFFICERS
Holdings is a Delaware corporation and a wholly owned
subsidiary of PacifiCorp, an Oregon corporation that conducts a
retail electric utility business under the names Pacific Power
& Light Company and Utah Power & Light Company and engages in
power production and sales on a wholesale basis under the name
PacifiCorp. Holdings was formed in 1984 to hold the stock of
PacifiCorp's principal subsidiaries and to facilitate the
conduct of businesses not regulated as electric utilities.
Through Holdings, PacifiCorp indirectly owns approximately 86.6
percent of Pacific Telecom. In addition, Holdings owns 100
percent of Pacific Generation Company, which is engaged in the
independent power production and cogeneration business, and 100
percent of PacifiCorp Financial Services, Inc. ("PFS"). PFS
has sold substantial portions of its loan, leasing,
manufacturing and real estate investments and expects to
continue its disposition activities over the next several
years. PFS presently expects to retain only its tax-advantaged
investments in leveraged lease assets (primarily aircraft) and
low-income housing projects. The executive offices of
PacifiCorp and Holdings are located at 700 NE Multnomah, Suite
1600, Portland, Oregon 97232-4116.
The following is a list of the executive officers and
directors of Holdings and PacifiCorp; their respective
principal occupations, positions, offices or employments; and
the number of shares beneficially owned by such persons and the
percentage of outstanding shares of PTI Common Stock
represented by such shares, as of ________________, 1995.
Unless otherwise indicated, all occupations, positions, offices
or employments listed opposite an individual's name have been
held by such individual during the course of the past five
years. Unless otherwise indicated, the business address of
each individual is PacifiCorp, 700 NE Multnomah, Suite 1600,
Portland, Oregon 97232-4116. All listed individuals are
citizens of the United States. All shares are held directly
with sole voting and sole investment power unless otherwise
indicated.
<TABLE>
<CAPTION>
Name and Principal Occupation Shares of PTI
Residence or Position, Office Common Stock Approximate
Business Address or Employment Beneficially Owned Percentage
---------------- -------------------- ------------------ ----------
<S> <C> <C> <C>
Frederick W. Buckman Director, President and Chief -- --
Executive Officer of PacifiCorp
since February 1994; President and
Chief Executive Officer (1992-1994)
and President and Chief Operating
Officer (1988-1991) of Consumers
Power Company, Jackson, Michigan
C. Todd Conover General Manager, Finance Industry -- --
Group, Tandem Computers
Incorporated, 19191 Vallco Parkway,
LOC 4-57, Cupertino, California
95014 since January 1994; President
and Chief Executive Officer, the
Vantage Company, a business
consulting firm, Los Altos,
California, since 1992; President
and Chief Executive Officer,
Central Banks of Colorado, 1991-
1992; and Partner and National
Director-Bank Consulting, KPMG Peat
Marwick, 1988-1990
A.M. Gleason Vice Chairman of Board of Directors 44,404(1) *
since February 1994 and President
and Chief Executive Officer of
PacifiCorp, 1989-1994
Michael C. Henderson President of Holdings since March -- --
1995; Senior Vice President of
Holdings (1994-March 1995);
Director, President and Chief
Operating Officer (since 1993),
Executive Vice President (1992-
1993) and Senior Vice President
(1991-1992) of PacifiCorp Financial
Services, Inc.; Chief Executive
Officer of Crescent Foods, Inc.,
Seattle, Washington, 1986-1990
Nolan E. Karras Investment Adviser, Karras & -- --
Associates, Inc., an investment
advisory firm with offices at 4695
South 1900 West #3, Roy, Utah 84067
___________________________
<FN>
* Less than 1 percent of the outstanding shares of PTI Common Stock.
(1) Includes 2,739 shares held by Mr. Gleason's wife as to which Mr. Gleason disclaims beneficial ownership.
</TABLE>
<TABLE>
<CAPTION>
Name and Principal Occupation Shares of PTI
Residence or Position, Office Common Stock Approximate
Business Address or Employment Beneficially Owned Percentage
---------------- -------------------- ------------------ ----------
<S> <C> <C> <C>
EXECUTIVE OFFICERS
- ------------------
Daniel L. Spalding Senior Vice President (since 1992) -- --
and Vice President (1987-1992) of
PacifiCorp; Senior Vice President
of Holdings
Richard T. O'Brien Vice President of PacifiCorp and -- --
Senior Vice President of Holdings,
Inc. since August 1993; Senior Vice
President, Treasurer and Chief
Financial Officer (1992-1993) and
Vice President and Treasurer (1989-
1992) of NERCO, Inc., PacifiCorp's
former mining and resource
subsidiary
William E. Peressini Treasurer of PacifiCorp and -- --
Treasurer of Holdings since January
1994; Executive Vice President
(1992-1994) and Senior Vice
President and Chief Financial
Officer (1989-1992) of PacifiCorp
Financial Services, Inc., 1989-1994
Sally A. Nofziger Vice President and Corporate -- --
Secretary of PacifiCorp and
Secretary of Holdings
Jacqueline S. Bell Controller of PacifiCorp and -- --
Holdings
PacifiCorp
DIRECTORS
- ---------
Kathryn A. Braun Executive Vice President, Western -- --
Digital Corporation, 8105 Irvine
Center Drive, Irvine, CA 92718
Frederick W. Buckman (See above) -- --
C. Todd Conover (See above) -- --
Richard C. Edgley Member of Presiding Bishopric, The -- --
Church of Jesus Christ of Latter-
day Saints, 50 East North Temple,
18th Floor, Salt Lake City, Utah
84150
A.M. Gleason (See above) (See above)
John C. Hampton Chairman and Chief Executive -- --
Officer of Hampton Resources, Inc.,
a forest products company with
offices at Suite 400, 9400 SW
Barnes Rd., Portland, Oregon 97225
Nolan E. Karras (See above) -- --
Keith R. McKennon Chairman of the Board of PacifiCorp -- --
since February 1994; formerly
Chairman (1992-1994) and Chief
Executive Officer (1992-1993) of
Dow Corning Corporation, Midland,
Michigan; Executive Vice President
and Director, The Dow Chemical
Company, 1990-1992
Robert G. Miller Chairman of the Board and Chief -- --
Executive Officer of Fred Meyer,
Inc., a retail merchandising chain,
with offices at 3800 SE 22nd,
Portland, Oregon 97202, since 1991;
Executive Vice President of Retail
Operations, Albertsons, Inc., 1989-
1991
Verl R. Topham Senior Vice President and General -- --
Counsel of PacifiCorp since May
1994; President, Utah Power & Light
Company, 1989-1994
Don M. Wheeler Chairman and Chief Executive -- --
Officer, Wheeler Machinery Company,
an equipment sales, repair and
service firm with offices at 4901
West 2100 South, Salt Lake City,
Utah 84120
Nancy Wilgenbusch President, Marylhurst College, 2,711 *
Marylhurst, Oregon 97036
Peter I. Wold Partner, Wold Oil & Gas Company, an -- --
oil and gas exploration and
production company, Casper, Wyoming
EXECUTIVE OFFICERS
- ------------------
Paul G. Lorenzini Senior Vice President of PacifiCorp -- --
since May 1994; President (1992-
1994) and Vice President (1989-
1992) of Pacific Power & Light
Company
Charles E. Robinson Chairman, President and Chief 78,766 *
Executive Officer of Pacific
Telecom
John A. Bohling Senior Vice President of PacifiCorp -- --
since February 1993; Executive Vice
President of Pacific Power & Light
Company, 1991-1993; Senior Vice
President, Utah Power & Light
Company, 1990-1991
Shelley R. Faigle Senior Vice President of PacifiCorp -- --
since 1993; Vice President of
PacifiCorp, 1992-1993; Vice
President Pacific Power & Light
Company, 1989-1992
John E. Mooney Senior Vice President of PacifiCorp -- --
since November 1994; Executive Vice
President Utah Power & Light
Company, 1991-1994; Vice President
Pacific Power & Light Company,
1990-1991
Daniel L. Spalding (See above) -- --
Dennis P. Steinberg Senior Vice President (since May -- --
1994), Vice President (1990-1994)
of PacifiCorp
Thomas J. Imeson Vice President of PacifiCorp -- *
Robert F. Lanz Vice President of PacifiCorp 2,229 *
Sally A. Nofziger (See above) -- --
Richard T. O'Brien (See above) -- --
William E. Peressini (See above) -- --
Jacqueline S. Bell (See above) -- --
________________________
<FN>
*Less than 1 percent of the outstanding shares of PTI Common Stock.
</TABLE>
INDEPENDENT AUDITORS
Deloitte & Touche LLP are Pacific Telecom's
independent public accountants. Representatives of Deloitte &
Touche LLP are expected to be present at the Annual Meeting to
respond to appropriate questions of shareholders and make a
statement if they so desire. The consolidated financial
statements and schedules of Pacific Telecom for the three years
ended December 31, 1994, 1993 and 1992 incorporated herein by
reference to Pacific Telecom's 1994 Form 10-K have been audited
by Deloitte & Touche LLP. Such financial statements and
schedules have been incorporated herein by reference in
reliance on the reports of Deloitte & Touche LLP given on the
authority of such firm as experts in auditing and accounting.
OTHER MATTERS
The Board of Directors does not presently know of any
matters to be presented for consideration at the Annual Meeting
other than matters described in the Notice of Annual Meeting
mailed together with this Proxy Statement, but if other matters
are presented, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with
their best judgment. The proxy confers discretionary authority
to vote only with respect to matters that the Board of
Directors did not know within a reasonable time before the
mailing of these materials were to be presented at the Annual
Meeting.
SHAREHOLDER PROPOSALS
If the Merger is consummated, no public annual
meetings of shareholders of Pacific Telecom will be held in the
future. If the Merger is not consummated, because the date of
any such annual meeting cannot currently be determined,
shareholders will be informed (by press release or other means
determined reasonable by Pacific Telecom) of the date of such
meeting and the date that shareholder proposals for inclusion
in the proxy material must be received by Pacific Telecom,
which proposals must comply with the rules and regulations of
the SEC then in effect.
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE
ACT OF 1934
Section 16(a) of the Exchange Act requires Pacific
Telecom's executive officers and directors, and persons who own
more than 10 percent of the
outstanding PTI Common Stock, to file reports of ownership and
changes in ownership with the SEC and the New York Stock
Exchange. Based solely on reports and other information
submitted by executive officers and directors, Pacific Telecom
believes that during the year ended December 31, 1994, and
prior fiscal years, each of its executive officers, directors
and persons who owns more than 10 percent of the outstanding
PTI Common Stock filed all reports required by Section 16(a).
AVAILABLE INFORMATION
Pacific Telecom is subject to the informational
requirements of the Exchange Act, and, in accordance therewith,
files reports, proxy statements and other information with the
SEC. Such reports and other information may be inspected and
copied or obtained by mail upon payment of the SEC's prescribed
rates at the public reference facilities maintained by the SEC
at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549
and at the following regional offices of the SEC: New York
Regional Office, 7 World Trade Center, New York, New York
10048, and Chicago Regional Office, 500 West Madison Avenue,
14th Floor, Chicago, Illinois 60661.
This Proxy Statement includes information required to
be disclosed pursuant to Rule 13e-3 under the Exchange Act,
which governs "going private" transactions by certain issuers
or their affiliates. In accordance with such rule, Pacific
Telecom, PacifiCorp and Holdings have filed with the SEC, under
the Exchange Act, a Schedule 13E-3 with respect to the Merger.
This Proxy Statement does not contain all of the information
set forth in the Schedule 13E-3, parts of which are omitted in
accordance with the applicable regulations of the SEC. The
Schedule 13E-3, and any amendments thereto, including exhibits
filed as a part thereof, will be available for inspection and
copying at the offices of the SEC as set forth above.
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
The following documents or portions thereof filed by
Pacific Telecom with the SEC are incorporated herein by
reference and are made a part hereof:
(a) Pacific Telecom's Annual Report on Form 10-K for
the year ended December 31, 1994; and
(b) Pacific Telecom's Current Reports on Form 8-K
dated February 6, 1995, February 15, 1995 and March 9, 1995.
All documents filed by Pacific Telecom pursuant to
Sections 13, 14 or 15(d) of the Exchange Act subsequent to the
date of this Proxy Statement and prior to the date of the
Annual Meeting shall be deemed to be incorporated by reference
in this Proxy Statement and to be a part hereof from the
respective dates of filing of such documents with the SEC. Any
statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Proxy Statement to the
extent that a statement contained herein modifies or supersedes
such statement. Any such statement so modified or superseded
shall not be deemed, except as modified or superseded, to
constitute part of this Proxy Statement.
This Proxy Statement incorporates documents by
reference that are not presented herein or delivered herewith.
Such documents (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference) are
available to any person to whom this Proxy Statement is
delivered, on written or oral request to Pacific Telecom at
(360) 905-5800, Attention: Brian M. Wirkkala. In order to
ensure delivery of the documents prior to the Annual Meeting,
requests must be received by ________________, 1995.
PACIFIC TELECOM, INC.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
_______________, 1995
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints ___________________ and
_____________________, or either of them, with full power of
substitution, the undersigned's true and lawful attorneys to
vote all the Common Stock standing in the undersigned's name on
the Company's books at the close of business on ________, 1995
at the Annual Meeting of Shareholders of Pacific Telecom, Inc.
to be held at ___________________________________, _________
___________, ________, ____________, on ______, ________, 1995
at _________, and any adjournments or postponements thereof.
1. APPROVAL OF THE AGREEMENT AND PLAN OF MERGER, DATED AS OF
MARCH 9, 1995, BY AND AMONG PACIFIC TELECOM, INC.,
PACIFICORP HOLDINGS, INC. AND PXYZ CORPORATION
/ / FOR / / AGAINST / / ABSTAIN
2. ELECTION OF DIRECTORS / / WITHHOLD AUTHORITY / /
For all nominees listed to vote for all
below (except as nominees listed
indicated to the
contrary below)
Joyce E. Galleher
Michael C. Henderson
Roy M. Huhndorf
Nolan E. Karras
Paul M. Lorenzini
Donald L. Mellish
Charles E. Robinson
Sidney R. Snyder
Verl R. Topham
Nancy Wilgenbusch
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW
- ---------------------------------------------------------------
The Board of Directors recommends a vote FOR the approval of
the above proposal and FOR the election of the above directors.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH INSTRUCTIONS, IF GIVEN. IF THIS PROXY IS
RETURNED UNMARKED, IT WILL BE VOTED FOR APPROVAL OF THE
AGREEMENT AND PLAN OF MERGER, FOR THE DIRECTORS AND ON ANY
OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING IN
ACCORDANCE WITH THE PROXY STATEMENT. THE PROXIES MAY VOTE IN
THEIR DISCRETION AS TO OTHER MATTERS THAT MAY PROPERLY COME
BEFORE THE MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF. The undersigned hereby acknowledges receipt of the
notice of Annual Meeting of Shareholders dated _______, 1995
and the Proxy Statement furnished therewith.
Dated this day of _____, 1995
- ------------------------------------------------------------
- ------------------------------------------------------------
Shareholder(s)
Please sign exactly as shown [below]. When signing as an
attorney, executor, administrator, trustee or guardian,
please give full title. If more than one trustee, all
should sign. All joint owners must sign.
Please complete, date, sign and mail this proxy card promptly
in the enclosed envelope.
EXHIBIT A
AGREEMENT
and
PLAN OF MERGER
by and among
PACIFIC TELECOM, INC.,
PACIFICORP HOLDINGS, INC.
and
PXYZ CORPORATION
Dated as of March 9, 1995
TABLE OF CONTENTS
ARTICLE I THE MERGER. . . . . . . . . . . . . . . . . . 2
1.1 Effect of Merger . . . . . . . . . . . . . . . . . 3
1.2 Articles of Incorporation, etc.. . . . . . . . . . 3
1.2.1 Articles of Incorporation and Bylaws. . . . 3
1.2.2 Directors . . . . . . . . . . . . . . . . . 3
1.2.3 Officers. . . . . . . . . . . . . . . . . . 3
1.3 Conversion and Cancellation of Shares. . . . . . . 4
1.3.1 PTI Common Stock Held by Holdings . . . . . 4
1.3.2 PTI Common Stock Held by Minority
Shareholders. . . . . . . . . . . . . . . . 4
1.3.3 Merger Sub Common Stock . . . . . . . . . . 4
1.3.4 Payment for Minority Stock. . . . . . . . . 5
1.3.5 Lost, Stolen or Destroyed Certificates. . . 6
1.3.6 No Further Rights or Transfers. . . . . . . 6
1.3.7 Dissenting Shareholders . . . . . . . . . . 7
1.4 Closing. . . . . . . . . . . . . . . . . . . . . . 7
1.5 Subsequent Actions . . . . . . . . . . . . . . . . 7
ARTICLE II REPRESENTATIONS AND WARRANTIES. . . . . . . . 8
2.1 Representations and Warranties of PTI. . . . . . . 8
2.1.1 Organization and Good Standing. . . . . . . 8
2.1.2 Capitalization. . . . . . . . . . . . . . . 8
2.1.3 Corporate Authority; Authorization. . . . . 9
2.1.4 Consents and Approvals. . . . . . . . . . . 9
2.1.5 Proxy Statement and Schedule 13E-3. . . . . 10
2.1.6 Company SEC Reports and Financial
Statements. . . . . . . . . . . . . . . . . 11
2.1.7 Absence of Material Adverse Change. . . . . 12
2.1.8 Brokers and Finders . . . . . . . . . . . . 12
2.1.9 Fairness Opinions . . . . . . . . . . . . . 13
2.2 Representations and Warranties of Holdings and
Merger Sub . . . . . . . . . . . . . . . . . . . . 13
2.2.1 Organization and Good Standing. . . . . . . 13
2.2.2 Corporate Authority . . . . . . . . . . . . 13
2.2.3 Proxy Statement and Schedule 13E-3. . . . . 14
2.2.4 Required Approvals. . . . . . . . . . . . . 14
2.2.5 Prior Proposals and Offers; No Present
Intent to Sell. . . . . . . . . . . . . . . 15
2.2.6 Financing . . . . . . . . . . . . . . . . . 16
ARTICLE III COVENANTS . . . . . . . . . . . . . . . . . . 16
3.1 Proxy Materials and Schedule 13E-3 . . . . . . . . 16
3.2 Shareholder Approval . . . . . . . . . . . . . . . 17
3.3 Acquisition Proposals. . . . . . . . . . . . . . . 18
3.4 Dissenters' Rights . . . . . . . . . . . . . . . . 18
3.5 Conduct of Business of PTI . . . . . . . . . . . . 18
3.6 Access and Information . . . . . . . . . . . . . . 20
3.7 Certain Filings, Consents and Arrangements . . . . 20
3.7.1 Consents. . . . . . . . . . . . . . . . . . 20
3.7.2 Filings . . . . . . . . . . . . . . . . . . 20
3.8 Indemnification and Insurance. . . . . . . . . . . 21
3.9 Dividend Policy. . . . . . . . . . . . . . . . . . 22
3.10 Notification of Certain Matters. . . . . . . . . . 23
3.11 Fees and Expenses. . . . . . . . . . . . . . . . . 23
3.12 Election of Directors. . . . . . . . . . . . . . . 23
3.13 Employee Benefits. . . . . . . . . . . . . . . . . 23
3.14 Additional Agreements. . . . . . . . . . . . . . . 23
ARTICLE IV CONDITIONS. . . . . . . . . . . . . . . . . . 24
4.1 Conditions to the Obligations of The Parties . . . 24
4.1.1 Shareholder Approval. . . . . . . . . . . . 24
4.1.2 No Injunction . . . . . . . . . . . . . . . 24
4.2 Conditions to Obligation of PTI. . . . . . . . . . 24
4.2.1 Representations, Warranties, and
Covenants . . . . . . . . . . . . . . . . . 24
4.2.2 PacifiCorp Agreement. . . . . . . . . . . . 25
4.2.3 No Injunction.. . . . . . . . . . . . . . . 25
4.2.4 Fairness Opinions . . . . . . . . . . . . . 25
4.2.5 Consents and Approvals. . . . . . . . . . . 25
4.3 Conditions to Obligations of Holdings and
Merger Sub . . . . . . . . . . . . . . . . . . . . 26
4.3.1 Representations, Warranties, and
Covenants . . . . . . . . . . . . . . . . . 26
4.3.2 No Injunction.. . . . . . . . . . . . . . . 26
4.3.3 Material Adverse Change . . . . . . . . . . 26
4.3.4 Consents and Approvals. . . . . . . . . . . 26
ARTICLE V TERMINATION . . . . . . . . . . . . . . . . . 27
5.1 Termination. . . . . . . . . . . . . . . . . . . . 27
5.1.1 Mutual Consent. . . . . . . . . . . . . . . 27
5.1.2 Failure of Merger to Occur by Certain
Date. . . . . . . . . . . . . . . . . . . . 27
5.1.3 Actions Restraining the Merger. . . . . . . 27
5.1.4 Failure of Shareholders to Approve. . . . . 28
5.1.5 By PTI. . . . . . . . . . . . . . . . . . . 28
5.1.6 By Holdings . . . . . . . . . . . . . . . . 28
5.2 Effect of Termination. . . . . . . . . . . . . . . 28
ARTICLE VI MISCELLANEOUS AND GENERAL . . . . . . . . . . 29
6.1 Survival of Representations, Warranties and
Agreements . . . . . . . . . . . . . . . . . . . . 29
6.2 Waiver and Amendment . . . . . . . . . . . . . . . 29
6.3 Entire Agreement . . . . . . . . . . . . . . . . . 29
6.4 Headings . . . . . . . . . . . . . . . . . . . . . 30
6.5 Notices. . . . . . . . . . . . . . . . . . . . . . 30
6.6 Parties in Interest; Assignment. . . . . . . . . . 30
6.7 Specific Performance . . . . . . . . . . . . . . . 31
6.8 Public Statements. . . . . . . . . . . . . . . . . 31
6.9 Counterparts . . . . . . . . . . . . . . . . . . . 31
6.10 Choice of Law. . . . . . . . . . . . . . . . . . . 31
AGREEMENT AND
PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated
as of March 9, 1995, by and among PACIFIC TELECOM, INC., a
Washington corporation ("PTI"), PACIFICORP HOLDINGS, INC., a
Delaware corporation ("Holdings"), and PXYZ CORPORATION, a
Washington corporation ("Merger Sub").
R E C I T A L S
A. Holdings, a direct wholly-owned subsidiary of
PacifiCorp, an Oregon corporation ("PacifiCorp"), owns
34,325,181 shares, or approximately 86.6 percent, of the issued
and outstanding common stock, no par value, of PTI ("PTI Common
Stock").
B. Merger Sub is a direct, wholly-owned subsidiary of
Holdings, formed solely for the purposes of the transactions
contemplated by this Agreement.
C. The Board of Directors of each of Holdings, Merger
Sub and PTI believes that it is in the best interest of each
respective corporation and their respective shareholders to
consummate the merger of Merger Sub with and into PTI pursuant
to the applicable provisions of the Washington Business
Corporation Act (the "WBCA") and in accordance with the terms
and subject to the conditions of this Agreement (the "Merger").
D. Based upon the unanimous recommendation of the
special committee of the Board of Directors of PTI (the
"Special Committee"), the Board of Directors of PTI has
approved the Merger, with PTI to be the surviving corporation
and a wholly-owned subsidiary of Holdings following the Merger,
upon the terms and subject to the conditions set forth herein
and has recommended approval of this Agreement and the Merger
by the shareholders of PTI.
E. The Board of Directors of each of Holdings and Merger
Sub have approved this Agreement and the Merger, upon the terms
and conditions set forth herein.
F. Contemporaneous with the execution of this Agreement,
PacifiCorp is entering into an agreement in the form attached
hereto as Exhibit A (the "PacifiCorp Agreement") with PTI
pursuant to which PacifiCorp is assuming certain obligations in
connection with the transactions contemplated hereby.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants, agreements and
conditions contained herein, the parties agree as follows:
ARTICLE I
THE MERGER
Pursuant to the WBCA, and subject to and in
accordance with the terms and conditions of this Agreement,
Merger Sub shall, at the Effective Time (as hereinafter
defined), be merged with and into PTI, the outstanding shares
of the capital stock of PTI held by Holdings shall be
cancelled, the outstanding shares of capital stock of PTI held
by shareholders other than Holdings (the "Minority
Shareholders") shall be converted into the right to receive the
Merger Consideration (as hereinafter defined), the outstanding
shares of the capital stock of Merger Sub shall be converted
into shares of the capital stock of PTI, all as described in
Section 1.3, and PTI shall execute Articles of Merger, to be
filed with the Secretary of State of the State of Washington on
the Closing Date (as hereinafter defined). The Merger shall
take effect (the "Effective Time") when, subject to and in
accordance with the terms and conditions of this Agreement,
Articles of Merger and such other documents as may be required
by the applicable provisions of the WBCA, in such form as are
required by and executed in accordance with the WBCA, are duly
filed with the Secretary of State of the State of Washington.
Such filings shall be made
as soon as practicable following the satisfaction or waiver of
the conditions set forth in Article IV of this Agreement.
1.1 Effect of Merger. At the Effective Time, Merger
Sub shall be merged with and into PTI in the manner and with
the effect provided by the WBCA, the separate corporate
existence of Merger Sub shall cease and thereupon Merger Sub
and PTI shall be a single corporation (the "Surviving
Corporation"). The outstanding shares of capital stock of PTI
held by Holdings shall be cancelled, the outstanding shares of
capital stock of PTI held by the Minority Shareholders shall be
converted into the right to receive the Merger Consideration,
and the outstanding shares of capital stock of Merger Sub shall
be converted into a like number of shares of the capital stock
of PTI, all on the basis, terms and conditions described in
Section 1.3.
1.2 Articles of Incorporation, etc. In addition to
the effects identified in Section 1.1:
1.2.1 Articles of Incorporation and Bylaws.
The Articles of Incorporation and Bylaws of PTI as in effect at
the Effective Time shall be the Articles of Incorporation and
Bylaws of the Surviving Corporation;
1.2.2 Directors. The directors of PTI at the
Effective Time shall be the directors of the Surviving
Corporation, until their respective successors shall be duly
elected or appointed and qualified; and
1.2.3 Officers. The officers of PTI at the
Effective Time shall be the initial officers of the Surviving
Corporation and will hold office from the Effective Time until
their respective successors are duly elected and qualified.
1.3 Conversion and Cancellation of Shares. The
manner and basis of cancelling the shares of PTI or converting
them into the right to receive cash and the manner and basis of
converting the shares of Merger Sub into shares of PTI shall be
as follows:
1.3.1 PTI Common Stock Held by Holdings. Each
of the 34,325,181 shares of PTI Common Stock held by Holdings
("Holdings Stock"), outstanding immediately before the
Effective Time, shall by virtue of the Merger and without any
action on the part of Holdings as the holder thereof, be
cancelled without payment of any consideration therefor and
shall cease to exist.
1.3.2 PTI Common Stock Held by Minority
Shareholders. Each share of PTI Common Stock held by the
Minority Shareholders (including, without limitation, PTI
Common Stock held in escrow for the benefit of participants in
PTI's Non-Employee Director Stock Compensation Plan and PTI's
Long-Term Incentive Plan 1994 Restatement) ("Minority Stock"),
outstanding immediately before the Effective Time (other than
shares with respect to which the holder thereof has properly
perfected dissenters' rights in accordance with the WBCA),
shall by virtue of the Merger and without any action on the
part of the holder thereof, be converted into the right to the
Merger Consideration in accordance with Section 1.3.4.
1.3.3 Merger Sub Common Stock. Each of the 100
shares of Merger Sub Common Stock, ("Merger Sub Stock"), issued
and outstanding immediately before the Effective Time shall, by
virtue of the Merger and without any action on the part of the
holder thereof, be converted into and become one share of PTI
Common Stock.
1.3.4 Payment for Minority Stock. Prior to the
Effective Time, Holdings shall designate a bank or trust
company with capital, surplus and undivided profits of at least
$100 million to act as the payment agent (the "Payment Agent")
in connection with the Merger. At or prior to the Effective
Time, Holdings shall take all steps necessary to enable and
cause the Payment Agent to receive the funds (the "Fund")
necessary to make the payments of Merger Consideration provided
for by this Agreement. Out of the Fund, the Payment Agent
shall, pursuant to irrevocable instructions, make the payments
of Merger Consideration provided for by this Agreement. The
Fund shall not be used for any other purpose. The Payment
Agent may invest portions of the Fund, as directed by Holdings
(so long as such instructions do not impair the Payment Agent's
ability to make the payments of Merger Consideration provided
for by this Agreement or otherwise impair the rights of holders
of Minority Stock). Any net earnings resulting from, or
interest or income produced by, such investments shall be paid
to the Surviving Corporation as and when requested by Holdings.
Holdings shall replace any monies lost through any investment
pursuant to this
Section 1.3.4. Promptly after the Effective Time, Holdings
shall cause the Payment Agent to mail to each record holder of
Minority Stock as of immediately prior to the Effective Time a
form of letter of transmittal and instructions for use in
effecting the surrender of certificates representing Minority
Stock for payment. After the Effective Time, each holder of
shares of Minority Stock outstanding immediately prior to the
Effective Time shall, upon surrender for cancellation of a
certificate or certificates representing such shares to the
Payment Agent, together with such letter of transmittal duly
executed and completed in accordance with the instructions
thereto, be entitled to receive an amount equal to $30.00 in
cash for each share of Minority Stock converted pursuant to the
provisions of Section 1.3.2 (the "Merger Consideration").
Subject to full compliance with this Agreement, any cash
provided to the Payment Agent pursuant to this Section 1.3.4
and not exchanged for certificates representing Minority Stock
within 180 days after the Effective Time will be returned by
the Payment Agent to the Surviving Corporation, which
thereafter shall act as the payment agent. Notwithstanding the
foregoing, neither the Payment Agent nor any party to this
Agreement shall be liable to any holder of Minority Stock for
any Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or
similar law.
1.3.5 Lost, Stolen or Destroyed Certificates.
In the event that any certificate representing Minority Stock
shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming such
certificate to be lost, stolen or destroyed, Holdings shall, or
shall cause the Payment Agent to, issue in exchange for such
lost, stolen or destroyed certificate the Merger Consideration
deliverable in respect thereof as determined in accordance with
this Agreement; provided, however, that Holdings may, in its
sole discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed
certificate to give Holdings a bond in such sum as it may
reasonably direct as indemnity against any claim that may be
made against Holdings with respect to the certificate alleged
to have been lost, stolen or destroyed.
1.3.6 No Further Rights or Transfers. At and
after the Effective Time, each holder of a certificate that
represented Minority Stock immediately prior to the Effective
Time shall cease to have any rights as a shareholder of PTI,
except for the right to surrender his or her certificate or
certificates in exchange for the Merger Consideration or to
perfect his or her right to receive payment for shares of
Minority Stock pursuant to RCW 23B.13.010 et seq. and Section
1.3.7 hereof (if such holder has validly exercised and
perfected the dissenters rights provided thereby), and there
shall be no transfers on the stock books of the Surviving
Corporation of any shares of PTI Common Stock which were
outstanding immediately prior to the Effective Time. If,
after the Effective Time, certificates formerly representing
Minority Stock are presented to the Surviving Corporation, they
shall be cancelled and exchanged solely for the Merger
Consideration.
1.3.7 Dissenting Shareholders. Shares of
Minority Stock outstanding immediately prior to the Effective
Time and held by shareholders who have validly perfected
dissenter's rights in accordance with RCW 23B.13.010 et seq.
("Dissenting Shares") shall not be converted as described in
Section 1.3.2 but shall from and after the Effective Time
represent only the right to receive such consideration as may
be determined to be due in accordance with RCW 23B.13.010
et seq. Each holder of Dissenting Shares who becomes entitled
to payment for his Dissenting Shares in accordance with RCW
23B.13.010 et seq. shall receive payment therefor from the
Surviving Corporation after the Effective Time (but only after
the amount thereof shall have been agreed upon or finally
determined pursuant to RCW 23B.13.010 et seq.).
Notwithstanding the foregoing, if any holder of Dissenting
Shares shall fail to perfect, effectively withdraw or otherwise
lose such rights either before or after the Effective Time,
such holder's Dissenting Shares shall be converted into the
right to receive the Merger Consideration in accordance with
the provisions of Section 1.3.2.
1.4 Closing. The closing of the Merger (the
"Closing") shall take place at the offices of Stoel Rives Boley
Jones & Grey, 900 SW Fifth Avenue, Suite 2300, Portland, Oregon
97204, at 10:00 a.m. on the date when the last of the
conditions set forth in Article IV hereof (other than
conditions that by their terms are to occur at Closing) shall
have been fulfilled or waived or on such other date as PTI and
Holdings may agree (the "Closing Date").
1.5 Subsequent Actions. If, at any time after the
Effective Time, the Surviving Corporation shall reasonably
determine that any deeds, bills of sale, assignments,
assurances, or any other actions or things are necessary or
desirable to vest,
perfect, or confirm of record or otherwise in the Surviving
Corporation its right, title, or interest in, to, or under any
of the rights, properties, or assets of, PTI or Merger Sub
acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger or otherwise to
carry out this Agreement, the officers and directors of the
Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of PTI or Merger Sub, or
otherwise, all such deeds, bills of sale, assignments, and
assurances, and to take and do, in the name and on behalf of
PTI or Merger Sub or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect, or
confirm any and all right, title, and interest in, to, and
under such rights, properties, or assets in the Surviving
Corporation or otherwise to carry out this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of PTI. PTI
hereby represents and warrants to Holdings and Merger Sub that:
2.1.1 Organization and Good Standing. Each of
PTI and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and is duly qualified in good
standing as a foreign corporation in each jurisdiction where
the properties owned, leased or operated, or the business
conducted, by it require such qualification, except where the
failure to be so qualified would not have a material adverse
effect on PTI and its subsidiaries taken as a whole. Each of
PTI and its subsidiaries has all requisite corporate power and
authority to own, lease and operate its properties and to carry
on its business as it is now being conducted.
2.1.2 Capitalization. The authorized capital
stock of PTI consists of (i) 200,000,000 shares of common
stock, no par value, of which at February 28,
1995, there were 39,616,123 shares issued and outstanding (of
which 34,325,181 were held by Holdings and 5,290,942
constituted Minority Stock) and (ii) 152,000 shares of
Cumulative Preferred Stock, $25.00 par value, of which at
February 28, 1995, there were no shares outstanding. All
issued and outstanding shares of Common Stock are validly
issued, fully paid, nonassessable and free of preemptive
rights.
2.1.3 Corporate Authority; Authorization. PTI
has the corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly and validly authorized and approved by the Board of
Directors of PTI and no other corporate proceedings on the part
of PTI or any subsidiary of PTI are necessary to authorize this
Agreement and, except for the approval of this Agreement by its
shareholders and the filing of the Articles of Merger pursuant
to the WBCA, no other corporate proceedings on the part of PTI
are necessary to consummate the transactions contemplated by
this Agreement. This Agreement has been duly and validly
executed and delivered by PTI and constitutes a valid and
binding obligation of PTI enforceable against PTI in accordance
with its terms, except as enforcement may be affected by
applicable bankruptcy, insolvency, reorganization, moratorium,
or similar laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable
remedies of specific performance and injunctive relief are
subject to the discretion of the court before which any
proceeding may be brought.
2.1.4 Consents and Approvals. Except for
compliance with applicable requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), the securities laws
of the various states, shareholder approval of the Merger, the
filing of the Articles of Merger pursuant to the WBCA and any
necessary consents from the Federal Communications Commission
and any state telecommunications regulatory authorities, no
filing with, and no permit, authorization, consent or approval
of, any public body or authority is necessary for the execution
and delivery by PTI of this Agreement or the consummation by
PTI of the transactions contemplated by this Agreement,
excluding from the foregoing filings, permits, authorizations,
consents or approvals that, either individually or in the
aggregate, would not have a material adverse effect on the
business, operations, financial condition or prospects of PTI
and its subsidiaries taken as a whole. Neither the execution
and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the articles of
incorporation or bylaws of PTI or any of its subsidiaries, (ii)
result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give
rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, permit, agreement or other
instrument or obligation to which PTI or any of its
subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or (iii) violate any order,
writ, injunction, decree, statute, rule or regulation
applicable to PTI, any of its subsidiaries or any of their
properties or assets, excluding from the foregoing clauses (ii)
and (iii) violations, breaches or defaults that, either
individually or in the aggregate, would not have a material
adverse effect on the business, operations, financial condition
or prospects of PTI and its subsidiaries taken as a whole.
2.1.5 Proxy Statement and Schedule 13E-3. None
of the information supplied or to be supplied by PTI and the
Special Committee for inclusion in the Rule 13e-3 Transaction
Statement to be filed pursuant to the Exchange Act in
connection with the transactions contemplated hereby (the
"Schedule 13E-3") or the proxy statement (the "Proxy
Statement") to be filed pursuant to the Exchange Act with
respect to the meeting of shareholders (the "Shareholder
Meeting") called for the purpose of
approving this Agreement and the transactions contemplated
hereby, which, unless Holdings otherwise approves in writing,
will be the 1995 Annual Meeting of Shareholders of PTI, and any
amendments thereof or supplements thereto, will, on the
respective dates such materials are filed with the Securities
and Exchange Commission ("SEC"), at the time of the mailing of
the Proxy Statement or any amendment or supplement thereto, to
shareholders of PTI, at the time of the Shareholder Meeting and
at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they
were made, not misleading. If at any time prior to the
Effective Time any event with respect to PTI or its officers
and directors should occur which is required to be described in
an amendment of, or a supplement to, the Proxy Statement or the
Schedule 13E-3, such event shall be so described, and such
amendment or supplement shall be promptly filed with the SEC
and, as required by law, disseminated to the shareholders of
PTI. The Schedule 13E-3 will comply (with respect to PTI) in
all material respects, as to form, with the applicable
requirements of each of the Exchange Act and the respective
rules and regulations thereunder.
2.1.6 Company SEC Reports and Financial
Statements. PTI has heretofore furnished to Holdings complete
copies of all registration statements, reports, and other
required filings, including all amendments thereto, filed since
January 1, 1992 and on or before the date hereof with the SEC
(collectively, the "Company SEC Reports"). Since January 1,
1992, PTI has timely filed all registration statements, reports
and other filings required to be filed with the SEC under the
rules and regulations of the SEC. The Company SEC Reports,
including without limitation, any financial statements or
schedules included therein, when filed (a) did not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which
they were made,
not misleading and (b) complied in all material respects with
the applicable requirements of the Securities Act of 1933 (the
"Securities Act") and the Exchange Act, as the case may be, and
the applicable rules and regulations thereunder. Other than as
disclosed by PTI in its filings with the SEC, each of the
financial statements of PTI (including any related notes and
schedules) contained in the Company SEC Reports comply as to
form in all material respects with applicable accounting
requirements and with the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles ("GAAP") applied
on a consistent basis throughout the periods indicated (except
as otherwise indicated in such financial statements or in the
notes thereto or, in the case of the unaudited interim
statements, as permitted by the requirements of Form 10-Q) and
fairly present in all material respects (subject, in the case
of the unaudited statements, to normal recurring audit
adjustments) the consolidated financial position of PTI and its
consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended in accordance with GAAP.
2.1.7 Absence of Material Adverse Change.
Since September 30, 1994 and except as disclosed in the Company
SEC Reports or as otherwise disclosed to a responsible officer
of Holdings or PacifiCorp on or before the date hereof, here
has not been any material adverse change in the business,
operations, properties, assets, liabilities or condition
(financial or otherwise) of PTI and its subsidiaries taken as a
whole or any declaration of any dividend or other distribution
with respect to PTI's capital stock, other than regular
quarterly dividends paid in respect of PTI Common Stock.
2.1.8 Brokers and Finders. Neither PTI nor any
officer, director or employee of PTI has employed any broker,
finder or investment banker, or incurred any liability for any
brokerage or investment banking fees, commissions or finder's
fees, in connection with the transactions contemplated by this
Agreement, except that Smith
Barney, Inc. ("Smith Barney") has been engaged as the financial
advisor to the Special Committee and CS First Boston
Corporation ("CS First Boston") has been engaged to render an
opinion as to whether the Merger Consideration is fair, from a
financial point of view, to the Minority Shareholders, pursuant
to engagement letters that have been disclosed to Holdings.
2.1.9 Fairness Opinions. The Special Committee
has received the written opinion of each of Smith Barney and CS
First Boston (the "Fairness Opinions"), to the effect that, as
of the respective dates of such opinions, the Merger
Consideration is fair, from a financial point of view, to the
Minority Shareholders.
2.2 Representations and Warranties of Holdings and
Merger Sub. Holdings and Merger Sub hereby represent and
warrant to PTI that:
2.2.1 Organization and Good Standing. Holdings
and Merger Sub are corporations duly organized, validly
existing and in good standing under the laws of the States of
Delaware and Washington, respectively. Each of Holdings and
Merger Sub has all requisite corporate power and authority to
own and operate its properties and to carry on its business as
now being conducted.
2.2.2 Corporate Authority. Each of Holdings
and Merger Sub has the corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized and approved by
the Board of Directors of Holdings and Merger Sub and the sole
shareholder of Merger Sub and no other corporate proceedings on
the part of Holdings or Merger Sub are necessary to authorize
this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Holdings and Merger Sub and
constitutes a valid and binding agreement of Holdings and
Merger Sub, enforceable against each of
them in accordance with its terms, except as enforcement may be
affected by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally and except that the availability of
the equitable remedies of specific performance and injunctive
relief are subject to the discretion of the court before which
any proceeding may be brought.
2.2.3 Proxy Statement and Schedule 13E-3. None
of the information supplied or to be supplied by PacifiCorp,
Holdings or Merger Sub for inclusion in the Schedule 13E-3 or
the Proxy Statement and any amendments thereof or supplements
thereto will, on the respective dates such materials are filed
with the SEC, at the time of the mailing of such Proxy
Statement or any amendment or supplement thereto to
shareholders of PTI, at the time of the Shareholder Meeting and
at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they
were made, not misleading. If at any time prior to the
Effective Time any event with respect to PacifiCorp, Holdings,
Merger Sub or any of their respective officers, directors or
affiliates should occur which is required to be described in an
amendment of, or a supplement to, the Proxy Statement or the
Schedule 13E-3, such event shall be so described, and such
amendment or supplement shall be promptly filed with the SEC
and, as required by law, disseminated to the shareholders of
PTI. The Schedule 13E-3 will comply (with respect to
PacifiCorp, Holdings, Merger Sub and their respective officers,
directors and affiliates) in all material respects, as to form,
with the applicable requirements of each of the Exchange Act
and the respective rules and regulations thereunder.
2.2.4 Required Approvals. Except for
compliance with the applicable requirements of the Exchange
Act, the securities laws of the various states and the filing
of the Articles of Merger pursuant to the WBCA, no filing with,
and no
permit, authorization, consent or approval of, any public body
is necessary for the execution and delivery by Holdings or
Merger Sub of this Agreement or the consummation by Holdings or
Merger Sub of the transactions contemplated by this Agreement.
Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the
articles or certificate of incorporation (as the case may be)
or bylaws of PacifiCorp, Holdings or Merger Sub, (ii) result in
a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, permit, agreement or other
instrument or obligation to which PacifiCorp, Holdings or
Merger Sub is a party or by which any of them or any of their
respective properties or assets may be bound or (iii) violate
any order, writ, injunction, decree, statute, rule or
regulation applicable to PacifiCorp, Holdings or Merger Sub, or
any of their respective properties or assets, excluding from
the foregoing clauses (ii) and (iii) violations, breaches or
defaults that, either individually or in the aggregate, would
not have a material adverse effect on the business, operations,
financial condition or prospects of such entity and its
subsidiaries taken as a whole.
2.2.5 Prior Proposals and Offers; No Present
Intent to Sell. Since January 1, 1993, to the best knowledge
of Holdings after due inquiry, none of PacifiCorp, Holdings or
Merger Sub has received any "proposal" or offer to purchase, or
solicited any proposal or offer to purchase, any material
portion of the stock or assets of PTI, other than transactions
disclosed in the Company SEC Reports (including, without
limitation, the sale of Alascom). For purposes of this Section
2.2.5 a "proposal" may be either written or oral, but must have
included a proposed or suggested price or possible range of
prices and, if made on behalf of a corporation, must have been
made by a
responsible officer or representative of that corporation.
Neither PacifiCorp nor Holdings has any current plan or intent
to sell or otherwise dispose of any material portion of the
stock or assets of PTI, other than transactions disclosed in
the Company SEC Reports (including, without limitation, the
sale of Alascom). The Schedule 13D of PacifiCorp filed in
respect of Holdings' ownership interest in PTI, as amended by
the form of amendment attached hereto as Exhibit B (the "13D
Amendment"), will fully comply with all of the requirements of
such Schedule including, without limitation, Item 4 thereof.
The 13D Amendment will be filed promptly after the execution of
this Agreement.
2.2.6 Financing. Holdings has available to it
the funds necessary to consummate the Merger and the other
transactions contemplated by this Agreement.
ARTICLE III
COVENANTS
3.1 Proxy Materials and Schedule 13E-3. As soon as
practicable after the date hereof, PTI will prepare and,
subject to prior approval by Holdings, file the Proxy Statement
and accompanying
proxy materials in preliminary form, and PTI and PacifiCorp,
Holdings and Merger Sub will prepare and file the Schedule
13E-3 with the SEC pursuant to the Exchange Act. PTI will
provide Holdings and Merger Sub with a reasonable opportunity
to review and approve the Proxy Statement and any amendments or
supplements thereto prior to filing them with the SEC.
Holdings and Merger Sub will provide PTI with a reasonable
opportunity to review and approve the Schedule 13E-3 and any
amendments thereto prior to filing with the SEC. PTI will use
its best efforts to, as soon as is practicable, have the Proxy
Statement cleared by the SEC. PTI, Holdings and Merger Sub
will use their respective best efforts to, as soon as is
practicable, have the Schedule 13E-3 cleared by the SEC. As
soon as is practicable, PTI will distribute to the shareholders
of PTI and file with the SEC the Proxy Statement and
accompanying materials in definitive form and Holdings, Merger
Sub and PTI will file with the SEC the Schedule 13E-3, as
amended. Each party to this Agreement shall, and shall cause
its respective officers, directors and affiliates to, cooperate
fully with each other in responding promptly to any comments of
the SEC in respect of any of the filings made by such persons
with the SEC in connection with the transactions contemplated
by this Agreement.
3.2 Shareholder Approval. PTI will take all action
necessary in accordance with applicable law and its governing
instruments to call, give notice of, convene, and hold the
Shareholder Meeting as promptly as practicable to consider and
vote upon the approvals of this Agreement, the Merger and such
other matters as are required or contemplated by this
Agreement. In order to facilitate the solicitation of Minority
Shareholders at the Shareholder Meeting, PTI shall retain a
proxy solicitation firm of national reputation and reasonably
acceptable to Holdings to assist in the solicitation of proxies
and shall permit Holdings to participate in the solicitation
process. The Special Committee has unanimously recommended to
the Board of Directors of PTI that the Merger is fair to and in
the best interests of the Minority Shareholders. Based upon
the recommendation of the Special Committee, the Board of
Directors of PTI has determined by a unanimous vote (except for
possible abstention by the director who also serves as a
director of PacifiCorp) that this Agreement is advisable and in
the best interests of the Minority Shareholders and recommends,
and subject to their respective fiduciary duties, (i) shall
continue to recommend, to the Minority Shareholders the
adoption and approval of this Agreement and the transactions
contemplated hereby and (ii) shall use their respective best
efforts to obtain the necessary approvals by its shareholders
of this Agreement and the transactions contemplated hereby.
Holdings and Merger Sub have each determined that the
transactions contemplated by this Agreement are fair to the
Minority Shareholders.
3.3 Acquisition Proposals. PTI will not, directly
or indirectly, through any officer, director, agent or
otherwise, solicit, initiate or encourage submission of
proposals or offers from any person (including any of its
officers or employees) relating to any acquisition or purchase
of all or a substantial portion of the assets of, or any equity
interest in, PTI or any of its subsidiaries (other than sales
of assets in the ordinary course of business which, in the
aggregate, do not involve a substantial portion of the assets
of PTI or any of its subsidiaries or sales disclosed in the
Company SEC Reports including, without limitation, the sale of
Alascom) or any business combination with PTI or any of its
subsidiaries, or, subject to fiduciary duties under applicable
law as advised by counsel, participate in any negotiations
regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or
attempt by any other person to do or seek any of the foregoing.
PTI represents and warrants that, as of the date of this
Agreement, no such negotiations or activities are in process
with respect to the foregoing. PTI shall promptly notify
Holdings if any such proposal or offer, or any inquiry or
contact with any person with respect thereto, is made.
3.4 Dissenters' Rights. PTI shall not settle or
compromise any claim for dissenters' rights in respect of the
Merger without the prior written consent of Holdings.
3.5 Conduct of Business of PTI. During the period
from the date of this Agreement to the Effective Time, except
as specifically contemplated by this Agreement or as previously
disclosed in the Company SEC Reports or otherwise approved in
writing by Holdings, PTI and its subsidiaries shall not:
(a) conduct their respective businesses except
in the ordinary course of business and consistent with past
practice;
(b) propose or adopt any amendments to its
Articles of Incorporation or Bylaws or make any change in the
Board of Directors of PTI except as may be required to comply
with Section 3.12 of this Agreement;
(c) issue, sell or repurchase, or authorize or
propose the issuance, sale or repurchase of any shares of its
capital stock or any other securities or issue any securities
convertible into or exchangeable for, or options, warrants to
purchase, rights to subscribe for, calls or commitments of any
character whatsoever relating to, or enter into any agreement,
understanding or arrangement with respect to the issuance of,
any of its shares of capital stock or any other securities
(including securities of others), other than pursuant to the
PacifiCorp K Plus and Employee Stock Ownership Plan, or enter
into any agreement, understanding or arrangement with respect
to the purchase or voting of shares of its capital stock, or
adjust, split, combine or reclassify any of its securities, or
make any other changes in its capital structure;
(d) declare, set aside, pay or make any
dividend or other distribution or payment (whether in cash,
stock or property) with respect to, or purchase or redeem, any
shares of the capital stock of PTI, except for regular
quarterly cash dividends of no more than $.33 per share;
(e) take any action with respect to the grant
of any severance or termination pay (otherwise than pursuant to
policies or agreements of PTI or any of its subsidiaries in
effect on the date hereof) or with respect to any increase of
benefits payable under its severance or termination pay
policies in effect on the date hereof; or
(f) except for salary increases or other
employee benefit arrangements made in the ordinary course of
business, adopt or amend any bonus, profit sharing,
compensation, pension, retirement, deferred compensation,
severance, employment or other employee benefit plan,
agreement, trust, fund or arrangement for the benefit or
welfare of any employee.
3.6 Access and Information. PTI shall and shall
cause its subsidiaries to give to Holdings and Merger Sub and
their respective representatives full access to all the
premises and books and records of PTI and its subsidiaries and
shall cause its officers and officers of its subsidiaries and
their independent auditors to furnish to such persons such
financial and operating data and other information, including
access to the working papers of its independent auditors, with
respect to its business and properties as Holdings shall from
time to time reasonably request. No investigation pursuant to
this Section 3.6 shall affect or be deemed to modify any
representations or warranties made in this Agreement or the
conditions to the obligations of the parties to consummate the
Merger.
3.7 Certain Filings, Consents and Arrangements.
3.7.1 Consents. Holdings, Merger Sub and PTI
shall use their respective best efforts to obtain any necessary
consents, permits, authorizations, approvals and waivers to
permit the consummation of the transactions contemplated by
this Agreement, provided that PTI shall not, without the
consent of Holdings (which consent shall not be unreasonably
withheld), agree to any amendment to any material instrument or
agreement to which it is a party.
3.7.2 Filings. Holdings, Merger Sub and PTI
shall cooperate with one another (i) in promptly determining
whether any filings are required to be made or consents,
approvals, permits or authorizations are required to be
obtained under any federal, state or foreign law or regulation
or any consents, approvals or waivers are required to be
obtained from other parties to loan agreements or other
agreements or instruments material to PTI's business in
connection with the consummation of the Merger and (ii) in
promptly making any such filings, furnishing information
required in connection therewith and seeking timely to obtain
any such consents, permits, authorizations, approvals or
waivers.
3.8 Indemnification and Insurance.
(a) From and after the Effective Time, the
Surviving Corporation shall maintain, and Holdings agrees to
cause the Surviving Corporation to maintain for a period of at
least six years from the Effective Time for the benefit of
PTI's current directors and officers, (i) director and officer
liability insurance providing at least the same amounts and
coverage with respect to PTI's current directors and officers
as the current policies maintained by or on behalf of PTI, and
containing terms and conditions which are no less advantageous
with respect to matters existing or occurring on or prior to
the Effective Time (or, with respect to matters arising from or
in connection with Section 1.5 hereof, subsequent to the
Effective Time), and in the event any claim is made against
present directors of PTI that is covered, in whole or in part,
or potentially so covered by insurance, the Surviving
Corporation and Holdings shall do nothing that would forfeit,
jeopardize, restrict or limit the insurance coverage available
for that claim until the final disposition of that claim;
provided, however, that if the cost of maintaining such
insurance exceeds the current cost related to providing such
insurance (the "Current Cost") by more than twice the Current
Cost, then the Surviving Corporation shall maintain and
Holdings agrees to cause the Surviving Corporation to maintain
such director and officer liability insurance with the maximum
amount of coverage obtainable at twice such Current Cost, and
(ii) all rights to indemnification now existing in favor of the
present directors and officers of PTI and its respective
subsidiaries as provided in their respective articles of
incorporation or bylaws or otherwise in effect on the date
hereof (other than pursuant to this Agreement) shall survive
the Merger for a period of six years; provided, however, that
all such rights to indemnification with respect to any claim
asserted, made or originated prior to the expiration of such
six-year period shall survive until the final disposition of
such Claim (as hereinafter defined), and that during such
period, the Articles of Incorporation and
Bylaws of the Surviving Corporation shall not be amended to
reduce or limit the rights of indemnity of the present
directors and officers of PTI, or the ability of the Surviving
Corporation to indemnify them, nor to hinder, delay or make
more difficult the exercise of such rights of indemnity or the
ability to indemnify.
(b) Without limiting the foregoing, in any case in
which approval by the Surviving Corporation is required to
effectuate any indemnification under this Section 3.8, Holdings
shall cause the Surviving Corporation to direct, at the
election of the director of PTI seeking indemnification
hereunder, that the determination of any such approval shall be
made by independent counsel acceptable to Holdings selected by
such director of PTI seeking indemnification hereunder.
(c) This Section 3.8 shall survive the consummation
of the Merger. The provisions of this Section 3.8 are intended
to be for the benefit of, and shall be enforceable by the
present directors or officers of PTI, as the case may be. The
rights provided under this Section 3.8 shall be in addition to,
and not in lieu of, any rights to indemnity which any party may
have under the Articles of Incorporation or Bylaws of PTI or
the Surviving Corporation or any other agreements.
(d) An indemnified party under this Section 3.8
shall be free to determine, in such party's sole discretion,
which of the sources of indemnification or insurance available
hereunder that such party desires to pursue without in any
manner waiving any rights against other sources not initially
pursued. In addition, this Section 3.8 is not intended to
release or limit any insurer from the obligations undertaken by
it in any policy of insurance.
3.9 Dividend Policy. During the period from the
date of this Agreement to the Effective Time, Holdings shall
not take any action to cause PTI to make any dividend or other
distribution or payment to Holdings with respect to Holdings
Stock otherwise than in accordance with PTI's existing dividend
policies.
3.10 Notification of Certain Matters. Each of PTI
and Holdings shall give prompt notice to the other of (i) any
claims, actions, proceedings or investigations commenced or, to
the best of its knowledge, threatened, involving or affecting
the notifying party or any of its property or assets, that
relate to the Merger, (ii) the occurrence, or failure to occur,
of any event that would be likely to cause any representation
or warranty of the notifying party contained in this Agreement
to be untrue or inaccurate in any material respect, and (iii)
any material failure of the notifying party or of any officer,
director, employee or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or
satisfied by it hereunder. No such notification shall affect
the representations or warranties of the parties or the
conditions to the obligations of the parties hereunder.
3.11 Fees and Expenses. All costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such
expenses (including, in the case of PTI, the costs of printing
and mailing the Proxy Statement), whether or not the Merger is
consummated.
3.12 Election of Directors. PTI agrees to take all
actions requested by Holdings to cause to be elected to PTI's
Board of Directors at the Shareholder Meeting such additional
directors as may be designated by Holdings.
3.13 Employee Benefits. Holdings agrees to honor,
from and after the Effective Time, in accordance with its terms
as in effect on the date of this Agreement, the Pacific
Telecom, Inc. Executive Officer Severance Plan effective
January 1, 1994.
3.14 Additional Agreements. Subject to the terms and
conditions hereof, each party shall use its best efforts
promptly to take, or cause to be taken, all actions and
promptly to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by
this Agreement.
ARTICLE IV
CONDITIONS
4.1 Conditions to the Obligations of The Parties.
The respective obligations of PTI, Holdings, and Merger Sub to
consummate the transactions contemplated by this Agreement are
subject to the satisfaction or waiver at or before the Closing
of each of the following conditions:
4.1.1 Shareholder Approval. This Agreement and
the Merger shall have been duly adopted and approved (A) by the
affirmative vote of the holders of at least a majority of the
Minority Stock and (B) by the requisite vote of the
shareholders of PTI in accordance with applicable law and its
Articles of Incorporation and Bylaws.
4.1.2 No Injunction. The consummation of the
Merger shall not be precluded by any order or injunction of a
court of competent jurisdiction (each party agreeing to use its
best efforts to have any such order reversed or injunction
lifted), and there shall not have been any action taken or any
statute, rule or regulation enacted, promulgated or deemed
applicable to the Merger by any government or governmental or
other regulatory agency, domestic or foreign, that makes
consummation of the Merger illegal.
4.2 Conditions to Obligation of PTI. The obligation
of PTI to consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver at or before
the Closing of the following additional conditions:
4.2.1 Representations, Warranties, and
Covenants. The representations and warranties of Holdings and
Merger Sub, including, without limitation, those relating to
PacifiCorp, contained in this Agreement shall be correct in all
material respects (a) at the date of this Agreement, and (b) on
and as of the Closing Date with the same effect as though made
on and as of such date, Holdings and Merger Sub shall have
performed in all material respects all of their respective
covenants and obligations hereunder theretofore to be
performed, and PTI shall have received at the Closing
certificates to that effect, dated the Closing Date, and
executed on behalf of Holdings by an executive officer of
Holdings and on behalf of Merger Sub by an executive officer of
Merger Sub.
4.2.2 PacifiCorp Agreement. PacifiCorp shall
have entered into the PacifiCorp Agreement, the representations
and warranties of PacifiCorp contained in the PacifiCorp
Agreement shall be correct in all material respects (a) at the
date of the PacifiCorp Agreement and (b) on and as of the
Closing Date with the same effect as though made on and as of
such date, and PacifiCorp shall have performed in all material
respects all of its covenants and obligations under the
PacifiCorp Agreement theretofore to be performed and PTI shall
have received at the Closing a certificate to that effect,
dated the Closing Date, and executed on behalf of PacifiCorp by
an executive officer of PacifiCorp.
4.2.3 No Injunction. No governmental action or
proceeding shall have been commenced that (a) in the opinion of
the Special Committee's counsel is more likely than not to be
successful and (b) seeks an injunction, a restraining order or
any other order seeking to prohibit, restrain, invalidate or
set aside the consummation of the Merger.
4.2.4 Fairness Opinions. Neither of the
Fairness Opinions shall have been modified withdrawn or revoked
as of the time of the mailing of the Proxy Statement to the
shareholders of PTI.
4.2.5 Consents and Approvals. All consents,
approvals, permits and authorizations required to be obtained
from governmental and regulatory authorities in connection with
the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by PTI
shall have been obtained, except where the failure to obtain
such consents, approvals, permits and authorizations would not
have a
material adverse effect on the business, operations, financial
condition or prospects of PTI and its subsidiaries, taken as a
whole.
4.3 Conditions to Obligations of Holdings and Merger
Sub. The obligations of Holdings and Merger Sub to consummate
the transactions contemplated by this Agreement are subject to
the satisfaction or waiver at or before the Closing of the
following additional conditions:
4.3.1 Representations, Warranties, and
Covenants. The representations and warranties of PTI contained
in this Agreement shall be correct in all material respects (a)
at the date of this Agreement, and (b) as of the Closing with
the same effect as though made on and as of such date, except
for changes specifically contemplated by this Agreement, and
PTI shall have performed in all material respects all of its
respective covenants and obligations hereunder theretofore to
be performed, and Holdings and Merger Sub shall have received
at the Closing certificates to that effect, dated the Closing
Date, and executed on behalf of PTI by an executive officer of
PTI.
4.3.2 No Injunction. No governmental action or
proceeding shall have been commenced that (a) in the opinion of
Holding's counsel is more likely than not to be successful, and
(b) seeks an injunction, a restraining order or any other order
seeking to prohibit, restrain, invalidate or set aside
consummation of the Merger.
4.3.3 Material Adverse Change. Except as
disclosed in the Company SEC Reports or as otherwise disclosed
to a responsible officer of Holdings or PacifiCorp on or before
the date hereof, since September 30, 1994, there shall not have
been any change or event that has resulted in, or may result
in, any material adverse change in the business, operations,
properties, assets, liabilities or condition (financial or
otherwise) of PTI and its subsidiaries, taken as a whole.
4.3.4 Consents and Approvals. All consents,
approvals, permits and authorizations required to be obtained
from governmental and regulatory authorities in connection with
the execution and delivery of this Agreement and the
consummation of
the transactions contemplated hereby by Holdings shall have
been obtained, except where the failure to obtain such
consents, approvals, permits and authorizations would not have
a material adverse effect on the business, operations,
financial condition or prospects of Holdings and its
subsidiaries, taken as a whole.
ARTICLE V
TERMINATION
5.1 Termination. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the
Effective Time, whether before or after the Shareholder
Meeting:
5.1.1 Mutual Consent. By the mutual consent of
the Boards of Directors of Holdings and PTI;
5.1.2 Failure of Merger to Occur by Certain
Date. By either PTI or Holdings if the Effective Time shall
not have occurred on or before September 30, 1995, which date
may be extended by the mutual consent of the Boards of
Directors of Holdings and PTI; provided, however, that the
right to terminate this Agreement under this Section 5.1.2
shall not be available to a party whose failure (or whose
subsidiary's or parent corporation's failure) to fulfill any
obligation under this Agreement has been a significant cause
of, or in any significant respect resulted in, the failure of
the Effective Time to occur on or before September 30, 1995 or,
in the event of an extension by the mutual agreement of
Holdings and PTI, by such later date;
5.1.3 Actions Restraining the Merger. By
either Holdings or PTI if any court of competent jurisdiction
in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall
have become final and nonappealable;
5.1.4 Failure of Shareholders to Approve. By
either Holdings or PTI if the shareholders of PTI fail to duly
adopt and approve this Agreement and the Merger as contemplated
by Section 4.1.1;
5.1.5 By PTI. By PTI if (A) there is a
material breach of any of the representations and warranties of
PacifiCorp, Holdings or Merger Sub or (B) PacifiCorp, Holdings
or Merger Sub fail to comply in any material respect with any
of their respective covenants or agreements, in each case as
contained herein or in the PacifiCorp Agreement; or
5.1.6 By Holdings. By Holdings or Merger Sub
if (A) the Special Committee or the Board of Directors upon the
recommendation of the Special Committee shall have withdrawn or
modified in any manner adverse to Holdings or Merger Sub its
approval or recommendation of this Agreement or the Merger, or
(B) there is a material breach of any of the representations
and warranties of PTI or (C) PTI fails to comply in any
material respect with any of its covenants or agreements
contained herein.
5.2 Effect of Termination. Except as set forth
below in this Section 5.2 and as provided in Section 6.1, upon
the termination of this Agreement pursuant to Section 5.1, this
Agreement shall forthwith become null and void and no party to
this Agreement shall have any liability or further obligation
to the other party by reason of this Agreement, other than for
damages to the extent arising from a prior breach of this
Agreement.
ARTICLE VI
MISCELLANEOUS AND GENERAL
6.1 Survival of Representations, Warranties and
Agreements. The representations and warranties in this
Agreement shall terminate at the Effective Time or upon the
termination of this Agreement pursuant to Section 5.1, as the
case may be. The covenants and agreements contained in this
Agreement shall survive the Effective Time and shall continue
until they terminate in accordance with their terms. The
covenants and agreements contained in Sections 3.11, 5.2 and
this Section 6.1 shall survive termination of this Agreement in
accordance with their terms.
6.2 Waiver and Amendment. Any provision of this
Agreement may be waived at any time by the party that is, or
whose shareholders are, entitled to the benefits thereof.
Except for the provisions hereof relating to indemnification
and insurance as set forth in Section 3.8, this Agreement may
be amended or supplemented at any time, except that after
approval hereof by the shareholders of PTI, no amendment shall
be made which decreases the Merger Consideration, changes the
form of the Merger Consideration or that in any other way
materially adversely affects the rights of the Minority
Shareholders (other than a termination of this Agreement)
without the further approval of the Minority Shareholders. No
such waiver, amendment or supplement shall be effective unless
in writing and signed by the party or parties intended to be
bound thereby.
6.3 Entire Agreement. This Agreement (a) contains
the entire agreement among Holdings, Merger Sub and PTI with
respect to the Merger and the other transactions contemplated
hereby, and supersedes all prior agreements among the parties
with respect to such matters, and (b) is not intended to confer
upon any other persons any rights or remedies hereunder, except
as specifically provided for herein.
6.4 Headings. The descriptive headings contained
herein are for convenience and reference only and shall not
affect in any way the meaning or interpretation of this
Agreement.
6.5 Notices. All notices or other communications
hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in
person, by cable, telegram, telex or other standard form of
telecommunications, or by registered or certified mail, postage
prepaid, return receipt requested addressed as follows:
If to PTI: With copies to:
Pacific Telecom, Inc. Latham & Watkins
Attention: Special Committee Attention: John J. Huber
of the Board of Directors 1001 Pennsylvania Ave., NW
c/o James H. Huesgen Suite 1300
805 Broadway Washington, D.C. 20004-2505
Vancouver, WA 98660
If to Holdings or Merger Sub: With a copy to:
PacifiCorp Holdings, Inc. Stoel Rives Boley Jones & Grey
Attention: Richard T. O'Brien Attention: Henry H. Hewitt
700 NE Multnomah 900 SW Fifth Avenue
Suite 1600 Suite 2300
Portland, Oregon 97232 Portland, Oregon 97204
or to such other address as any party may have furnished to the
other parties in writing in accordance herewith.
6.6 Parties in Interest; Assignment. This Agreement
is binding upon and is solely for the benefit of the parties
and their respective successors, legal representatives and
assigns except that Sections 3.8 and 3.13 shall be for the
express benefit of the persons in the categories referred to
therein. Holdings shall have the right to assign to one or
more direct or indirect wholly owned subsidiaries of Holdings
any and all rights and obligations of Merger Sub under this
Agreement, including without limitation, the right to
substitute in Merger Sub's place such a subsidiary as one of
the
constituent corporations in the Merger (if such subsidiary
assumes all of the obligations of Merger Sub in connection with
the Merger). If Holdings exercises its right to so restructure
the transaction, PTI shall promptly enter into appropriate
agreements to reflect such restructuring. In any such event
the amounts to be paid to holders of Minority Stock shall not
be reduced, nor shall there be any material delay of the
Effective Time.
6.7 Specific Performance. The parties agree that
irreparable damage would occur if any of the provisions of this
Agreement are not performed in accordance with their specific
terms or are otherwise breached. It is agreed that the parties
shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the
terms and provisions hereof in any court of the United States
or any state having jurisdiction, in addition to any other
remedy to which any party is entitled at law or in equity.
6.8 Public Statements. The parties agree to consult
with each other prior to issuing any public announcement or
statement with respect to the Merger, if practicable. As soon
as is practicable following execution of this Agreement, the
parties will issue a joint press release announcing the
execution of this Agreement, which press release will be in the
form of Exhibit C hereto.
6.9 Counterparts. For the convenience of the
parties hereto, this Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an
original instrument, and all such counterparts shall together
constitute the same agreement.
6.10 Choice of Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Washington regardless of the laws that might otherwise govern
under applicable principles of conflicts of law.
(Signature pages to follow)
IN WITNESS WHEREOF, this Agreement has been duly
executed and delivered by the duly authorized officers of the
parties hereto as of the date first hereinabove written.
PACIFIC TELECOM, INC.
By CHARLES E. ROBINSON
----------------------------------
Title: Chief Executive Officer
PACIFICORP HOLDINGS, INC.
By RICHARD T. O'BRIEN
-----------------------------
Title: Senior Vice President
PXYZ CORPORATION
By RICHARD T. O'BRIEN
-----------------------------
Title: President
EXHIBITS TO THE
AGREEMENT AND PLAN OF MERGER
Exhibit Description (Section Reference)
A. Form of PacifiCorp Agreement (Recital F and
Section 4.2.2)
B. Form of Amendment to Schedule 13D to be filed by
PacifiCorp (Section 2.2.5)
C. Form of Joint Press Release (Section 6.8)
EXHIBIT A
AGREEMENT
This Agreement is dated as of March 9, 1995 between
PacifiCorp, an Oregon corporation ("PacifiCorp"), and Pacific
Telecom, Inc., a Washington corporation ("PTI").
RECITALS
A. PacifiCorp owns all of the issued and outstanding
capital stock of PacifiCorp Holdings, Inc., a Delaware
corporation ("Holdings"). On the date hereof, PTI, PXYZ
Corporation, a Washington corporation ("Merger Sub"), and
Holdings are entering into an Agreement and Plan of Merger (the
"Agreement and Plan of Merger") dated the date hereof and
providing, among other things, for the merger of Merger Sub
with and into PTI (the "Merger"). PTI has indicated that it
will not enter into the Agreement and Plan of Merger unless PTI
and PacifiCorp enter into this Agreement at the same time.
PacifiCorp is entering into this Agreement with PTI expressly
for the purpose of inducing PTI to enter into the Agreement and
Plan of Merger. Immediately following the Merger, Holdings
will own all of the issued and outstanding capital stock of
PTI.
B. PacifiCorp believes that it is in the best interests
of PacifiCorp and its shareholders to consummate the Merger.
AGREEMENT
In consideration of the execution by Company of the
Agreement and Plan of Merger and of the mutual covenants and
agreements set forth herein, PacifiCorp and PTI agree as
follows:
1. Defined Terms. Capitalized terms used herein
shall have the meanings assigned to them in the Agreement and
Plan of Merger unless otherwise defined herein.
2. Certain Representations.
(a) Organization and Good Standing. PacifiCorp
is a corporation duly organized and validly existing under the
laws of the State of Oregon. PacifiCorp has all requisite
corporate power and authority to own and operate its properties
and to carry on its business as now being conducted.
(b) Corporate Authority. PacifiCorp has full
corporate power and authority to execute and deliver this
Agreement and to undertake the obligations provided for herein.
The execution, delivery and performance of this Agreement by
PacifiCorp have been duly authorized by all requisite corporate
action and no further corporate proceedings on the part of
PacifiCorp are necessary to authorize this Agreement or to
undertake the obligations provided for herein. This Agreement
has been duly and validly executed and delivered by PacifiCorp
and constitutes a valid and binding agreement of PacifiCorp,
enforceable in accordance with its terms, except as enforcement
may be affected by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and except that the
availability of the equitable remedies of specific performance
and equitable relief are subject to the discretion of the court
before which any such proceeding may be brought.
(c) Proxy Statement and Schedule 13E-3. None
of the information supplied or to be supplied by PacifiCorp for
inclusion in the Schedule 13E-3 or the Proxy Statement and any
amendments thereof or supplements thereto will, on the
respective dates such materials are filed with the SEC, at the
time of the mailing of such Proxy Statement or any amendment or
supplement thereto to shareholders of PTI, at the time of the
Shareholder Meeting and at the Effective Time, contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. If
at any time prior to the Effective Time any event with respect
to PacifiCorp or any of its officers, directors or affiliates
should occur which is required to be described in an amendment
of, or a supplement to, the Proxy Statement or the Schedule
13E-3, such event shall be so described, and such amendment or
supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the shareholders of PTI. The
Schedule 13E-3 will comply (with respect to PacifiCorp and its
officers, directors and affiliates) in all material respects,
as to form, with the applicable requirements of each of the
Exchange Act and the respective rules and regulations
thereunder.
(d) Required Approvals and Consents. Except
for compliance with the applicable requirements of the Exchange
Act and the securities laws of the various states, no filing
with, and no permit, authorization, consent or approval of, any
public body is necessary for the execution and delivery by
PacifiCorp of this Agreement or the consummation by PacifiCorp
of the transactions contemplated by this Agreement.
(e) Prior Offers; No Present Intent to Sell.
Since January 1, 1993, to the best knowledge of PacifiCorp,
after due inquiry, PacifiCorp has not received any "proposal"
or offer to purchase, or solicited any proposal or offer to
purchase, any material portion of the stock or assets of PTI,
other than transactions disclosed in Company SEC Reports
(including, without limitation, the sale of Alascom). For
purposes of this Section 2(e) a "proposal" may be either
written or oral, but must have included a proposed or suggested
price or possible range of prices and, if made on behalf of a
corporation, must have been made by a responsible officer or
representative of that corporation. PacifiCorp has no current
plan or intent to sell or otherwise dispose of any material
portion of the stock or assets of PTI, other than transactions
disclosed in Company SEC Reports (including, without
limitation, the sale of Alascom). The Schedule 13D of
PacifiCorp filed in respect of Holdings' ownership interest in
PTI, as amended by the 13D Amendment, fully complies with all
of the requirements of such Schedule, including, without
limitation, Item 4 thereof. The 13D Amendment will be filed
promptly after execution of this Agreement.
3. Proxy Materials and Schedule 13E-3. PacifiCorp
will cooperate fully with Holdings, Merger Sub and PTI in
preparing and filing the Schedule 13E-3 and in obtaining SEC
clearance of the Schedule 13E-3 as contemplated by Section 3.1
of the Agreement and Plan of Merger. PacifiCorp will cause its
officers and directors to cooperate fully with PTI in
responding promptly to any comments of the SEC in regard of any
of the filings made by such persons with the SEC in connection
with the transactions contemplated by this Agreement or the
Agreement and Plan of Merger.
4. Fairness of the Merger. PacifiCorp has
determined that the transactions contemplated by this Agreement
and the Agreement and Plan of Merger are fair to the Minority
Shareholders.
5. Certain Filings, Consents and Arrangements.
5.1 Consents. PacifiCorp shall use its best
efforts to obtain any necessary consents, permits,
authorizations, approvals and waivers required to be obtained
by it to permit the consummation of the transactions
contemplated by the Agreement and Plan of Merger.
5.2 Filings. PacifiCorp shall promptly
determine whether any filings are required to be made by it or
consents, approvals, permits or authorizations are required to
be obtained by it under any federal, state or foreign law or
regulation or any consents, approvals or waivers are required
to be obtained from other parties to loan agreements or other
agreements or instruments material to PacifiCorp's business in
connection with the consummation of the Merger and will
promptly make any such filings, furnish information required in
connection therewith and seek timely to obtain any such
consents, permits, authorizations, approvals or waivers.
6. Dividend Policy. During the period from the
date of this Agreement to the Effective Time, PacifiCorp shall
not take any action to cause PTI to make any dividend or other
distribution or payment to Holdings with respect to Holdings
Stock otherwise than in accordance with PTI's existing dividend
policies.
7. Indemnification. From and after the Effective
Time, PacifiCorp shall (to the extent specified in the
following sentence) indemnify, defend and hold harmless each
person who is now a director or officer of PTI against all
losses, claims, damages, costs, expenses or liabilities, or in
connection with any claim, action, suit, proceeding or
investigation (a "Claim"), arising out of the fact that such
person is a director or officer of PTI (or out of any action
taken by any such person on behalf of PTI), pertaining to any
matter existing or occurring on or prior to the Effective Time
(or, with respect to matters arising from or in connection with
Section 1.5 of the Agreement and Plan of Merger, subsequent to
the Effective Time) (including, without limitation, the
transactions contemplated by the Agreement and Plan of Merger),
whether asserted or claimed prior to, or on or after, the
Effective Time. In each case such indemnification shall be to
the full extent a corporation is permitted under Washington law
to indemnify its own directors and officers (and PacifiCorp
will pay expenses in advance of the final disposition of any
such action or proceeding to each such director of PTI seeking
indemnification hereunder to the full extent permitted by law).
8. Notification of Certain Matters. Each of
PacifiCorp and PTI shall give prompt notice to the other of (i)
any claims, actions, proceedings or investigations commenced
or, to the best of its knowledge, threatened, involving or
affecting the notifying party or any of its property or assets,
that relate to the Merger, (ii) the occurrence, or failure to
occur, of any event that would be likely to cause any
representation or warranty of the notifying party contained in
this Agreement or the Agreement and Plan of Merger to be untrue
or inaccurate in any material respect, and (iii) any material
failure of the notifying party or of any officer, director,
employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or
satisfied by it hereunder or under the Agreement and Plan of
Merger. No such notification shall affect the representations
or warranties of the parties or the conditions to the
obligations of the parties hereunder or under the Agreement and
Plan of Merger. Any notice properly given by PTI to Holdings
in compliance with the Agreement and Plan of Merger shall also
constitute notice of such matter to PacifiCorp hereunder.
9. Fees and Expenses. All costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
10. Public Announcements. PacifiCorp agrees to
consult with PTI prior to issuing any public announcement or
statement with respect to the Merger, if practicable.
11. Assignment. This Agreement shall be binding
upon and is solely for the benefit of the parties and their
respective successors, legal representatives and assigns, and
is not intended to confer any benefit on any third party except
that Section 7 shall be for the express benefit of the persons
in the categories referred to therein. The rights under this
Agreement shall not be assigned by either party without the
prior written consent of the other.
12. Governing Law. This Agreement shall be governed
by the laws of the State of Washington applicable to contracts
made and to be performed therein.
13. Entire Agreement. This Agreement (a) contains
the entire agreement between PacifiCorp and PTI with respect to
the transactions contemplated by the Agreement and Plan of
Merger, and (b) supersedes all prior agreements between the
parties with respect to such matters.
14. Notices. All notices or other communications
hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in
person, by cable, telegram, telex or other standard form of
telecommunications, or by registered or certified mail, postage
prepaid, return receipt requested addressed as follows:
If to PTI: With copies to:
Pacific Telecom, Inc. Latham & Watkins
Attention: Special Committee Attention: John J. Huber
of the Board of Directors 1001 Pennsylvania Ave., NW
c/o James H. Huesgen Suite 1300
805 Broadway Washington, D.C. 20004-2505
Vancouver, WA 98660
If to Holdings or Merger Sub: With a copy to:
PacifiCorp Holdings, Inc. Stoel Rives Boley Jones & Grey
Attention: Richard T. O'Brien Attention: Henry H. Hewitt
700 NE Multnomah 900 SW Fifth Avenue
Suite 1600 Suite 2300
Portland, Oregon 97232 Portland, Oregon 97204
or to such other address as any party may have furnished to the
other parties in writing in accordance herewith.
15. Specific Performance. The parties agree that
irreparable damage would occur if any of the provisions of this
Agreement are not performed in accordance with their specific
terms or are otherwise breached. It is agreed that the parties
shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the
terms and provisions hereof in any court of the United States
or any state having jurisdiction, in addition to any other
remedy to which any party is entitled at law or in equity.
16. Counterparts. This Agreement may be executed in
counterparts, each of which when so executed shall be deemed to
be an original, and such counterparts shall together constitute
but one and the same instrument.
(Signature pages to follow)
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed as of the date first above
written.
PACIFICORP
By: FREDERICK W. BUCKMAN
---------------------------------
Title: Chief Executive Officer
PACIFIC TELECOM, INC.
By: CHARLES E. ROBINSON
---------------------------------
Title: Chief Executive Officer
EXHIBIT B
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 18)*
PACIFIC TELECOM, INC.
- -------------------------------------------------------------
(Name of Issuer)
Common Stock (no par value)
- -------------------------------------------------------------
(Title of Class of Securities)
694876 10 3
------------------------------
(CUSIP Number)
Richard T. O'Brien
PacifiCorp
700 NE Multnomah, Suite 1600
Portland, oregon 97232-4116
Telephone: (503) 731-2133
- -------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
March 9, 1995
------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of
Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement
/ /. (A fee is not required only if the reporting person:
(1) has a previous statement on file reporting beneficial
ownership of more than five percent of the class of securities
described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less
of such class.) (See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits,
should be filed with the Commission. See Rule 13d-1(a) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect to
the subject class of securities, and for any subsequent amendment
containing information which would alter the disclosures provided
in a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section 18
of the Securities Exchange Act of 1934 ("Act") or otherwise
subject to the liabilities of that section of the Act but shall
be subject to all other provisions of the Act (however, see the
Notes).
SCHEDULE 13D
CUSIP No. 694876 10 3
- -------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PacifiCorp Holdings, Inc. (formerly Inner PacifiCorp, Inc.)
93-0866672
- -------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) / /
(b) / /
- -------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------
4 SOURCE OF FUNDS*
BK
- -------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
/ /
- -------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
WITH:
7 SOLE VOTING POWER
0
- -------------------------------------------------------------
8 SHARED VOTING POWER
34,325,181
- -------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
0
- -------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
34,325,181
- -------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
34,325,181
- -------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
/ /
- -------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
86.6%
- -------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- -------------------------------------------------------------
SCHEDULE 13D
CUSIP No. 694876 10 3
- -------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PacifiCorp 93-0246090
- -------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) / /
(b) / /
- -------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------
4 SOURCE OF FUNDS*
Not Applicable
- -------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
/ /
- -------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Oregon
- -------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON
WITH
7 SOLE VOTING POWER
0
- -------------------------------------------------------------
8 SHARED VOTING POWER
34,325,181
- -------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
0
- -------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
34,325,181
- -------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
34,325,181
- -------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES*
/ /
- -------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
86.6%
- -------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- -------------------------------------------------------------
PACIFICORP HOLDINGS, INC.
-------------------------
AMENDMENT NO. 18 TO
SCHEDULE 13D
------------
Item 1. Security and Issuer.
- ------ -------------------
PacifiCorp Holdings, Inc. (formerly Inner PacifiCorp,
Inc.), a Delaware corporation ("PacifiCorp Holdings"), amends its
statement on Schedule 13D (as previously amended, "Statement")
pertaining to the Common Stock, no par value ("Common Stock"),
of Pacific Telecom, Inc., a Washington corporation ("PTI"). This
Amendment No. 18 ("Amendment") amends the Statement to report the
transactions contemplated by that certain Agreement and Plan of
Merger dated as of March 9, 1995 (the "Merger Agreement"), by and
among PacifiCorp Holdings, PTI and PXYZ Corporation, a Washington
corporation and a wholly owned subsidiary of PacifiCorp Holdings
("Merger Sub"), pursuant to which PacifiCorp Holdings intends to
acquire the minority interest of PTI. PacifiCorp, an Oregon
corporation ("PacifiCorp"), which owns 100 percent of the
outstanding voting securities of PacifiCorp Holdings, joins in
this filing.
Item 2. Identity and Background.
- ------ -----------------------
PacifiCorp Holdings owns approximately 86.6% of PTI, 100%
of PacifiCorp Financial Services, Inc. ("PFS") and 100% of
Pacific Generation Company ("PGC"). These ownership interests
are the primary assets of PacifiCorp Holdings. PTI, through its
subsidiaries, provides local telephone service and access to the
long distance network in Alaska, seven other western states and
three midwestern states, provides intrastate and interstate long
distance communication services in Alaska, provides cellular
mobile telephone services and is engaged in sales of capacity in
and operation of a submarine fiber-optic cable between the U.S.
and Japan. PFS plans to continue sales of portions of its loan,
leasing and real estate investments over the next several years.
PGC is engaged in the independent power production and
cogeneration business.
PacifiCorp Holdings is a wholly owned subsidiary of
PacifiCorp, an electric utility that conducts a retail electric
utility business through Pacific Power & Light Company ("Pacific
Power") and Utah Power & Light Company ("Utah Power"), and
engages in power production and sales on a wholesale basis under
the name PacifiCorp. The Company furnishes electric service in
portions of seven western states: California, Idaho, Montana,
Oregon, Utah, Washington and Wyoming. The principal executive
offices of PacifiCorp and PacifiCorp Holdings are located at 700
NE Multnomah, Suite 1600, Portland, Oregon 97232-4116.
For a current list of the executive officers and
directors of PacifiCorp Holdings and PacifiCorp, along with the
other information required to be furnished with respect to such
executive officers and directors under this Item 2, see
Exhibit 1, which is incorporated herein by reference.
Neither PacifiCorp Holdings nor PacifiCorp has been,
during the last five years, (i) convicted in a criminal
proceeding (excluding traffic violations or similar
misdemeanors), or (ii) a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with
respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
- ------ -------------------------------------------------
PacifiCorp Holdings currently plans to finance the
proposed acquisition by borrowing some or all of the required
funds under the $500,000,000 Credit Agreement (the "Credit
Agreement") dated September 30, 1993 among PacifiCorp Holdings,
the banks listed therein, Bank of America National Trust and
Savings Association, as Co-Agent and Morgan Guaranty Trust
Company of New York, as Agent, a copy of which was filed as an
exhibit to Amendment No. 17 to the Statement. PacifiCorp
Holdings will need to obtain an amendment of certain borrowing
restrictions in the Credit Agreement to complete the transaction.
However, PacifiCorp Holdings is planning to replace the Credit
Agreement with a new credit facility that does not include those
restrictions.
Item 4. Purpose of Transaction.
- ------ ----------------------
The Merger Agreement, which is more fully described in
Item 6 of this Amendment, contemplates the merger (the "Merger")
of Merger Sub with and into PTI, with PTI as the corporation
surviving the Merger. In the Merger, each share of outstanding
Common Stock owned by PacifiCorp Holdings will be cancelled and
each share of Common Stock owned by shareholders other than
PacifiCorp Holdings will be converted into the right to receive
a cash payment of $30.00. Each outstanding share of the capital
stock of Merger Sub will be converted into one share of Common
Stock. As a result of the Merger, PTI would become a wholly
owned subsidiary of PacifiCorp Holdings.
The Merger Agreement includes an agreement by PTI to take
all actions requested by PacifiCorp Holdings to cause such
additional directors as may be designated by PacifiCorp Holdings
to be elected at the shareholder meeting at which the Merger will
be submitted to a vote of PTI's shareholders. The provision
reflects the current intention of PacifiCorp Holdings, regardless
of the outcome of the vote on the Merger, to increase the size
of the Board and to elect at the meeting an as yet undetermined
number of additional directors designated by PacifiCorp Holdings.
Consummation of the Merger will cause the Common Stock
to cease to be quoted on NASDAQ and will result in termination
of registration of the Common Stock under Section 12 of the
Exchange Act.
Item 5. Interest in Securities of the Issuer.
- ------ ------------------------------------
The information set forth below amends and restates the
information included under Item 5 of the Statement:
(a) - (b) The aggregate number of shares of Common Stock
beneficially owned by the persons named in response to Item 2,
and the number of shares of Common Stock with respect to which
there is sole power to vote or to direct the vote, shared power
to vote or to direct the vote, sole power to dispose or to direct
the disposition, or shared power to dispose or to direct the
disposition, are set forth on Exhibit 2, which is incorporated
herein by reference. Except as described in Exhibit 2, neither
PacifiCorp Holdings, PacifiCorp, nor, to the knowledge of
PacifiCorp Holdings or PacifiCorp, any director or officer of
either of them is the beneficial owner of any Common Stock.
(c) Information regarding transactions in shares of
Common Stock within the past 60 days by the persons named in
response to Item 2 is set forth on Exhibit 2. Except as
described in Exhibit 2, neither PacifiCorp Holdings, PacifiCorp
nor, to the knowledge of PacifiCorp Holdings, any director or
officer of either of them has bought or sold or otherwise
effected any transactions in shares of the Common Stock during
the past 60 days.
(d) - (e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships
- ------ -----------------------------------------------------
with Respect to Securities of the Issuer.
----------------------------------------
The Merger Agreement is attached hereto as Exhibit 3 and
incorporated herein by reference. As described above, the Merger
will have the effect of an acquisition by PacifiCorp Holdings of
all of the outstanding Common Stock currently owned by the
minority shareholders for a purchase price of $30.00 per share
in cash.
The Merger Agreement contains representations, warranties
and covenants customary in transactions of similar size and type,
including a covenant obligating PTI to conduct its business in
the ordinary course and consistent with past practice prior to
consummation of the Merger and not to take, or permit its
subsidiaries to take, certain actions, including amendment of
their respective articles of incorporation or bylaws or the
issuance of any securities (other than issuances by PTI of Common
Stock pursuant to the PacifiCorp K Plus and Employee Stock
Ownership Plan). The Merger Agreement also contains a covenant
of PacifiCorp Holdings with respect to indemnification of PTI's
directors and officers.
The Merger Agreement contains a number of closing
conditions, including (i) approval of the Merger by the
affirmative vote of the holders of at least a majority of the
outstanding shares held by shareholders other than PacifiCorp
Holdings, (ii) accuracy of certain representations and warranties
and compliance with the covenants in the Merger Agreement and
(iii) other conditions customary in transactions of similar size
and type. In addition, the obligations of PacifiCorp Holdings
and Merger Sub are conditioned upon the absence of any material
adverse change affecting the business or properties of PTI and
its subsidiaries. The obligations of PTI are also conditioned
upon (i) no withdrawal, modification or revocation of the
fairness opinions rendered to the Special Committee of PTI's
Board of Directors, and (ii) the accuracy of representations and
compliance with covenants contained in an agreement dated as of
March 9, 1995 between PacifiCorp and PTI (the "PacifiCorp
Agreement") pursuant to which PacifiCorp has agreed to, among
other things, cooperate with PacifiCorp Holdings in making
certain filings required under the Securities Exchange Act of
1934 with respect to the Merger and to provide indemnification
for certain matters to present directors and officers of PTI.
The PacifiCorp Agreement is attached hereto as Exhibit 4 and
incorporated herein by reference.
The Merger will close on the date when the last of the
required conditions to closing has been satisfied or waived, or
at such other time as may be agreed to by the parties.
Item 7. Material to be Filed as Exhibits.
- ------ --------------------------------
Exhibit 1, Directors and officers of corporations named
in Item 2.
Exhibit 2, Interests in Securities of PTI.
Exhibit 3, Agreement and Plan of Merger dated as of
March 9, 1995 by and among Pacific Telecom, Inc.,
PacifiCorp Holdings, Inc. and PXYZ Corporation.
Exhibit 4, Agreement dated as of March 9, 1995 between
PacifiCorp and Pacific Telecom, Inc.
After reasonable 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 this 9th day of March, 1995.
PACIFICORP HOLDINGS, INC.
By RICHARD T. O'BRIEN
------------------------------
Richard T. O'Brien
Senior Vice President
Attention: Intentional misstatements or omissions of fact
constitute Federal criminal violations (See 18 U.S.C. 1001).
------------------------------------------------------------
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
1. Directors and Executive Officers of
Corporations named in Item 2.
2. Interests in Securities of
Pacific Telecom, Inc.
3. Agreement and Plan of Merger dated
as of March 9, 1995 by and among
Pacific Telecom, Inc., PacifiCorp
Holdings, Inc. and PXYZ Corporation.
4. Agreement dated as of March 9, 1995
between PacifiCorp and Pacific
Telecom, Inc.
EXHIBIT 1
DIRECTORS AND EXECUTIVE OFFICERS
OF PACIFICORP HOLDINGS, INC. and PACIFICORP
(Note: footnote (*) appears at end of this Exhibit 1)
The directors and executive officers of PacifiCorp
Holdings, Inc. and PacifiCorp are as follows:
<TABLE>
PacifiCorp Holdings, Inc.
-------------------------
<CAPTION>
Name Title Principal Occupation
<S> <C> <C>
Frederick W. Buckman Director President and Chief Executive
Officer of PacifiCorp*
C. Todd Conover Director General Manager, Finance
Industry Group, Tandem
Computers Incorporated, 19191
Vallco Parkway, LOC 4-57,
Cupertino, California 95014
A.M. Gleason Director Vice Chairman of Board of
Directors of PacifiCorp*
Michael C. Henderson Director and President Director and President of
PacifiCorp Holdings, Inc.*;
Director & President of PacifiCorp
Financial Services, Inc.*, a
financial services company with
offices at 825 NE Multnomah,
Suite 775, Portland, Oregon 97232
Nolan E. Karras Director Owner of Investment Management
& Research, Inc., an investment
advisory firm with offices at 4695
South 1900 West #3, Roy, Utah
84067
Richard T. O'Brien Senior Vice President Vice President of PacifiCorp*;
Senior Vice President of
PacifiCorp Holdings, Inc.*
Daniel L. Spalding Senior Vice President Senior Vice President of
PacifiCorp*; Senior Vice President
of PacifiCorp Holdings, Inc.*
William E. Peressini Treasurer Treasurer of PacifiCorp*;
Treasurer of PacifiCorp Holdings,
Inc.*
Sally A. Nofziger Secretary Vice President and Corporate
Secretary of PacifiCorp*;
Secretary of PacifiCorp Holdings,
Inc.*
Jacqueline S. Bell Controller Controller of PacifiCorp*;
Controller of PacifiCorp Holdings,
Inc.*
</TABLE>
All of the directors and executive officers of Pacific
Holdings, Inc. are U.S. citizens. The business address of each
individual listed above is the address shown for the
individual's principal occupation. None of the individuals
listed has been, during the last five years, (i) convicted in a
criminal proceeding (excluding traffic violations or similar
misdemeanors), or (ii) a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation
with respect to such laws.
<TABLE>
PacifiCorp
----------
<CAPTION>
Name Title Principal Occupation
<S> <C> <C>
Kathryn A. Braun Director Executive Vice President, Western
Digital Corporation, 8105 Irvine
Center Drive, Irvine, CA 92718
Frederick W. Buckman Member of Corporate President and Chief Executive
Policy Group, Director Officer of PacifiCorp*
and President & Chief
Executive Officer
C. Todd Conover Director General Manager, Finance
Industry Group, Tandem
Computers Incorporated, 19191
Vallco Parkway, LOC 4-57,
Cupertino, California 95014
Richard C. Edgley Director Member of Presiding Bishopric,
The Church of Jesus Christ of
Latter-day Saints, 50 East North
Temple, 18th Floor, Salt Lake
City, Utah 84150
A.M. Gleason Director and Vice Vice Chairman of the Board of
Chairman of the Board PacifiCorp*
John C. Hampton Director Chairman and Chief Executive
Officer of Hampton Resources,
Inc., a forest products company
with offices at Suite 400, 9400 SW
Barnes Rd., Portland, Oregon
97225
Nolan E. Karras Director Owner of Investment Management
& Research, Inc., an investment
advisory firm with offices at 4695
South 1900 West #3, Roy, Utah
84067
Keith R. McKennon Director and Chairman Chairman of the Board of
of the Board of Directors PacifiCorp*
Robert G. Miller Director Chairman of the Board and Chief
Executive Officer of Fred Meyer,
Inc., a retail merchandising chain,
with offices at 3800 SE 22nd,
Portland, Oregon 97202
Verl R. Topham Director, Senior Vice Senior Vice President and
President and General General Counsel of PacifiCorp*
Counsel of PacifiCorp
Don M. Wheeler Director Chairman and Chief Executive
Officer, Wheeler Machinery
Company, an equipment sales,
repair and service firm with
offices at 4901 West 2100 South,
Salt Lake City, Utah 84120
Nancy Wilgenbusch Director President, Marylhurst College,
Marylhurst, Oregon, 97036
Paul G. Lorenzini Member of Corporate Senior Vice President of
Policy Group and Senior PacifiCorp*
Vice President of PacifiCorp
Charles E. Robinson Member of Corporate Chairman, President and Chief
Policy Group Executive Officer of Pacific
Telecom, Inc., a
telecommunications holding
company with offices at 805
Broadway, P.O. Box 9901,
Vancouver, Washington 98668
John A. Bohling Senior Vice President Senior Vice President of
PacifiCorp*
Shelley R. Faigle Senior Vice President Senior Vice President of
PacifiCorp*
John E. Mooney Senior Vice President Senior Vice President of
PacifiCorp*
Daniel L. Spalding Senior Vice President Senior Vice President of
PacifiCorp*; Senior Vice President
of PacifiCorp Holdings, Inc.*
Dennis P. Steinberg Senior Vice President Senior Vice President of
PacifiCorp*
Thomas J. Imeson Vice President Vice President of PacifiCorp*
Robert F. Lanz Vice President Vice President of PacifiCorp*
Sally A. Nofziger Vice President & Vice President and Corporate
Corporate Secretary Secretary of PacifiCorp*;
Secretary of PacifiCorp Holdings,
Inc.*
Richard T. O'Brien Vice President Vice President of PacifiCorp*;
Senior Vice President of
PacifiCorp Holdings, Inc.*
William E. Peressini Treasurer Treasurer of PacifiCorp*;
Treasurer of PacifiCorp Holdings,
Inc.*
Jacqueline S. Bell Controller Controller of PacifiCorp*;
Controller of PacifiCorp Holdings,
Inc.*
</TABLE>
All of the directors and executive officers of
PacifiCorp are U.S. citizens. The business address of each
individual listed above is the address shown for the
individual's principal occupation. None of the individuals
listed has been, during the last five years, (i) convicted in a
criminal proceeding (excluding traffic violations or similar
misdemeanors), or (ii) a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction which
resulted in a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation
with respect to such laws.
* The principal business and address of the corporation or
other organization for which the listed individual's principal
occupation is conducted is set forth at the first place at
which the name of such corporation or other organization
appears in this Exhibit 1.
EXHIBIT 2
INTERESTS IN SECURITIES OF
PACIFIC TELECOM, INC.
The beneficial ownership interests of PacifiCorp Holdings,
PacifiCorp and the directors and officers of each of them as of
December 31, 1994 are described below. The percentages are
calculated on the basis of 39,619,623 shares of Common Stock
outstanding as of December 31, 1994.
<TABLE>
PacifiCorp Holdings, Inc.
-------------------------
<CAPTION>
Nature of Number of Percent of Total Number
Ownership Shares of Outstanding Shares
- --------- --------- -----------------------
<S> <C> <C>
Sole Power to Vote 0 0%
or Direct the Vote
Shared Power to Vote 34,325,181 86.6%
or Direct the Vote
Sole Power to Dispose or 0 0%
to Direct the Disposition
Shared Power to Dispose or 34,325,181 86.6%
to Direct the Disposal
Total Beneficially Owned 34,325,181 86.6%
PacifiCorp Holdings has not bought or sold or otherwise effected any transactions in shares of
Common Stock during the past 60 days.
</TABLE>
<TABLE>
PacifiCorp
----------
<CAPTION>
Nature of Number of Percent of Total Number
Ownership Shares of Outstanding Shares
- --------- --------- -----------------------
<S> <C> <C>
Sole Power to Vote 0 0%
or Direct the Vote
Shared Power to Vote 34,325,181 86.6%
or Direct the Vote
Sole Power to Dispose or 0 0%
to Direct the Disposition
Shared Power to Dispose or 34,325,181 86.6%
to Direct the Disposal
Total Beneficially Owned 34,325,181 86.6%
PacifiCorp has not bought or sold or otherwise effected any
transactions in shares of Common Stock during the past 60 days.
</TABLE>
<TABLE>
A.M. Gleason
------------
<CAPTION>
Nature of Number of Percent of Total Number
Ownership Shares of Outstanding Shares
- --------- --------- -----------------------
<S> <C> <C>
Sole Power to Vote 38,954.0523 *
or Direct the Vote
Shared Power to Vote 5,450** *
or Direct the Vote
Sole Power to Dispose or 38,954.0523 *
to Direct the Disposition
Shared Power to Dispose or 5,450** *
to Direct the Disposal
Total Beneficially Owned 44,404.0523** *
Mr. Gleason is a participant in the PacifiCorp K Plus Employee Savings and Stock Ownership
Plan ("K Plus Plan") and, pursuant to an election in effect since January 3, 1990, he has directed
that a portion of his elective contributions be invested in the Pacific Telecom, Inc. Common Stock
fund (the "PTI Stock Fund"). The Trustee of the K Plus Plan has acquired shares of Pacific
Telecom Common Stock with funds invested in the PTI Stock Fund within the past 60 days,
172.4667 of which were allocated to Mr. Gleason's account effective as of March 6, 1995. Mr.
Gleason has not bought or sold or otherwise effected any other transactions in shares of Common
Stock during the past 60 days.
<FN>
__________________
* Less than 1 percent
**Includes 2,739 shares held by Mr. Gleason's wife as to which Mr. Gleason disclaims
beneficial ownership.
</TABLE>
<TABLE>
Robert F. Lanz
--------------
<CAPTION>
Nature of Number of Percent of Total Number
Ownership Shares of Outstanding Shares
- --------- --------- -----------------------
<S> <C> <C>
Sole Power to Vote 2,228.8471 *
or Direct the Vote
Shared Power to Vote 0 0%
or Direct the Vote
Sole Power to Dispose or 2,228.8471 *
to Direct the Disposition
Shared Power to Dispose or 0 0%
to Direct the Disposal
Total Beneficially Owned 2,228.8471 *
Mr. Lanz is a participant in the K Plus Plan and, pursuant to an election in effect since
February 15, 1994, he has directed that a portion of his elective contributions be invested in the
PTI Stock Fund. The Trustee of the K Plus Plan has acquired shares of Pacific Telecom
Common Stock with funds invested in the PTI Stock Fund within the past 60 days, 17.5682 of
which were allocated to Mr. Lanz's account effective as of March 6, 1995. Mr. Lanz has not
bought or sold or otherwise effected any other transactions in shares of Common Stock during the
past 60 days.
<FN>
__________________
* Less than 1 percent
</TABLE>
<TABLE>
Charles E. Robinson
-------------------
<CAPTION>
Nature of Number of Percent of Total Number
Ownership Shares of Outstanding Shares
- --------- --------- -----------------------
<S> <C> <C>
Sole Power to Vote 72,166.3071 *
or Direct the Vote
Shared Power to Vote 0 0%
or Direct the Vote
Sole Power to Dispose or 72,166.3071 *
to Direct the Disposition
Shared Power to Dispose or 0 0%
to Direct the Disposal
Total Beneficially Owned 72,166.3071 *
Mr. Robinson is a participant in the K Plus Plan and, pursuant to an election in effect since
January 3, 1990, he has directed that a portion of his elective contributions be invested in the PTI
Stock Fund. The Trustee of the K Plus Plan has acquired shares of Pacific Telecom Common
Stock with funds invested in the PTI Stock Fund within the past 60 days, 166.3223 of which were
allocated to Mr. Robinson's account effective as of March 6, 1995. In February 1995, Mr.
Robinson received a grant of 6,600 shares of restricted stock pursuant to the Pacific Telecom
Long-Term Incentive Plan 1994 Restatement, which shares are scheduled to vest over a four-year
period commencing February 15, 1996. Mr. Robinson has not bought or sold or otherwise
effected any other transactions in shares of Common Stock during the past 60 days.
<FN>
__________________
* Less than 1 percent
</TABLE>
<TABLE>
Nancy Wilgenbusch
-----------------
<CAPTION>
Nature of Number of Percent of Total Number
Ownership Shares of Outstanding Shares
- --------- --------- -----------------------
<S> <C> <C>
Sole Power to Vote 2,711 *
or Direct the Vote
Shared Power to Vote 0 0%
or Direct the Vote
Sole Power to Dispose or 2,711 *
to Direct the Disposition
Shared Power to Dispose or 0 0%
to Direct the Disposal
Total Beneficially Owned 2,711 *
Dr. Wilgenbusch has not bought or sold or otherwise effected any transactions in shares of
Common Stock during the past 60 days.
<FN>
__________________
* Less than 1 percent
</TABLE>
<TABLE>
Thomas J. Imeson
----------------
<CAPTION>
Nature of Number of Percent of Total Number
Ownership Shares of Outstanding Shares
- --------- --------- -----------------------
<S> <C> <C>
Sole Power to Vote 287.2779 *
or Direct the Vote
Shared Power to Vote 0 0%
or Direct the Vote
Sole Power to Dispose or 287.2779 *
to Direct the Disposition
Shared Power to Dispose or 0 0%
to Direct the Disposal
Total Beneficially Owned 287.2779 *
Mr. Imeson has not bought or sold or otherwise effected any transactions in shares of Common
Stock during the past 60 days.
<FN>
__________________
* Less than 1 percent
</TABLE>
EXHIBIT C
Chris Hunter: (503) 731-2090
Scott Hibbs: (503) 731-2123
FOR IMMEDIATE RELEASE..BUSINESS & FINANCIAL EDITORS..March 9,
1995
PACIFICORP AND PACIFIC TELECOM, INC. ANNOUNCE DEFINITIVE MERGER
AGREEMENT FOR A $30.00 PER SHARE ACQUISITION
Portland, Oregon, March 9, 1995 -- PacifiCorp
(NYSE: "PPW") and Pacific Telecom, Inc. (Nasdaq National
Market: "PTCM") jointly announced today a definitive merger
agreement pursuant to which PacifiCorp Holdings, Inc., a
wholly-owned subsidiary of PacifiCorp, will acquire the
outstanding shares of Pacific Telecom not owned by it for
$30.00 per share in cash.
Under the terms of the agreement, a newly-formed,
wholly-owned subsidiary of PacifiCorp Holdings, Inc. will be
merged with and into Pacific Telecom and the holders of the
approximately 5.3 million shares of common stock of Pacific
Telecom not held by PacifiCorp Holdings, Inc. would receive
$30.00 in cash in exchange for each share of Pacific Telecom
common stock. As a result of the merger, Pacific Telecom would
become an indirect, wholly-owned subsidiary of PacifiCorp.
The merger is conditioned upon, among other things,
affirmative approval of the merger by holders of a majority of
the approximately 5.3 million shares held by the unaffiliated
public shareholders. Additional information relating to the
merger, to be considered at Pacific Telecom's annual meeting,
the date of which has not yet been determined, will be set
forth in a proxy statement which
must be submitted to the Securities and Exchange Commission
before being mailed to shareholders.
PacifiCorp Holdings, Inc. presently owns
approximately 87% of the outstanding shares of Pacific Telecom.
On November 1, 1994, it proposed to acquire the shares not
owned by it for $28 per share in cash. Promptly thereafter,
Pacific Telecom formed a Special Committee of independent
directors to receive, study, negotiate and make recommendations
to the Board of Directors of Pacific Telecom regarding that
proposal. The merger announced today has been unanimously
approved by the Board of Directors of Pacific Telecom as fair
to, and in the best interests of, Pacific Telecom's public
minority shareholders upon the unanimous recommendation of the
Special Committee. In connection with its recommendation of
the transaction, the Special Committee received the written
opinions of Smith Barney Inc. and CS First Boston Corporation,
to the effect that the consideration to be received by the
minority shareholders in the merger is fair, from a financial
point of view, to such holders. The Board of Directors of
PacifiCorp has received a fairness opinion from Salomon
Brothers Inc to the effect that the consideration to be paid to
minority shareholders is fair, from a financial point of view,
to PacifiCorp.
EXHIBIT B
TITLE 23B. WASHINGTON BUSINESS CORPORATION ACT
CHAPTER 23B.13. DISSENTERS' RIGHTS
23B.13.010. Definitions
As used in this chapter:
(1) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving or
acquiring corporation by merger or share exchange of that
issuer.
(2) "Dissenter" means a shareholder who is entitled to
dissent from corporate action under RCW 23B.13.020 and who
exercises that right when and in the manner required by RCW
23B.13.200 through 23B.13.280.
(3) "Fair value," with respect to a dissenter's shares,
means the value of the shares immediately before the effective
date of the corporate action to which the dissenter objects,
excluding any appreciation or depreciation in anticipation of
the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of
the corporate action until the date of payment, at the average
rate currently paid by the corporation on its principal bank
loans or, if none, at a rate that is fair and equitable under
all the circumstances.
(5) "Record shareholder" means the person in whose name
shares are registered in the records of a corporation or the
beneficial owner of shares to the extent of the rights granted
by a nominee certificate on file with a corporation.
(6) "Beneficial shareholder" means the person who is a
beneficial owner of shares held in a voting trust or by a
nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the
beneficial shareholder.
23B.13.020. Right to dissent
(1) A shareholder is entitled to dissent from, and obtain
payment of the fair value of the shareholder's shares in the
event of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the
corporation is a party (i) if shareholder approval is required
for the merger by RCW 23B.11.030, 23B.11.080, or the articles
of incorporation and the shareholder is entitled to vote on the
merger, or (ii) if the corporation is a subsidiary that is
merged with its parent under RCW 23B.11.040;
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other
than in the usual and regular course of business, if the
shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan
by which all or substantially all of the net proceeds of the
sale will be distributed to the shareholders within one year
after the date of sale;
(d) An amendment of the articles of incorporation that
materially reduces the number of shares owned by the
shareholder to a fraction of a share if the fractional share so
created is to be acquired for cash under RCW 23B.06.040; or
(e) Any corporate action taken pursuant to a shareholder
vote to the extent the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain
payment for their shares.
(2) A shareholder entitled to dissent and obtain payment
for the shareholder's shares under this chapter may not
challenge the corporate action creating the shareholder's
entitlement unless the action fails to comply with the
procedural requirements imposed by this title, RCW 25.10.900
through 25.10.955, the articles of incorporation, or the
bylaws, or is fraudulent with respect to the shareholder or the
corporation.
(3) The right of a dissenting shareholder to obtain
payment of the fair value of the shareholder's shares shall
terminate upon the occurrence of any one of the following
events:
(a) The proposed corporate action is abandoned or
rescinded;
(b) A court having jurisdiction permanently enjoins or
sets aside the corporate action; or
(c) The shareholder's demand for payment is withdrawn with
the written consent of the corporation.
23B.13.030. Dissent by nominees and beneficial owners
(1) A record shareholder may assert dissenters' rights as
to fewer than all the shares registered in the shareholder's
name only if the shareholder dissents with respect to all
shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person
on whose behalf the shareholder asserts dissenters' rights.
The rights of a partial dissenter under this subsection are
determined as if the shares as to which the dissenter dissents
and the dissenter's other shares were registered in the names
of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights
as to shares held on the beneficial shareholder's behalf only
if:
(a) The beneficial shareholder submits to the corporation
the record shareholder's written consent to the dissent not
later than the time the beneficial shareholder asserts
dissenters' rights; and
(b) The beneficial shareholder does so with respect to all
shares of which such shareholder is the beneficial shareholder
or over which such shareholder has power to direct the vote.
23B.13.200. Notice of dissenters' rights
(1) If proposed corporate action creating dissenters'
rights under RCW 23B.13.020 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that
shareholders are or may be entitled to assert dissenters'
rights under this chapter and be accompanied by a copy of this
chapter.
(2) If corporate action creating dissenters' rights under
RCW 23B.13.020 is taken without a vote of shareholders, the
corporation, within ten days after [the] effective date of such
corporate action, shall notify in writing all shareholders
entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in RCW
23B.13.220.
23B.13.210. Notice of intent to demand payment
(1) If proposed corporate action creating dissenters'
rights under RCW 23B.13.020 is submitted to a vote at a
shareholders' meeting, a shareholder who wishes to assert
dissenters' rights must (a) deliver to the corporation before
the vote is taken written notice of the shareholder's intent to
demand payment for the shareholder's shares if the proposed
action is effected, and (b) not vote such shares in favor of
the proposed action.
(2) A shareholder who does not satisfy the requirements of
subsection (1) of this section is not entitled to payment for
the shareholder's shares under this chapter.
23B.13.220. Dissenters' notice
(1) If proposed corporate action creating dissenters'
rights under RCW 23B.13.020 is authorized at a shareholders'
meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of
RCW 23B.13.210.
(2) The dissenters' notice must be sent within ten days
after the effective date of the corporate action, and must:
(a) State where the payment demand must be sent and where
and when certificates for certificated shares must be
deposited;
(b) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment
demand is received;
(c) Supply a form for demanding payment that includes the
date of the first announcement to news media or to shareholders
of the terms of the proposed corporate action and requires that
the person asserting dissenters' rights certify whether or not
the person acquired beneficial ownership of the shares before
that date;
(d) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than thirty nor
more than sixty days after the date the notice in subsection
(1) of this section is delivered; and
(e) Be accompanied by a copy of this chapter.
23B.13.230. Duty to demand payment
(1) A shareholder sent a dissenters' notice described in
RCW 23B.13.220 must demand payment, certify whether the
shareholder acquired beneficial ownership of the shares before
the date required to be set forth in the dissenters' notice
pursuant to RCW 23B.13.220(2)(c), and deposit the shareholder's
certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits the
shareholder's share certificates under subsection (1) of this
section retains all other rights of a shareholder until the
proposed corporate action is effected.
(3) A shareholder who does not demand payment or deposit
the shareholder's share certificates where required, each by
the date set in the dissenters' notice, is not entitled to
payment for the shareholder's shares under this chapter.
23B.13.240. Share restrictions
(1) The corporation may restrict the transfer of
uncertificated shares from the date the demand for their
payment is received until the proposed corporate action is
effected or the restriction is released under RCW 23B.13.260.
(2) The person for whom dissenters' rights are asserted as
to uncertificated shares retains all other rights of a
shareholder until the effective date of the proposed corporate
action.
23B.13.250. Payment
(1) Except as provided in RCW 23B.13.270, within thirty
days of the later of the effective date of the proposed
corporate action, or the date the payment demand is received,
the corporation shall pay each dissenter who complied with RCW
23B.13.230 the amount the corporation estimates to be the fair
value of the shareholder's shares, plus accrued interest.
(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a
fiscal year ending not more than sixteen months before the date
of payment, an income statement for that year, a statement of
changes in shareholders' equity for that year, and the latest
available interim financial statements, if any;
(b) An explanation of how the corporation estimated the
fair value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment
under RCW 23B.13.280; and
(e) A copy of this chapter.
23B.13.260. Failure to take action
(1) If the corporation does not effect the proposed action
within sixty days after the date set for demanding payment and
depositing share certificates, the corporation shall return the
deposited certificates and release any transfer restrictions
imposed on uncertificated shares.
(2) If after returning deposited certificates and
releasing transfer restrictions, the corporation wishes to
undertake the proposed action, it must send a new dissenters'
notice under RCW 23B.13.220 and repeat the payment demand
procedure.
23B.13.270. After-acquired shares
(1) A corporation may elect to withhold payment required
by RCW 23B.13.250 from a dissenter unless the dissenter was the
beneficial owner of the shares before the date set forth in the
dissenters' notice as the date of the first announcement to
news media or to shareholders of the terms of the proposed
corporate action.
(2) To the extent the corporation elects to withhold
payment under subsection (1) of this section, after taking the
proposed corporate action, it shall estimate the fair value of
the shares, plus accrued interest, and shall pay this amount to
each dissenter who agrees to accept it in full satisfaction of
the dissenter's demand. The corporation shall send with its
offer an explanation of how it estimated the fair value of the
shares, an explanation of how the interest was calculated, and
a statement of the dissenter's right to demand payment under
RCW 23B.13.280.
23B.13.280. Procedure if shareholder dissatisfied with payment
or offer
(1) A dissenter may notify the corporation in writing of
the dissenter's own estimate of the fair value of the
dissenter's shares and amount of interest due, and demand
payment of the dissenter's estimate, less any payment under RCW
23B.13.250, or reject the corporation's offer under RCW
23B.13.270 and demand payment of the dissenter's estimate of
the fair value of the dissenter's shares and interest due, if:
(a) The dissenter believes that the amount paid under RCW
23B.13.250 or offered under RCW 23B.13.270 is less than the
fair value of the dissenter's shares or that the interest due
is incorrectly calculated;
(b) The corporation fails to make payment under RCW
23B.13.250 within sixty days after the date set for demanding
payment; or
(c) The corporation does not effect the proposed action
and does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares within
sixty days after the date set for demanding payment.
(2) A dissenter waives the right to demand payment under
this section unless the dissenter notifies the corporation of
the dissenter's demand in writing under subsection (1) of this
section within thirty days after the corporation made or
offered payment for the dissenter's shares.
23B.13.300. Court action
(1) If a demand for payment under RCW 23B.13.280 remains
unsettled, the corporation shall commence a proceeding within
sixty days after receiving the payment demand and petition the
court to determine the fair value of the shares and accrued
interest. If the corporation does not commence the proceeding
within the sixty-day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the
superior court of the county where a corporation's principal
office, or, if none in this state, its registered office, is
located. If the corporation is a foreign corporation without a
registered office in this state, it shall commence the
proceeding in the county in this state where the registered
office of the domestic corporation merged with or whose shares
were acquired by the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or
not residents of this state, whose demands remain unsettled,
parties to the proceeding as in an action against their shares
and all parties must be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or
by publication as provided by law.
(4) The corporation may join as a party to the proceeding
any shareholder who claims to be a dissenter but who has not,
in the opinion of the corporation, complied with the provisions
of this chapter. If the court determines that such shareholder
has not complied with the provisions of this chapter, the
shareholder shall be dismissed as a party.
(5) The jurisdiction of the court in which the proceeding
is commenced under subsection (2) of this section is plenary
and exclusive. The court may appoint one or more persons as
appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers
described in the order appointing them, or in any amendment to
it. The dissenters are entitled to the same discovery rights
as parties in other civil proceedings.
(6) Each dissenter made a party to the proceeding is
entitled to judgment (a) for the amount, if any, by which the
court finds the fair value of the dissenter's shares, plus
interest, exceeds the amount paid by the corporation, or (b)
for the fair value, plus accrued interest, of the dissenter's
after- acquired shares for which the corporation elected to
withhold payment under RCW 23B.13.270.
23B.13.310. Court costs and counsel fees
(1) The court in a proceeding commenced under RCW
23B.13.300 shall determine all costs of the proceeding,
including the reasonable compensation and expenses of
appraisers appointed by the court. The court shall assess the
costs against the corporation, except that the court may assess
the costs against all or some of the dissenters, in amounts the
court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously, or not in good faith
in demanding payment under RCW 23B.13.280.
(2) The court may also assess the fees and expenses of
counsel and experts for the respective parties, in amounts the
court finds equitable:
(a) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not
substantially comply with the requirements of RCW 23B.13.200
through 23B.13.280; or
(b) Against either the corporation or a dissenter, in
favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by chapter 23B.13 RCW.
(3) If the court finds that the services of counsel for
any dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services should
not be assessed against the corporation, the court may award to
these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
Exhibit C
SMITH BARNEY INC.
March 9, 1995
The Special Committee of the Board of Directors
Pacific Telecom, Inc.
805 Broadway
Vancouver, WA 98668
Members of the Special Committee:
You have requested our opinion as to the fairness, from a
financial point of view, of the consideration to be received by
the holders of the common stock of Pacific Telecom, Inc. ("PTI"
or the "Company"), other than PacifiCorp and its affiliates
("PacifiCorp"), including but not limited to PacifiCorp
Holdings, Inc. ("PHI") (the holders of common stock of PTI,
other than PacifiCorp, are hereinafter collectively referred to
as the "PTI Minority Shareholders"), of the terms of the
Agreement and Plan of Merger, dated March 9, 1995 by and among
PTI, PHI, and PXYZ Corporation (together with the exhibits
thereto, including the Agreement dated March 9, 1995 between
PacifiCorp and the Company, the "Merger Agreement"). As more
fully described in the Merger Agreement, and subject to the
terms and conditions specified therein, PXYZ Corporation shall
be merged with and into PTI (the "Merger") and each outstanding
share of PTI common stock, other than shares held by PHI, shall
be converted into the right to receive $30.00 in cash (the
"Merger Consideration"), subject to dissenters appraisal
rights.
In arriving at our opinion, we reviewed the Merger
Agreement and held discussions with certain senior officers,
directors and other representatives and advisors of PTI
concerning the business, operations and prospects of PTI. We
participated in discussions and negotiations among
representatives of PTI and PHI and their financial and legal
advisors. We examined certain publicly available business and
financial information relating to PTI and PacifiCorp as well as
certain financial forecasts and other data for PTI which were
provided to us by the senior management of PTI. We reviewed
the financial terms of the Merger as set forth in the Merger
Agreement in relation to, among other things, the Company's
historical and projected earnings and the capitalization and
financial condition of PTI. We also considered, to the extent
publicly available, the financial terms of certain other
transactions which we deemed comparable to the Merger and
analyzed certain financial and other publicly available
information relating to the businesses of other companies whose
operations we considered comparable to PTI. In addition, we
conducted such other analyses and examinations and considered
such other financial, economic and market criteria as we deemed
necessary to arrive at our opinion.
In rendering our opinion, we have assumed and relied,
without independent verification, upon the accuracy and
completeness of all financial and other information publicly
available or furnished to or otherwise discussed with us. With
respect to financial forecasts and other information provided
to or otherwise discussed with us, we have been informed by the
management of PTI that such forecasts and other information
were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of PTI as
to the expected future financial performance of PTI. We have
not made or been provided with an independent valuation or
appraisal of the assets or liabilities (contingent or
otherwise) of PTI. We were not asked to, and did not, solicit
acquisition proposals from any third parties. Our opinion is
necessarily based upon financial, stock market and other
conditions and circumstances existing and disclosed to us as of
the date hereof.
Smith Barney has been engaged to render financial advisory
services to PTI in connection with the Merger and will receive
a fee for our services, a significant portion of which is
contingent upon the delivery of this opinion. We have in the
past provided financial advisory and investment banking
services to PTI and have received fees for the rendering of
such services. We have also provided certain investment
banking services to PacifiCorp related to the underwriting of
certain debt and equity securities and have received fees for
the rendering of such services. In addition, we and our
affiliates (including The Travelers Inc. and its affiliates)
may maintain business relationships with PTI, PacifiCorp and
their affiliates.
Our advisory services, and the opinion expressed herein,
are provided solely for the use of the Special Committee in its
evaluation of the proposed Merger and are not on behalf of, and
are not intended to confer rights or remedies upon, PacifiCorp,
any stockholder of PTI or PacifiCorp, or any person other than
PTI's Special Committee. Our opinion may not be published or
otherwise used or referred to, nor shall any public reference
to Smith Barney be made, without our prior written consent.
This opinion is not intended to be and shall not be deemed to
be a recommendation to any PTI Minority Shareholder to vote in
favor of the Merger.
Based upon and subject to the foregoing, our experience as
investment bankers, our work as described above and other
factors we deemed relevant, we are of the opinion that, as of
the date hereof, the Merger Consideration is fair from a
financial point of view to the PTI Minority Shareholders.
Very truly yours,
SMITH BARNEY INC.
Exhibit D
CS FIRST BOSTON
March 9, 1995
Special Committee of the Board of Directors
Pacific Telecom, Inc.
805 Broadway
P.O. Box 9901
Vancouver, WA 98668-8701
Dear Members of the Special Committee:
You have asked us to advise you with respect to the
fairness to the stockholders of Pacific Telecom, Inc. (the
"Company"), other than PacifiCorp Holdings, Inc. (together with
its affiliates other than the Company, the "Acquiror"), from a
financial point of view of the consideration to be received by
such stockholders pursuant to the terms of the Agreement and
Plan of Merger dated as of March 9, 1995 by and among
PacifiCorp Holdings, Inc., PXYZ Corporation and the Company
(together with the exhibits thereto, including the Agreement
dated March 9, 1995, between PacifiCorp and the Company, the
"Merger Agreement"). The Merger Agreement provides for the
merger (the "Merger") of a newly-formed, wholly-owned
subsidiary of the Acquiror with and into the Company. In the
Merger, the Company will become a wholly-owned subsidiary of
the Acquiror and each outstanding share of Common Stock not
held by the Acquiror will be converted into the right to
receive $30.00 in cash (the "Merger Consideration"), subject to
dissenters' appraisal rights. The Merger is conditioned upon,
among other things, the affirmative vote of the holders of at
least a majority of the shares of Common Stock not held by the
Acquiror.
In arriving at our opinion, we have reviewed the Merger
Agreement and certain publicly available business and financial
information relating to the Company. We have also reviewed
certain other information, including financial forecasts,
provided to us by the Company and have met with the Company's
management to discuss the business and prospects of the
Company.
We have also considered certain financial and stock market
data of the Company, and we have compared that data with
similar data for other publicly held companies in businesses
similar to those of the Company and we have considered the
financial terms of certain other business combinations and
other transactions which have recently been effected. We also
considered such other information, financial studies, analyses
and investigations and financial, economic and market criteria
which we deemed relevant.
In connection with our review, we have not assumed any
responsibility for independent verification of any of the
foregoing information and have relied on its being complete and
accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been
reasonably prepared on bases reflecting the best currently
available estimates and judgments of the Company's management
as to the future financial performance of the Company. In
addition, we have not made an independent evaluation or
appraisal of the assets or liabilities (contingent or
otherwise) of the Company, nor have we been furnished with any
such evaluations or appraisals. Our opinion is necessarily
based upon financial, economic, market and other conditions as
they exist and can be evaluated on the date hereof.
We have been engaged by the Special Committee to render a
fairness opinion in connection with the proposed Merger and
will receive a fee for our services, a significant portion of
which fee is contingent upon the delivery of this opinion.
In the past, we have performed certain investment banking
services for the Company and have received customary fees for
such services.
In the ordinary course of our business, CS First Boston
and its affiliates may actively trade the debt and equity
securities of both the Company and the Acquiror for their own
accounts and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such
securities.
It is understood that this letter is for the information
of the Special Committee only in connection with its
consideration of the Merger, does not constitute a
recommendation to any stockholder as to how such stockholder
should vote on the proposed Merger and is not to be quoted or
referred to, in whole or in part, in any registration
statement, prospectus or proxy statement, or in any other
document used in connection with the offering or sale of
securities, nor shall this letter be used for any other
purposes, without CS First Boston's prior written consent.
Based upon and subject to the foregoing, it is our opinion
that, as of the date hereof, the Merger Consideration to be
received by the stockholders of the Company in the Merger is
fair to such stockholders, other than the Acquiror, from a
financial point of view.
Very truly yours,
CS FIRST BOSTON CORPORATION
CS FIRST BOSTON CORPORATION
EXHIBIT E
Salomon Brothers Inc
March 9, 1995
Board of Directors
PacifiCorp
700 N.E. Multnomah
Suite 1600
Portland, Oregon 97232-4116
To the Board of Directors:
You have requested our opinion as investment bankers as to the
fairness, from a financial point of view, to PacifiCorp (the
"Company") of the consideration per share to be paid to the
minority shareholders of Pacific Telecom, Inc. ("PTI") in
connection with the proposed merger (the "Merger") of PT Merger
Corporation, an indirect wholly owned subsidiary of the Company
("Sub"), into PTI, as contemplated by the Merger Agreement to
be dated as of March 9, 1995 (the "Merger Agreement"), among
PacifiCorp Holdings, Inc., a direct wholly owned subsidiary of
the Company, Sub and PTI. Pursuant to the Merger, those shares
of common stock of PTI owned by the minority shareholders of
PTI will be canceled and converted into the right to receive
$30 per share in cash.
In arriving at our opinion, we have reviewed the draft Merger
Agreement and draft of the related schedule provided to us and
assumed that the definitive Merger Agreement and related
schedule will not differ in any material respect from such
drafts. We also have reviewed certain publicly available
business and financial information relating to PTI, as well as
certain other information, including financial projections
prepared by PTI, provided to us by the Company. We have
discussed the past and current operations and financial
condition and prospects of PTI with its senior management and
senior management of the Company. We have considered certain
publicly available information with respect to other companies
and businesses that we believe to be comparable to PTI and
publicly available information with respect to transactions
involving the sale of other companies or businesses that we
believe to be relevant to our analysis. We have also
considered such other information, financial studies, analyses,
investigations and financial, economic, market and trading
criteria which we deemed relevant.
In our review and analysis and in arriving at our opinion, we
have assumed and relied on the accuracy and completeness of the
information reviewed by us for the purpose of this opinion and
we have not assumed any responsibility for independent
verification of such information or for any independent
evaluation or appraisal of the assets of PTI. We have also
taken into account our assessment of general economic, market
and financial conditions, as well as our experience in
connection with similar transactions. With respect to the
financial projections, we have assumed that they have been
reasonably prepared on bases reflecting the best currently
available estimates and judgments of PTI's management as to the
future financial performance of PTI and we express no opinion
with respect to such forecasts or the assumptions on which they
are based. Our opinion is necessarily based solely upon
information available to us and business, market, economic and
other conditions as they exist on, and can be evaluated as of,
the date of this letter and does not address the underlying
business decision of the Company to effect the Merger or
constitute a recommendation to any holder of shares of PTI as
to how such holder should vote with respect to the Merger.
We have acted as financial advisor to the Board of Directors of
the Company in connection with the Merger and will receive a
fee for our services. As you are aware, in the ordinary course
of our business, Salomon Brothers Inc trades the outstanding
debt and/or equity securities of the Company and certain of its
affiliates (including PTI) for our own account and for the
accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities. Salomon
Brothers Inc has previously rendered certain investment banking
and financial advisory services to the Company and certain of
its affiliates (including PTI) for which we have received
customary compensation.
It is understood that this letter is for the information of the
Board of Directors of the Company only and is not to be quoted
or referred to, in whole or in part, in any registration
statement, prospectus, offering memorandum or proxy statement,
or in any other document used in connection with the offering
or sale of securities, nor shall this letter be used for any
other purposes, without the prior written consent of Salomon
Brothers Inc.
Based upon and subject to the foregoing, it is our opinion
that, as of the date hereof, the consideration per share to be
paid to the minority shareholders of PTI in connection with the
proposed Merger is fair to the Company from a financial point
of view.
Very truly yours,
SALOMON BROTHERS INC
