AGREEMENT OF MERGER AND PLAN
OF REORGANIZATION
dated as of
October 2, 1996
by and between
NEXTEL COMMUNICATIONS, INC.,
NEXTEL FINANCE COMPANY,
DCI MERGER INC.
and
PITTENCRIEFF COMMUNICATIONS, INC.
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
TABLE OF CONTENTS
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ARTICLE I. CONVERSION OF PCI STOCK INTO NEXTEL COMMON STOCK; TREATMENT
OF OPTIONS AND WARRANTS . . . . . . . . . . . . . . . . . . . 2
1.1 Exchange Ratio and Conversion of Shares . . . . . . . . . . . 2
1.2 Value Cap Adjusted for Channels Not Delivered . . . . . . . . 4
1.3 Value Cap Adjusted for Negative Cash Flow . . . . . . . . . . 7
1.4 Value Cap Adjusted for Negative Working Capital . . . . . . . 8
1.5 Value Cap Adjusted for Option/Warrant Exercise. . . . . . . . 10
1.6 Value Cap Adjusted for Severance Amounts. . . . . . . . . . . 10
1.6A Settlement with Castle Tower. . . . . . . . . . . . . . . . . 11
1.7 Value Cap Adjusted if Closing Occurs After 1997 . . . . . . . 11
1.8 Asset Value and Dilution Adjustments to Exchange Ratio. . . . 11
1.9 Value Cap Adjustment. . . . . . . . . . . . . . . . . . . . . 12
1.10 Additional Consideration in Lieu of Termination . . . . . . . 13
1.11 Nextel Closing Price. . . . . . . . . . . . . . . . . . . . . 13
1.13 Terms of the Merger . . . . . . . . . . . . . . . . . . . . . 15
1.14 Effective Time; Effects of the Merger . . . . . . . . . . . . 15
1.15 Certificate of Incorporation and Bylaws . . . . . . . . . . . 16
1.16 Directors and Officers. . . . . . . . . . . . . . . . . . . . 17
1.17 Exchange Agent. . . . . . . . . . . . . . . . . . . . . . . . 17
1.18 Surrender of Certificates and Delivery of Merger
Consideration . . . . . . . . . . . . . . . . . . . . . . . . 17
1.19 No Fractional Shares. . . . . . . . . . . . . . . . . . . . . 20
1.20 Rights of Holders of Certificates . . . . . . . . . . . . . . 20
1.21 Assumption of Stock Options . . . . . . . . . . . . . . . . . 22
1.22 Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF PCI . . . . . . . . . . . . 26
2.1 Corporate Organization. . . . . . . . . . . . . . . . . . . . 26
2.2 Subsidiaries and Other Entities . . . . . . . . . . . . . . . 27
2.3 Corporate Authorization . . . . . . . . . . . . . . . . . . . 28
2.4 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . 29
2.5 Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.6 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 31
2.7 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.8 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.10 Intellectual Property . . . . . . . . . . . . . . . . . . . . 36
2.11 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.12 Financial Statements. . . . . . . . . . . . . . . . . . . . . 38
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2.13 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.14 Transactions Not in the Ordinary Course . . . . . . . . . . . 39
2.15 Capital Projects. . . . . . . . . . . . . . . . . . . . . . . 41
2.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.17 Bank Accounts; Employees. . . . . . . . . . . . . . . . . . . 42
2.18 Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . 43
2.19 Title to Properties . . . . . . . . . . . . . . . . . . . . . 44
2.20 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.21 Compliance with Securities Laws . . . . . . . . . . . . . . . 46
2.22 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
2.23 Special Liabilities; Warranties . . . . . . . . . . . . . . . 47
2.24 Employee Benefit Matters. . . . . . . . . . . . . . . . . . . 48
2.25 Materially Correct. . . . . . . . . . . . . . . . . . . . . . 52
2.26 Information.. . . . . . . . . . . . . . . . . . . . . . . . . 52
2.27 Regulatory Matters. . . . . . . . . . . . . . . . . . . . . . 53
2.28 Schedule Disclosure . . . . . . . . . . . . . . . . . . . . . 61
2.29 Information in Registration Statement . . . . . . . . . . . . 61
2.30 Castle Tower Agreements . . . . . . . . . . . . . . . . . . . 61
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF NEXTEL AND MERGER SUB . . . 62
3.1 Corporate Organization; Authorization . . . . . . . . . . . . 62
3.3 Common Stock; Registration. . . . . . . . . . . . . . . . . . 64
3.4 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . 64
3.5 Information . . . . . . . . . . . . . . . . . . . . . . . . . 65
3.6 Information in Registration Statement . . . . . . . . . . . . 66
ARTICLE IV. COVENANTS OF PCI. . . . . . . . . . . . . . . . . . . . . . . 66
4.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . 66
4.2 Reasonable Efforts. . . . . . . . . . . . . . . . . . . . . . 68
4.3 Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . 68
4.4 SEC Registration. . . . . . . . . . . . . . . . . . . . . . . 69
4.5 Antitrust Filing. . . . . . . . . . . . . . . . . . . . . . . 71
4.6 Restraint on Solicitations. . . . . . . . . . . . . . . . . . 71
4.7 Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . 72
4.8 Stockholder Approval. . . . . . . . . . . . . . . . . . . . . 73
4.9 Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . 73
4.10 Update Information. . . . . . . . . . . . . . . . . . . . . . 73
4.11 Nonparticipation in Auctions. . . . . . . . . . . . . . . . . 74
ARTICLE V. COVENANTS OF NEXTEL . . . . . . . . . . . . . . . . . . . . . 74
5.1 Antitrust Filing. . . . . . . . . . . . . . . . . . . . . . . 74
5.2 Registration Statement. . . . . . . . . . . . . . . . . . . . 75
5.3 Current Public Information. . . . . . . . . . . . . . . . . . 76
5.4 Offer to Warrant Holders. . . . . . . . . . . . . . . . . . . 77
5.5 Directors and Officers Indemnification. . . . . . . . . . . . 77
5.6 Employee Matters. . . . . . . . . . . . . . . . . . . . . . . 78
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ARTICLE VI. JOINT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 79
6.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 79
6.2 Standstill Agreement. . . . . . . . . . . . . . . . . . . . . 81
6.3 Trading Prohibitions. . . . . . . . . . . . . . . . . . . . . 81
6.4 Substitute of Subsidiary. . . . . . . . . . . . . . . . . . . 81
6.6 Cooperation Concerning Extended Implementation Channels . . . 82
ARTICLE VII. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.1 Filing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
ARTICLE VIII. CONDITIONS TO OBLIGATIONS . . . . . . . . . . . . . . . . . . 84
8.1 Conditions to Obligations of Nextel and PCI . . . . . . . . . 84
8.2 Conditions to Obligations of Nextel . . . . . . . . . . . . . 86
8.3 Conditions to the Obligations of PCI. . . . . . . . . . . . . 88
ARTICLE IX. TERMINATION/EFFECTIVENESS . . . . . . . . . . . . . . . . . . 89
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 89
9.2 Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
ARTICLE X. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 92
10.1 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
10.3 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 93
10.4 Rights of Third Parties . . . . . . . . . . . . . . . . . . . 93
10.5 Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . . 94
10.6 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 94
10.7 Construction. . . . . . . . . . . . . . . . . . . . . . . . . 94
10.8 Captions; Counterparts. . . . . . . . . . . . . . . . . . . . 95
10.9 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 95
10.10 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . 95
10.11 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . 95
- iii -
DEFINITIONS
Page
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Actual PCI Common Equivalents. . . . . . . . . . . . . . . . . . . . . . . . . 3
Adjusted EBITDA Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Adjusted Value Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AMI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Asset List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Basic Value Cap. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
By-Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Castle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
Castle License Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Castle Purchase Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . .62
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . .16
Certificate of Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Channel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Communications Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
Constituent Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Contaminants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Converted Nextel Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Converted Per Share Price. . . . . . . . . . . . . . . . . . . . . . . . . . .24
Current Payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
DCI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Defined benefit plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Defined contribution plan. . . . . . . . . . . . . . . . . . . . . . . . . . .48
Delivered. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Dilutive PCI Common Equivalents. . . . . . . . . . . . . . . . . . . . . . . . 3
Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . .15
Employee Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
ESMR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
Excess parachute payments. . . . . . . . . . . . . . . . . . . . . . . . . . .52
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Executive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79
Extended Implementation Channel. . . . . . . . . . . . . . . . . . . . . . . . 5
FCC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
FCC License. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
Fiduciaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Final Order. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84
FMR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
GCL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71
Immaterial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
July 1 Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
July 1 Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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June 30 Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Market Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 15
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Xxxxxx Xxxxxxx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
MSA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Multiemployer plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Multiple employer plan . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
Nasdaq NM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Nextel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Nextel Closing Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Nextel Cure Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90
Nextel Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Nextel Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
Nextel Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Non-core Market Channel. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Off the shelf. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
PCI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PCI Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PCI Cure Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89
PCI Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
PCI Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .53
PCI Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
PCI Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
PCI Share Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PCI Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
PCI/PCI Subs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Permitted Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Permitted Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Pollutants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Potentially responsible party. . . . . . . . . . . . . . . . . . . . . . . . .33
Qualifying Extended Implementation Channel . . . . . . . . . . . . . . . . . . 5
Qualifying Extended Implementation Channels. . . . . . . . . . . . . . . . . . 5
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Shortfall Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SMR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SMR License. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
SMR System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
SMR Units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Takeover Proposal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
Terminating Nextel Breach. . . . . . . . . . . . . . . . . . . . . . . . . . .90
Terminating PCI Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . .89
Third-Party Management Agreement . . . . . . . . . . . . . . . . . . . . . . .55
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To the knowledge of PCI. . . . . . . . . . . . . . . . . . . . . . . . . . . .94
To the knowledge of the Subsidiaries . . . . . . . . . . . . . . . . . . . . .94
Transaction Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Unfavorable FCC Response . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Value Floor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Voting stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Welfare Benefit Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
- vi -
ANNEXES
Annex A - Form of Letter Concerning Compliance with Rule 145
Annex B - Blue Sky
Annex C-1 - Form of Opinion of Gardere & Xxxxx, L.L.P.
Annex C-2 - Form of Opinion of Xxxxxxx, Carton & Xxxxxxx
Annex D - Form of Nextel Warrant
Annex E - Form of Opinion of Xxxxx, Day, Xxxxxx & Xxxxx
Annex F - Letter Agreement between Nextel Communications, Inc. and
Castle Tower Corporation
- vii -
AGREEMENT OF MERGER AND PLAN
OF REORGANIZATION
Agreement of Merger and Plan of Reorganization dated as of October 2, 1996
("Agreement") by and among NEXTEL COMMUNICATIONS, INC., a Delaware corporation
("Nextel"), NEXTEL FINANCE COMPANY, a Delaware corporation and a wholly owned
subsidiary of Nextel formerly known as Dispatch Communications, Inc. ("NFC"),
DCI MERGER INC., a Delaware corporation and a wholly owned subsidiary of NFC
("Merger Sub") and PITTENCRIEFF COMMUNICATIONS, INC., a Delaware corporation
("PCI").
PLAN OF REORGANIZATION
Nextel, through NFC and Merger Sub, and PCI intend to enter into a tax-free
plan of reorganization under the Internal Revenue Code of 1986, as amended (the
"Code").
The plan of reorganization will consist of the merger of Merger Sub with
and into PCI, with PCI being the surviving corporation. This merger ("Merger")
will be consummated in accordance with the terms and conditions hereof and will
be consummated at the "Effective Time of the Merger" as defined herein.
Nextel has caused NFC to form Merger Sub solely for the purpose of
consummating the Merger.
Simultaneously with the execution of this Agreement, PCI has delivered to
Nextel (i) an executed letter agreement from Castle Tower Corporation, (ii) a
waiver of preemptive rights from Advanced MobileComm, Inc. ("AMI") pursuant to
that certain
2
Contribution Agreement, dated as of September 5, 1995, as subsequently
amended, among PCI, Pittencrieff Communications, Inc., a Texas corporation,
AMI and each of the other sellers named therein, which waiver shall be
effective at the Effective Time of the Merger, and (iii) a confirmation from
AMI that the Voting Agreement and Proxy dated January 16, 1996 shall
terminate in accordance with its terms pursuant to Section 4(ii) thereof
effective at the Effective Time of the Merger.
Simultaneously with the execution of this Agreement, FMR Corp., a
Massachusetts corporation ("FMR"), has agreed that, among other things, at the
Effective Time of the Merger, FMR will exchange its warrants to purchase capital
stock of PCI for a warrant to purchase Class A (Voting) Common Stock of Nextel,
par value $.001 per share ("Nextel Common Stock"), in the form of Annex D.
AGREEMENT
In order to consummate the plan of reorganization, and in consideration of
the mutual agreements hereinafter contained, Nextel, NFC, Merger Sub and PCI
agree as follows:
ARTICLE I. CONVERSION OF PCI STOCK INTO NEXTEL COMMON STOCK; TREATMENT
OF OPTIONS AND WARRANTS
1.1 EXCHANGE RATIO AND CONVERSION OF SHARES. At the Effective Time of the
Merger (as defined herein), all the outstanding shares of common stock of PCI,
par value $.01 per share ("PCI Common Stock") shall be converted into shares of
Nextel Common Stock using an exchange ratio of 3.17:1.0, so that
3
three and seventeen one hundredths shares of PCI Common Stock are converted
into one share of Nextel Common Stock (the "Basic Exchange Ratio"), subject
to the adjustments described in this Article I. As of July 1, 1996, (i) the
total number of shares of PCI Common Stock outstanding ("July 1 Shares"),
plus (ii) the total number of shares of PCI Common Stock issuable upon
exercise of warrants or options, or upon exchange or conversion of
convertible instruments (regardless of whether they were on July 1 or are at
the Effective Time of the Merger "in the money") as set forth on Schedule
2.5(a) ("July 1 Derivatives"), and excluding (y) all treasury shares, and (z)
all other shares, rights to acquire shares or other issuance commitments for
shares of PCI Common Stock that are not July 1 Shares or July 1 Derivatives,
was 27,840,219 (the "PCI Share Base"). The maximum value of Nextel Common
Stock to be issued hereunder at the Effective Time of the Merger with respect
to (a) the PCI Share Base (without adjustment for any instrument that may
have expired without exercise, exchange or conversion into PCI Common Stock),
and (b) any PCI Common Stock, or options, warrants, convertible or
exchangeable instruments or other commitments to issue PCI Common Stock
outstanding at the Effective Time of the Merger that are not July 1 Shares or
July 1 Derivatives (such additional PCI Common Stock or issuance commitments,
the "Dilutive PCI Common Equivalents"; and together with the PCI Share Base
(without adjustment for any instrument that may have expired without
exercise, exchange or conversion into PCI Common Stock), the "Actual PCI
Common Equivalents") shall be $170,000,000 (the
4
"Basic Value Cap"). The maximum number of shares of Nextel Common Stock to
be issued hereunder at the Effective Time of the Merger shall be 8,782,403,
subject to adjustment only in the event Nextel elects to deliver additional
shares to avert a termination of this Agreement pursuant to Section 1.10, or
for changes to the capitalization of Nextel pursuant to Section 1.12.
1.2 VALUE CAP ADJUSTED FOR CHANNELS NOT DELIVERED. (a) If at the time of
the Closing (as defined herein) the number of Channels Delivered by PCI is (i)
less than 95% of the number of Channels set forth on Schedule 1.2 in any
xxxxxxxxxxxx xxxxxxxxxxx xxxx ("XXX") identified on Schedule 1.2 (each such MSA,
a "Shortfall Market"), or (ii) fewer than 3,000 Channels with regard to the
market areas not listed on Schedule 1.2 (each such Channel, a "Non-core Market
Channel"), then (A) for each Shortfall Market the Channel value set forth on
Schedule 1.2 for that Shortfall Market shall be multiplied by the difference
between the number of Channels set forth on Schedule 1.2 for that Shortfall
Market minus the number of Channels Delivered in that Shortfall Market and (B)
except as provided in Section 1.2(b)(iii), for the Non-core Market Channels, the
shortfall, if any, between 3,000 and the number of Non-core Market Channels
Delivered shall be multiplied by $3,000 (the product of each calculation, a
"Market Adjustment"). The sum of all such Market Adjustments shall be
subtracted from the Basic Value Cap.
(b) If the FCC (as defined herein) responds to PCI's filings for
rejustification of its extended implementation
5
authority by granting PCI less than twenty four (24) months from the date of
such FCC response to construct any Channel that had extended implementation
authority (an "Unfavorable FCC Response") then (i) each extended
implementation channel identified on Schedule 2.27 ("Extended Implementation
Channel") that received an Unfavorable FCC Response and is located within 25
miles of an MSA will be deemed constructed as required by clause 1.2(d)(iii)
for purposes of determining whether such Extended Implementation Channels are
Delivered, and if all other criteria set forth in Section 1.2(d) for that
Channel to be Delivered have been met, such Extended Implementation Channel
(the "Qualifying Extended Implementation Channel") will be counted toward the
Channel targets set forth on Schedule 1.2(a), provided, however, that the
total number of Qualifying Extended Implementation Channels in any MSA shall
not exceed the number of Extended Implementation Channels for such MSA
identified on Schedule 1.2, (ii) an amount equal to the lesser of (A)
$3,000,000, or (B) the product of $3,658 multiplied by the number of Extended
Implementation Channels receiving an Unfavorable FCC Response, will be
subtracted from the Basic Value Cap, and (iii) the target for Non-core Market
Channels shall be reduced from 3,000 to 1,800 and the shortfall, if any,
between 1,800 and the number of Non-core Market Channels Delivered shall be
multiplied by $5,000 to determine the Market Adjustment, if any, for the
Non-core Market Channels.
(c) If the FCC responds to PCI's filings for rejustification of its
extended implementation authority by
6
granting PCI twenty-four (24) months or more from the date of such response
to construct any Extended Implementation Channel, that Extended
Implementation Channel will be deemed constructed as required by clause
1.2(d)(iii) for purposes of determining whether such Extended Implementation
Channel is Delivered regardless of when the date of the Closing occurs, so
long as any postponements of the date of the Closing are not caused by the
action or inaction of PCI.
(d) A "Channel" shall be "Delivered" by PCI if at the Effective Time
of the Merger: (i) the FCC license for such channel has been granted to PCI or a
PCI Subsidiary by a Final Order (as defined herein); (ii) there is a Final Order
approving a transfer of control of that license to Nextel; (iii) if
unconstructed or deconstructed, there are at least 180 days remaining before the
construction or reconstruction deadline applicable to that channel; (iv) in the
case of a channel counted towards or applicable to an MSA market target, such
channel is located within 25 miles of the core of the applicable MSA, except as
otherwise provided on Schedule 1.2; (v) in the case of a channel counted towards
or applicable to an MSA market target, there is no co-channel license located
within 55 miles of the channel, except for co-channel licenses that are PCI, PCI
Subsidiaries, or licenses controlled by Nextel, except as otherwise provided on
Schedule 1.2; (vi) the channel is either (x) a land mobile 800 MHz frequency,
being one of the 430 frequencies allocated for specialized mobile radio ("SMR"),
or (y) a frequency in an MSA identified on Schedule 1.2 and
7
allocated for public safety, industrial land transportation or business where
the radio service classification has been converted to commercial service
classification (I.E., YX or GX radio service type) or (z) a frequency in a
Non-core Market allocated for public safety, industrial land transportation
or business; (vii) the channel is granted pursuant to a primary license;
(viii) in the case of a channel counted towards or applicable to an MSA
market target, such channel is a discrete frequency within the applicable
market and not subject to any cross border frequency sharing or channel
coordination or similar arrangement, taking into account all frequencies
deemed Delivered pursuant to this Agreement in that market; (ix) the license
for or including the channel is not subject to (A) any agreement to be sold
to a third party, or (B) any option or right of first refusal in favor of any
third party; (x) there is no contract right of any third party or FCC order
otherwise encumbering or limiting the use of the license; (xi) no
consideration is due to any person in connection with the channel; and (xii)
the channel is not subject to any finders' preference action (other than the
pending appeal of a favorable FCC ruling) or otherwise included within any
proceeding commenced or assessed by a third party (other than Nextel) or any
regulatory agency, including, without limitation, the FCC, that could result
in a take-back, termination, cancellation or nonrenewal of the relevant
licenses.
1.3 VALUE CAP ADJUSTED FOR NEGATIVE CASH FLOW. If Adjusted EBITDA
Earnings for the period from April 1, 1996 to the last day of the calendar
quarter most recently ended before the Effective
8
Time of the Merger is negative, that amount shall be annualized (i.e.
adjusted) to equal the loss that PCI would have experienced in a 12-month
period at that rate of loss, and that annualized amount shall be subtracted
from the Basic Value Cap. In the event the Effective Time of the Merger is
more than one year from the date hereof, so long as any postponements of the
date of the Closing are not caused by the action or inaction of PCI, there
shall be no value cap adjustment pursuant to this Section 1.3. "Adjusted
EBITDA Earnings" means PCI's earnings from continuing operations as shown on
the unaudited consolidated financial statements that are prepared by PCI in
the ordinary course of business consistent with past practice, (a) before
interest expense, taxes, depreciation, amortization, other income and
expense, all determined in accordance with past practices, to the extent
consistent with GAAP (as herein defined), and (b) without reduction for
reasonable accounting, legal, printing and financial advisory fees, special
employee incentive bonuses (as agreed to by Nextel from time to time) and
expenses associated with the Agreement and the transactions contemplated
hereby (the "Transaction Costs") so long as the Transaction Costs in the
aggregate for the period through and including the Closing (regardless
whether GAAP would reflect them in that period) do not exceed $1,500,000, all
determined in accordance with past practices, to the extent consistent with
GAAP.
1.4 VALUE CAP ADJUSTED FOR NEGATIVE WORKING CAPITAL. (a) Based on the
unaudited consolidated balance sheet of PCI as of the month-end preceding the
Effective Time of the Merger
9
prepared by PCI in the ordinary course of business, consistent with past
practices, if the working capital (herein defined) of PCI is negative, the
negative amount of such working capital shall be subtracted from the Basic
Value Cap. The terms used in this Section shall have the meaning given to
those terms in current use in the accounting profession in the United States
under Generally Accepted Accounting Principles ("GAAP"). For the purposes of
this Section, with the exceptions herein listed, working capital shall mean
the result obtained by subtracting current liabilities from current assets.
(b) For purposes of calculating working capital pursuant to this
Section, (i) the long term portion of the long term debt of PCI shall be
included in the current liabilities; (ii) all accounts and/or notes receivable
from the five executive officers of PCI shall be excluded from the current
assets; (iii) discounts on notes payable shall be excluded from the current
liabilities (thus increasing current liabilities); (iv) both (A) the Transaction
Costs that were paid on or before the period reflected on the balance sheet, and
(B) the Transaction Costs that have not been paid on or before the period
reflected on the balance sheet (regardless whether GAAP would reflect them as
current liabilities as of that date) shall, up to an aggregate maximum for all
amounts under this clause (iv) of $1,500,000, be excluded from the current
liabilities; (v) all severance costs that have been incurred or are estimated to
be incurred as a result of the Merger and change of control effected thereby
shall be included in the current liabilities of PCI under the
10
provisions of this Section (regardless whether GAAP would reflect them as
current liabilities as of that date); (vi) any cash advanced by Nextel
pursuant to Section 6.6 and any expenditures of those funds shall be excluded
from either current assets or current liabilities, as applicable; and (vii)
any cash that was received upon the exercise of any July 1 Derivatives (as
those instruments were in effect on July 1, 1996) prior to the Effective Time
of the Merger will be excluded from current assets.
1.5 VALUE CAP ADJUSTED FOR OPTION/WARRANT EXERCISE. If at the Effective
Time of the Merger, PCI (on a consolidated basis) does not have cash in an
amount equal to the aggregate exercise price or other consideration due upon
exercise, exchange or conversion under the terms of the July 1 Derivatives (as
those instruments were in effect on July 1, 1996) exercised prior to the
Effective Time of the Merger, or has issued any shares of PCI Common Stock in
respect of any July 1 Derivatives in any cashless exercise transaction, the
Basic Value Cap shall be reduced by the difference between the amount of cash
that should have been received upon such exercise and the actual amount of cash
received upon such exercise and held at the Effective Time of the Merger.
1.6 VALUE CAP ADJUSTED FOR SEVERANCE AMOUNTS. If the aggregate amount
paid or to be paid or other value given to the five executives identified in
Section 5.6(b) as described therein whether pursuant to existing commitments or
otherwise, excluding (i) bonuses earned in 1996 or debt forgiven in 1996 up to
an
11
aggregate of $222,871, and (ii) bonuses earned in 1997 up to 35% of the
salary of each such executive as in effect on the date of this Agreement,
prorated through the date of the Closing, exceeds $1,260,000, then the amount of
such excess shall be subtracted from the Basic Value Cap.
1.6A SETTLEMENT WITH CASTLE TOWER. Prior to Closing, PCI shall enter
into a settlement and release agreement with Castle (as defined below) pursuant
to which Castle shall settle and release all claims arising under the Castle
Purchase Agreement (as defined below).
1.7 VALUE CAP ADJUSTED IF CLOSING OCCURS AFTER 1997. For purposes of the
exchange ratio adjustments, if any, to be made pursuant to Sections 1.8 and 1.9,
if the date of the Closing occurs after December 31, 1997, then, so long as any
postponements of the date of the Closing are not caused by the action or
inaction of PCI, any adjustments made to the Basic Value Cap pursuant to
Sections 1.2, 1.4, 1.5 and 1.6 shall be reduced to equal one half of the
adjustments otherwise calculated pursuant to those Sections.
1.8 ASSET VALUE AND DILUTION ADJUSTMENTS TO EXCHANGE RATIO. If there are
any reductions to the Basic Value Cap under Section 1.2, 1.3, 1.4, 1.5, 1.6 or
1.7 or if there are any Dilutive PCI Common Equivalents at the Effective Time of
the Merger then, in lieu of the Basic Exchange Ratio set forth in Section 1.1,
the exchange ratio shall equal:
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(i) 3.17; multiplied by
(ii) the quotient of (A) the Basic Value Cap of $170,000,000,
divided by (B) the Basic Value Cap minus the sum of any
reductions pursuant to Sections 1.2, 1.3, 1.4, 1.5 and 1.6,
or, if Section 1.7 is applicable, one-half of such sum (the
"Adjusted Value Cap"); multiplied by
(iii) the quotient of (Y) the Actual PCI Common Equivalents,
divided by (Z) the PCI Share Base.
1.9 VALUE CAP ADJUSTMENT. If, at the Effective Time of the Merger:
(a) (i) the PCI Share Base, or, if higher, (ii) the Actual PCI Common
Equivalents; divided by
(b) (i) the Basic Exchange Ratio of 3.17 or, if Section 1.8 applies,
(ii) the exchange ratio calculated under Section 1.8; multiplied
by
(c) the Nextel Closing Price,
is greater than the lower of (y) the Basic Value Cap, or (z) the Adjusted Value
Cap, then the exchange ratio shall be further adjusted to equal:
(A) (i) the PCI Share Base, or, if higher, (ii) the Actual PCI Common
Equivalents; multiplied by
(B) the Nextel Closing Price; divided by
(C) (i) the Basic Value Cap, or, if lower, (ii) the Adjusted Value
Cap.
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1.10 ADDITIONAL CONSIDERATION IN LIEU OF TERMINATION. (a) If the Board of
Directors of PCI has elected (as contemplated by Section 9.1(d)(iv)) to
terminate this Agreement because the Nextel Closing Price on the day before the
scheduled date of the Closing is less than $14.00, Nextel may elect to deliver
shares of Nextel Common Stock with an aggregate value, based on the Nextel
Closing Price on the day of the Closing equal to the product of (i) $14,
multiplied by (ii) the total number of shares of Nextel Common Stock that would
be issued or issuable with respect to Actual PCI Common Equivalents as otherwise
determined under this Article I (the "Value Floor").
(b) If Nextel makes the election contemplated by Section 1.10(a),
then: (i) the termination election made by the PCI Board of Directors under
Section 9.1(d)(iv) shall be automatically rescinded and cancelled; (ii) the
Merger shall proceed pursuant to this Agreement; and (iii) in lieu of the
exchange ratio set forth in Section 1.1 or calculated and adjusted under Section
1.8 or 1.9, the Actual PCI Common Equivalents shall be converted into shares of
Nextel Common Stock in the ratio that (i) Actual PCI Common Equivalents, bears
to (ii) the quotient of the Value Floor divided by the Nextel Closing Price on
the date of the Closing.
1.11 NEXTEL CLOSING PRICE. As used in this Agreement, the "Nextel Closing
Price" shall be the arithmetic average of the closing sales price for Nextel
Common Stock on the Nasdaq National Market (the "Nasdaq NM") for the 20 trading
days
14
immediately preceding the date on which the Nextel Closing Price is to be
determined.
1.12 OTHER ADJUSTMENTS. Nextel and PCI agree that in the event of any
change in the terms of the authorized capital stock of Nextel (other than a
change solely in the number of shares), or the declaration or payment of any
share dividend or share distribution by Nextel to its stockholders, or any
distribution of cash, property or securities by Nextel to its stockholders
(other than regular quarterly cash dividends payable out of earnings), or any
split, reclassification, recapitalization, subdivision or exchange in respect of
the outstanding stock of Nextel, then appropriate adjustments shall be made to
the number of shares of Nextel Common Stock issuable in the Merger, as set forth
in Section 1.1, to place each of Nextel, NFC, and Merger Sub, PCI and the
holders of PCI Common Stock in the same posture as if the Effective Time of the
Merger had occurred immediately prior to the occurrence of the event giving rise
to such adjustment. Further, Nextel and PCI agree that in the event of any
change in the terms of the authorized capital stock of PCI, or any distribution
of securities by PCI to its stockholders, or any split, reclassification,
recapitalization, subdivision or exchange in respect of the outstanding stock of
PCI, appropriate adjustments shall be made to place each of Nextel, Merger Sub,
PCI and the holders of PCI Common Stock in the same posture as if the Effective
Time of the Merger had occurred immediately prior to the occurrence of the event
giving rise to such adjustment. No adjustment shall be made pursuant to the
preceding sentence
15
for redemptions, repurchases or other cancellation or retirement of
outstanding shares of PCI Common Stock or rights to acquire shares of PCI
Common Stock.
1.13 TERMS OF THE MERGER. Upon the terms and subject to the conditions set
forth herein, and in accordance with the General Corporation Law of the State of
Delaware ("GCL"), as soon as practicable following the satisfaction (or, to the
extent permitted, the waiver) of the conditions set forth in Article VIII,
Merger Sub and PCI shall cause a Certificate of Merger (the "Certificate of
Merger") to be executed and filed with the Secretary of State of Delaware as
provided in Section 251 of the GCL. The Certificate of Merger shall provide
that Merger Sub shall be merged with and into PCI (the "Merger"). Following the
Merger, PCI shall continue as the surviving corporation (the "Surviving
Corporation").
1.14 EFFECTIVE TIME; EFFECTS OF THE MERGER. The Merger shall become
effective when both (a) this Agreement shall be adopted and approved by the
stockholders of PCI in accordance with the applicable provisions of the GCL and
(b) the Certificate of Merger, executed in accordance with the relevant
provisions of the GCL, is filed with the Secretary of State of Delaware (the
time the Merger becomes effective being referred to as the "Effective Time of
the Merger"). Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time of the Merger: the separate existence of Merger
Sub shall cease; the Surviving Corporation shall possess all assets and property
of every description, and all interests therein, wherever located,
16
and the rights, privileges, immunities, powers, franchises and authority, of
a public as well as of a private nature, of each of Merger Sub and PCI (the
"Constituent Corporations"); all obligations belonging to or due each of the
Constituent Corporations shall be vested in, and become the obligations of,
the Surviving Corporation without further act or deed; title to any real
estate or any interest therein vested in either of the Constituent
Corporations shall not revert or in any way be impaired by reason of the
Merger; all rights of creditors and all liens upon any property of any of the
Constituent Corporations shall be preserved unimpaired, and the Surviving
Corporation shall be liable for all of the obligations of each of the
Constituent Corporations; and any claim existing, or action or proceeding
pending, by or against either of the Constituent Corporations may be
prosecuted to judgment with right of appeal, as if the Merger had not taken
place.
1.15 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation of Merger Sub as in effect immediately preceding the Effective
Time of the Merger shall constitute the Certificate of Incorporation of the
Surviving Corporation (the "Certificate of Incorporation") within the meaning of
the GCL Section 104. The By-Laws of Merger Sub as in effect immediately
preceding the Effective Time of the Merger shall constitute the By-Laws of the
Surviving Corporation (the "By-Laws") until amended in accordance with
applicable law and the Certificate of Incorporation.
17
1.16 DIRECTORS AND OFFICERS. The directors and officers of Merger Sub
immediately prior to the Effective Time of the Merger shall be the directors and
officers of the Surviving Corporation at the Effective Time of the Merger and
shall hold office from the Effective Time of the Merger until their respective
successors are duly elected or appointed and qualified in the manner provided
in the Certificate of Incorporation and By-Laws of the Surviving Corporation, or
as otherwise provided by law.
1.17 EXCHANGE AGENT. Prior to the Effective Time of the Merger, Nextel
shall designate a bank or trust company to act as exchange agent in the Merger
(the "Exchange Agent"). Prior to the Effective Time of the Merger, Nextel shall
contribute to NFC the shares of Nextel Common Stock necessary to make payment
for each share of the capital stock of PCI being converted by reason of the
Merger. Immediately thereafter, NFC shall contribute such shares of Nextel
Common Stock to Merger Sub and Merger Sub will immediately prior to or at the
Effective Time of the Merger deliver to the Exchange Agent such shares of Nextel
Common Stock.
1.18 SURRENDER OF CERTIFICATES AND DELIVERY OF MERGER CONSIDERATION.
(a) Promptly after the Effective Time of the Merger, Nextel shall
cause the Exchange Agent to mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time of the Merger
represented outstanding shares of PCI Common Stock (the "Certificates") (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only
18
upon proper delivery of the Certificates to the Exchange Agent and shall be
in form approved by Nextel and the Exchange Agent) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for
certificates representing shares of Nextel Common Stock and cash for
fractional shares. Upon surrender to the Exchange Agent of a Certificate or
Certificates, together with a letter of transmittal duly executed (in the
approved form), and such other documents as the Surviving Corporation or the
Exchange Agent may reasonably request, a holder of a Certificate shall be
entitled to receive in exchange therefor a portion of Nextel Common Stock as
set forth in Section 1.1, as adjusted pursuant to this Article I (the "Merger
Consideration").
(b) The stock transfer books of PCI shall be closed at the Effective
Time of the Merger and no transfer of capital stock of PCI outstanding prior to
the Effective Time of the Merger shall be registered on the stock transfer books
of the Surviving Corporation. If Nextel Common Stock is to be issued to a
person other than the person in whose name the Certificates are registered, it
shall be a condition of issuance that the Certificates surrendered shall be
properly endorsed or otherwise in proper form for transfer and that the person
requesting such issuance shall pay all transfer and other taxes required by
reason of the receipt by a person other than the registered holder of the
Certificates surrendered, or establish to the reasonable satisfaction of the
Surviving Corporation or the Exchange Agent that such tax has been paid or is
not applicable.
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(c) At any time following ninety days after the Effective Time of the
Merger, Nextel shall be entitled to require the Exchange Agent to deliver to
Nextel any Nextel Common Stock which had been made available to the Exchange
Agent by or on behalf of Nextel or the Surviving Corporation and which has not
been disbursed to holders of Certificates, and thereafter such holders shall be
entitled to look to Nextel (subject to abandoned property, escheat or other
similar laws) only as general creditors thereof with respect to the Nextel
Common Stock payable upon due surrender of their Certificates. Notwithstanding
the foregoing, Nextel shall not be liable to a holder of Certificates for
amounts delivered to a public official pursuant to any applicable abandoned
property, escheat or similar laws. Nextel shall pay all charges and expenses,
including those of the Exchange Agent, in connection with the exchange of
shares.
(d) If any Certificates shall not have been surrendered prior to one
year after the Effective Time of the Merger (or immediately prior to such
earlier date on which any payment in respect thereof would otherwise escheat to
or become the property of any governmental unit or agency), the payment in
respect of such Certificates shall, to the extent permitted by applicable law,
become the property of Nextel, free and clear of all claims of interest of any
person previously entitled thereto.
(e) Certificates, if and when presented to the Exchange Agent or the
Surviving Corporation after the Effective Time of the Merger, shall be cancelled
and exchanged for the
20
consideration provided for, and in accordance with, the procedures set forth
in this Section.
1.19 NO FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement (but subject to the final sentence of this Section 1.19), no
fractional share of Nextel Common Stock or certificates or scrip therefor shall
be issued as a result of the conversion of issued and outstanding capital stock
of PCI into Nextel Common Stock, but in lieu of each fractional interest there
shall be made a payment in cash therefor, without interest, at a pro rata price
based on the Nextel Closing Price. The Surviving Corporation shall provide (or
shall cause one or more of its Affiliates to provide) the Exchange Agent with
sufficient cash to make such payments, and, thereafter, the Surviving
Corporation shall cause the Exchange Agent to make such payments to the holders
of Certificates in cash, without interest, on the surrender of their
Certificates. Wherever in this Agreement it is contemplated that, in connection
with the Merger, cash payment shall be made in lieu of fractional share
interests to persons otherwise entitled to receive such fractional share
interests, Nextel may (in its sole and absolute discretion) deliver to such
persons a number of whole shares, determined by rounding up to the nearest whole
share, and thereupon shall be relieved of any obligation hereunder to make cash
payments to such persons in lieu of any fractional share interests.
1.20 RIGHTS OF HOLDERS OF CERTIFICATES.
(a) At the Effective Time of the Merger, the holders of Certificates
for shares of capital stock of PCI (other than
21
certificates representing shares held in PCI's treasury, which shall be
automatically cancelled pursuant to the Merger) shall cease to have any
rights as stockholders of PCI, and their sole rights shall pertain to the
shares of Nextel Common Stock into which their shares of PCI capital stock
shall have been converted by the Merger. After the Effective Time of the
Merger, each holder of outstanding Certificates for shares of capital stock
of PCI shall be entitled upon surrender of the same duly transmitted to the
Exchange Agent to receive in exchange therefor certificates representing the
number of whole shares of Nextel Common Stock into which such holder's shares
of capital stock of PCI shall have been converted by the Merger, plus (if
applicable) cash in lieu of fractional shares.
(b) Pending surrender and exchange under this Agreement, a holder's
Certificates for capital stock of PCI shall be deemed for all corporate
purposes, other than the payment of dividends, to evidence the number of whole
shares of Nextel Common Stock into which such shares have been converted by the
Merger and, subject to the last sentence of Section 1.19, the right to receive
cash for any fractional interests resulting therefrom. Subject to
Section 1.18(d), unless and until any outstanding Certificates for shares of PCI
capital stock are surrendered, no dividend (stock or cash) payable to holders of
record of Nextel Common Stock as of any date subsequent to the Effective Time of
the Merger shall be paid to the holder of any such Certificate, but upon such
surrender of such Certificates there shall be paid to the record holder of the
certificate for
22
Nextel Common Stock issued in exchange therefor the amount of dividends, if
any, but without interest, that have theretofore become payable subsequent to
the Effective Time of the Merger with respect to the number of whole shares
of Nextel Common Stock represented by the certificate issued upon such
surrender and exchange.
1.21 ASSUMPTION OF STOCK OPTIONS.
(a) Schedules 2.5(a) and 2.5(b) set forth a list of each director and
employee stock option outstanding on the date of this Agreement, whether or not
fully exercisable (collectively, the "PCI Stock Options"), to purchase PCI
Common Stock heretofore granted or assumed by PCI pursuant to any stock option,
stock purchase or similar plan adopted, assumed or maintained at any time by
PCI, any of its controlled Affiliates or any of their respective predecessors in
interest, including but not limited to the PCI 1993 Stock Option Plan, the PCI
1994 Non-Employee Director Stock Option Plan, the PCI 1996 Stock Option Plan,
and the PCI 1996 Non-Employee Director Stock Option Plan, each as amended and in
effect on the date of this Agreement (collectively the "PCI Option Plans").
Schedules 2.5(a) and 2.5(b) also set forth with respect to each PCI Stock Option
the option exercise price, the number of shares subject to the option, any
related stock appreciation rights, the dates of grant, vesting, exercisability
and expiration of the option and whether the option is an incentive stock option
or a non-qualified stock option. All rights under the PCI Stock Options shall
be treated as provided in this Section 1.21, and to the
23
extent the terms of the PCI Option Plans and/or of any related agreements are
inconsistent with the treatment to be accorded to the PCI Stock Options
pursuant to this Section 1.21, then PCI shall cause the PCI Option Plans
and/or any related agreements with affected participants to be amended, and
all required third party, governmental and regulatory body consents or
approvals to such amendments to be procured, such that all such
inconsistencies shall be eliminated by the Effective Time of the Merger.
(b) Each PCI Stock Option outstanding immediately prior to the
Effective Time of the Merger shall be converted at the Effective Time of the
Merger into an issued and outstanding option of Nextel in accordance with the
terms of the PCI Option Plans, so that (i) from and after the Effective Time of
the Merger, each such PCI Stock Option may be exercised only for shares of
Nextel Common Stock notwithstanding any contrary provision of the PCI Option
Plans or stock option agreements executed in connection therewith, (ii) each
such PCI Stock Option shall at the Effective Time of the Merger become an option
to purchase a number of shares of Nextel Common Stock equal to the quotient
arrived at by dividing the number of shares of PCI Common Stock subject to such
option immediately prior to the Effective Time, by the Basic Exchange Ratio, as
adjusted pursuant to Article I ("Converted Nextel Shares"), and (iii) the
exercise price per share of Nextel Common Stock at which each such PCI Stock
Option is exercisable shall be the amount (rounded up to the next whole cent)
arrived at by multiplying the exercise price
24
per share of PCI Common Stock at which such PCI Stock Option is exercisable
immediately prior to the Effective Time by the Basic Exchange Ratio, as
adjusted pursuant to Article I (the "Converted Per Share Price"); provided,
however, that, notwithstanding the foregoing, Nextel shall not issue or pay
for any fractional share otherwise issuable upon any exercise by any holder
of PCI Stock Options that are so converted, and provided further, however,
that in the case of each PCI Stock Option which is an incentive stock option,
the Basic Exchange Ratio shall be adjusted for such option, if necessary, so
as not to constitute a modification, extension or renewal of the option,
within the meaning of Section 424(h) of the Code. All PCI Stock Options
converted into issued and outstanding options of Nextel pursuant to the
preceding sentence, except those PCI Stock Options held by directors who are
not also employees or consultants of PCI or any of its subsidiaries, shall be
so converted into issued and outstanding options under Nextel's Amended and
Restated Incentive Equity Plan, as amended May 13, 1996 (the "Nextel Plan").
(c) The Board of Directors of PCI and/or of the Surviving
Corporation, as appropriate, shall take such action as may be required under the
PCI Option Plans and the Compensation Committee of the Board of Directors of
Nextel shall take such action as may be required under the Nextel Plan to
effectuate the foregoing. Prior to the Effective Time of the Merger, Nextel
shall reserve for issuance the number of shares of Nextel Common
Stock necessary to satisfy the obligations of Nextel under this Section 1.21,
and within five (5) business days
25
after the Effective Time of the Merger, Nextel shall register such shares
pursuant to the Securities Act of 1933, as amended (the "Securities Act").
Prior to the Effective Time of the Merger, PCI, and thereafter the Surviving
Corporation, as may be appropriate, shall take such actions as are necessary
to effect the provisions of this Section 1.21 and to preserve for the holders
of PCI Stock Options the benefits to be provided pursuant to this Section
1.21. Notwithstanding anything in this Section 1.21(c), neither PCI nor
Nextel shall have any liability for failing to take (or to cause to be taken)
actions in respect of any stock option plan or related agreement that would
violate (in any material respect) the terms thereof or would be prohibited by
applicable law.
1.22 WARRANTS. At the Effective Time of the Merger, PCI's outstanding
warrants (the "Warrants") to purchase shares of PCI Common Stock shall be
assumed by Nextel. Each Warrant shall thereafter evidence a warrant to purchase
the number of shares of Nextel Common Stock into which the number of shares of
PCI Common Stock issuable pursuant to such Warrant would have been converted in
the Merger at an exercise price per share equal to the amount (rounded up to the
next whole cent) arrived at by dividing the aggregate exercise price under such
Warrant by the number of shares of Nextel Common Stock purchasable thereunder,
unless exchanged at the Closing for warrants of Nextel pursuant to agreements
with the warrant holders as described in the Recitals or as contemplated by
Section 5.4.
26
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF PCI
PCI represents and warrants to Nextel that:
2.1 CORPORATE ORGANIZATION.
(a) PCI has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware and has the
corporate power and authority to own or lease its properties and to conduct its
business as it has been and is now being conducted. The copies of the
Certificate of Incorporation of PCI, certified by the Secretary of the State of
Delaware, and its By-Laws, certified by the Secretary of PCI, previously
delivered by PCI to Nextel, are true, correct and complete.
(b) The subsidiaries of PCI are listed on the Schedules with
reference to this Section (collectively, the "Subsidiaries"). Each of the
Subsidiaries has been duly incorporated and is validly existing as a corporation
in good standing under the laws of the state of its incorporation, as set forth
on the Schedules with reference to this Section and has the corporate power and
authority to own or lease its properties and to conduct its business as it has
been and is now being conducted. The copies of the Certificate of Incorporation
of each Subsidiary, certified by the Secretary of State of the state of its
incorporation, and its By-Laws, certified by such Subsidiary's Secretary,
previously delivered by PCI to Nextel, are true, correct and complete.
(c) PCI and each Subsidiary are duly licensed or qualified and in
good standing as a foreign corporation in all
27
jurisdictions identified on the Schedules with reference to this Section and
such jurisdictions are the only ones in which their ownership of property or
the character of their activities is such as to require them to be so licensed
or qualified.
2.2 SUBSIDIARIES AND OTHER ENTITIES.
(a) All the outstanding capital stock of each Subsidiary is duly
authorized, validly issued, fully paid and nonassessable. PCI owns all the
issued and outstanding capital stock of each Subsidiary. Except as set forth on
the Schedules with reference to this Section, PCI holds all the issued and
outstanding capital stock of each Subsidiary free and clear of any mortgage,
pledge, security interest, encumbrance, lien, claim or charge of any kind. As
of the Closing, PCI shall hold all the issued and outstanding capital stock of
each Subsidiary free and clear of any mortgage, pledge, security interest,
encumbrance, lien, claim or charge of any kind.
(b) There are no warrants, options, subscriptions, other convertible
instruments, and no commitments, obligations, or agreement (whether firm or
conditional) pursuant to which PCI or any Subsidiary is or may be obligated to
issue, transfer, deliver or sell shares of capital stock of any Subsidiary or
other securities of any Subsidiary.
(c) Except for the Subsidiaries, and except as set forth in the
Schedules with reference to this Section, none of PCI or the Subsidiaries has
any direct or indirect subsidiaries, nor do any of them own, directly or
indirectly, any partnership, equity, profit, participation or similar ownership
interest in
28
any corporations, partnerships, joint ventures, trusts, unincorporated
organizations, associations or similar entities.
2.3 CORPORATE AUTHORIZATION.
(a) The Board of Directors of PCI, by unanimous vote of all directors
at a meeting duly called and held, has (i) determined that the Merger is fair to
and in the best interests of the stockholders of PCI and (ii) resolved to submit
this Agreement to and recommend approval of this Agreement by the stockholders
of PCI.
(b) PCI has all necessary corporate power and authority to enter into
this Agreement and to perform all of the obligations to be performed by it
hereunder. The execution, delivery and performance of this Agreement by PCI has
been duly authorized by PCI, and, upon the execution and delivery hereof by,
respectively, Nextel, NFC and Merger Sub, this Agreement will constitute the
valid and legally binding obligations of PCI, enforceable against PCI in
accordance with its terms, except as enforceability thereof may be limited by
applicable bankruptcy, reorganization, insolvency or other similar laws
affecting creditors' rights generally, by equitable principles of general
applicability with respect to the availability of equitable remedies, or by
public policies applicable to securities laws.
(c) The Board of Directors of PCI received an opinion of Xxxxxx
Xxxxxxx & Co. Incorporated ("Xxxxxx Xxxxxxx"), its financial advisor, at or
before the Board meeting (prior to the approval vote) described in Section
2.3(a) above, to the effect that the consideration to be received by PCI's
stockholders in
29
the Merger is fair to the stockholders from a financial point of view. PCI
has provided Nextel with a correct and complete copy of the engagement letter
between Xxxxxx Xxxxxxx and PCI.
2.4 CAPITAL STOCK. The entire authorized capital stock of PCI consists
solely of 50,000,000 shares of PCI Common Stock, of which 26,162,225 shares are
issued and outstanding as of the date of this Agreement, and 1,000,000 shares of
preferred stock, par value $.01 per share, none of which are issued or
outstanding. All of the outstanding shares of PCI Common Stock (and any shares
issuable pursuant to presently outstanding options, if exercised and purchased
at the applicable exercise price) were duly authorized and will be, when issued
and the option price paid (if applicable), validly issued, fully paid and
nonassessable. Except as set forth in the Schedules with reference to this
Section, none of the capital stock or other securities of PCI is entitled or
subject to preemptive rights or registration rights. Other than the requisite
vote of PCI stockholders to consummate the Merger, the authorization or consent
of no person is required in order to consummate the transactions contemplated
herein by virtue of any such person having an equitable or beneficial interest
in the PCI Common Stock. Except as set forth on the Schedules with reference to
this Section, there are not now, and at the Effective Time of the Merger there
will not be, any voting trusts or other agreements or understandings to which
PCI is a party or is bound with respect to the voting of PCI Common Stock. To
the knowledge of PCI, all outstanding shares of PCI Common
30
Stock were offered, sold and issued in compliance with all applicable laws and
regulations.
2.5 OPTIONS. (a) PCI has set forth on the Schedules with reference to
this Section all warrants, options, subscriptions and other convertible
instruments or agreements pursuant to which PCI was obligated as of July 1, 1996
to issue, transfer, deliver or sell shares of PCI Common Stock and the exercise
or purchase price of each such warrant, option, subscription, convertible
instrument or agreement. Except as set forth in the Schedules with reference to
this Section, as of July 1, 1996, no options or warrants to purchase shares of
PCI Common Stock have ever been granted, except for employee options that have
been exercised or have terminated without exercise prior to July 1, 1996,
pursuant to the terms of the respective PCI Option Plans. Except as set forth
in the Schedules with reference to this Section, as of July 1, 1996, there were
no commitments or obligations of PCI, either firm or conditional, to issue,
deliver or sell, whether under offers, stock option agreements, stock bonus
agreements, stock purchase plans, incentive compensation plans, warrants,
conversion rights or otherwise, any authorized but unissued shares, or treasury
shares, of PCI Common Stock or other securities of PCI.
(b) PCI has set forth on the Schedules with reference to this Section
all warrants, options, subscriptions and other convertible instruments or
agreements pursuant to which PCI was or is obligated as of July 1, 1996, as of
the date hereof, and as of the Closing to issue, transfer, deliver or sell
shares of PCI
31
Common Stock, which are not set forth on Schedule 2.5(a). Additionally, set
forth on such Schedule with reference to this Section are the exercise or
purchase price of each warrant, option, subscription, convertible instrument
or agreement set forth thereon.
2.6 COMPLIANCE WITH LAWS. Except for matters that individually and in the
aggregate will not have a material adverse effect on the business, financial
condition, results of operations, liabilities or assets of PCI and its
Subsidiaries, taken as a whole, and that will not impair PCI's ability to
perform, in any material respect, its obligations under this Agreement or any
other document or instrument to which PCI is a party in connection with the
transactions contemplated herein, or as set forth in the Schedules with
reference to this Section, to the knowledge of PCI, (i) neither PCI nor any
Subsidiary is currently in violation (nor is any of them currently liable or
otherwise currently responsible with respect to prior violations) of any
statute, law or regulation applicable to any of their presently or formerly
owned properties or to the conduct of their current or past businesses;
(ii) none of the processes followed, results obtained, services provided or
products made, modified or installed by any of them (in the ordinary course of
their businesses or otherwise), or by any managers with respect to SMR Licenses
(as defined herein) held by any of PCI or its Subsidiaries (pursuant to Third
Party Management Agreements (as defined herein) or otherwise) or by PCI or its
Subsidiaries in the management or operation of SMR Licenses managed by any of
32
them (pursuant to PCI Management Agreements or otherwise), violate any statute,
law or regulation applicable thereto; (iii) none of (a) the businesses of PCI or
any Subsidiary, (b) the processes, results, services or products performed, sold
or otherwise made available by PCI or any Subsidiary, (c) the processes,
results, services or products performed, sold or otherwise made available by any
manager with respect to SMR Licenses held by PCI or any Subsidiary (pursuant to
Third Party Management Agreements or otherwise) or (d) the processes, results,
services or products performed, sold or otherwise made available by PCI or any
Subsidiary in the management or operation of SMR Licenses managed by any of them
(pursuant to PCI Management Agreements or otherwise) violates any applicable law
or regulation relating to air, water or noise pollution or employee health and
safety or the production, storage, labeling, transportation or disposition of
solid waste or hazardous or toxic substances; (iv) PCI, its Subsidiaries, each
of the managers with respect to SMR Licenses held by PCI or a Subsidiary, and
PCI and its Subsidiaries in their capacities as managers under PCI Management
Agreements, has each timely obtained all licenses and permits and timely filed
all reports required to be filed under any such applicable laws or regulations;
(v) neither PCI, its Subsidiaries nor any other person has stored, dumped or
otherwise disposed of any chemical substances, including any "Hazardous
Substances," "Pollutants" or "Contaminants" (as such terms are defined in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
33
as amended ("CERCLA")) on, beneath or about any of the properties of PCI or its
Subsidiaries; (vi) none of PCI, its Subsidiaries or any of their respective
managers (with respect to SMR Licenses held by PCI or a Subsidiary) has received
written notice that it is a "potentially responsible party" under any
environmental law or of any violation of any environmental, zoning or other land
use ordinance, law or regulation relating to the operation of its or their
businesses, or to any of the processes followed, results obtained, services
provided or products made, modified or installed (in the ordinary course of its
or their businesses or otherwise), including, but not limited to, the Toxic
Substances Control Act of 1976, as amended, the Resource Conservation Recovery
Act of 1976, as amended, the Clean Air Act, as amended, the Federal Water
Pollution Control Act, as amended, CERCLA or the Occupational Safety and Health
Act of 1970, as amended, nor are PCI and any Subsidiary aware of any such
violation. PCI has listed in the Schedules with reference to this Section all
environmental reports known to PCI or its Subsidiaries relating to any owned or
leased real property of PCI or its Subsidiaries and has previously delivered to
Nextel a true, correct and complete copy of each report so listed.
2.7 NO CONFLICT. Except as set forth in the Schedules with reference to
this Section and subject to the adoption and approval of this Agreement by the
stockholders of PCI, the execution and delivery of this Agreement by PCI and the
consummation of the transactions contemplated hereby do not, and will not
constitute an event which, after notice or lapse of time
34
or both would (a) violate any provision of, or result in the breach of, or
accelerate or permit the acceleration of the performance required by: (i) the
terms of, any applicable law, rule or regulation of any governmental body,
except where any such violation, breach, acceleration, termination or creation,
individually or in the aggregate, would not have a material adverse effect
upon the business, financial condition, results of operation, liabilities or
assets of PCI and the Subsidiaries, taken as a whole, and would not impair
PCI's ability to perform, in any material respect, its obligations under this
Agreement or any other document or instrument to which PCI is a party in
connection with the transactions contemplated herein, (ii) the Certificate of
Incorporation or By-Laws of PCI or any Subsidiary; (iii) any indenture,
material agreement, or other material instrument to which PCI or any Subsidiary
is a party or by which PCI or any Subsidiary may be bound; or (iv) any order,
judgment or decree applicable to any of them, except where any such violation,
breach, acceleration, termination, creation or order, individually or in the
aggregate, would not have a material adverse effect upon the business, financial
condition, results of operation, liabilities or assets of PCI and the
Subsidiaries, taken as a whole, and would not impair PCI's ability to perform,
in any material respect, its obligations under this Agreement or any other
document or instrument to which PCI is a party in connection with the
transactions contemplated herein, or (b) terminate or result in the termination
of any indenture, material agreement or other material instrument, or result
in the creation
35
of any lien, charge or encumbrance upon any of the properties or assets of PCI
or any Subsidiary under any agreement to which any of them is a party, except
where any such violation, breach, acceleration, termination or creation,
individually or in the aggregate, would not have a material adverse effect
upon the business, financial condition, results of operation, liabilities or
assets of PCI and the Subsidiaries, taken as a whole, and would not impair
PCI's ability to perform, in any material respect, its obligations under this
Agreement or any other document or instrument to which PCI is a party in
connection with the transactions contemplated herein.
2.8 LITIGATION. Except as set forth in the Schedules with reference to
this Section, there are no actions, suits, proceedings, claims or investigations
formally instituted and pending or, to the knowledge of PCI and its
Subsidiaries, threatened against or specifically affecting PCI or any Subsidiary
or involving any of their properties or assets, at law or in equity, or before
or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
any arbitration panel or alternative dispute resolution body, except where the
outcome of any such actions, suits, proceedings, claims or investigations,
individually or in the aggregate, would not have a material adverse effect upon
the business, financial condition, results of operation, liabilities or assets
of PCI and the Subsidiaries, taken as a whole, and would not impair PCI's
ability to perform, in any material respect, its obligations
36
under this Agreement or any other document or instrument to which PCI is a
party in connection with the transactions contemplated herein. Except as set
forth in such Schedule, neither PCI nor any Subsidiary is subject to or is in
default under, any order, writ, injunction or decree of any court or Federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, or any arbitration panel or alternative dispute
resolution body.
2.9 INSURANCE. Set forth in the Schedules with reference to this Section
is a list of (a) all insurance policies held by PCI or any Subsidiary
(indicating the insurer, type, amount and term of coverage, deductible,
description of vehicles, latest property insurable values by location (100%
replacement value), workers' compensation payroll (separately for clerical,
sales and technical employees), and additional named insureds with respect to
each such policy); and (b) to the knowledge of PCI, all claims pending under
any of such insurance policies. Except as set forth in such Schedule, all of
these policies are in full force and effect and all premiums due thereon have
been paid or accrued and there are no retroactive experience-based premium
adjustment features in any policy.
2.10 INTELLECTUAL PROPERTY. Except for the name of PCI and except as set
forth in the Schedules with reference to this Section, to the knowledge of PCI,
there are no patents or patent applications; trademarks, service marks, trade
dress, trade names, corporate names or any applications to register any of the
foregoing marks or names; copyrights or copyright registrations;
37
or any licenses, other than software licenses acquired solely through the
purchase of the underlying software, to or from third parties with respect to
any of the foregoing (including, without limiting the generality of the
foregoing, all computer software, data and documentation) relating to PCI's
or the Subsidiaries' business as now conducted or as presently proposed to be
conducted. To the knowledge of PCI, except as set forth in the Schedules with
reference to this Section, (i) neither of PCI nor any Subsidiary has infringed,
misappropriated or otherwise conflicted with any proprietary rights of any third
parties; (ii) PCI is not aware of any infringement, misappropriation or conflict
which will occur as a result of the continued operation of PCI's or the
Subsidiaries' business as now conducted or as presently proposed to be
conducted; and (iii) neither PCI nor any Subsidiary has received any notices
of any infringement or misappropriation from any third party.
2.11 ASSETS. PCI has delivered to Nextel a Schedule (which makes reference
to this Section) that lists all fixed capital assets owned by PCI (including,
without limitation, all repeater and ancillary equipment necessary for the
operation of the business of PCI, all assets located at each site, all office
equipment and furniture owned by PCI and all other material tangible assets
owned by PCI) (the "Asset List"). The assets on the Asset List include
substantially all of the tangible assets presently used by PCI in the conduct of
its business in Arizona, California, Colorado, New Mexico, North Dakota,
Oklahoma, South Dakota and Texas (collectively, the "States").
38
2.12 FINANCIAL STATEMENTS. PCI has previously delivered to Nextel the
following financial statements (including any notes thereto), all of which have
been prepared in accordance with GAAP consistently applied throughout the
periods involved and present fairly in all material respects the consolidated
financial position of PCI and its Subsidiaries, at the dates stated in such
financial statements and the results of their operations for the periods stated
therein (subject in the case of the financial statements referenced in
paragraph (b) to the absence of notes and to normal year-end adjustments):
(a) a Consolidated Balance Sheet at December 31, 1995, and a
Consolidated Statement of Operations, Statement of Stockholders' Equity and
Consolidated Statement of Cash Flows for the year ended December 31, 1995 which
have been audited by and that are accompanied by the report of KPMG Peat Marwick
LLP; and
(b) a Consolidated Balance Sheet at June 30, 1996 and a Consolidated
Statement of Operations, and a Consolidated Statement of Cash Flows for the six
months ended June 30, 1996.
2.13 LIABILITIES. PCI and its Subsidiaries do not have any liability or
obligation, secured or unsecured (whether accrued, absolute, contingent or
otherwise), except:
(i) trade payables and accrued expenses incurred in the
ordinary course of business and consistent with past practices for which
the stated due date has not passed ("Current Payables");
(ii) those liabilities or obligations (for which the stated due
date has not passed) relating to operating
39
contracts or leases entered into in the ordinary course of business
consistent with past practice;
(iii) liabilities and obligations of the type shown on PCI's
balance sheet at June 30, 1996 that was previously delivered to Nextel (the
"June 30 Balance Sheet") and any increase in the amount of such liabilities
after June 30, 1996 was either (1) consented to in writing by Nextel, or
(2) incurred by PCI or any Subsidiary in the ordinary course of business
after such date;
(iv) the Transaction Costs which shall not exceed $1,500,000;
and
(v) other liabilities or obligations that do not exceed $10,000
individually and do not exceed $100,000 in the aggregate or that are set
forth in the Schedules with reference to this Section specifically
identified and agreed to by Nextel as Permitted Liabilities for purposes of
this Agreement (and, to the extent reasonably ascertainable, have been
identified by type, source and dollar amount) (the liabilities and
obligations described in this clause and clauses (i) through (iv) above,
collectively, the "Permitted Liabilities").
2.14 TRANSACTIONS NOT IN THE ORDINARY COURSE. Except as set forth on the
Schedules with reference to this Section, during the period commencing July 1,
1996 and ending on the date of this Agreement, neither PCI nor any Subsidiary
has (a) incurred any liability or obligation not in the ordinary course of
business or entered into any transaction other than in the ordinary course of
40
business the value of which did not exceed $10,000 individually and did not
exceed $100,000 in the aggregate; (b) declared or made any payment or
distribution to stockholders or other holders of equity or other similar
ownership or participation interests, including stock splits, stock dividends
and profit distributions, or purchased or redeemed any shares or other equity or
other similar ownership or participation interests except as provided for in
this Agreement; (c) mortgaged, pledged or subjected to lien, charge or any other
encumbrance, any of its assets, tangible or intangible; (d) sold or transferred,
or agreed to sell or transfer, or acquired or agreed to acquire any SMR
Licenses; (e) sold or transferred any of its other assets, tangible or
intangible, the value of which did not exceed $10,000 individually and did not
exceed $100,000 in the aggregate except, in each case, in the ordinary course of
business; (f) cancelled any debts or claims except in each case in the ordinary
course of business; (g) increased the rate of compensation of any officer or of
any employee receiving (giving effect to such increase) more than $50,000 per
annum or paid or declared any bonus (excluding fixed-formula compensation
incentive payments such as may be paid to certain sales employees from time to
time), except as set forth in the Schedules with reference to this Section;
(h) agreed to or amended or instituted any employment contract, bonus plan,
stock option plan, profit sharing plan, pension plan, retirement plan or other
similar arrangement or plan, except as set forth in the Schedules with reference
to this Section.
41
2.15 CAPITAL PROJECTS. Set forth in the Schedules with reference to this
Section is a description of all capital projects currently committed for or
authorized by PCI for (i) SMR Systems (as defined herein) and (ii) all other
capital projects involving the expenditure of more than $50,000 in any single
case or more than $200,000 in the aggregate.
2.16 TAXES. Except as set forth in the Schedules with reference to this
Section, the Subsidiaries have been included in a consolidated Federal income
tax return filed by PCI. Except as set forth in the Schedules with reference to
this Section, (i) PCI, on behalf of itself and its Subsidiaries (collectively,
"PCI/PCI Subs"), has accurately prepared and has duly and timely filed with all
appropriate Federal, foreign, state and local governmental agencies, all tax
returns and reports required to be filed by it; (ii) all taxes owed or withheld,
or which may be claimed to be owed or required to be withheld, to or for the
benefit of any governmental agency for or with respect to the periods covered by
such returns and reports or with respect to any period (or portions thereof)
ending at or before the Closing, and all interest, penalties, assessments and
deficiencies connected therewith, have been or will be timely paid in full or
provided for in full; (iii) PCI/PCI Subs has not executed or filed with any
taxing authority any agreement extending the period for assessment or collection
of any taxes; (iv) PCI/PCI Subs is not a party to any pending audit, inquiry,
action or proceeding, nor has PCI/PCI Subs been notified of the inception of any
such audit, inquiry, action or proceeding by any Federal,
42
foreign, state or local governmental entity or municipality or subdivision
thereof or any authority, department, commission, board, bureau, agency,
court or instrumentality for the assessment or collection of taxes; (v) no
deficiency or assessment notices or reports or statements of tax due have
been received by PCI/PCI Subs in respect of any of its tax returns; and (vi)
to the best of PCI's knowledge, the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby will have no
material effect upon the tax treatment of any previously consummated
transaction in which PCI acquired all or any part of the assets or capital
stock of another entity.
2.17 BANK ACCOUNTS; EMPLOYEES. Set forth in the Schedules with reference
to this Section is a complete list of (a) all banks in which PCI or any
Subsidiary has an account or safe deposit box and the names of all persons
authorized to draw thereon or have access thereto; (b) the current fixed annual
rate of compensation (plus total cash compensation broken down between fixed and
bonus components for fiscal year 1995) as of the date of such list for each of
the five (5) then highest paid employees of PCI and each Subsidiary for the
current fiscal year and a summary of the basis on which each such person is
compensated if such basis is other than exclusively a fixed salary rate; (c) the
names of all persons holding powers of attorney from PCI and each Subsidiary and
a summary statement of the terms thereof; and (d) the name of each person who is
an "affiliate" of PCI for purposes of Rule 145 under the Securities Act.
43
2.18 REAL ESTATE. The Schedules with reference to this Section list all
real estate, real estate options and leaseholds owned or held by PCI or any
Subsidiary. Except for matters that individually and in the aggregate will not
have a material adverse effect on the business, financial condition, results of
operations, liabilities or assets of PCI and its Subsidiaries, taken as a whole,
and that will not impair PCI's or the Subsidiaries' ability to perform, in any
material respect, its or their obligations under this Agreement or any other
document or instrument to which PCI or a Subsidiary is a party in connection
with the transactions contemplated herein, or as set forth on the Schedules with
reference to this Section, there are no title defects, issues of validity or
enforceability, deficiencies in rights of possession or use or similar matters
relating to or affecting any real estate owned or leased, or which is subject to
an option to buy, sell or lease, of or by PCI or any Subsidiary. Except for
Permitted Liens (as defined herein), for matters that individually and in the
aggregate will not have a material adverse effect on the business, financial
condition, results of operations, liabilities or assets of PCI and its
Subsidiaries, taken as a whole, and that will not impair PCI's or the
Subsidiaries' ability to perform, in any material respect, its or their
obligations under this Agreement or any other document or instrument to which
PCI or a Subsidiary is a party in connection with the transactions contemplated
herein, or as set forth in the Schedules with reference to this Section, PCI or
a Subsidiary, as the case may be, has good and marketable title in fee simple to
44
all real estate owned by it and good leasehold interests in all of its
leaseholds, none of which interests will be materially and adversely affected by
the transactions contemplated hereby, and each lease with an initial term of
more than one year is, to the knowledge of PCI and its Subsidiaries, enforceable
against the lessor thereunder and PCI or its Subsidiary, as the case may be,
enjoys quiet possession of all leaseholds.
2.19 TITLE TO PROPERTIES. Except for matters that individually and in the
aggregate will not have a material adverse effect on the business, financial
condition, results of operations, liabilities or assets of PCI and its
Subsidiaries, taken as a whole, and that will not impair PCI's or the
Subsidiaries' ability to perform, in any material respect, its or their
obligations under this Agreement or any other document or instrument to which
PCI or a Subsidiary is a party in connection with the transactions contemplated
herein, or as set forth on the Schedules with reference to this Section, each of
PCI and its Subsidiaries has good title to all of its personal properties and
assets, tangible and intangible (including, without limitation, those on the
Asset List). Except for liens or encumbrances set forth in the Schedules with
reference to this Section (which identifies those that will be removed prior to
the Closing), none of such properties or assets is subject to any lien or
encumbrance other than (a) any liens securing Current Payables, (b) any liens or
encumbrances connected with operating leases entered into in the ordinary course
of business consistent with past practice, (c) such other encumbrances that do
not secure
45
indebtedness and do not materially detract from the value of, or
interfere with the present or future use of, the property subject thereto and
affected thereby or otherwise materially impair the business, financial
condition, results of operations or operations of PCI and its Subsidiaries,
taken as a whole, or (d) as otherwise disclosed to and approved by Nextel in
writing (collectively, "Permitted Liens").
2.20 CONTRACTS. Except as set forth in the Schedules with reference to
this Section, neither PCI nor any Subsidiary (nor any of their properties) is a
party to or bound by any (a) agreement or other arrangement not made in the
ordinary course of business, involving payments or receipts in excess of $25,000
individually or more than $100,000 in the aggregate; (b) employment or
consulting contract; (c) contract with any labor union; (d) employee bonus,
pension, profit-sharing, retirement, stock purchase or other benefit or welfare
plan or agreement; (e) lease or management agreement relating to the use or
operation of an SMR Channel; (f) other lease with respect to real or personal
property, whether as lessor or lessee, involving lease payments in excess of
$50,000 per annum or $200,000 in the aggregate; (g) contract or commitment for
the purchase of raw materials or supplies or the sale of products involving more
than $50,000 per annum or $200,000 in the aggregate; (h) indenture, agreement,
note, mortgage, guaranty or other writing which evidences or relates to any loan
of money to, or indebtedness for money borrowed by, PCI or any Subsidiary;
(i) license agreement or other contract or agreement relating to patents,
trademarks,
46
trade names, techniques or copyrights or applications for any thereof,
inventions, trade secrets or other proprietary know-how or technical
assistance; (j) any loan to officers, directors or employees of PCI or any
Subsidiary (all of which loans will be repaid in full by the Closing); or (k)
any agreement relating to any direct or indirect acquisition of SMR Licenses
in the case of any of the foregoing, whether written or oral (and, in the
case of oral commitments, with PCI providing an accurate written summary of
all material terms to Nextel). Except for matters that individually and in
the aggregate will not have a material adverse effect on the business,
financial condition, results of operations, liabilities or assets of PCI and
its Subsidiaries, taken as a whole, and that will not impair PCI's or the
Subsidiaries' ability to perform, in any material respect, its or their
obligations under this Agreement or any other document or instrument to which
PCI or a Subsidiary is a party in connection with the transactions
contemplated herein, or as set forth in such Schedule, to the knowledge of
PCI, neither PCI nor any Subsidiary, nor any other party thereto, is in
default under the terms of any commitments described in Subsections (a)
through (k) of this Section.
2.21 COMPLIANCE WITH SECURITIES LAWS. PCI has complied with all applicable
Federal and state securities laws and regulations with regard to the
registration, offer and sale of the PCI Common Stock registered under the shelf
registration statement on Form S-4 (Registration No. 33-83810).
47
2.22 BROKERS. Except for fees paid to Xxxxxx Xxxxxxx, neither PCI nor any
Subsidiary has directly or indirectly dealt with anyone acting in the capacity
of a finder or broker and none of them has incurred nor will they incur any
obligation for any finder's or broker's fee or commission in connection with
this Agreement or the Merger.
2.23 SPECIAL LIABILITIES; WARRANTIES. Except for matters that individually
and in the aggregate will not have a material adverse effect on the business,
financial condition, results of operations, liabilities, or assets of PCI and
its Subsidiaries, taken as a whole, and that will not impair PCI's or its
Subsidiaries' ability to perform, in any material respect, its or their
obligations under this Agreement or any other document or instrument to which
PCI or a Subsidiary is a party in connection with the transactions contemplated
herein, or as set forth on the Schedules with reference to this Section,
(i) neither PCI nor any Subsidiary has any liability under any contracts under
which the consideration to be paid or received by PCI or a Subsidiary is
determined in whole or in part based on profits or operating results, nor are
there any contingent payments owing to any person in connection with the
acquisition of any business, entity, frequency or channel by PCI or a
Subsidiary; (ii) neither PCI nor any Subsidiary has extended any warranties to
their respective customers, except those that each of them is authorized to
extend on behalf of product manufacturers; (iii) neither PCI nor any Subsidiary
is now subject to any outstanding, pending or, to the knowledge of PCI,
threatened
48
claims based on warranty coverage; and (iv) there are no pending or
threatened claims by any manufacturer or vendor of equipment to disallow or
invalidate manufacturers' warranty coverage.
2.24 EMPLOYEE BENEFIT MATTERS. Except as set forth on the Schedules with
reference to any particular subsection of this Section, to the knowledge of PCI:
(a) PCI does not have and never has had any obligation to contribute
to any "multiemployer plan" (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) or any "multiple
employer plan" described in Section 210(a) of ERISA or Section 413(c) of the
Code. PCI does not maintain, contribute to, or have any liability under or with
respect to any plan or arrangement, whether or not terminated, which provides or
provided medical, health, life insurance of other welfare-type benefits for
current or future retired or terminated employees (except for limited continued
medical benefit coverage required to be provided under Section 4980B of the Code
or as required under applicable state law). PCI does not maintain, contribute
to or have any liability under or with respect to any employee plan which is a
"defined benefit plan" (as defined in Section 3(35) of ERISA), whether or not
terminated. PCI does not maintain, contribute to or have any liability under or
with respect to any employee plan which is a "defined contribution plan" (as
defined in Section 3(34) of ERISA), whether or not terminated.
(b) PCI does not maintain, contribute to or have any liability under
or with respect to any plan or arrangement
49
providing benefits to current or former employees or directors, including any
bonus plan, plan for deferred compensation, employee health or other welfare
benefit plan or other arrangement, whether or not terminated (any such plan
or arrangement, an "Employee Plan"). For purposes of this Section 2.24,
"PCI" includes all organizations that now are or that have been, within the
past six years, under common control with PCI pursuant to Section 414(b) or
(c) of the Code. PCI previously has delivered to Nextel true, complete and
correct copies of each of the Employee Plans, including all amendments
thereto, and any other documents or other instruments relating thereto
reasonably requested by Nextel.
(c) All Employee Plans are being, and have been, maintained, operated
and administered in all material respects in accordance with their respective
terms and in compliance with all applicable laws.
(d) No Employee Plan is funded through a "welfare benefit fund" as
defined in Section 419(e) of the Code.
(e) There have been no prohibited transactions or breaches of any of
the duties imposed on "fiduciaries" (within the meaning of Section 3(21) of
ERISA) by ERISA with respect to any Employee Plan that could reasonably be
expected to result in PCI or any Subsidiary becoming liable directly or
indirectly (by indemnification or otherwise) for any material excise tax,
penalty or other liability under ERISA or the Code.
(f) There are no actions or claims pending or, to the knowledge of
PCI or any Subsidiary, threatened, with respect to
50
any Employee Plan (other than routine claims for benefits), and there are no
investigations or audits of any Employee Plan by any governmental authority
currently pending and there have been no such investigations or audits that
have been concluded that resulted in any liability of PCI and its
Subsidiaries that has not been fully discharged.
(g) All (i) insurance premiums required to be paid with respect to,
(ii) benefits, expenses, and other amounts due and payable under, and (iii)
contributions, transfers, or payments required to be made to, any Employee Plan
have been paid. With respect to any insurance policy providing funding
for benefits under any Employee Plan, (x) there is no liability of PCI and its
Subsidiaries, in the nature of a retroactive or retrospective rate adjustment,
loss sharing arrangement, or other actual or contingent liability, nor would
there be any such liability if such insurance policy was terminated on the date
hereof, and (y) no insurance company issuing any such policy is in receivership,
conservatorship, liquidation or similar proceeding and, to the knowledge of PCI
and its Subsidiaries, no such proceedings with respect to any insurer are
imminent.
(h) Each Employee Plan that is a group health plan subject to Section
4980B of the Code (or which was subject to Section 162(k) of the Code) has been
operated in material compliance with the continuation coverage requirements of
Section 4980B of the Code and Section 162(k) of the Code, as applicable, and
Part 6 of Subtitle B of Title I of ERISA.
51
(i) Each Employee Plan that is subject to Section 1862(b)(1) of the
Social Security Act has been operated in compliance with the secondary payer
requirements of Section 1862(b)(1) of such Act.
(j) The execution, delivery and performance of this Agreement will
not, solely in and of itself, (i) constitute a stated triggering event under any
Employee Plan that will result in any payment (whether of severance pay or
otherwise) becoming due from PCI or any Subsidiary to any present or former
officer, employee, director, shareholder or consultant, or former employee (or
dependents of any thereof), or (ii) accelerate the time of payment or vesting,
or increase the amount, of compensation due to any employee, officer, director,
shareholder or consultant of PCI or any Subsidiary.
(k) Neither PCI nor any Subsidiary has agreed or committed to make
any amendments to any of the Employee Plans not already embodied in the
documents comprising any such Employee Plan, other than any amendments required
by law.
(l) All contributions, transfers, and payments by PCI or any
Subsidiary in respect of any Employee Plan have been or are fully deductible
under the Code.
(m) PCI's financial statements at and for the six months ended
June 30, 1996 contain and, at and for the period ending on the Closing, will
contain adequate accruals for (i) bonuses, sales commissions and vacation pay
earned but not received as of such dates and (ii) incurred or continuing but
unpaid claims under Employee Plans not funded by insurance.
52
(n) No Employee Plan provides benefits to any individual who is not a
current or former employee of PCI or a Subsidiary, or the dependents or other
beneficiaries of any such individual.
(o) Except as set forth on Schedule 2.24(o), no "excess parachute
payments" within the meaning of Section 280G of the Code will be made in
connection with or as a result of the Merger (without regard to whether any such
payment might be reasonable compensation for personal services performed or to
be performed in the future).
2.25 MATERIALLY CORRECT. Article II of this Agreement together with the
Schedules referenced herein does not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
disclosures contained therein in the light of the circumstances under which they
are made, not misleading.
2.26 INFORMATION. PCI has made available to Nextel each registration
statement, schedule, report, proxy statement or information statement it has
filed with the Securities and Exchange Commission (the "SEC") since January 1,
1994, including, without limitation, (a) PCI's Annual Report on Form 10-K for
the years ended December 31, 1994 and December 31, 1995, including all documents
incorporated by reference therein, and (b) PCI's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996 and any Report on Form 8-K filed since
December 31, 1995 (collectively, the "PCI Reports"). As of the date of this
Agreement, the PCI Reports, taken as a whole and taken together
53
with information previously furnished by PCI to Nextel, 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. As used
in this Section 2.26, "material" means material to the business, financial
condition, results of operations, liabilities or assets of PCI and its
Subsidiaries taken as a whole. PCI has delivered to Nextel on or prior to
the date hereof all private placement, confidential offering or similar
memoranda and other offering or solicitation materials used at any time by
PCI or anyone acting on its behalf in connection with any offer or sale of
securities of PCI.
2.27 REGULATORY MATTERS.
(a) DEFINITIONS. For purposes of this Agreement, the following terms
shall have the indicated meanings:
"FCC" shall mean the Federal Communications Commission or any
successor thereto.
"FCC LICENSE" shall mean any paging, mobile telephone, SMR or
other license, permit, consent, certificate of compliance, franchise, approval
or authorization of any type granted or issued by the FCC, including, without
limitation, any of the foregoing authorizing the acquisition, construction or
operation of an SMR System (as defined herein), radio paging system or other
radio communications system.
"PCI MANAGEMENT AGREEMENT" shall mean any management or other
agreement (other than a loading agreement)
54
pursuant to which PCI or a Subsidiary agrees to manage or to perform other
services (other than loading) with respect to SMR Licenses held by another
person in exchange for either the right to receive a portion of the revenues
derived from such SMR Licenses or the right to purchase such SMR Licenses or
any loading agreement pursuant to which such Subsidiary is loading SMR
Licenses held by another person in exchange for either the right to receive a
portion of the revenues derived from such SMR Licenses in excess of 25% of
the aggregate revenues derived from such SMR Licenses or the right to
purchase such SMR Licenses.
A fact or circumstance shall be "IMMATERIAL" for purposes of this
Section if such fact or circumstance would not result in the cancellation,
revocation, termination, adverse modification or any other material adverse
effect on any 800 MHz FCC license; the cancellation, revocation, termination,
adverse modification or any other material adverse effect on 5% or more of the
frequencies in any category of service set forth on Schedule 2.27; or any other
material adverse effect on any other right granted or enjoyed by PCI, with
respect to the FCC frequencies.
"SMR LICENSE" shall mean an FCC License authorizing the
construction, ownership and operation of an SMR system in the 800 or 900 MHz
band issued pursuant to 47 CFR Part 90 of the Rules and Regulations of the FCC.
"SMR SYSTEM" shall mean an SMR system licensed under 47 CFR Part
90 of the Rules and Regulations of the FCC.
55
"SMR UNITS" shall mean the number of mobile and control stations
(within the meaning of 47 CFR Part 90 of the Rules and Regulations of the FCC)
subscribing to SMR Systems licensed to or managed by PCI or a Subsidiary
excluding, however, any such units which are subject to a Third-Party Management
Agreement if the respective third party has a right to purchase the SMR Licenses
which are subject to such Third-Party Management Agreement.
"THIRD-PARTY MANAGEMENT AGREEMENT" shall mean any management or
other agreement (other than a loading agreement) pursuant to which a person
(other than PCI or a Subsidiary) is managing SMR Licenses held by PCI or a
Subsidiary or any loading agreement pursuant to which a person (other than PCI
or a Subsidiary) is loading SMR Licenses held by PCI or a Subsidiary in exchange
for the right to receive a portion of the revenues derived from such SMR
Licenses in excess of 25% of the aggregate revenues derived from such SMR
Licenses.
(b) LICENSE INFORMATION. Schedule 2.27 sets forth a true and
complete list of the following information, which need not with respect to the
information called for by clause (ii) below include Immaterial information, for
each FCC License issued to or operated by PCI or its Subsidiaries (including all
FCC Licenses subject to a PCI Management Agreement):
(i) for all FCC Licenses (including all SMR Licenses), the name
of the licensee, the name of the seller(s), the call sign, the transmitter
location (by site coordinates and city), the category or type of service
56
(E.G., paging, SMR, etc.), the frequency or frequencies authorized, and
operating entity;
(ii) in the case of SMR Licenses, the number of channels
authorized, the number of channels constructed, whether the license is for
a conventional or trunked SMR System, the applicable loading date, whether
the SMR License is subject to a Finders Preference, whether the SMR License
is operating under Special Temporary Operating Authority ("STA") and the
applicable STA expiration date, and whether the SMR License is managed by
PCI pursuant to a PCI Management Agreement or by any other persons pursuant
to a Third-Party Management Agreement;
(iii) each holder of any such FCC License that is neither wholly
owned by PCI nor owned entirely by unaffiliated persons and managed by PCI;
and
(iv) for all FCC Licenses (including SMR Licenses), whether such
FCC Licenses are subject to rights of first refusal, options and other such
rights or obligations in existence on the date hereof, including, without
limitation, entitlements to acquire additional ownership interests, which
may affect the ownership interests of PCI.
(c) CONDITION OF SYSTEMS. All of the properties, equipment and
systems owned and/or operated by PCI and related to the FCC licenses set forth
on Schedule 2.27 are, and, to the knowledge of PCI, any such properties,
equipment and systems added in connection with any contemplated system expansion
or
57
construction prior to the Closing will be, in compliance with all standards
or rules imposed by any governmental agency or authority (including, without
limitation, the FCC, the Federal Aviation Administration and (if applicable),
any public utilities commission or other state or local governments or
instrumentalities) applicable to PCI or its operation of the properties,
equipment and systems or as imposed under any agreements with customers, except
for any non-compliance that is, individually or in the aggregate Immaterial. To
the knowledge of PCI, all of the equipment and systems owned and/or operated by
PCI are in good repair and working order, ordinary wear and tear excepted. In
addition to the other representations and warranties set forth herein which are
expressly based upon PCI's knowledge, with regard to the 450 MHz FCC Licenses
set forth on Schedule 2.27, the representations in this Section 2.27(c) are made
to the best of PCI's knowledge.
(d) FEES; LICENSE COMPLIANCE. PCI has paid all franchise, license or
other fees and charges which have become due in respect of its business and has
made appropriate provision as is required by generally accepted accounting
principles, consistently applied, for any such fees and charges which have
accrued. Except for Immaterial matters or as set forth in Schedule 2.27, PCI
has duly secured all necessary permits, licenses, consents and authorizations
from, and has filed all required registrations, applications, reports and other
documents with, the FCC and, if applicable, any public utilities commission and
other entity exercising jurisdiction over the SMR businesses,
58
radio paging businesses and other radio communications businesses of PCI or
the construction of delivery systems therefor, as such businesses are
currently conducted. PCI or a Subsidiary holds or has the contractual right
to obtain the FCC Licenses specified on Schedule 2.27 and, except for matters
that are, individually or in the aggregate Immaterial, or as indicated in
such Schedule, all such FCC Licenses are valid and in full force and effect
without conditions except for such conditions as are stated on the FCC
License or as are generally applicable to holders of similarly situated FCC
Licenses. PCI has filed with the FCC prior to any applicable deadline a
complete and accurate application for rejustification of any unconstructed or
deconstructed FCC License related to previously granted or requested wide
area Enhanced Specialized Mobile Radio ("ESMR") licenses. Except as set
forth on Schedule 2.27, with regard to FCC Licenses related to wide area ESMR
frequencies, neither PCI nor any of its Subsidiaries is subject to a short
space agreement or any other agreement, FCC waiver or otherwise applicable
regulations encumbering or limiting the use of such FCC License. Except for
Immaterial matters or as set forth on Schedule 2.27, all applicable loading
requirements with respect to any SMR Licenses listed on such Schedule have
been met and PCI has taken every reasonable action to cause the same to be
loaded in compliance with FCC regulations. Except matters that are,
individually or in the aggregate Immaterial, or as set forth on Schedule
2.27, to the knowledge of PCI no event has occurred and is continuing which
could (i) result in the revocation,
59
termination or adverse modification of any FCC License listed on such
Schedule or (ii) adversely affect any rights of PCI thereunder. Except as
indicated on Schedule 2.27, PCI has no reason to believe and no knowledge
that all of the FCC Licenses specified on Schedule 2.27 will not be renewed
in the ordinary course. Except with regard to any planned enhanced SMR
Systems of PCI and except as shown on Schedule 2.27, PCI has sufficient time,
materials, equipment, contract rights and other required resources to
complete, in a timely fashion and in full, construction of all the SMR
Systems, radio paging and other radio communications systems associated with
the FCC Licenses listed on Schedule 2.27 in compliance with all applicable
technical standards and construction requirements and deadlines. Except for
matters that are, individually or in the aggregate Immaterial, or as set
forth on Schedule 2.27, the current ownership and operation by PCI of such
SMR Systems, radio paging and other radio communications systems comply with
the Communications Act of 1934, as amended (the "Communications Act"), and
all applicable rules, regulations and policies of the FCC. In addition to
the other representations and warranties set forth herein which are expressly
based upon PCI's knowledge, with regard to the 450 MHz FCC Licenses set forth
on Schedule 2.27, the representations in this Section 2.27(d) are made to the
best of PCI's knowledge.
(e) MANAGEMENT AGREEMENTS. Set forth on Schedule 2.27(e) is a
complete and correct list of all PCI Management Agreements (and associated
option agreements, if any) and
60
Third-Party Management Agreements to which PCI or any Subsidiary is a party
that correctly identifies the manager under each such agreement and the
holder of the SMR Licenses which are the subject of such agreements, the
transmitter locations (by address), and number of channels covered by such
SMR Licenses, the term of such agreements, any options or calls (and the
respective option or call prices as well as the time period in which any
option or call must be exercised or made) in favor of any party to such
agreements to purchase or sell any interest in such SMR Licenses and the
respective fees or revenues payable or receivable under any such agreements.
Except for matters that are, individually or in the aggregate, Immaterial or
as set forth on Schedule 2.27(e) to the knowledge of PCI and its
Subsidiaries, the terms of all such PCI Management Agreements and Third-Party
Management Agreements and the operation of each SMR System pursuant thereto
comply with the Communications Act and all applicable rules, regulations and
policies of the FCC. Except for matters that are, individually or in the
aggregate Immaterial, or as set forth on Schedule 2.27(e), none of the
channels licensed to PCI or its Subsidiaries are subject to a Third Party
Management Agreement. Each PCI Management Agreement includes an option
allowing PCI or a Subsidiary to purchase the channels that are subject to
that agreement and no such option will be adversely affected by the Merger.
(f) DISCRETE FREQUENCY APPLICATION. PCI has provided Nextel access
to, and prior to December 16, 1996 will have delivered to Nextel a true and
correct copy of, each Request for
61
Rule Waiver and related digital mobile system application and each general
cover letter related to an ESMR application, as filed with the FCC, and any
correspondence relating to any frequency sent to the FCC and all supplemental
or related materials filed or sent in connection therewith by or on behalf of
PCI, all materials submitted to the FCC and/or to PCI in connection therewith
by any third party, and any written communication issued by the FCC or any
FCC staff member in response to, or otherwise in connection with, any of the
foregoing.
2.28 SCHEDULE DISCLOSURE. Regardless of any qualifications or limitations
on the representations and warranties set forth in this Article II regarding
materiality, PCI has used all reasonable best efforts to list and/or describe on
the Schedules all matters required to be listed and/or described by the
representations and warranties set forth herein.
2.29 INFORMATION IN REGISTRATION STATEMENT. The information, regarding PCI,
its subsidiaries and affiliates, included in the Registration Statement referred
to in Sections 4.4 and 5.2 of this Agreement will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
2.30 CASTLE TOWER AGREEMENTS. PCI, a certain PCI Subsidiary and Castle
Tower Corporation, formerly known as Castle Communications Corporation
("Castle"), entered into that certain
62
License Agreement dated as of January 10, 1995, as amended, (the "Castle
License Agreement") and that certain Purchase and Sale Agreement dated as of
December 23, 1994, as amended, (the "Castle Purchase Agreement"). Except as
set forth in the Schedules with reference to this Section, (i) there are no
actions, suits or proceedings, formally instituted, pending or threatened,
against PCI or any of its affiliates related to the Castle Purchase Agreement
or the Castle License Agreement, and (ii) all radio communications equipment,
including base stations, antennae, poles, dishes or masts, cabling or wiring
and accessories used therewith, leased to or owned by PCI and located on
property owned by Castle is currently in compliance with the technical
standards relating to frequency compatibility, radio interference protection,
antenna type and location and physical installation set forth on Exhibit B to
the License Agreement.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF NEXTEL AND MERGER SUB
Nextel and Merger Sub, jointly and severally, represent and warrant to PCI
that:
3.1 CORPORATE ORGANIZATION; AUTHORIZATION. (a) Each of Nextel and Merger
Sub has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Delaware and has the corporate power and
authority to own or lease its properties and to conduct its business as it is
now being conducted.
(b) Each of Nextel and Merger Sub has all necessary corporate power and
authority to enter into this Agreement and to
63
perform all of the obligations to be performed by it hereunder. The
execution, delivery and performance of this Agreement by Nextel and Merger
Sub have been duly authorized by Nextel and Merger Sub, respectively, and
upon the execution and delivery hereof by Nextel and Merger Sub, this
Agreement will constitute the valid and legally binding obligations of Nextel
and Merger Sub, enforceable against each of them in accordance with its terms.
3.2 CAPITAL STOCK. The entire authorized capital stock of Nextel consists
solely of (a) 515,000,000 shares of Nextel Common Stock, of which 337,899,220
shares were issued and outstanding as of August 30, 1996, (b) 35,000,000 shares
of Class B Non-Voting Common Stock, par value $.001 per share, of which
17,830,000 shares were issued and outstanding as of August 30, 1996, (c)
10,000,000 shares of preferred stock, par value $.01 per share, of which (i)
8,163,265 Class A shares, (ii) 82 Class B shares and (iii) no other Preferred
shares of any other Class were issued and outstanding as of August 30, 1996. At
the Effective Time of the Merger, the shares of Nextel Common Stock issued by
reason of the Merger will be duly authorized, validly issued, fully paid and
nonassessable, and their issuance in connection with the Merger will be
registered under the Securities Act and registered or exempt from registration
under applicable state securities laws and such shares of Nextel Common Stock
will be listed on the Nasdaq NM. At the Effective Time of the Merger, Nextel
will have a sufficient number of authorized but unissued shares of Nextel
64
Common Stock reserved under the Nextel Plan for issuance upon conversion and
exercise of the PCI Stock Options.
3.3 COMMON STOCK; REGISTRATION. At the Closing, the shares of Nextel
Common Stock issued by reason of the Merger will be duly authorized, validly
issued, fully paid and nonassessable, will be registered under the Securities
Act, and will be "voting stock" within the meaning of Section 368(a)(1)(B) of
the Code.
3.4 NO CONFLICT. The execution and delivery of this Agreement by Nextel
and Merger Sub and the consummation of the transactions contemplated hereby do
not and will not violate any provision of, or result in the breach of, or
accelerate or permit the acceleration of the performance required by the terms
of, any applicable law, rule or regulation of any governmental body, the Amended
and Restated Certificate of Incorporation or the Amended and Restated By-Laws of
Nextel, or the Certificate of Incorporation or the By-Laws of Merger Sub or any
agreement, indenture or other instrument to which Nextel or Merger Sub is a
party or by which Nextel or Merger Sub may be bound, or of any order, judgment
or decree applicable to it, or terminate or result in the termination of any
such agreement, indenture or instrument, or result in the creation of any lien,
charge or encumbrance upon any of the properties or assets of Nextel or Merger
Sub under any agreement to which either of them is a party, or constitute an
event which, after notice or lapse of time or both, would result in any such
violation, breach, acceleration, termination or creation of a lien, charge or
encumbrance, except where any such violation, breach,
65
acceleration, termination or creation would not have a material adverse
effect on the business, financial condition, results of operations,
liabilities or assets of Nextel and its subsidiaries, taken as a whole, or
would not impair Nextel's or Merger Sub's ability to perform, in any material
respect, its obligations under this Agreement or any other document or
instrument to which Nextel or Merger Sub is a party in connection with the
transactions contemplated herein.
3.5 INFORMATION. Nextel has delivered to PCI each registration statement,
schedule, report, proxy statement or information statement it has filed with the
SEC from January 1, 1996 to the date of this Agreement, including, without
limitation, (a) Nextel's Annual Report on Form 10-K for the year ended
December 31, 1995 and (b) Nextel's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996, (collectively, the "Nextel Reports"). As of the date of
this Agreement, the Nextel Reports, taken as a whole and taken together with any
other information previously furnished by Nextel to PCI (except for any
forecasts or projections or forward-looking estimates or similar predictive
information contained therein), did not contain an 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. As used in this Section, "material" means
material to the business, financial condition, results of operations,
liabilities or assets of Nextel and its subsidiaries, taken as a whole. The
representation made in this
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Section shall also be deemed to be made by Nextel to PCI immediately prior to
the Closing, but with reference to all information furnished by Nextel to PCI
prior to the Closing.
3.6 INFORMATION IN REGISTRATION STATEMENT. The information, except
information regarding PCI, its Subsidiaries and affiliates, included in the
Registration Statement referred to in Sections 4.4 and 5.2 of this Agreement
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
ARTICLE IV. COVENANTS OF PCI
4.1 CONDUCT OF BUSINESS. (a) From the date of this Agreement until the
Effective Time of the Merger, PCI shall conduct its business, and shall cause
each Subsidiary to conduct such Subsidiary's business, only in the ordinary
course and, without limiting the generality of the foregoing, neither PCI nor
any Subsidiary shall, without the written consent of Nextel: (i) except as
permitted by Section 4.1(b), dispose or contract to dispose of any SMR Channels
or FCC Licenses except as may occur as a result of an FCC enforcement action or
otherwise required under law; (ii) except as set forth on a Schedule that refers
to this Section, dispose of or contract to dispose of any other assets, tangible
or intangible, except in the ordinary course of business, consistent with past
practice and, with respect to capital assets, in connection with the replacement
of the asset
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being disposed of; (iii) except as set forth in Section 4.7 or as permitted
by Section 4.1(b), acquire or contract to acquire any SMR Channels or FCC
Licenses or any rights to acquire any SMR Channels or FCC Licenses or acquire
or contract to acquire, directly or indirectly, any interest in an entity
that has any interest in SMR Channels or FCC Licenses; (iv) voluntarily incur
any absolute or contingent debt obligation except in the ordinary course of
business under currently existing lines of credit; (v) enter into any lease
or contract for the purchase or sale of real estate or of any interest
therein; (vi) encumber any property or other assets except for encumbrances
constituting Permitted Liens or encumbrances of which Nextel is promptly
notified in writing and which will be removed prior to the Closing; (vii)
declare or pay any dividend or purchase or redeem any of its shares, notes or
other securities or make any other distribution to shareholders; (viii) other
than in accordance with normal compensation adjustment policies (all of
which, including year-end bonuses, are included in the Schedules), increase
the rate of remuneration to any of its directors, officers, employees or
other representatives, or agree to do so or fail to pay any year-end bonuses
then owed included on such Schedule prior to the Effective Time of the
Merger; (ix) except for obtaining stockholder approval of the 1996 Stock
Option Plan and the 1996 Non-Employee Director Stock Option Plan, amending
the 1994 Non-Employee Director Stock Option Plan to eliminate automatic
granting of PCI Options or as permitted by Section 5.6(a), adopt any new or
amend any existing employee benefit plan
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or any employment agreement or amend any PCI Stock Option once implemented
except as set forth in Section 1.21(a); (x) form or cause to be formed any
subsidiary; (xi) issue, sell, distribute or dispose of any shares, notes or
other securities of PCI or offer to sell or sell any PCI Common Stock
registered pursuant to PCI's shelf registration statement on Form S-4
(Registration No. 33-83810) or commit itself to do so; (xii) make any
commitments for capital improvements; or (xiii) fail to keep its properties
insured substantially to the same extent as they are currently insured.
(b) PCI may dispose of or contract to dispose of any non-SMR Channel or
FCC License that is within 25 miles of an MSA market identified on Schedule 1.2
but does not meet the criteria set forth in Section 1.2(d)(vi)(y) in exchange
for SMR Channels or FCC Licenses that enable PCI to Deliver additional Channels.
PCI may acquire third-party FCC Licenses that are located within 55 miles of a
PCI controlled license, but PCI may not pay more than $10,000 per frequency so
acquired.
4.2 REASONABLE EFFORTS. PCI shall, and shall cause each Subsidiary to,
use all reasonable efforts to preserve intact its business organization and to
preserve its goodwill as to customers, suppliers and others having business
relations with it.
4.3 INSPECTION. PCI shall, and shall cause each Subsidiary to, permit
representatives of Nextel, during normal business hours, to examine PCI's and
each Subsidiary's properties, books, contracts, tax returns and other records,
and shall furnish such
69
representatives with all such information concerning such affairs as they may
reasonably request.
4.4 SEC REGISTRATION. (a) PCI shall use its reasonable best efforts to,
and shall use its reasonable best efforts to cause each Subsidiary to, furnish
to Nextel such information about PCI and each Subsidiary (including their
respective affiliates) as may be necessary to enable Nextel to prepare and file
with the SEC a Registration Statement on Form S-4 under the Securities Act and
the rules and regulations promulgated thereunder, in respect of the shares of
Nextel Common Stock to be issued by reason of the Merger (such registration
statement, the prospectus included therein and the proxy statement to be
furnished to the holders of PCI Common Stock, in each case together with any
amendments or supplements thereto, the "Registration Statement"). PCI shall use
its reasonable best efforts so that the PCI Information (as defined below)
included in the Registration Statement shall not, at the time the Registration
Statement is declared effective, at the time the proxy statement/prospectus
contained therein is first mailed to PCI's stockholders, or at the time of the
meeting of the stockholders of PCI to approve the Merger, contain any untrue
statement of a material fact, omit to state any material fact required to be
stated therein, or omit any material fact necessary in order to make the
statements therein not misleading. If at any time prior to the Effective Time
any event or circumstance should come to the attention of PCI with respect to
the PCI Information which is required to be set forth in an
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amendment or supplement to the Registration Statement, PCI will immediately
notify Nextel and shall assist Nextel in appropriately amending or
supplementing the Registration Statement in the manner contemplated in
Section 5.2(b). An amendment or supplement may be accomplished, to the
extent permitted by law, rule or regulation, by including such information in
a filing under the Exchange Act that is incorporated by reference into the
Registration Statement. The Registration Statement insofar as it relates to
information concerning PCI, its Subsidiaries, or any of their respective
businesses, assets, directors, affiliates, officers or shareholders that is
supplied by PCI for inclusion in the Registration Statement, including
incorporation by reference to SEC filings (the "PCI Information"), will
comply as to form and substance in all material respects with the applicable
requirements of the Securities Act and the rules and regulations thereunder
and the Exchange Act and the rules and regulations thereunder; except that
PCI shall have no liability or obligation for any information other than the
PCI Information.
(b) PCI shall instruct its accountants to deliver and shall use its
reasonable best efforts to cause its accountants, KPMG Peat Marwick LLP, to
deliver to Nextel letters dated at the time the Registration Statement becomes
effective and as of the Closing, addressed to Nextel, each containing such
matters as are customarily contained in auditors' letters regarding information
about PCI and its Subsidiaries expressly for inclusion in the
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Registration Statement, and in a form and substance reasonably satisfactory
to Nextel.
4.5 ANTITRUST FILING. In connection with the transactions contemplated by
this Agreement, PCI (and, to the extent required, its affiliates) shall promptly
file or cause to be filed any reports, documents, filings or other data required
to be filed by PCI pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 0000 (xxx "XXX Xxx") and the rules and regulations promulgated thereunder,
and shall use its best efforts to respond as promptly as practicable to all
inquiries received for additional information or documentation.
4.6 RESTRAINT ON SOLICITATIONS. From the date of this Agreement until the
Effective Time of the Merger, neither PCI nor any of its respective directors,
officers, employees, affiliates, representatives or agents, shall directly or
indirectly, encourage (including by way of furnishing information), solicit,
initiate, participate in or otherwise be a party to any discussions or
negotiations with any corporation, partnership, person or other entity or group
concerning any transaction that constitutes, or may reasonably be expected to
lead to, any Takeover Proposal (as defined herein). Neither the Board of
Directors of PCI nor any committee thereof shall (a) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Nextel, the approval or
recommendation by the Board of Directors of PCI of the Merger or this Agreement
or (b) approve or recommend, or propose to approve or recommend, any Takeover
Proposal or any other acquisition of outstanding shares of PCI
72
Common Stock other than pursuant to the Merger or this Agreement.
Notwithstanding the foregoing, nothing contained in this Agreement shall
prevent the Board of Directors of PCI from furnishing information to, or
entering into discussions or negotiations with, any unsolicited corporation,
partnership, person or other entity or group, or taking any action described
in clauses (a) and (b) of the preceding sentence, if and only to the extent
that the Board of Directors of PCI shall have determined in good faith, after
receiving written advice of its outside counsel, that such action would be
required under applicable law in the exercise of its fiduciary duties. PCI
will immediately notify Nextel if any such inquiries or proposals are
received by, any such information is requested from, or any such negotiations
or discussions are sought to be initiated or continued with, PCI. As used in
this Agreement, "Takeover Proposal" shall mean any tender or exchange offer,
proposal, other than a proposal by Nextel or any of its affiliates, for a
merger, share exchange or other business combination involving PCI or any
proposal or offer to acquire in any manner a substantial equity interest in
PCI or a substantial portion of the assets of PCI.
4.7 BEST EFFORTS. PCI shall, and shall cause each Subsidiary to, use its
reasonable best efforts (i) to obtain prior to Closing all of the SMR licenses
or applications being sought by PCI and/or a Subsidiary that are on file with
and pending approval from the FCC prior to Closing, including all frequencies or
applications pending as of the date hereof for
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wide area ESMR filings and all finder's preference applications, and (ii) to
obtain as promptly as practicable and in any event prior to Closing all FCC
approvals or consents necessary to permit the consummation of the
transactions contemplated by this Agreement. PCI shall obtain the
amendments, consents and approvals regarding the PCI Stock Options and/or any
related agreements contemplated by Section 1.21(a).
4.8 STOCKHOLDER APPROVAL. After the Registration Statement has become
effective, PCI shall use its reasonable best efforts to promptly furnish a copy
of the proxy statement/ prospectus included therein to each stockholder of PCI
and to call and convene a special meeting to obtain promptly any approvals of
the PCI stockholders required in connection with the transactions contemplated
by this Agreement.
4.9 AFFILIATES.
(a) PCI shall use all reasonable efforts to cause each person who is
an "affiliate" of PCI for purposes of Rule 145 under the Securities Act to
deliver to Nextel prior to the date of PCI's stockholders' meeting a written
agreement substantially in the form attached hereto as Annex A.
4.10 UPDATE INFORMATION. Not earlier than ten (10) and not less than five
(5) days before the date scheduled for Closing, PCI shall correct and supplement
in writing any information furnished on Schedules that, to the knowledge of PCI,
is incorrect or incomplete (or otherwise expressly contemplated by Article II of
this Agreement), and shall promptly furnish such corrected and supplemented
information to Nextel, so that such
74
information shall be correct and complete at the time such updated
information is so provided. Thereafter, to the Closing, PCI shall notify
Nextel in writing of any changes or supplements to the updated information
needed, to the knowledge of PCI, to make such information correct and
complete at all times to the Closing. It is agreed that the furnishing of
such corrected and supplemental information, in and of itself, shall not
create any presumption that such information constitutes or evidences the
existence of a material change or any breach or violation by PCI of any
provision of this Agreement.
4.11 NONPARTICIPATION IN AUCTIONS. PCI and its respective controlled
affiliates shall not participate, directly, or indirectly in any FCC auction in
any market or region, including, without limitation, the D, E or F personal
communications services auctions, which began on August 26, 1996 pursuant to
Public Notice DA 96-1026, or any auction for specialized mobile radio
frequencies.
ARTICLE V. COVENANTS OF NEXTEL
5.1 ANTITRUST FILING. In connection with the transactions contemplated by
this Agreement, Nextel shall promptly file or cause to be filed any reports,
documents, filings or other data required to be filed by Nextel pursuant to the
HSR Act and the rules and regulations promulgated thereunder, and shall use its
best efforts to respond as promptly as practicable to all inquiries received for
additional information or documentation.
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5.2 REGISTRATION STATEMENT.
(a) Nextel shall file the Registration Statement and use its
reasonable best efforts to cause such Registration Statement to become effective
as promptly as practicable, and shall use its reasonable best efforts to take
any action required to be taken to comply in all material respects with any
applicable federal or state securities laws in connection with the issuance of
Nextel Common Stock in the Merger; except that such covenant of Nextel is made,
as to those portions of the Registration Statement containing or required to
contain PCI Information, assuming and relying on timely and full compliance with
Section 4.4.
(b) Nextel shall use its reasonable best efforts so that the
information included in the Registration Statement, shall not, at the time the
Registration Statement is declared effective, at the time the proxy
statement/prospectus contained therein is first mailed to PCI's stockholders, or
at the time of the meeting of the stockholders of PCI to approve the Merger,
contain any untrue statement of a material fact, omit to state any material fact
required to be stated therein, or omit to state any material fact necessary in
order to make the statements therein not misleading; except that such covenant
of Nextel is made, as to those portions of the Registration Statement containing
or required to contain PCI Information, assuming and relying on timely and full
compliance with Section 4.4. If at any time prior to the Effective Time any
event or circumstance should come to the attention of Nextel which is required
to be
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set forth in an amendment or supplement to the Registration Statement,
Nextel will use its reasonable best efforts to appropriately amend or supplement
the Registration Statement. An amendment or supplement may be accomplished, to
the extent permitted by law, rule or regulation, by including such information
in a filing under the Exchange Act that is incorporated by reference into the
Registration Statement. The Registration Statement and all other documents
required to be filed by Nextel with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the rules
and regulations thereunder and the Exchange Act and the rules and regulations
thereunder; except that Nextel shall have no liability or obligation for any PCI
Information.
5.3 CURRENT PUBLIC INFORMATION. Nextel shall use all reasonable efforts
to file all reports required to be filed by it under the Securities Act or the
Securities Exchange Act of 1934 and the rules and regulations adopted by the SEC
thereunder and shall use all reasonable efforts to take such further action as
may be necessary to ensure that the requirements of Rule 144(c) under the
Securities Act are satisfied such as to enable any "affiliates" of PCI (for
purposes of Rule 145 under the Securities Act) to offer or sell the shares of
Nextel Common Stock received by them in the Merger pursuant to paragraph (d) of
Rule 145 (subject to compliance with the provisions of paragraphs (e), (f) and
(g) of Rule 144).
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5.4 OFFER TO WARRANT HOLDERS. Nextel shall offer to each holder of a
warrant listed on Schedule 2.5(a) (other than FMR, Corp.) the opportunity to
exchange its warrant at the Closing for a warrant to purchase shares of Nextel
Common Stock in the form attached as Annex D. Any terms and conditions
negotiated by Nextel with any warrant holder shall not give any other warrant
holder the right to comparable terms and conditions. Nextel's offer pursuant to
this Section 5.4 shall expire at the time the Registration Statement is filed
with the SEC.
5.5 DIRECTORS AND OFFICERS INDEMNIFICATION. (a) For a period of three
years from and after the Effective Time of the Merger, Nextel shall cause the
Surviving Corporation to indemnify and hold harmless each present and former
director and officer of PCI against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, proceeding, investigation or action,
whether civil, criminal, administrative or investigative, arising out of or
pertaining to matters existing or occurring at or prior to the Effective Time of
the Merger, whether asserted or claimed prior to, at or after the Effective Time
of the Merger, to the fullest extent that PCI would have been permitted under
the Certificate of Incorporation or By-Laws of PCI in effect immediately prior
to the Effective Time of the Merger to indemnify such person (including the
advancing of expenses as incurred to the fullest extent permitted under
applicable law; PROVIDED that the person to whom such expenses are advanced
provides an undertaking to the Surviving
78
Corporation to repay such advances if it is ultimately determined that such
person is not entitled to indemnification).
(b) For a period of three years from and after the Effective Time of
the Merger, Nextel shall cause the Surviving Corporation to use all reasonable
efforts to maintain director and officer insurance comparable to that maintained
by PCI at the Effective Time of the Merger. After the third anniversary of the
Closing, the Surviving Corporation may terminate such insurance provided that
the Board of Directors of the Surviving Corporation reasonably determines that
the Surviving Corporation has the financial ability to satisfy its
indemnification obligations under this Section 5.5.
5.6 EMPLOYEE MATTERS. (a) If any individual who is employed by PCI at the
Effective Time of the Merger whose employment with the Surviving Corporation
(and all affiliates of the Surviving Corporation) is involuntarily terminated by
the Surviving Corporation or an affiliate without cause (as defined below)
during the six-month period immediately after the Effective Time of the Merger
then (y) such individual shall receive a severance payment, subject to
applicable withholding and other taxes, in an amount equal to (i) three (3)
times such employee's monthly salary, plus (ii) an additional week's salary for
each year that such employee had been employed by PCI, plus (iii) an amount
equal to the unvested employer's contributions made or accrued on or before the
date of the Closing to the PCI 401(k) Plan for the account of that employee and
(z) all issued and outstanding options of Nextel held by such employee shall
79
automatically vest. For purposes of this Section, termination without cause
shall mean the termination of any employee's employment with the Surviving
Corporation and all affiliates of the Surviving Corporation other than a
termination for one or more of the following reasons: (i) willful, knowing and
intentional violation of an express direction or rule or regulation of general
application; (ii) theft, misappropriation or embezzlement of the employer's
funds; (iii) conviction of a felony; or (iv) repeated and consistent failure to
be present at work during regular hours without a valid reason therefor.
(b) In accordance with the terms and provisions of the executive
employment agreements dated as of February 22, 1996 and presently in existence
between PCI and each of Xxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxx,
X.X. Xxxxxxx and Xxxxxxx X. Xxxxxxx (each, an "Executive"), the employment of
each Executive shall be terminated upon the occurrence of a "change of control"
as defined therein, and, upon such termination, the Surviving Corporation will
pay and make available to each Executive, all of the severance payments and
rights provided for in Section 2.2(e) of each such agreement.
(c) At the Effective time of the Merger, all issued and outstanding
options of PCI held by non-employee directors of PCI shall automatically vest.
ARTICLE VI. JOINT COVENANTS
6.1 CONFIDENTIALITY.
(a) Except (i) for the use of information as required in connection
with Nextel's Registration Statement, (ii) for any
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other governmental filing required in order to complete the transactions
contemplated herein, and (iii) as Nextel and PCI may agree or consent in
writing, all information received by PCI and Nextel and their respective
representatives pursuant to the terms of this Agreement shall be kept in
strictest confidence by the receiving party and its representatives. If the
transactions contemplated hereby shall fail to be consummated, all copies of
documents or extracts thereof containing information and data as to one of
the other parties, including all information prepared by the receiving party
or such receiving party's representatives, shall be turned over to the party
furnishing same, except that such information prepared by the receiving party
or such receiving party's representatives may be destroyed at the option of
the receiving party, with notice of such destruction (or return) to be
confirmed in writing to the disclosing party. Any information not so
destroyed (or returned) will remain subject to these confidentiality
provisions (notwithstanding any termination of this Agreement) until the
second anniversary of the date of this Agreement.
(b) The foregoing confidentiality provisions shall not apply to such
portions of the information received which (i) are or become generally available
to the public through no action by the receiving party or by such party's
representatives or (ii) are or become available to the receiving party on a
nonconfidential basis from a source, other than the disclosing party or its
representatives, which the receiving party believes, after reasonable inquiry,
is not prohibited from disclosing such
81
portions to it by a contractual, legal or fiduciary obligation, and shall not
apply to any disclosure by Nextel of any information disclosed by PCI, so
long as such disclosure occurs after the Closing.
6.2 STANDSTILL AGREEMENT. From the date hereof until the Effective Time
of the Merger, neither PCI, nor any representatives of PCI, acting on its behalf
or in concert with it, will directly or indirectly (i) acquire, or offer,
propose or agree to acquire, by purchase or otherwise, any Nextel Common Stock,
or (ii) participate in or encourage the formation of any partnership, syndicate
or other group which owns or seeks or offers to acquire beneficial ownership of,
any Nextel Common Stock.
6.3 TRADING PROHIBITIONS. PCI hereby acknowledges that as a result of
disclosures by Nextel contemplated under this Agreement, PCI and its affiliates
may, from time to time, have material, non-public information concerning Nextel
and other companies. PCI confirms that it and its affiliates are aware and PCI
has advised its representatives that (i) the United States securities laws may
prohibit a person who has material, non-public information from purchasing or
selling securities of any company to which such information relates, and (ii)
material non-public information shall not be communicated to any other person
except as permitted herein.
6.4 SUBSTITUTE OF SUBSIDIARY. Nextel has the option to substitute any
wholly-owned direct or indirect subsidiary of Nextel either for NFC or Merger
Sub in connection with the
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Merger, provided that such substitution does not adversely affect the
interests of PCI or its stockholders. If Nextel makes such an election, each
reference to NFC or Merger Sub, as applicable, herein shall be deemed to
refer to the new subsidiary.
6.5 SUPPORT OF TRANSACTIONS. Nextel, PCI and their respective affiliates
shall each (i) use his or its reasonable best efforts to assemble, prepare and
file any information (and, as needed, to supplement such information) as may be
reasonably necessary to obtain as promptly as practicable all governmental and
regulatory consents required under Article VIII, (ii) exert his or its
reasonable best efforts to obtain all material consents and approvals of third
parties that either of Nextel, PCI or their respective affiliates are
responsible to obtain in order to consummate the Merger, (iii) take such other
action as may reasonably be necessary or as another party may reasonably request
to satisfy the conditions of Article VIII or otherwise to comply with this
Agreement, and (iv) provide the other parties, and such other party's employees,
officers, accountants, lawyers, financial advisors and other representatives
with access to its personnel, properties, business and records under all
reasonable circumstances.
6.6 COOPERATION CONCERNING EXTENDED IMPLEMENTATION CHANNELS. Nextel, PCI
and their respective controlled affiliates agree to cooperate and to use their
respective best efforts to achieve the maximum amount of time from the FCC for
construction of the Extended Implementation Channels. Accordingly, PCI agrees
to present reasonably in advance of any proposed filing with the
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FCC a draft for review by Nextel and either (i) to make such changes as are
proposed by Nextel or (ii) to discuss any changes proposed by Nextel that
will not be made in the filing. Further, Nextel, PCI and their respective
controlled affiliates shall cooperate with regard to any design, engineering,
zoning, equipment selection or construction efforts to achieve construction
of such Extended Implementation Channels as economically as possible and in
full compliance with all applicable rules and regulations of the FCC. Nextel
may, in its sole discretion, advance cash to PCI to enable PCI to construct
channels on which there is at any time prior to Closing less than six months
remaining to construct Extended Implementation Channels after the FCC has
responded to PCI's filings for rejustification of its extended implementation
grants.
ARTICLE VII. CLOSING
7.1 FILING. As soon as all of the conditions set forth in Article VIII of
this Agreement have either been fulfilled or waived, the Boards of Directors of
Nextel, NFC, Merger Sub and PCI hereby direct their officers forthwith to file
and record all relevant documents with the appropriate government officials to
effectuate the Merger.
7.2 CLOSING. The Closing shall, unless another date or place is agreed to
in writing by the parties hereto, take place at a location and time mutually
agreed upon by Nextel and PCI at the earliest practicable date, and such date,
time and location shall be confirmed in writing by such parties not less than
ten
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(10) days prior to the scheduled date of the Closing. The term "Closing,"
when used in this Agreement, means the Effective Time of the Merger.
ARTICLE VIII. CONDITIONS TO OBLIGATIONS
8.1 CONDITIONS TO OBLIGATIONS OF NEXTEL AND PCI. The obligations of
Nextel and PCI to consummate, or cause to be consummated, the Merger are subject
to the satisfaction of the following conditions, any one or more of which may be
waived in writing by such parties:
(a) The stockholders of PCI shall have taken all necessary action to
authorize, approve and adopt this Agreement and the transactions referred to
herein.
(b) All waiting periods under the HSR Act and the regulations
promulgated thereunder applicable to the Merger shall have expired or been
terminated.
(c) All necessary approvals, clearances and consents of governmental
and regulatory authorities required to be procured by Nextel and PCI in
connection with the Merger (including all required FCC approvals and consents,
which shall be deemed to be obtained for purposes of this Agreement only when
they have become Final Orders), and all material approvals and consents of third
parties that are required to be obtained in connection with the transactions
contemplated by this Agreement or the Merger Agreement, shall have been
procured. Any consent or approval granted or an order entered by the FCC shall
be a "Final Order" when a sufficient number of days shall have elapsed
85
from the date of entry or grant thereof without the filing of any adverse
request, petition or appeal by any party or third party or by the FCC (on its
own motion) with respect to such consent, approval or order, or any aspect or
portion thereof, or any resubmissions of any applications or requests for any
of such consents, approvals or orders, or, if challenged, that such consent,
approval or order (or affected aspects or portions thereof) shall have been
reaffirmed or upheld and the applicable period for seeking further
administrative or judicial review shall have expired without the filing of
any action, petition or request for further review.
(d) There shall not be in force any order or decree, statute, rule or
regulation nor shall there be on file any complaint by a governmental agency
seeking an order or decree, restraining, enjoining or prohibiting the
consummation of the Merger, and neither Nextel nor NFC nor Merger Sub nor PCI
nor any of its Subsidiaries shall have received notice from any governmental
agency that it has determined to institute any suit or proceeding to restrain or
enjoin the consummation of the Merger or to nullify or render ineffective this
Agreement if consummated, or to take any other action which would result in the
prohibition or material change in the Merger.
(e) Nextel's Registration Statement shall have become effective under
the Securities Act and no stop order suspending such effectiveness shall have
been issued or threatened with respect thereto.
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(f) The registration statements or other filings as may be required
under applicable blue sky laws pursuant to Annex B shall have become effective,
and no stop order shall be threatened or in effect with respect thereto.
(g) The shares of Nextel Common Stock issuable in the Merger shall
have been listed or approved for listing upon notice of issuance by the
Nasdaq NM.
8.2 CONDITIONS TO OBLIGATIONS OF NEXTEL. The obligation of Nextel to
consummate, or cause to be consummated, the transactions contemplated by this
Agreement is subject to the satisfaction of the following additional conditions,
any one or more of which may be waived in writing by Nextel:
(a) Each of the representations and warranties of PCI contained in
this Agreement shall be true and correct both on the date hereof and as of the
Closing, as if made anew at and as of that time, and each of the covenants and
agreements of PCI and its Subsidiaries to be performed as of or prior to the
Closing shall have been duly performed, except in each case for changes after
the date hereof which are contemplated or expressly permitted by this Agreement.
(b) PCI shall have delivered to Nextel a certificate signed by its
President, dated the Closing, certifying, in form reasonably satisfactory to
Nextel and to its counsel that, to the best of the knowledge and belief of such
officer, the conditions specified in Section 8.1 as they relate to PCI and in
subsection 8.2(a), (d), (e), (i) and (j) have been fulfilled.
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(c) Nextel shall have received opinions, dated the Closing, from
Gardere & Xxxxx, L.L.P. in the form of Annex C-1 and from Xxxxxxx, Carton &
Xxxxxxx, in the form of Annex C-2.
(d) The FCC shall have acted on PCI's filing(s) for rejustification
of its extended implementation authority.
(e) PCI shall have no liabilities or obligations except Permitted
Liabilities.
(f) Nextel shall have received letters from KPMG Peat Marwick LLP,
dated as of the date the Registration Statement becomes effective and as of the
Closing, addressed to Nextel, containing such matters as are customarily
contained in auditors' letters regarding information about PCI and its
Subsidiaries expressly for inclusion in the Registration Statement, and in form
and substance reasonably satisfactory to Nextel.
(g) At the time the Registration Statement becomes effective, and
also at the Closing, PCI and its Subsidiaries shall have furnished to Nextel
certificates, dated as of said times and signed by its President and Secretary,
to the effect that to the best of the knowledge and belief of the signing
persons the material contained in the Registration Statement which relates to
PCI and its Subsidiaries, contains, as of the date of each of such certificates,
no material misstatement of fact and does not omit to state any material fact
necessary to make the statements made not misleading.
(h) Nextel shall have received from each "affiliate" of PCI (as
defined in Rule 145 under the Securities Act) a Rule 145 Letter in the form of
Annex A.
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(i) No stockholder of PCI shall be entitled to exercise dissenter's
or appraisal rights under the GCL.
(j) PCI shall be the sole owner of each entity listed on
Schedule 2.2(b).
(k) Nextel and Castle shall have entered into definitive agreements
that are consistent with the terms set forth in Annex F.
8.3 CONDITIONS TO THE OBLIGATIONS OF PCI. The obligation of PCI to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following additional conditions, any one or more of which
may be waived in writing by PCI:
(a) Each of the representations and warranties of Nextel contained in
this Agreement shall be true and correct in all material respects both on the
date hereof and as of the Closing, as if made anew at and as of that time, and
each of the covenants and agreements of Nextel to be performed as of or prior to
the Closing shall have been duly performed, except in each case for changes
after the date hereof which are contemplated or expressly permitted by this
Agreement.
(b) Nextel shall have delivered to PCI a certificate signed by an
officer of Nextel, dated the Closing, certifying, in form reasonably
satisfactory to PCI and its counsel, to the effect that to the best of the
knowledge and belief of such officer, the conditions specified in Section 8.1 as
they relate to Nextel and in subsection 8.3(a) have been fulfilled.
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(c) PCI shall have received an opinion, dated the Closing, from
Xxxxx, Day, Xxxxxx & Xxxxx in the form of Annex E.
ARTICLE IX. TERMINATION/EFFECTIVENESS
9.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby abandoned:
(a) By mutual written consent of the parties authorized by their
respective Boards of Directors, at any time prior to the Closing.
(b) By PCI by written notice to Nextel on December 31, 1997 if the
Closing has not occurred on or before such date so long as any postponements of
the date of the Closing are not caused principally by the action or inaction of
PCI.
(c) Prior to the Closing, by written notice to PCI from Nextel
authorized by the Board of Directors of Nextel, if (i) there is a material
breach of any representation, warranty, covenant or agreement on the part of PCI
or any Subsidiary set forth in this Agreement, or if a representation or
warranty of PCI shall be untrue in any material respect, in either case such
that the condition specified in Sections 8.2(a) or 8.2(b) would not be satisfied
at Closing (a "Terminating PCI Breach"), except that, if such Terminating PCI
Breach is curable by PCI through the exercise of its reasonable best efforts,
then, for up to thirty (30) days, but only as long as PCI continues to exercise
such reasonable best efforts, Nextel may not terminate this Agreement under this
Section 9.1(c)(i) (the number of days elapsed prior to any such cure, the "PCI
Cure Period"), (ii) any
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governmental or regulatory consent or approval required for consummation of
the transactions contemplated hereby is denied by or in a final order or
other final action issued or taken by the appropriate governmental or
regulatory authority, agency or similar body or (iii) consummation of any of
the transactions contemplated hereby is enjoined, prohibited or otherwise
restrained by the terms of a final, non-appealable order or judgment of a
court of competent jurisdiction. If any amendments, consents and approvals
with respect to stock option agreements for the PCI Stock Options have not
been obtained by October 30, 1996, such failure shall be a material breach of
a covenant for purposes of this Section 9.1(c).
(d) Prior to the Closing, by written notice to Nextel from PCI
authorized by its Board of Directors, if (i) there is a material breach of any
representation, warranty, covenant or agreement on the part of Nextel set forth
in this Agreement, or if a representation or warranty of Nextel shall be untrue
in any material respect, in either case such that the condition specified in
Sections 8.3(a) or 8.3(b) would not be satisfied at Closing (a "Terminating
Nextel Breach"), except that, if such Terminating Nextel Breach is curable by
Nextel through the exercise of its reasonable best efforts then for up to 30
days, but only as long as Nextel continues to exercise such reasonable best
efforts, PCI may not terminate this Agreement under this Section 9.1(d)(i) (the
number of days elapsed prior to any such cure, the "Nextel Cure Period"), (ii)
any governmental or regulatory consent or approval required for consummation of
the
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transactions contemplated hereby is denied by or in a final order or other
final action issued or taken by the appropriate governmental or regulatory
authority, agency or similar body, (iii) consummation of any of the
transactions contemplated hereby is enjoined, prohibited or otherwise
restrained by the terms of a final, non-appealable order or judgment of a
court of competent jurisdiction or (iv) the Nextel Closing Price is below
$14.00 and Nextel does not adjust the Exchange Ratio, as provided in Section
1.10.
(e) By Nextel by written notice to PCI during the thirty (30) day
period commencing on March 1, 1997, if Nextel and Castle have not entered into
the agreements contemplated by Section 8.2(k) so long as any failure to enter
into such agreements has not been caused by the action or inaction of Nextel.
9.2 EFFECT. Any termination of this Agreement, however effected, shall
not release either Nextel or PCI from any liability or other consequences
arising from any breach or violation by any such party of the terms of this
Agreement prior to the effective time of such termination, nor shall any such
termination release any party from its obligations or duties under this
Agreement which, by their terms and/or expressed intent, may require performance
subsequent to any such termination, and all provisions of this Agreement which
set forth such obligations or duties (including, without limitation, Section 6.1
and, to the extent provided therein, in Section 10.6) and such other general or
procedural provisions which may be
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relevant to any attempt to enforce such obligations or duties, shall survive
any such termination of this Agreement until such obligations or duties shall
have been performed or discharged in full.
ARTICLE X. MISCELLANEOUS
10.1 WAIVER. Any party to this Agreement may, at any time prior to the
Closing, by action taken by its Board of Directors, or officers thereunto duly
authorized, waive any of the terms or conditions of this Agreement or agree to
an amendment or modification to this Agreement by an agreement in writing
executed in the same manner (but not necessarily by the same persons) as this
Agreement.
10.2 NOTICES. All notices and other communications among the parties shall
be in writing and shall be deemed to have been duly given when (i) delivered in
person, or (ii) five days after posting in the United States mail having been
sent registered or certified mail return receipt requested, or (iii) delivered
by telecopy, which must be received in its entirety during normal business
hours, meaning between the hours of 10:00 a.m. and 6:00 p.m., McLean, Virginia
time, and promptly confirmed by delivery in person or post as aforesaid in each
case, with postage prepaid, addressed as follows:
(a) If to Nextel, to:
0000 Xxxx Xxxxxx Xxxxx
Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
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with a copy (which shall not constitute notice) to:
Xxxxx, Day, Xxxxxx & Xxxxx
North Point
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
(b) If to PCI, to:
0 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Gardere & Xxxxx, L.L.P.
0000 Xxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
or to such other address or addresses as the parties may from time to time
designate in writing.
10.3 ASSIGNMENT. Except as provided in Section 6.4, no party hereto shall
assign this Agreement or any part hereof without the prior written consent of
the other parties. Except as otherwise provided herein, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
10.4 RIGHTS OF THIRD PARTIES. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto, or any subsidiary of Nextel
joining this
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Agreement under the circumstances described in Section 6.4, any right or
remedies under or by reason of this Agreement.
10.5 RELIANCE. Each of the parties to this Agreement shall be deemed to
have relied upon the accuracy of the written representations and warranties made
to it in or pursuant to this Agreement, notwithstanding any investigations
conducted by or on its behalf or notice, knowledge or belief to the contrary.
10.6 EXPENSES. Nextel shall bear its own expenses incurred in connection
with this Agreement and the transactions herein contemplated whether or not such
transactions shall be consummated, including, without limitation, all fees of
its legal counsel and accountants. PCI and its Subsidiaries shall bear their
own legal, financial advisory and accounting fees and expenses incurred in
connection with this Agreement and the transactions herein contemplated if such
transactions shall be consummated. In no event will the expenses borne by PCI
and the Subsidiaries include expenses incurred by PCI's stockholders or the
officers and directors of PCI and its Subsidiaries in connection with the
transactions herein contemplated.
10.7 CONSTRUCTION. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware. Unless otherwise stated,
references to Sections, Articles or Annexes refer to the Sections, Articles and
Annexes to this Agreement. As used in this Agreement, the phrase "to the
knowledge of PCI" or "to the knowledge of the Subsidiaries" shall comprehend
those matters that are, known to any of the executive officers of PCI.
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10.8 CAPTIONS; COUNTERPARTS. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
10.9 ENTIRE AGREEMENT. This Agreement (together with the Schedules to this
Agreement), constitutes the entire agreement among the parties and supersedes
any other agreements, whether written or oral, that may have been made or
entered into by or among Nextel or its subsidiaries and PCI or its Subsidiaries
or by any Director or Directors or officer or officers of such parties relating
to the transactions contemplated hereby, or incident hereto. No
representations, warranties, covenants, understandings, agreements, oral or
otherwise, relating to the transactions contemplated by this Agreement exist
between the parties except as expressly set forth in this Agreement.
10.10 AMENDMENTS. This Agreement may be amended or modified in whole
or in part, only by a duly authorized agreement in writing executed in the same
manner as this Agreement and which makes reference to this Agreement.
10.11 PUBLICITY. All press releases or other public communications of
any nature whatsoever relating to the transactions contemplated by this
Agreement, and the method of the release for publication thereof, shall be
subject to the prior mutual approval of Nextel and PCI which approval shall not
be unreasonably withheld by any party; provided, however, that,
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subject to compliance with Section 6.1, nothing herein shall prevent any
party from publishing such press releases or other public communications as
such party may consider necessary in order to satisfy such party's legal or
contractual obligations.
IN WITNESS WHEREOF the parties have hereunto caused this Agreement to
be duly executed as of the date first above written.
NEXTEL COMMUNICATIONS, INC.
By: /s/ XXXX X. XXXXXXXX
------------------------------------
Title:
---------------------------------
NEXTEL FINANCE COMPANY
By: /s/ XXXX X. XXXXXXXX
------------------------------------
Title:
---------------------------------
DCI MERGER INC.
By: /s/ XXXX X. XXXXXXXX
------------------------------------
Title:
---------------------------------
PITTENCRIEFF COMMUNICATIONS, INC.
By: /s/ XXXXXX X. XXXXXXX
------------------------------------
Title: President
---------------------------------
