1
EXHIBIT 2.1
================================================================================
AGREEMENT AND PLAN OF MERGER
between
METROCALL, INC.
and
PRONET INC.
August 8, 1997
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2
TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3 Certificate of Incorporation and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4 Directors and Officers of Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
CONVERSION OF SHARES; EXCHANGE PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1 Conversion of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.2 Conversion Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.3 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.4 PN Option Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.5 PN Subordinated Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.6 Termination of Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.3 Authorization; Validity of Agreement; PN Action . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.4 Consents and Approvals; No Violations; Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.5 SEC Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.6 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.7 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.8 Employee Benefit Plans; ERISA; Labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.10 No Default; Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.14 Proxy Statement; Registration Statement; Other Information. . . . . . . . . . . . . . . . . . . 16
Section 3.15 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.16 Share Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.17 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.3 Authorization; Validity of Agreement; MC Action . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.4 Consents and Approvals; No Violations; Licenses . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.5 SEC Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.6 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.7 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.8 Employee Benefit Plans; ERISA; Labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.10 No Default; Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.14 Proxy Statement; Registration Statement; Other Information. . . . . . . . . . . . . . . . . . . 24
Section 4.15 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.16 Share Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.17 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE V
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.1 Interim Operations of PN and MC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 5.2 Stockholder Approval; Meetings; Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.3 Proxy Statement, Registration Statement, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.4 Compliance with the Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.5 Nasdaq Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.6 Approvals and Consents; Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.7 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.8 [Reserved.] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.9 No Solicitation by PN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.10 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.11 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.12 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.13 Directors' and Officers' Insurance and Indemnification . . . . . . . . . . . . . . . . . . . . . 34
Section 5.14 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.15 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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ARTICLE VI
CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 6.1 Conditions to Each Party's Obligation To Effect the Merger . . . . . . . . . . . . . . . . . . . 36
Section 6.2 Conditions to Obligations of PN to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . 37
Section 6.3 Conditions to Obligations of MC to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VII
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.2 Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.2 Nonsurvival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 8.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.5 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.7 Entire Agreement; Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.10 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ANNEXES
Annex A
Directors of the Surviving Corporation
Annex B
Conversion Ratio Adjustments
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5
SCHEDULES
PN DISCLOSURE LETTER:
Schedule 3.1 -- Subsidiaries of PN
Schedule 3.2(a) -- PN Capitalization
Schedule 3.2(b) -- Liens
Schedule 3.4(a) -- PN Consents and Approvals
Schedule 3.4(c) -- PN FCC Authorizations
Schedule 3.5(a) -- SEC Reports
Schedule 3.5(b) -- June 30 Financial Statements
Schedule 3.6 -- Undisclosed Liabilities
Schedule 3.7 -- Certain Changes
Schedule 3.8 -- Employee Benefit Plans
Schedule 3.9 -- Litigation
Schedule 3.11 -- Taxes
Schedule 3.15 -- Transactions with Affiliates
Schedule 5.1(a) -- Permitted Activities by PN
MC DISCLOSURE LETTER:
Schedule 4.1 -- Subsidiaries of MC
Schedule 4.2(a) -- MC Capitalization
Schedule 4.2(b) -- Liens
Schedule 4.4 -- MC Consents and Approvals
Schedule 4.6 -- Undisclosed Liabilities
Schedule 4.7 -- Certain Changes
Schedule 4.8 -- Employee Benefit Plans
Schedule 4.9 -- Litigation
Schedule 4.11 -- Taxes
Schedule 4.15 -- Transactions with Affiliates
Schedule 4.16 -- Share Ownership
Schedule 4.17 -- MC Financial Advisors
Schedule 5.1(b) -- Permitted Activities by MC
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INDEX OF DEFINED TERMS
Page
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Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Amendment Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Annualized Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Communications Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Conversion Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
D&O Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Deferred Settlement Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,2
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Final Regulatory Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Materials of Environmental Concern . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
MC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
MC Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
MC ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
MC Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
MC Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
MC Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
MC Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
MC Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
MC Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
MC Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
v
7
MC Replacement Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
MC SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
MC Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
MC Voting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Measurement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Merger Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Merger Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
New Pager Inventory Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Plaintiff Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Plaintiffs' Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Plaintiffs' Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,10
PN Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
PN Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PN Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PN Employee Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PN ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PN Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PN Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PN Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
PN Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PN Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PN Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PN Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PN Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PN Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Regulatory Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Regulatory Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Relevant Net Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Scheduled Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Series A Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Series B Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
State Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
vi
8
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Target Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2
Target Net Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Voting Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
vii
9
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 8, 1997 (this
"Agreement"), between METROCALL, INC., a Delaware corporation ("MC"), and
PRONET INC., a Delaware corporation ("PN").
WHEREAS, the Boards of Directors of MC and PN have determined
that it is in the best interests of their respective stockholders to consummate
a strategic combination of their respective businesses upon the terms and
subject to the conditions set forth herein;
WHEREAS, it is intended that the strategic business
combination be accomplished by a merger of PN with and into MC (the "Merger")
pursuant to which each issued and outstanding share of common stock of PN, $.01
par value (the "PN Shares"), will be converted into shares of common stock of
MC, $.01 par value ("MC Shares");
WHEREAS, in furtherance of the strategic business combination,
and as a condition to MC entering into this Agreement and incurring the
obligations set forth herein, concurrently with the execution and delivery of
this Agreement, MC and PN have entered into an Option Agreement (the "PN Option
Agreement") pursuant to which PN has agreed, on the terms and subject to the
conditions thereof, to grant MC an option to purchase certain PN Shares;
WHEREAS, as a condition to PN's entering into this Agreement
and incurring the obligations set forth herein, concurrently with the execution
and delivery of this Agreement, certain stockholders of MC have entered into a
voting agreement (the "MC Voting Agreement") agreeing to vote for the Merger
and related transactions;
WHEREAS, the Board of Directors of PN has (i) adopted this
Agreement, resolved to submit this Agreement for approval by the stockholders
of PN pursuant to Section 251 of the Delaware General Corporation Law (the
"DGCL"), and resolved to recommend that all stockholders of PN approve and
adopt this Agreement and the Merger, (ii) duly approved the business
combination contemplated by this Agreement and the PN Option Agreement so as to
render inapplicable thereto the provisions of Section 203 of the DGCL; and
(iii) resolved to amend the Rights Agreement, dated as of April 5, 1995,
between PN and Chemical Shareholder Services Group, Inc., as Rights Agent (the
"PN Rights Plan"), to provide that the PN Rights Plan and the preferred share
purchase rights ("Rights") issued thereunder shall terminate and be of no
further force or effect upon the consummation of the Merger;
WHEREAS, the Board of Directors of MC has (i) adopted this
Agreement, resolved to submit this Agreement for approval by the stockholders
of MC pursuant to Section 251 of the DGCL, and resolved to recommend that all
stockholders of MC approve and adopt this Agreement and the Merger, and (ii)
duly approved the business combination contemplated by this Agreement, the PN
Option Agreement and the MC Voting Agreement so as to render inapplicable
thereto the provisions of Section 203 of the DGCL; and
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WHEREAS, for United States federal income tax purposes, it is
intended that the Merger provided for herein shall qualify as a reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder (the "Code"), and this Agreement
is intended to be and is adopted as a plan of reorganization within the meaning
of Section 368 of the Code;
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions set forth in Article VI hereof, and in accordance with the DGCL, PN
shall be merged with and into MC. The closing (the "Closing") of the Merger
shall take place as promptly as practicable but in no event later than the date
that is two business days after satisfaction or waiver of the conditions set
forth in Article VI (other than those relating to documents to be delivered at
the Closing); provided, that in no event will the Closing occur before November
16, 1997. The date on which the Closing occurs is hereinafter referred to as
the "Closing Date." The Closing will be held at 10:00 a.m., local time, on the
Closing Date at the offices of Xxxxxx, Xxxxxx & Xxxxxxxxx, 0000 X Xxxxxx, X.X.,
Xxxxxxxxxx, X.X. 00000. Following the Merger, the separate corporate existence
of PN will cease, and MC shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all of the rights and
obligations of PN.
Section 1.2 Effective Time. Upon the Closing, the parties
hereto shall cause the Merger to be consummated by filing with the Secretary of
State of the State of Delaware a certificate of merger or other appropriate
documents (in any such case, the "Merger Documents") in such form as is
required by, and executed in accordance with, this Agreement and the relevant
provisions of the DGCL (the date and time of such filing being referred to
herein as the "Effective Time"). The Merger shall have the effects set forth
in Section 251 of the DGCL.
Section 1.3 Certificate of Incorporation and By-Laws. The
Certificate of Incorporation and By-Laws of MC, as in effect immediately prior
to the Effective Time, shall be the Certificate of Incorporation and By-Laws of
the Surviving Corporation.
Section 1.4 Directors and Officers of Surviving Corporation.
(a) Upon the Effective Time, the directors of the Surviving Corporation, and
their classification, shall be as set forth in Annex A.
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(b) PN agrees to request that the Board of
Directors of PN, at a meeting duly called and held, unanimously approve the
election of directors designated pursuant to this Section 1.4 and PN agrees to
use its best efforts to cause the election of such designees to be approved by
the affirmative vote of at least 66 2/3 % of the members of the Board of
Directors of PN who were directors on the date that was two years prior to the
date of this Agreement (or whose election or nomination for election was
previously so approved) and to supply MC with a certificate of vote attesting
to the foregoing. Failure of such designees to be so approved shall be deemed
to constitute a failure by PN to perform and comply with an obligation
hereunder sufficient to permit MC to terminate this Agreement pursuant to
Section 7.1 (d)(iii).
(c) The officers of MC shall be the officers of
the Surviving Corporation and shall hold their offices from the Effective Time
for such term as is provided in the MC By-Laws.
ARTICLE II
CONVERSION OF SHARES; EXCHANGE PROCEDURES
Section 2.1 Conversion of Shares. (a) Each PN Share that is
issued and outstanding immediately prior to the Effective Time (other than
Shares held by MC or any Subsidiary (as defined in Section 3.1) of MC) shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive (i) such number of duly
authorized, validly issued, fully paid and nonassessable MC Shares equal to the
Conversion Ratio (as defined in Section 2.2) plus (ii) cash, if any, for
fractional MC Shares pursuant to Section 2.3(f) (collectively, the "Merger
Consideration").
(b) Each PN Share (i) held in the treasury of PN
or by any Subsidiary of PN and (ii) held by MC or any Subsidiary of MC
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be canceled and retired
and cease to exist, and no Merger Consideration shall be issued in respect
thereof.
(c) Any rights to receive a PN Share which is
required to be issued, and has not been issued prior to the Effective Time,
pursuant to Section 2.b of the Memorandum of Understanding dated May 14, 1997
("Plaintiffs' Settlement"), between certain classes of Plaintiffs ("Plaintiff
Class") and certain defendants in the litigation in In re ProNet Inc. 1934 Act
Securities Litigation, Master File No. 3-96CV2116-P (N.D.Tex.); In re ProNet
Inc. 1933 Act Securities Litigation, Master File No. 3-96CV1795-P (N.D. Tex.);
and Xxxxxxx Xxxxxxx, et al. v. ProNet Inc., et al., No. 96-06509 (D.Ct., 14th
Dist., Tex.) (collectively, the "Plaintiffs' Litigation") shall be converted at
the Effective Time into the right to receive the same Merger Consideration as
an outstanding PN Share is entitled to receive under Section 2.1(a). MC agrees
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to cause the Surviving Corporation to perform PN's obligations to the Plaintiff
Class pursuant to Section 2.d of the Plaintiffs' Settlement.
Section 2.2 Conversion Ratio. "Conversion Ratio" shall mean
.90 as adjusted pursuant to the adjustment provisions set forth in Annex B
hereto. In the event that, between the date of this Agreement and the
Effective Time, the number of issued and outstanding PN Shares or MC Shares
shall have been changed into a different number of shares or a different class
of shares as a result of a stock split, reverse stock split, stock dividend,
spinoff, extraordinary dividend, recapitalization, reclassification or other
similar transaction with a record date within such period, the Conversion Ratio
shall be appropriately adjusted.
Section 2.3 Exchange of Certificates. (a) Prior to the
Effective Time, PN and MC shall appoint ChaseMellon Shareholder Services,
L.L.C. (or any other commercial bank or trust company which shall be reasonably
acceptable to PN and MC) to act as exchange agent (the "Exchange Agent") to
effect the exchange of certificates representing the PN Shares as set forth in
Section 2.1 (collectively, the "PN Certificates") for the Merger Consideration.
The Surviving Corporation shall deposit, or shall cause to be deposited, with
the Exchange Agent for the benefit of the holders of PN Shares for exchange in
accordance with this Article II, certificates representing MC Shares issuable
pursuant to Section 2.1 and funds in amounts necessary to make any cash
payments pursuant to Section 2.3(f).
Additionally, subject to the provisions of this Section
2.3(a), MC shall, if and when a payment date has occurred with respect to a
dividend or distribution that has been declared subsequent to the Effective
Time, deposit with the Exchange Agent an amount in cash (or property of like
kind to that which is the subject of such dividend or distribution) equal to
the dividend or distribution per MC Share times the number of MC Shares
evidenced by certificates issued in respect of PN Shares pursuant to Section
2.1 that have not theretofore been surrendered for exchange as provided herein.
(b) Promptly after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each person who
was, at the Effective Time, a holder of record of a PN Certificate (i) a letter
of transmittal which shall specify that delivery shall be effected, and risk of
loss and title to an PN Certificate shall pass, upon (and only upon) proper
delivery to the Exchange Agent, and which shall be in such form and have such
other provisions as the Surviving Corporation may reasonably specify, and (ii)
instructions for use in effecting the surrender of such PN Certificate in
exchange for a certificate representing MC Shares to which such holder is
entitled to pursuant to this Article II. Upon surrender of a PN Certificate,
together with such letter of transmittal duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be
reasonably required pursuant to such instructions, the holder of such PN
Certificate shall be entitled to receive in exchange therefor, as soon as
practicable after the Effective Time, (i) a certificate representing that
number of MC Shares to which such holder of PN Shares shall have become
entitled pursuant to the provisions of this Article II, and (ii) if applicable,
a check representing the amount of cash to which such
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holder of PN Shares shall have become entitled pursuant to the provisions of
Section 2.3(f), and the PN Certificate so surrendered shall forthwith be
canceled. All payments in respect of PN Shares which are made in accordance
with the terms hereof shall be deemed to have been made in full satisfaction of
all rights pertaining to such PN Shares.
(c) No dividends or other distributions declared
with respect to MC Shares and payable to the holders of record thereof after
the Effective Time shall be paid to the holder of any unsurrendered PN
Certificate until the holder thereof shall surrender such PN Certificate in
accordance with Section 2.3(b). Subject to the effect, if any, of applicable
law, after the surrender and exchange of a PN Certificate, there shall be paid
to the holder of the certificates evidencing MC Shares issued in exchange
therefor, without interest, (i) promptly following the surrender of such
certificate and in addition to the amount of any cash payable with respect to a
fractional PN Share to which such holder is entitled pursuant to Section
2.3(f), the amount of dividends or other distributions with a record date after
the Effective Time theretofore paid with respect to such MC Shares and (ii) at
the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a
payment date occurring after surrender payable with respect to such MC Shares.
(d) If any portion of the Merger Consideration
(whether a certificate representing MC Shares or a check representing cash
payment pursuant to Section 2.3(f)) is to be issued or paid in a name other
than that in which the PN Certificate surrendered in exchange therefor is
registered, it shall be a condition to the issuance thereof that the PN
Certificate so surrendered shall be properly endorsed (or accompanied by an
appropriate instrument of transfer) and otherwise in proper form for transfer,
and that the person requesting such exchange shall pay to the Exchange Agent in
advance any transfer or other taxes required by reason of the issuance of a
certificate representing MC Shares or a check representing the cash payment
pursuant to Section 2.3(f) in any name other than that of the registered holder
of the PN Certificate surrendered, or required for any other reason, or shall
establish to the reasonable satisfaction of the Exchange Agent that such tax
has been paid or is not payable.
(e) On and after the Effective Time, the stock
transfer books of PN shall be closed and there shall be no further registration
of transfers of the PN Shares which were outstanding immediately prior to the
Effective Time; the PN Certificates representing PN Shares shall cease to have
any rights with respect to such PN Shares except as otherwise provided for
herein or by applicable law; and the MC Shares into which PN Shares have been
converted pursuant to Section 2.1 hereof shall be deemed outstanding (subject
to Section 2.3(c)) notwithstanding the failure of the holders thereof to
surrender and exchange PN Certificates as specified herein.
(f) No certificates or scrip representing
fractional MC Shares shall be issued upon the surrender or exchange of PN
Certificates, and, except pursuant to this Section 2.3(f), no dividend,
distribution or other payment with respect to MC Shares shall be payable on or
with respect to any fractional MC Share and such fractional MC Share shall not
entitle the
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owner thereof to vote or to any other rights of a stockholder or creditor of
PN. In lieu of any such fractional MC Share, the Surviving Corporation shall
pay to each stockholder of PN who otherwise would be entitled to receive a
fractional MC Share an amount in cash determined by multiplying (i) the closing
price of an MC Share on the Nasdaq Stock Market on the trading day prior to the
Closing by (ii) the fractional MC Share interest to which such holder would
otherwise be entitled.
(g) At any time following the first anniversary
of the Effective Time, the Surviving Corporation may terminate its agreement
with the Exchange Agent, and thereafter holders of PN Certificates shall be
entitled to look to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general creditors thereof with respect
to the consideration payable upon due surrender of their PN Certificates
pursuant to the provisions of this Article II. Notwithstanding the foregoing,
neither the Surviving Corporation nor the Exchange Agent shall be liable to any
holder of a PN Certificate for consideration delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
Section 2.4 PN Option Plans. (a) Each outstanding option to
purchase PN Shares (each, a "PN Option") granted pursuant to PN's 1987 Stock
Option Plan, 1995 Long-Term Incentive Plan and Non-Employee Director Stock
Option Plan (collectively, the "PN Option Plans"), and which has not vested
prior to the Effective Time, shall become fully exercisable and vested as of
the Effective Time.
(b) Effective as of the Effective Time, each PN
Option then outstanding and not exercised shall be converted into an option to
purchase a number of MC Shares equal to the number of PN Shares subject to such
PN Option immediately prior to the Effective Time multiplied by the Conversion
Ratio with an exercise price equal to the exercise price for such PN Option
immediately prior to the Effective Time divided by the Conversion Ratio. PN
will use its reasonable best efforts to cause each holder of PN Options to
agree to convert his or her PN Options into options ("MC Replacement Options")
issued under MC's 1996 Stock Option Plan (the "MC Option Plan").
Notwithstanding any other provision of the PN Option Plans or the MC Option
Plan, all PN Options held by any PN director whose status as a director ends
upon the Effective Time, by employees whose employment is involuntarily
terminated without cause within six months after the Closing Date, or by other
employees as agreed by MC, will be exercisable until the earlier of (i) the
fourth anniversary of the Closing Date and (ii) the date on which such PN
Options would otherwise have expired if such person had remained a director or
employee of PN.
(c) Notwithstanding the foregoing provisions, in
the case of any option to which Code Section 421 applies, the option price, the
number of shares subject to such option, and the terms and conditions of
exercise of such option shall be determined in order to comply with Code
Section 424(a). As soon as practicable after the Effective Time, the Surviving
Corporation shall deliver to the holders of MC Replacement Options appropriate
notices setting forth such holders' rights pursuant to MC Replacement Options.
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Section 2.5 PN Subordinated Notes. After the Effective
Time, MC will comply with applicable terms of the Indenture (the "Indenture")
dated as of June 15, 1995 between PN and First Interstate Bank of Texas, N.A.
for PN's 11 7/8% Senior Subordinated Notes due 2005 (the "Notes"), including
causing the obligations under the Notes and the Indenture to be assumed by the
Surviving Corporation in accordance with the Indenture.
Section 2.6 Termination of Rights Plan. The Board of
Directors of PN has adopted a resolution approving an amendment to the Rights
Plan to provide that the Rights Plan shall terminate and the Rights shall be
canceled upon the consummation of the Merger. PN shall not redeem the Rights
prior to the Effective Time unless required to do so by a court of competent
jurisdiction; provided that nothing herein shall prohibit PN from taking any
action with respect to the Rights Plan after the Board of Directors of PN has
made a determination in accordance with Section 5.9(f).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PN
PN represents and warrants to MC as follows (in each case as
qualified by matters reflected on the disclosure letter dated as of the date of
this Agreement and delivered by PN to MC on or prior to the date of this
Agreement (the "PN Disclosure Letter") which is made a part hereof by
reference, each such matter qualifying each representation and warranty, as
applicable, notwithstanding any specific Section or Schedule reference or lack
thereof).
Section 3.1 Organization. (a) Except as set forth on
Schedule 3.1 to the PN Disclosure Letter, each of PN and its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or
to have such power, authority, and governmental approvals would not have a
Material Adverse Effect on PN and its Subsidiaries taken as a whole. As used
in this Agreement, the word "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization, is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries. As used in this Agreement, any reference to "Material Adverse
Effect" on or with respect to any entity (or group of entities taken as a
whole) means any event, change or effect that is or would likely be materially
adverse to the consolidated financial condition, businesses, results of
operations or cash flows of such entity (or, if used with respect thereto, of
such group of entities taken as a whole). Each of PN and its Subsidiaries is
duly qualified or licensed to do business
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and in good standing in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on PN and its Subsidiaries, taken as
a whole, or prevent PN from consummating any of the transactions contemplated
hereby.
(b) PN has heretofore made available to MC a
complete and correct copy of the Certificate of Incorporation and By-Laws or
other organizational documents of PN and the organizational documents of each
of its Subsidiaries, as currently in effect. Each such document is in full
force and effect and no other organizational documents are applicable to or
binding upon PN or any Subsidiary.
(c) Schedule 3.1 to the PN Disclosure Letter
identifies all the Subsidiaries of PN.
Section 3.2 Capitalization. (a) The authorized capital
stock of PN consists of 20,000,000 shares of common stock, par value $.01 per
share, and 5,000,000 shares of preferred stock, par value $1.00 per share.
Schedule 3.2 to the PN Disclosure Letter sets forth as of the date hereof (i)
the number of issued and outstanding PN Shares; (ii) the number of PN Shares
that would be issuable by PN upon the exercise of all unexpired PN Options
granted pursuant to PN Option Plans, including the name of each holder of PN
Options, the number of PN Options held by such holder, and the date of grant,
date of vesting, and exercise price for all such PN Options; and (iii) all
other PN Shares issuable to any person pursuant to any existing options,
warrants, calls, preemptive (or similar) rights, subscriptions or other rights,
agreements, arrangements or commitments of any character, except pursuant to
the Rights (collectively, the "Scheduled Shares"). As of the date hereof, no
shares of preferred stock are issued and outstanding or held in the treasury of
PN, and 406,450 PN Shares are held in the treasury of PN. PN has taken all
necessary corporate and other action to authorize and reserve and to permit it
to issue PN Shares which may be issued pursuant to PN Options or the
transactions contemplated hereby. All the outstanding shares of PN's capital
stock are, and all shares which may be issued pursuant to the exercise of PN
Options, when issued in accordance with the respective terms thereof will be,
duly authorized, validly issued, fully paid and non-assessable and free of any
preemptive (or similar) rights. Schedule 3.2(a) describes all agreements
currently in effect pursuant to which any person or entity has the right to
cause PN to register any PN Shares under the Securities Act of 1933, as amended
(the "Securities Act"). There are no bonds, debentures, notes or other
indebtedness having general voting rights (or convertible into securities
having such rights) ("Voting Debt") of PN or any of its Subsidiaries issued and
outstanding. Except as set forth in Schedule 3.2(a) to the PN Disclosure
Letter and for the Rights, as of the date hereof, (i) there are no shares of
capital stock of PN authorized, issued or outstanding, (ii) there are no
existing options, warrants, calls, preemptive (or similar) rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of PN or any of its
Subsidiaries, obligating PN or any of its Subsidiaries to issue, transfer or
sell or cause to be issued, transferred or sold any shares of capital stock or
Voting
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Debt of, or other equity interest in, PN or any of its Subsidiaries or
securities convertible into or exchangeable for such shares or equity interest
or obligations of PN or any of its Subsidiaries, and (iii) there are no
outstanding contractual obligations of PN or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any PN Shares, or capital stock of PN
or any Subsidiary or affiliate of PN.
(b) Except as set forth on Schedule 3.2(b) to the
PN Disclosure Letter, all of the outstanding shares of capital stock of each of
PN's Subsidiaries are beneficially owned by PN, directly or indirectly, free
and clear of all security interests, liens, claims, pledges, agreements,
limitations on voting rights, charges or other encumbrances of any nature
whatsoever.
(c) There are no voting trusts or other
agreements or understandings to which PN or any of its Subsidiaries is a party
with respect to the voting of the capital stock of PN or any of its
Subsidiaries. Other than as contemplated herein, none of PN or its
Subsidiaries is required to redeem, repurchase or otherwise acquire shares of
capital stock of PN, or any of its Subsidiaries, respectively, as a result of
the transactions contemplated by this Agreement.
(d) At the time of issuance, the PN Shares issued
pursuant to the PN Option Agreement will be duly authorized and validly issued,
and, upon payment of the exercise price as set forth in the PN Option
Agreement, such PN Shares will be fully paid and nonassessable and not subject
to preemptive (or similar) rights.
Section 3.3 Authorization; Validity of Agreement; PN Action.
(a) PN has full corporate power and authority to execute and deliver this
Agreement and the PN Option Agreement and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by PN
of this Agreement and the PN Option Agreement, and the consummation by it of
the transactions contemplated hereby and thereby, have been duly authorized by
the Board of Directors of PN, and no other corporate action on the part of PN
is necessary to authorize the execution and delivery by PN of this Agreement
and the PN Option Agreement and the consummation by it of the transactions
contemplated hereby and thereby (other than the approval of this Agreement by
the affirmative vote of the holders of a majority of the outstanding PN
Shares). This Agreement and the PN Option Agreement have been duly executed
and delivered by PN and (assuming due and valid authorization, execution and
delivery hereof and thereof by the other parties hereto and thereto) are valid
and binding obligations of PN enforceable against PN in accordance with their
terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now
or hereafter in effect, affecting creditors' rights generally, and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
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(b) The Board of Directors of PN has approved the
transactions contemplated by this Agreement, the MC Voting Agreement and the PN
Option Agreement so as to render inapplicable thereto the provisions of Section
203 of the DGCL.
(c) PN has received the written opinion of
Salomon Brothers Inc (the "PN Financial Advisor"), dated on or before the date
of this Agreement, to the effect that, as of such date, the consideration to be
received by holders of PN Shares pursuant to the Merger is fair to such holders
from a financial point of view (the "PN Fairness Opinion"). PN has delivered
to MC a copy of the PN Fairness Opinion for informational purposes only.
Section 3.4 Consents and Approvals; No Violations; Licenses.
(a) Neither the execution, delivery or performance of this Agreement, the MC
Voting Agreement or the PN Option Agreement by PN, nor the consummation by PN
of the transactions contemplated hereby or thereby, nor compliance by PN with
any of the provisions hereof or thereof will (i) conflict with or result in any
breach of any provision of the Certificate of Incorporation or By-Laws or other
organizational documents of PN or of any of its Subsidiaries, (ii) require on
the part of PN any filing with, or permit, authorization, consent or approval
of, any court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a "Governmental Entity")
except for (A) filings, permits, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Federal
Communication Commission (the "FCC"), the Communications Act of 1934, as
amended (the "Communications Act"), state public utility or public service
laws, the Securities Act, the DGCL, state or foreign laws relating to
takeovers, state securities or blue sky laws, and the laws of other states in
which PN is qualified to do or is doing business, or (B) where the failure to
obtain such permits, authorizations, consents or approvals or to make such
filings, individually or in the aggregate, would not have a Material Adverse
Effect on PN and its Subsidiaries, taken as a whole, or prevent PN from
consummating the transactions contemplated hereby or thereby, (iii) except as
disclosed on Schedule 3.4(a) to the PN Disclosure Letter, result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which PN or any of its Subsidiaries is a party or
by which any of them or any of their properties or assets may be bound and
which has been included or is required to be included as an exhibit to PN's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (the "PN
Material Agreements") or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to PN, any of its Subsidiaries or any of
their properties or assets, excluding from the foregoing clauses (iii) and (iv)
such violations, breaches or defaults which would not, individually or in the
aggregate, have a Material Adverse Effect on PN and its Subsidiaries, taken as
a whole, or prevent PN from consummating the transactions contemplated hereby.
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(b) PN or one of its Subsidiaries holds all
licenses, permits, certificates, franchises, ordinances, registrations, or
other rights, applications and authorizations filed with, granted or issued by,
or entered by any Governmental Entity, including without limitation, the FCC,
or any state or local regulatory authorities or any state or local public
service commission or public utility commission asserting jurisdiction over the
radio facilities used in PN's business (each, a "State Authority"), that are
required for the conduct of its businesses as now being conducted, except for
those the absence of which would not, individually or in the aggregate, have a
Material Adverse Effect on PN and its Subsidiaries taken as a whole
(collectively, "PN Licenses"). The PN Licenses are valid and in full force and
effect, and the terms of said PN Licenses are not subject to any restrictions
or conditions that materially limit or would materially limit the operations of
the business of PN or any of its Subsidiaries as presently conducted, other
than restrictions or conditions generally applicable to licenses of that type.
The PN Licenses granted, issued or entered by the FCC are subject to the
Communications Act. There are no proceedings pending or, to the best knowledge
of PN, complaints or petitions by others, or threatened proceedings, before the
FCC or any other Governmental Entity relating to the business or operations of
PN or any of its Subsidiaries or the PN Licenses, and there are no facts or
conditions that reasonably could be expected to constitute grounds for the FCC
to revoke, terminate, suspend, deny, annul, or impose conditions on any renewal
of any PN Licenses, in either case that would, individually or in the
aggregate, have a Material Adverse Effect on PN and its Subsidiaries, taken as
a whole, or prevent PN from consummating the transactions contemplated hereby
or to impose any fines, forfeitures or other penalties on PN or its
Subsidiaries that would, individually or in the aggregate, have a Material
Adverse Effect on PN and its Subsidiaries, taken as a whole.
(c) Schedule 3.4(c) to the PN Disclosure Letter
contains a true and complete list of each FCC permit and FCC license issued in
the name of PN, or any of its Subsidiaries, as of August 1, 1997. Schedule
3.4(c) also contains a true and complete list of all licenses, certificates,
consents, permits, approvals and authorizations pending before or issued by any
State Authority.
Section 3.5 SEC Reports and Financial Statements. Except as
disclosed in Schedule 3.5(a) of the PN Disclosure Letter, since July 1, 1995,
PN and its Subsidiaries have filed with the Securities and Exchange Commission
("SEC") all forms, reports, schedules, statements, and other documents required
to be filed by them with the SEC (as such documents have been amended since the
time of their filing, collectively, the "PN SEC Documents"), have included as
exhibits all material contracts, and have filed all other exhibits required to
be filed with the PN SEC Documents other than any exhibits (excluding material
contracts) that the failure to file would not, individually or in the
aggregate, have a Material Adverse Effect on PN and its Subsidiaries, taken as
a whole. As of their respective dates or, if amended, as of the date of the
last such amendment, the PN SEC Documents, including, without limitation, any
financial statements or schedules included therein, complied in all material
respects with the applicable requirements of the Securities Act and the
Exchange Act, and did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
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necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of PN's
Subsidiaries is required to file any forms, reports or other documents with the
SEC pursuant to Section 12 or 15 of the Exchange Act. The consolidated
financial statements of PN for the fiscal year ended December 31, 1996
(including the related notes thereto) included in PN's Annual Report on Form
10-K and the consolidated financial statements of PN for the six months ended
June 30, 1997, copies of which have been provided to MC (together, the "PN
Financial Statements"), have been prepared from, and are in accordance with,
the books and records of PN and its consolidated Subsidiaries, comply in all
material respects with applicable accounting requirements and comply (or as to
the PN Financial Statements for the six months ended June 30, 1997, will
comply) with the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto), and present
fairly the consolidated financial position and the consolidated results of
operations and cash flows of PN and its consolidated Subsidiaries as at the
dates thereof or for the periods presented therein. The financial statements
that will be reported in PN's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997 will include the financial statements for the six months
ended June 30, 1997 included as Schedule 3.5(b) to the PN Disclosure Letter.
Section 3.6 No Undisclosed Liabilities. Except (i) as
disclosed in the PN SEC Documents, (ii) as set forth in Schedule 3.6 to the PN
Disclosure Letter, and (iii) for liabilities incurred in the ordinary course of
business and consistent with past practice, and liabilities incurred in
connection with the consummation of the transactions contemplated hereby (none
of which, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on PN and its Subsidiaries, taken as a whole), since
December 31, 1996, neither PN nor any of its Subsidiaries has incurred any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) which would be required by GAAP to be reflected on a consolidated
balance sheet of PN and its Subsidiaries (including the notes thereto), and,
which individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on PN and its Subsidiaries, taken as a whole.
Section 3.7 Absence of Certain Changes. Except as
contemplated by this Agreement or as disclosed in the PN SEC Documents or in
Schedule 3.7 hereto, since December 31, 1996, (i) PN and its Subsidiaries have
conducted their respective businesses only in the ordinary course of business
and consistent with past practice, (ii) there has not been any change in the
business, properties, assets, liabilities, financial condition, cash flows,
operations, licenses, franchises or results of operations of PN or its
Subsidiaries which has had a Material Adverse Effect on PN and its
Subsidiaries, taken as a whole, and (iii) there has not been any action taken
by PN or its Subsidiaries of a type described in clauses (ii) through (xvi) of
Section 5.1(a).
Section 3.8 Employee Benefit Plans; ERISA; Labor. (a)
Schedule 3.8 to the PN Disclosure Letter sets forth (i) a list of all employee
benefit plans (including but not limited to plans described in section 3(3) of
the Employee Retirement Income Security Act of 1974, as
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amended ("ERISA")), maintained by PN, any of its Subsidiaries or any trade or
business, whether or not incorporated (a "PN ERISA Affiliate"), which together
with PN would be deemed a "single employer" within the meaning of section
4001(b)(1) of ERISA ("PN Benefit Plans") and (ii) all employment, retention,
and severance agreements with employees of PN and its Subsidiaries ("PN
Employee Agreements"). True and complete copies of all current PN Benefit
Plans and PN Employee Agreements have been provided to MC by PN.
(b) With respect to each PN Benefit Plan, (i) if
intended to qualify under section 401(a) or 401(k) of the Code, such plan has
received a determination letter from the Internal Revenue Service ("IRS")
stating that it so qualifies and that its trust is exempt from taxation under
section 501(a) of the Code, no such determination letter has been revoked and
no such revocation has been threatened, nothing has occurred that could
reasonably be expected to cause the relevant PN Benefit Plan to lose such
qualification or exemption, and no such plan holds "employer securities" as
defined in Section 407(d)(1) of ERISA; (ii) such plan has been administered in
all material respects in accordance with its terms and applicable law,
including state and federal securities laws; (iii) no breaches of fiduciary
duty by PN, or, to PN's knowledge, by any other person, have occurred that
might reasonably be expected to give rise to material liability on the part of
PN or any PN ERISA Affiliate; (iv) no disputes are pending, or, to the
knowledge of PN, threatened that might reasonably be expected to give rise to
material liability on the part of PN or any PN ERISA Affiliate; (v) no
prohibited transaction (within the meaning of Section 406 of ERISA) has
occurred that might reasonably be expected to give rise to material liability
on the part of PN or any PN ERISA Affiliate; (vi) all contributions required to
be made to such plan as of the date hereof (taking into account any extensions
for the making of such contributions) have been made in full; (vii) to PN's
knowledge, no PN Benefit Plans are presently under audit or examination (nor
has notice been received of a potential audit or examination) by the IRS,
Department of Labor, or any other governmental agency or entity, and no matters
are pending with respect to any PN Benefit Plan under the IRS's Voluntary
Compliance Resolution program, its Closing Agreement Program, or other similar
programs; and (viii) all monies withheld from employees with respect to PN
Benefit Plans have been transferred to the appropriate plan in accordance with
the terms of such plan and applicable law.
(c) No PN Benefit Plan is a "multiemployer plan,"
as defined in section 3(37) of ERISA and no PN Benefit Plan is or has been
subject to Title IV of ERISA.
(d) No liability under Title IV of ERISA has been
incurred by PN or any PN ERISA Affiliate (whether direct, indirect, actual, or
contingent, and including, without limitation, withdrawal liability to a
multiemployer plan), and no condition exists that presents a material risk to
PN or any PN ERISA Affiliate of incurring a material liability under such
Title. No PN Benefit Plan has incurred an accumulated funding deficiency, as
defined in section 302 of ERISA or section 312 of the Code, whether or not
waived.
(e) With respect to each PN Benefit Plan that is
a "welfare plan" (as defined in section 3(1) of ERISA), no such plan provides
material medical or death benefits with
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respect to current or former employees of PN or any of its Subsidiaries beyond
their termination of employment (other than to the extent required by
applicable law). All group health plans of PN and any PN ERISA Affiliates have
been operated in material compliance with the requirements of Section 4980B
(and its predecessor) and 5000 of the Code, and PN and the PN ERISA Affiliates
have provided, or will have provided prior to the Effective Date, to
individuals entitled thereto all notices and coverage pursuant to Section 4980B
required before such date, except to the extent that failure to provide such
notice or coverage is not reasonably likely to result, individually or in the
aggregate, in a Material Adverse Effect on PN and its Subsidiaries, taken as a
whole.
(f) Except as required by applicable law, no PN
Benefit Plan, plan documentation or agreement, summary plan description or
other written communication distributed generally to employees of PN or its
Subsidiaries by its terms prohibits the amendment or termination of any such PN
Benefit Plan.
(g) As of the date hereof, except for PN Employee
Agreements and PN Option Plans or as described in Schedule 3.8 to the PN
Disclosure Letter, PN and its Subsidiaries are not parties to any (i) agreement
with any director, executive officer or other key employee of PN or its
Subsidiaries (A) the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving PN or
its Subsidiaries of the nature of any of the transactions contemplated by this
Agreement, (B) providing any term of employment or compensation guarantee, or
(C) providing severance benefits or other benefits after the termination of
employment of such director, executive officer or key employee; (ii) agreement,
plan or arrangement under which any person may receive payments from PN or its
Subsidiaries that would be subject to the tax imposed by Section 4999 of the
Code or included in the determination of such person's "parachute payment"
under Section 280G of the Code; and (iii) agreement or plan binding PN or its
Subsidiaries, including without limitation any stock option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan, severance
benefit plan or employee benefit plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
(h) As of the date hereof, no collective
bargaining agreement is binding and in force against PN or its Subsidiaries or
is currently under negotiation, and no current employees of PN or its
Subsidiaries are represented by any labor union. As of the date hereof, to
PN's knowledge, no labor representation effort exists with respect to PN or its
Subsidiaries.
(i) Since December 31, 1996, PN has not paid any
bonuses or agreed to pay any bonuses to any employee except as disclosed on
Schedule 3.8 to the PN Disclosure Letter.
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Section 3.9 Litigation. Schedule 3.9 to the PN Disclosure
Letter sets forth each suit, action or proceeding pending (as to which PN has
received notice), or, to the knowledge of PN, threatened against PN, any of its
Subsidiaries, or any of their properties or assets on the date hereof. Except
as set forth on Schedule 3.9 to the PN Disclosure Letter, there is no suit,
action or proceeding pending (as to which PN has received notice), or, to the
knowledge of PN, threatened against PN, any of its Subsidiaries or any of their
properties or assets that individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect on PN and its Subsidiaries, taken as a
whole, if resolved adversely to PN or its Subsidiaries. Neither PN nor any of
its Subsidiaries, nor any of their respective properties, is subject to any
order, writ, judgment, injunction, decree, determination or award having, or
which would have, a Material Adverse Effect on PN and its Subsidiaries, taken
as a whole, or which would prevent PN from consummating the transactions
contemplated hereby.
Section 3.10 No Default; Compliance with Applicable Laws.
Neither PN nor any of its Subsidiaries is in default (or would be in default
after passage of time or giving of notice) or violation in any material respect
of any term, condition or provision of (i) its respective Certificate of
Incorporation or By-laws or other organizational documents, (ii) any PN
Material Agreement or (iii) any federal, state, local or foreign statute, law,
ordinance, rule, regulation, judgment, decree, order, concession, grant,
franchise, permit or license or other governmental authorization or approval
applicable to PN or any of its Subsidiaries or by which they or their
respective assets may be bound (other than matters addressed in Sections 3.4,
3.8, 3.9, 3.11, and 3.12), excluding from the foregoing clauses (ii) and (iii),
defaults or violations which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on PN and its Subsidiaries, taken
as a whole, or prevent PN from consummating the transactions contemplated
hereby.
Section 3.11 Taxes. Except as set forth on Schedule 3.11 to
the PN Disclosure Letter:
(a) PN and its Subsidiaries have (i) duly and
timely filed (or there has been filed on their behalf) with the appropriate
governmental authorities all Tax Returns (as hereinafter defined) required to
be filed by them on or prior to the date hereof, other than those Tax Returns
for which extensions for filing have been obtained in a timely manner, and such
Tax Returns are true, correct and complete in all material respects, and (ii)
duly paid in full all Taxes (as hereinafter defined) shown to be due on such
Tax Returns or have provided adequate reserves in their financial statements
for any Taxes that have not been paid. There are no liens on any of the assets
of PN or any of its Subsidiaries that arose in connection with any delinquency
in paying any Tax.
(b) As of the date hereof, there are no ongoing
federal, state, local or foreign audits or examinations of any Tax Return of PN
or its Subsidiaries.
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(c) As of the date hereof, there are no
outstanding requests, agreements, consents or waivers to extend the statutory
period of limitations applicable to the assessment of any Taxes or deficiencies
against PN or any of its Subsidiaries (excluding extensions for filings that
have been timely obtained), and no power of attorney granted by either PN or
any of its Subsidiaries with respect to any Taxes is currently in force.
(d) Neither PN nor any of its Subsidiaries is a
party to any agreement providing for the allocation or sharing of Taxes.
(e) "Taxes" shall mean any and all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, excise, real or personal property, sales, withholding,
social security, occupation, use, service, service use, license, net worth,
payroll, franchise, transfer and recording taxes, fees and charges, imposed by
the IRS or any taxing authority (whether domestic or foreign including, without
limitation, any state, county, local or foreign government or any subdivision
or taxing agency thereof (including a United States possession)), whether
computed on a separate, consolidated, unitary, combined or any other basis; and
such term shall include any interest whether paid or received, fines, penalties
or additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments. "Tax Return" shall
mean any report, return, document, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction (foreign or
domestic) with respect to Taxes.
Section 3.12 Environmental Matters. (a) PN and its
Subsidiaries have complied in all respects with all applicable Environmental
Laws (as defined below), except to the extent that any failure to comply is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PN and its Subsidiaries, taken as a whole. There is no pending or,
to the knowledge of PN, threatened, civil or criminal litigation, written
notice or violation, formal administrative proceeding or investigation, inquiry
or information request by any Governmental Entity relating to any Environmental
Law involving PN or any of its Subsidiaries or any of their properties. For
purposes of this Agreement, "Environmental Law" means any foreign, federal,
state or local law, statute, rule or regulation or the common law relating to
the environment or occupational health and safety, including without limitation
any statute, regulation or order pertaining to (i) treatment, storage,
disposal, generation or transportation of industrial, toxic or hazardous
substances or solid or hazardous waste; (ii) air, water and noise pollution;
(iii) groundwater and soil contamination; (iv) the release or threatened
release into the environment of industrial, toxic or hazardous substances, or
solid or hazardous waste, including without limitation emissions, discharges,
injections, spills, escapes or dumping of pollutants, contaminants or
chemicals; (v) the protection of wildlife, marine sanctuaries and wetlands,
including without limitation all endangered and threatened species; (vi)
storage tanks, vessels and containers; (vii) underground and other storage
tanks or vessels, abandoned, disposed or discarded barrels, containers and
other closed receptacles; (viii) health and safety of employees and other
persons; and (ix) manufacture, processing, use, distribution, treatment,
storage, disposal, transportation or handling of pollutants, contaminants,
chemicals or industrial, toxic or
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hazardous substances or oil or petroleum products or solid or hazardous waste.
As used above, the terms "release" and "environment" shall have the meaning set
forth in the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA").
(b) With the exception of releases that are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on PN and its Subsidiaries, taken as a whole, there have been no
releases of any Materials of Environmental Concern (as defined below) into the
environment by PN or any of its Subsidiaries, or, to the knowledge of PN, by
any other party at any parcel of real property or any facility formerly or
currently owned, operated or controlled by PN or any of its Subsidiaries. For
purposes of this Agreement, "Materials of Environmental Concern" means any
chemicals, pollutants or contaminants, hazardous substances (as such term is
defined under CERCLA), solid wastes and hazardous wastes (as such terms are
defined under the federal Resource Conservation and Recovery Act), toxic
materials, oil or petroleum and petroleum products, or any other material
subject to regulation under any Environmental Law.
Section 3.13 Insurance. PN and its Subsidiaries maintain
adequate insurance with respect to their respective businesses and are in
compliance with all material requirements and provisions thereof.
Section 3.14 Proxy Statement; Registration Statement; Other
Information. The information supplied or to be supplied by PN with respect to
PN, its officers and directors and its Subsidiaries (i) to be contained in the
definitive joint Proxy Statement (the "Proxy Statement") to be furnished to the
respective stockholders of PN and MC pursuant to Section 5.2 and which will
form a part of MC's Registration Statement on Form S-4 (the "Registration
Statement") to be filed with the SEC and which will constitute a prospectus of
MC with respect to the MC Shares to be issued in the Merger, and (ii) to be
contained in the Registration Statement will not, on the respective dates on
which (A) the Proxy Statement is first mailed to stockholders of PN and MC, (B)
the Meetings (as defined in Section 5.2) are held (in the case of the Proxy
Statement), (C) the Registration Statement becomes effective (in the case of
the Registration Statement), and (D) in the case of the Proxy Statement and the
Registration Statement, as such Proxy Statement or Registration Statement is
then amended or supplemented, at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. When the
Proxy Statement or any amendment or supplement thereto shall be mailed, and at
the time of each Meeting and at the Effective Time, the Proxy Statement will
comply as to form with all applicable laws including the provisions of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder. If at any time prior to the Effective Time any event with respect
to PN, its officers and directors and its Subsidiaries should occur which is or
should be described in an amendment of, or a supplement to, the Proxy Statement
or the Registration Statement, PN shall promptly so inform MC and such event
shall be so described in an amendment or supplement to the Proxy Statement
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and such information in such amendment or supplement will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 3.15 Transactions with Affiliates. Except as set
forth in the PN SEC Documents or on Schedule 3.15 to the PN Disclosure Letter,
since December 31, 1996, neither PN nor any of its Subsidiaries has entered
into any transaction with any current director or officer of PN or any
Subsidiary or any transaction which would be subject to proxy statement
disclosure under the Exchange Act pursuant to the requirements of Item 404 of
Regulation S-K.
Section 3.16 Share Ownership. As of the date hereof, neither
PN nor any of its Subsidiaries or affiliates beneficially owns any MC Shares.
Section 3.17 Brokers. Other than the PN Financial Advisor,
no broker, finder or investment banker is entitled to any brokerage, finder's
or other fee or commission from PN in connection with the transactions
contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MC
MC represents and warrants to PN as follows (in each case as
qualified by matters reflected on the disclosure letter dated as of the date of
this Agreement and delivered by MC to PN on or prior to the date of this
Agreement (the "MC Disclosure Letter") and made a part hereof by reference,
each such matter qualifying each representation and warranty, as applicable,
notwithstanding any specific Section or Schedule reference or lack thereof).
Section 4.1 Organization. (a) Each of MC and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to be so organized, existing
and in good standing or to have such power, authority, and governmental
approvals would not have a Material Adverse Effect on MC and its Subsidiaries
taken as a whole. Each of MC and its Subsidiaries is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so duly qualified or licensed and in good standing would not,
individually or in the aggregate, have a Material Adverse Effect on MC and its
Subsidiaries, taken as a whole, or prevent MC from consummating any of the
transactions contemplated hereby.
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(b) MC has heretofore made available to PN a
complete and correct copy of the Certificate of Incorporation and By-Laws or
other organizational documents of MC and the organizational documents of each
of its Subsidiaries, as currently in effect. Each such document is in full
force and effect and no other organizational documents are applicable to or
binding upon MC or any Subsidiary.
(c) Schedule 4.1 to the MC Disclosure Letter
identifies all the Subsidiaries of MC.
Section 4.2 Capitalization. (a) The authorized capital
stock of MC consists of 60,000,000 shares of common stock, par value $.01 per
share, and 1,000,000 shares of preferred stock, par value $.01 per share, of
which 810,000 shares have been designated as Series A Convertible Preferred
Stock ("Series A Preferred") and 9,000 shares have been designated as Series B
Junior Convertible Preferred Stock ("Series B Preferred"). Schedule 4.2(a) to
the MC Disclosure Letter sets forth as of the date hereof (i) the number of
issued and outstanding MC Shares; (ii) the number of issued and outstanding
shares of Series A Preferred; (iii) the number of issued and outstanding shares
of Series B Preferred; (iv) the number of MC Shares that would be issuable by
MC upon the exercise of all unexpired options to purchase MC Shares ("MC
Options"), and date of vesting thereof; and (v) all other MC Shares issuable to
any person pursuant to any existing options, warrants, calls, preemptive (or
similar) rights, subscriptions or other rights, agreements, arrangements or
commitments of any character. As of the date hereof, no MC Shares, shares of
Series A Preferred or shares of Series B Preferred are held in the treasury of
MC. Subject to stockholder approval of an amendment to MC's Certificate of
Incorporation to increase the number of authorized MC Shares to 80,000,000, MC
has taken all necessary corporate and other action to authorize and reserve and
to permit it to issue MC Shares which may be issued pursuant to MC Options or
the transactions contemplated hereby. All the outstanding shares of MC's
capital stock are, and all shares which may be issued pursuant to the exercise
of MC Options, when issued in accordance with the respective terms thereof will
be, duly authorized, validly issued, fully paid and non-assessable and free of
any preemptive (or similar) rights. There is no Voting Debt of MC or any of its
Subsidiaries issued and outstanding. Except as set forth in Schedule 4.2(a) to
the MC Disclosure Letter, as of the date hereof, (i) there are no shares of
capital stock of MC authorized, issued or outstanding, (ii) there are no
existing options, warrants, calls, preemptive (or similar) rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of MC or any of its
Subsidiaries, obligating MC or any of its Subsidiaries to issue, transfer or
sell or cause to be issued, transferred or sold any shares of capital stock or
Voting Debt of, or other equity interest in, MC or any of its Subsidiaries or
securities convertible into or exchangeable for such shares or equity interest
or obligations of MC or any of its Subsidiaries, and (iii) there are no
outstanding contractual obligations of MC or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any MC Shares, or capital stock of MC
or any Subsidiary or affiliate of MC.
(b) Except as set forth on Schedule 4.2(b) to the
MC Disclosure Letter, all of the outstanding shares of capital stock of each of
MC's Subsidiaries are beneficially owned
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by MC, directly or indirectly, free and clear of all security interests, liens,
claims, pledges, agreements, limitations on voting rights, charges or other
encumbrances of any nature whatsoever.
(c) There are no voting trusts or other
agreements or understandings to which MC or any of its Subsidiaries is a party
with respect to the voting of the capital stock of MC or any of its
Subsidiaries. Other than as contemplated herein, none of MC or its
Subsidiaries is required to redeem, repurchase or otherwise acquire shares of
capital stock of MC, or any of its Subsidiaries, respectively, as a result of
the transactions contemplated by this Agreement.
(d) At the time of issuance, the MC Shares issued
pursuant to the Merger will be duly authorized and validly issued, and such MC
Shares will be fully paid and nonassessable and not subject to preemptive (or
similar) rights.
Section 4.3 Authorization; Validity of Agreement; MC Action.
(a) MC has full corporate power and authority to execute and deliver this
Agreement and the PN Option Agreement and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by MC
of this Agreement and the PN Option Agreement, and the consummation by it of
the transactions contemplated hereby and thereby, have been duly authorized by
the Board of Directors of MC, and no other corporate action on the part of MC
is necessary to authorize the execution and delivery by MC of this Agreement
and the PN Option Agreement and the consummation by it of the transactions
contemplated hereby and thereby (other than approval of this Agreement by the
affirmative vote of the holders of a majority of the outstanding MC Shares).
This Agreement and the PN Option Agreement have been duly executed and
delivered by MC and (assuming due and valid authorization, execution and
delivery hereof by the other parties hereto and thereto) are valid and binding
obligations of MC enforceable against MC in accordance with their terms, except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(b) The Board of Directors of MC has approved the
transactions contemplated by this Agreement, the PN Option Agreement and the MC
Voting Agreement so as to render inapplicable thereto the provisions of Section
203 of the DGCL.
(c) MC has received the written opinion of Xxxxxx
Xxxxxxx & Co. (the "MC Financial Advisor"), dated on or before the date of this
Agreement, to the effect that, as of such date, the consideration to be paid to
the holders of PN Shares pursuant to the Merger is fair to the holders of MC
Shares from a financial point of view (the "MC Fairness Opinion"). MC has
delivered to PN a copy of the MC Fairness Opinion for informational purposes
only.
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Section 4.4 Consents and Approvals; No Violations; Licenses.
(a) Neither the execution, delivery or performance of this Agreement or the PN
Option Agreement by MC, nor the consummation by MC of the transactions
contemplated hereby or thereby, nor compliance by MC with any of the provisions
hereof or thereof will (i) conflict with or result in any breach of any
provision of the Certificate of Incorporation or By-Laws or other
organizational documents of MC or of any of its Subsidiaries, (ii) require on
the part of MC any filing with, or permit, authorization, consent or approval
of, any Governmental Entity except for (A) filings, permits, authorizations,
consents and approvals as may be required under, and other applicable
requirements of, the Exchange Act, the HSR Act, the FCC, the Communications
Act, state public utility or public service laws, the Securities Act, the DGCL,
state or foreign laws relating to takeovers, state securities or blue sky laws,
and the laws of other states in which MC is qualified to do or is doing
business, or (B) where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings, individually or in the
aggregate, would not have a Material Adverse Effect on MC and its Subsidiaries,
taken as a whole, or prevent MC from consummating the transactions contemplated
hereby or thereby, (iii) except as disclosed on Schedule 4.4 to the MC
Disclosure Letter, result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which MC or
any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound and which has been included as an exhibit to
MC's Annual Report on Form 10-K for the fiscal year ended December 31, 1996
(the "MC Material Agreements") or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to MC, any of its Subsidiaries
or any of their properties or assets, excluding from the foregoing clauses
(iii) and (iv) such violations, breaches or defaults which would not,
individually or in the aggregate, have a Material Adverse Effect on MC and its
Subsidiaries, taken as a whole, or prevent MC from consummating the
transactions contemplated hereby.
(b) MC or one of its Subsidiaries holds all
licenses, permits, certificates, franchises, ordinances, registrations, or
other rights, applications and authorizations filed with, granted or issued by,
or entered by any Governmental Entity, including without limitation, the FCC,
or any State Authority, that are required for the conduct of its businesses as
now being conducted, except for those the absence of which would not,
individually or in the aggregate, have a Material Adverse Effect on MC and its
Subsidiaries, taken as a whole (collectively, "MC Licenses"). The MC Licenses
are valid and in full force and effect, and the terms of said MC Licenses are
not subject to any restrictions or conditions that materially limit or would
materially limit the operations of the business of MC or any of its
Subsidiaries as presently conducted, other than restrictions or conditions
generally applicable to licenses of that type. The MC Licenses granted, issued
or entered by the FCC are subject to the Communications Act. There are no
proceedings pending or, to the best knowledge of MC, complaints or petitions by
others, or threatened proceedings, before the FCC or any other Governmental
Entity relating to the business or operations of MC or any of its Subsidiaries
or the MC Licenses, and there are no facts or conditions that reasonably could
be expected to constitute
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grounds for the FCC to revoke, terminate, suspend, deny, annul, or impose
conditions on any renewal of any MC Licenses, in either case that would,
individually or in the aggregate, have a Material Adverse Effect on MC and its
Subsidiaries, taken as a whole, or prevent MC from consummating the
transactions contemplated hereby or to impose any fines, forfeitures or other
penalties on MC or its Subsidiaries that would, individually or in the
aggregate, have a Material Adverse Effect on MC and its Subsidiaries, taken as
a whole.
Section 4.5 SEC Reports and Financial Statements. Since July
1, 1995, MC and its Subsidiaries have filed with the SEC all forms, reports,
schedules, statements, and other documents required to be filed by them with
the SEC (as such documents have been amended since the time of their filing,
collectively, the "MC SEC Documents"), have included as exhibits all material
contracts, and have filed all exhibits required to be filed with the MC SEC
Documents other than any exhibits (excluding material contracts) that the
failure to file would not, individually or in the aggregate, have a Material
Adverse Effect on MC and its Subsidiaries, taken as a whole. As of their
respective dates or, if amended, as of the date of the last such amendment, the
MC SEC Documents, including, without limitation, any financial statements or
schedules included therein, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, and did not
contain any untrue statement of a material fact or omit to state a 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. None of MC's Subsidiaries is required to file any forms, reports
or other documents with the SEC pursuant to Section 12 or 15 of the Exchange
Act. The consolidated financial statements of MC for the fiscal year ended
December 31, 1996 (including the related notes thereto) included in MC's Annual
Report on Form 10-K and the consolidated financial statements of MC for the six
months ended June 30, 1997, copies of which have been provided to PN (together,
the "MC Financial Statements"), have been prepared from, and are in accordance
with, the books and records of MC and its consolidated Subsidiaries, comply in
all material respects with applicable accounting requirements and comply (or as
to the MC Financial Statements for the six months ended June 30, 1997, will
comply) with the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto), and present fairly the consolidated financial position and the
consolidated results of operations and cash flows of MC and its consolidated
Subsidiaries as at the dates thereof or for the periods presented therein.
Section 4.6 No Undisclosed Liabilities. Except (i) as
disclosed in the MC SEC Documents, (ii) as set forth in Schedule 4.6 to the MC
Disclosure Letter, and (iii) for liabilities incurred in the ordinary course of
business and consistent with past practice, and liabilities incurred in
connection with the consummation of the transactions contemplated hereby (none
of which, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on MC and its Subsidiaries, taken as a whole), since
December 31, 1996, neither MC nor any of its Subsidiaries has incurred any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) which would be required by GAAP to be reflected on a consolidated
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balance sheet of MC and its Subsidiaries (including the notes thereto), and,
which individually or in which the aggregate, is reasonably likely to have a
Material Adverse Effect on MC and its Subsidiaries, taken as a whole.
Section 4.7 Absence of Certain Changes. Except as
contemplated by this Agreement, or as disclosed in the MC SEC Documents or in
Schedule 4.7 to the MC Disclosure Letter, since December 31, 1996, (i) MC and
its Subsidiaries have conducted their respective businesses only in the
ordinary course of business and consistent with past practice, (ii) there has
not been any change in the business, properties, assets, liabilities, financial
condition, cash flows, operations, licenses, franchises or results of
operations of MC or its Subsidiaries which has had a Material Adverse Effect on
MC and its Subsidiaries, taken as a whole, and (iii) there has not been any
action taken by MC or its Subsidiaries of a type described in clauses (i)
through (vi) of Section 5.1(b).
Section 4.8 Employee Benefit Plans; ERISA; Labor. (a)
Schedule 4.8 to the MC Disclosure Letter sets forth (i) a list of all employee
benefit plans (including but not limited to plans described in section 3(3) of
ERISA), maintained by MC, any of its Subsidiaries or any trade or business,
whether or not incorporated (a "MC ERISA Affiliate"), which together with MC
would be deemed a "single employer" within the meaning of section 4001(b)(1) of
ERISA ("MC Benefit Plans") and (ii) all employment, retention, and severance
agreements with employees of MC and its Subsidiaries ("MC Employee
Agreements"). True and complete copies of all current MC Benefit Plans and MC
Employee Agreements have been provided to PN by MC.
(b) Except as provided in Schedule 4.8 to the MC
Disclosure Letter, with respect to each MC Benefit Plan, (i) if intended to
qualify under section 401(a) or 401(k) of the Code, such plan has received a
determination letter from the IRS stating that it so qualifies and that its
trust is exempt from taxation under section 501(a) of the Code, no such
determination letter has been revoked and no such revocation has been
threatened, nothing has occurred that could reasonably be expected to cause the
relevant MC Benefit Plan to lose such qualification or exemption, and no such
plan holds "employer securities" as defined in Section 407(d)(1) of ERISA; (ii)
such plan has been administered in all material respects in accordance with its
terms and applicable law, including state and federal securities laws; (iii) no
breaches of fiduciary duty by MC, or, to MC's knowledge, by any other person,
have occurred that might reasonably be expected to give rise to material
liability on the part of MC or any MC ERISA Affiliate; (iv) no disputes are
pending, or, to the knowledge of MC, threatened that might reasonably be
expected to give rise to material liability on the part of MC or any MC ERISA
Affiliate; (v) no prohibited transaction (within the meaning of Section 406 of
ERISA) has occurred that might reasonably be expected to give rise to material
liability on the part of MC or any MC ERISA Affiliate; (vi) all contributions
required to be made to such plan as of the date hereof (taking into account any
extensions for the making of such contributions) have been made in full; (vii)
to MC's knowledge, no MC Benefit Plans are presently under audit or examination
(nor has notice been received of a potential audit or examination) by the IRS,
Department of Labor, or any other
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governmental agency or entity, and no matters are pending with respect to any
MC Benefit Plan under the IRS's Voluntary Compliance Resolution program, its
Closing Agreement Program, or other similar programs; and (viii) all monies
withheld from employees with respect to MC Benefit Plans have been transferred
to the appropriate plan in accordance with the terms of such plan and
applicable law.
(c) No MC Benefit Plan is a "multiemployer plan,"
as defined in section 3(37) of ERISA and no MC Benefit Plan is or has been
subject to Title IV of ERISA.
(d) No liability under Title IV of ERISA has been
incurred by MC or any MC ERISA Affiliate (whether direct, indirect, actual, or
contingent, and including, without limitation, withdrawal liability to a
multiemployer plan), and no condition exists that presents a material risk to
MC or any MC ERISA Affiliate of incurring a material liability under such
Title. No MC Benefit Plan has incurred an accumulated funding deficiency, as
defined in section 302 of ERISA or section 312 of the Code, whether or not
waived.
(e) With respect to each MC Benefit Plan that is
a "welfare plan" (as defined in section 3(1) of ERISA), no such plan provides
material medical or death benefits with respect to current or former employees
of MC or any of its Subsidiaries beyond their termination of employment (other
than to the extent required by applicable law). All group health plans of MC
and any MC ERISA Affiliates have been operated in material compliance with the
requirements of Section 4980B (and its predecessor) and 5000 of the Code, and
MC and the MC ERISA Affiliates have provided, or will have provided prior to
the Effective Date, to individuals entitled thereto all notices and coverage
pursuant to Section 4980B required before such date, except to the extent that
failure to provide such notice or coverage is not reasonably likely to result,
individually or in the aggregate, in a Material Adverse Effect on MC and its
Subsidiaries, taken as a whole.
(f) Except as required by applicable law, no MC
Benefit Plan, plan documentation or agreement, summary plan description or
other written communication distributed generally to employees of MC or its
Subsidiaries by its terms prohibits the amendment or termination of any such MC
Benefit Plan.
(g) As of the date hereof, except for MC Employee
Agreements and MC Option Plans or as described in Schedule 4.8 to the MC
Disclosure Letter, MC and its Subsidiaries are not parties to any (i) agreement
with any director, executive officer or other key employee of MC or its
Subsidiaries (A) the benefits of which are contingent, or the terms of which
are materially altered, upon the occurrence of a transaction involving MC or
its Subsidiaries of the nature of any of the transactions contemplated by this
Agreement, (B) providing any term of employment or compensation guarantee, or
(C) providing severance benefits or other benefits after the termination of
employment of such director, executive officer or key employee; (ii) agreement,
plan or arrangement under which any person may receive payments from MC or its
Subsidiaries that would be subject to the tax imposed by Section 4999
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of the Code or included in the determination of such person's "parachute
payment" under Section 280G of the Code; and (iii) agreement or plan binding MC
or its Subsidiaries, including without limitation any stock option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan, severance
benefit plan or employee benefit plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
(h) As of the date hereof, no collective
bargaining agreement is binding and in force against MC or its Subsidiaries or
is currently under negotiation, and no current employees of MC or its
Subsidiaries are represented by any labor union. As of the date hereof, to
MC's knowledge, no labor representation effort exists with respect to MC or its
Subsidiaries.
Section 4.9 Litigation. Schedule 4.9 hereto sets forth each
suit, action or proceeding pending (as to which MC has received notice), or, to
the knowledge of MC, threatened against MC, any of its Subsidiaries, or any of
their properties or assets on the date hereof. Except as set forth on Schedule
4.9 to the MC Disclosure Letter, there is no suit, action or proceeding pending
(as to which MC has received notice), or, to the knowledge of MC, threatened
against MC, any of its Subsidiaries or any of their properties or assets that,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on MC and its Subsidiaries, taken as a whole, if resolved
adversely to MC or its Subsidiaries. As of the date hereof, neither MC nor any
of its Subsidiaries, nor any of their respective properties, is subject to any
order, writ, judgment, injunction, decree, determination or award having, or
which would have, a Material Adverse Effect on MC and its Subsidiaries, taken
as a whole, or which would prevent MC from consummating the transactions
contemplated hereby.
Section 4.10 No Default; Compliance with Applicable Laws.
Neither MC nor any of its Subsidiaries is in default (or would be in default
after passage of time or giving of notice) or violation in any material respect
of any term, condition or provision of (i) its respective Certificate of
Incorporation or By-laws or other organizational documents, (ii) any MC
Material Agreement or (iii) any federal, state, local or foreign statute, law,
ordinance, rule, regulation, judgment, decree, order, concession, grant,
franchise, permit or license or other governmental authorization or approval
applicable to MC or any of its Subsidiaries or by which they or their
respective assets may be bound (other than matters addressed in Sections 4.4,
4.8, 4.9, 4.10, 4.11, and 4.12), excluding from the foregoing clauses (ii) and
(iii), defaults or violations which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on MC and its
Subsidiaries, taken as a whole, or prevent MC from consummating the
transactions contemplated hereby.
Section 4.11 Taxes. Except as set forth on Schedule 4.11 to
the MC Disclosure Letter:
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(a) MC and its Subsidiaries have (i) duly and
timely filed (or there has been filed on their behalf) with the appropriate
governmental authorities all Tax Returns (as hereinafter defined) required to
be filed by them on or prior to the date hereof, other than those Tax Returns
for which extensions for filing have been obtained in a timely manner, and such
Tax Returns are true, correct and complete in all material respects, and (ii)
duly paid in full all Taxes (as hereinafter defined) shown to be due on such
Tax Returns or have provided adequate reserves in their financial statements
for any Taxes that have not been paid. There are no liens on any of the assets
of MC or any of its Subsidiaries that arose in connection with any delinquency
in paying any Tax.
(b) As of the date hereof, there are no ongoing
federal, state, local or foreign audits or examinations of any Tax Return of MC
or its Subsidiaries.
(c) As of the date hereof, there are no
outstanding requests, agreements, consents or waivers to extend the statutory
period of limitations applicable to the assessment of any Taxes or deficiencies
against MC or any of its Subsidiaries (excluding extensions for filings that
have been timely obtained), and no power of attorney granted by either MC or
any of its Subsidiaries with respect to any Taxes is currently in force.
(d) Neither MC nor any of its Subsidiaries is a
party to any agreement providing for the allocation or sharing of Taxes.
Section 4.12 Environmental Matters. (a) MC and its
Subsidiaries have complied in all respects with all applicable Environmental
Laws, except to the extent that any failure to comply is not reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on MC and
its Subsidiaries, taken as a whole. There is no pending or, to the knowledge
of MC, threatened, civil or criminal litigation, written notice or violation,
formal administrative proceeding or investigation, inquiry or information
request by any Governmental Entity relating to any Environmental Law involving
MC or any of its Subsidiaries or any of their properties.
(b) With the exception of releases that are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on MC and its Subsidiaries, taken as a whole, there have been no
releases of any Materials of Environmental Concern into the environment by MC
or any of its Subsidiaries, or, to the knowledge of MC, by any other party at
any parcel of real property or any facility formerly or currently owned,
operated or controlled by MC or any of its Subsidiaries.
Section 4.13 Insurance. MC and its Subsidiaries maintain
adequate insurance with respect to their respective businesses and are in
compliance with all material requirements and provisions thereof.
Section 4.14 Proxy Statement; Registration Statement; Other
Information. The information supplied or to be supplied by MC with respect to
MC, its officers and directors and
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its Subsidiaries (i) to be contained in the Proxy Statement; and (ii) to be
contained in the Registration Statement will not, on the respective dates on
which (A) the Proxy Statement is first mailed to stockholders of PN and MC, (B)
the Meetings are held (in the case of the Proxy Statement), (C) the
Registration Statement becomes effective (in the case of the Registration
Statement), and (D) in the case of the Proxy Statement and the Registration
Statement, as such Proxy Statement or Registration Statement is then amended or
supplemented, at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. When the
Registration Statement or any post-effective amendment thereto shall become
effective and when the Proxy Statement or any amendment or supplement thereto
shall be mailed, and at the time of each Meeting and at the Effective Time, the
Registration Statement or the Proxy Statement will comply as to form with all
applicable laws including the provisions of the Securities Act and the Exchange
Act and the rules and regulations promulgated thereunder. If at any time prior
to the Effective Time any event with respect to MC, its officers and directors
and its Subsidiaries should occur which is or should be described in an
amendment of, or a supplement to, the Proxy Statement or the Registration
Statement, MC shall promptly so inform PN and such event shall be so described
in an amendment or supplement to Proxy Statement or the Registration Statement
and such information in such amendment or supplement will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Section 4.15 Transactions with Affiliates. Except as set
forth in the MC SEC Documents or on Schedule 4.15 to the MC Disclosure Letter,
since December 31, 1996, neither MC nor any of its Subsidiaries has entered
into any transaction with any current director or officer of MC or any
Subsidiary or any transaction which would be subject to proxy statement
disclosure under the Exchange Act pursuant to the requirements of Item 404 of
Regulation S-K.
Section 4.16 Share Ownership. Except as set forth in
Schedule 4.16 to the MC Disclosure Letter, as of the date hereof, neither MC
nor any of its Subsidiaries or affiliates beneficially owns any PN Shares.
Section 4.17 Brokers. Except as set forth on Schedule 4.17
to the MC Disclosure Letter, other than the MC Financial Advisor, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission from MC in connection with the transactions contemplated by this
Agreement.
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ARTICLE V
COVENANTS
Section 5.1 Interim Operations of PN and MC. (a) PN
covenants and agrees that, except (x) as contemplated by this Agreement or the
PN Option Agreement, (y) as set forth in Schedule 5.1(a) to the PN Disclosure
Letter, or (z) as agreed in writing by MC, after the date hereof and prior to
the Effective Time:
(i) the business of PN and its
Subsidiaries shall be conducted only in, and PN and its
Subsidiaries shall not take any action except in, the ordinary
and usual course of business and consistent with past
practice, and PN and its Subsidiaries shall use all reasonable
efforts, consistent with past practice, to maintain and
preserve their business organizations, assets, employees and
advantageous business relations;
(ii) PN will not, directly or indirectly,
(A) sell, transfer or pledge or agree to sell, transfer or
pledge any PN Shares, preferred stock of PN, or capital stock
of any of its Subsidiaries either directly or indirectly; or
(B) split, combine or reclassify the outstanding PN Shares or
any outstanding capital stock of any of the Subsidiaries of
PN;
(iii) neither PN nor any of its
Subsidiaries shall (A) amend its organizational documents; (B)
issue, grant, sell, pledge, dispose of or encumber any shares
of, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to
acquire, any shares of capital stock of any class of PN or its
Subsidiaries or any other ownership interests (including but
not limited to stock appreciation rights or phantom stock),
other than PN Shares reserved for issuance on the date hereof
pursuant to the exercise of PN Options outstanding on the date
hereof; (C) transfer, lease, license, sell, mortgage, pledge,
dispose of, or encumber any material assets individually or in
the aggregate for consideration in excess of $125,000 per
fiscal quarter, other than in the ordinary and usual course of
business and consistent with past practice; (D) incur any
indebtedness other than borrowings under existing agreements
or modify the terms of any indebtedness; (E) incur any
liability, other than borrowings permitted by clause (D) above
of money under existing agreements or incurrence of other
liabilities in the ordinary and usual course of business and
consistent with past practice; or (F) redeem, purchase or
otherwise acquire directly or indirectly any of its capital
stock;
(iv) neither PN nor any of its
Subsidiaries shall terminate any PN Material Agreement, modify
or amend any PN Material Agreements in any
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37
material respect or waive, release or assign any material
rights or claims except in the ordinary course of business and
consistent with past practice;
(v) PN will not declare, set aside or
pay any dividend or other distribution payable in cash, stock
or property with respect to its capital stock;
(vi) each of PN and its Subsidiaries
shall maintain in full force and effect such types and amounts
of insurance issued by insurers of recognized responsibility
insuring it with respect to its respective business and
properties, in such amount and against such losses and risks
as are usually carried by persons engaged in the same or
similar businesses;
(vii) neither PN nor any of its
Subsidiaries shall: (A) except for or on behalf of
Subsidiaries, assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person; (B) make
any loans, advances or capital contributions to, or
investments in, any other person (other than to Subsidiaries
of PN pursuant to PN's written obligations on the date
hereof), other than in the ordinary course of business and
consistent with past practice; or (C) enter into any
commitment or transaction with respect to any of the
foregoing.
(viii) neither PN nor any of its
Subsidiaries shall change any of the accounting methods used
by it unless required by GAAP;
(ix) neither PN nor any of its
Subsidiaries will adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of PN
or any of its Subsidiaries (other than the Merger);
(x) neither PN nor any of its
Subsidiaries will acquire (by merger, consolidation, or
acquisition of stock or assets or otherwise) any corporation,
partnership or other business organization or division of any
such entity;
(xi) neither PN nor any of its
Subsidiaries will (A) increase the compensation or fringe
benefits of any of its directors, officers or employees,
provided, that PN may increase the compensation of employees
of PN or its Subsidiaries who are not officers or directors of
PN and whose annual compensation as of the date hereof is less
than $50,000, if such increases are made in the ordinary
course of business and consistent with past practice, and
provided that PN will promptly advise MC of any increases of
compensation of its employees, (B) grant any severance or
termination pay not currently required to be paid under
existing severance plans or agreements to any present or
former
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director, office or employee of PN or any of its Subsidiaries,
(C) enter into or modify any employment, consulting or
severance agreement with any present or former director,
officer or employee of PN or any of its Subsidiaries, (D) or
establish, adopt, enter into or amend or terminate any
collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment termination,
severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers or
employees of PN;
(xii) neither PN nor any of its
Subsidiaries will make any material tax election or settle or
compromise any material federal, state, local or foreign tax
liability except for settlements that would not have a
Material Adverse Effect on PN and its Subsidiaries, taken as a
whole;
(xiii) neither PN nor any of its
Subsidiaries will settle or compromise any pending or
threatened suit, action or claim, which settlement or
compromise is material to PN and its Subsidiaries, taken as a
whole, or which relates to the transactions contemplated
hereby;
(xiv) neither PN nor any of its
Subsidiaries will pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course
of business and consistent with past practice of liabilities
(A) reflected or reserved against in the PN Financial
Statements, (B) incurred in the ordinary course of business
and consistent with past practice or (C) incurred in a manner
not otherwise prohibited under this Section 5.1(a);
(xv) PN shall not effect a registration
under the Securities Act with respect to PN Shares held by any
person or entity, other than the registration of PN Shares
pursuant to registration rights agreements in effect on the
date hereof and described in Schedule 3.2(a) to the PN
Disclosure Letter, or pursuant to the PN Option Agreement; and
(xvi) neither PN nor any of its
Subsidiaries will authorize or enter into an agreement to do
any of the foregoing.
(b) MC covenants and agrees that, except (w) as
contemplated by this Agreement or the PN Option Agreement, (x) as set forth in
Schedule 5.1(b) to the MC Disclosure Letter, or (y) as agreed in writing by PN,
after the date hereof and prior to the Effective Time:
(i) the business of MC and its
Subsidiaries shall be conducted only in, and MC and its
Subsidiaries shall not take any action except in, the ordinary
and usual course of business and consistent with past
practice, and MC
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and its Subsidiaries shall use all reasonable effects,
consistent with past practice, to maintain and preserve their
business organizations, assets, employees and advantageous
business relations;
(ii) MC will not (A) amend its
Certificate of Incorporation or By-Laws; provided, that the
Board of Directors of MC shall submit a resolution to approve
the Amendment Proposal for a vote of the stockholders at the
Meeting, and if such amendment is approved at the Meeting, MC
shall so amend its Certificate of Incorporation or (B) redeem,
purchase or otherwise acquire directly or indirectly any of
its capital stock, provided, that MC may redeem Series A
Preferred or Series B Preferred in accordance with the
respective terms of such stock;
(iii) MC will not declare, set aside or
pay any dividend or other distribution payable in cash, stock
or property with respect to its capital stock except for
dividends on the Series A Preferred and the Series B Preferred
payable in shares of such series in accordance with the
respective terms of such stock;
(iv) MC will not, directly or indirectly,
split, combine or reclassify the outstanding MC Shares;
(v) with the exception of the existing
liens described in Schedule 4.2(b) to the MC Disclosure
Letter, neither MC nor any of its Subsidiaries will issue,
sell, pledge, dispose of or encumber any shares of, or
securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire,
any shares of capital stock of any class of MC or its
Subsidiaries, other than (A) issuances of MC Shares reserved
for issuance on the date hereof upon exercise of MC Options
outstanding on the date hereof, (B) issuances by MC of MC
Shares upon conversion of the Series A Preferred or Series B
Preferred in accordance with the respective terms of such
stock, (C) issuances of Series A Preferred or Series B
Preferred as dividends in accordance with the respective terms
of such stock, (D) issuances by MC of MC Shares or other
securities for the fair market value of such MC Shares or
other securities at the time of such issuance, provided, that
the issuance of MC Shares pursuant to an acquisition agreement
with a third party on terms negotiated on an arms' length
basis or the issuance of other securities convertible into MC
Shares to an unaffiliated third party on terms negotiated on
an arms' length basis shall be deemed for purposes hereof the
issuance of MC Shares at the fair market value of such MC
Shares, and (E) the granting (and issuance of MC Shares upon
exercise) of options pursuant to MC's director and employee
stock option plans as in effect on the date hereof, with
exercise prices equal to the fair market value of MC Shares on
the date of grant;
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(vi) MC will not adopt a plan of
complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or
other reorganization of MC or any of its Subsidiaries;
(vii) MC will use its reasonable best
efforts to maintain the listing of MC Shares on the Nasdaq
Stock Market;
(viii) neither MC nor any of its
Subsidiaries will authorize or enter into an agreement to do
any of the foregoing.
Section 5.2 Stockholder Approval; Meetings; Etc. Each of PN
and MC will take all action necessary in accordance with applicable law, the
rules of Nasdaq, this Agreement and its respective Certificate of Incorporation
and By-Laws to convene a meeting of its stockholders (each, a "Meeting") as
promptly as practicable after the date hereof to consider and vote upon a
proposal to approve and adopt this Agreement (the "Merger Proposal") and, in
the case of MC, to consider and vote upon a proposal to amend MC's Certificate
of Incorporation to increase the authorized number of MC Shares to 80,000,000
(the "Amendment Proposal"). The Boards of Directors of each of PN (subject to
a determination of the Board of Directors of PN made in accordance with Section
5.9(f)) and MC will (i) recommend that their respective stockholders vote in
favor of the Merger Proposal and, in the case of MC, the Amendment Proposal and
(ii) use their respective reasonable best efforts to cause to be solicited
proxies from stockholders of PN or MC, as the case may be, to be voted at their
Meetings in favor of the Merger Proposal and, in the case of MC, the Amendment
Proposal and to take all other actions necessary or advisable to secure the
vote or consent of stockholders required to effect the Merger.
Section 5.3 Proxy Statement, Registration Statement, Etc. (a)
PN and MC shall promptly prepare and file with the SEC under the Exchange Act,
and shall use their reasonable best efforts to have cleared by the SEC and
shall thereafter promptly mail to their stockholders, the Proxy Statement for
the Meetings, which shall also constitute the prospectus included in the
Registration Statement to be filed by MC pursuant to Section 5.3(b). The Proxy
Statement shall be mailed to stockholders of each of PN and MC, as the case may
be, at least 20 business days in advance of the date of its Meeting. MC shall
furnish PN, and PN shall furnish MC, with all information and shall take such
other action as PN or MC, as the case may be, may reasonably request in
connection with the Proxy Statement. The Proxy Statement shall contain the
recommendation of each Board of Directors (subject to a determination of the
Board of Directors of PN made in accordance with Section 5.9(f)) that
stockholders of PN and MC, as the case may be, approve and adopt the Merger
Proposal, and, in the case of MC, the Amendment Proposal. PN and MC shall
cause their respective Financial Advisers to provide their written consent to
the inclusion of or reference to their respective Fairness Opinions in the
Proxy Statement and Registration Statement.
(b) MC shall promptly prepare and file with the
SEC under the Securities Act the Registration Statement with respect to MC
Shares to be issued in the Merger
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and shall use its reasonable best efforts to have the Registration Statement
declared effective by the SEC as promptly as practicable. MC will not enter
into any transaction that would result in any material delay in filing or
declaration of effectiveness of the Registration Statement due to the need to
provide additional financial statements or pro forma financial statements. MC
shall also take any action required to be taken under state blue sky or other
securities laws in connection with the issuance of MC Shares in the Merger. PN
shall furnish MC with all information and shall take such other action as MC
may reasonably request in connection with any such action.
(c) PN and MC shall notify one another of the
receipt of the comments of the SEC and of any requests by the SEC for
amendments or supplements to the Proxy Statement or the Registration Statement
or for additional information, and shall promptly supply one another with
copies of all correspondence between any of them (or their representatives) and
the SEC (or its staff) with respect thereto. If, at any time prior to either
Meeting, any event should occur relating to or affecting PN, MC, or their
respective officers or directors, which event should be described in an
amendment or supplement to the Proxy Statement or the Registration Statement,
the parties shall promptly inform one another and shall cooperate in promptly
preparing, filing and clearing with the SEC and, if required by applicable
securities laws, mailing to PN's or MC's stockholders, as the case may be, such
amendment or supplement.
Section 5.4 Compliance with the Securities Act. (a) Prior to
the Effective Time, PN shall cause to be delivered to MC a list identifying all
stockholders of PN who are, at the time of the PN Meeting, considered by PN to
be "affiliates" of PN for purposes of Rule 145 under the Securities Act (the
"Affiliates").
(b) PN shall use reasonable efforts to cause each
person who is identified as an Affiliate to deliver to MC on or prior to the
Effective Time a written agreement, in such form as may be agreed to by the
parties, that such person will not offer to sell, sell or otherwise dispose of
any of the MC Shares issued to such person in connection with the Merger,
except pursuant to an effective registration statement or in compliance with
Rule 145 or pursuant to an exemption from the registration requirements of the
Securities Act. The Surviving Corporation shall be entitled to place
appropriate legends on the certificates evidencing MC Shares to be received by
such Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for MC Shares, to
the effect that MC Shares received or to be received by such Affiliate pursuant
to the terms of this Agreement may only be sold, transferred or otherwise
conveyed, pursuant to an effective registration statement under the Securities
Act or in accordance with the provisions of Rule 145 or pursuant to an
exemption provided from registration under the Securities Act. The foregoing
restrictions on the transferability of MC Shares shall apply to all purported
sales, transfers and other conveyances of the shares received or to be received
by such Affiliate pursuant to the Merger.
Section 5.5 Nasdaq Listing. MC shall use its reasonable best
efforts to cause MC Shares to be issued in the Merger to be admitted for
quotation on the Nasdaq Stock Market.
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Section 5.6 Approvals and Consents; Cooperation. (a) Subject
to the terms and conditions herein provided, each of the parties hereto agrees
to use all reasonable efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated this Agreement, and to cooperate with each other in connection
with the foregoing, including using all reasonable efforts: (i) to obtain all
necessary waivers, consents and approvals from other parties to loan
agreements, leases and other contracts; (ii) to obtain all necessary consents,
approvals and authorizations as are required to be obtained under any federal,
state or foreign laws or regulations; (iii) to lift or rescind any injunction
or restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby; (iv) to effect all
necessary registrations and filings, including, but not limited to, filings
under the HSR Act and Communications Act and submissions of information
requested by Governmental Entities; (v) to cause the Merger and the actions
contemplated herein not to constitute a "Change of Control" as defined in and
solely for the purposes of the Indenture; and (vi) to fulfill all conditions to
this Agreement. For purposes of the foregoing, the obligations of MC and PN to
use "best efforts" or "reasonable efforts" to obtain waivers, consents and
approvals to loan agreements, leases and other contracts shall not include any
obligation to agree to a modification of the terms of such documents, except as
expressly contemplated hereby or to make any monetary payment in consideration
of such waiver, consent or approval.
(b) PN and MC shall take all reasonable actions
necessary to file as soon as practicable notifications under the HSR Act and to
respond as promptly as practicable to any inquiries received from the Federal
Trade Commission or the Antitrust Division of the Department of Justice for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other Governmental Entity in connection with antitrust matters.
(c) Within fifteen business days of the date of
this Agreement, or as soon thereafter as practicable, MC and PN shall prepare
and make all filings (the "Regulatory Filings") required to be made with the
FCC pursuant to the Communications Act and with any State Authority as are
required to permit the consummation of the Merger and shall thereafter promptly
make any additional or supplemental submissions required or requested by the
FCC and any such State Authority. With respect to the Regulatory Filings,
counsel to PN shall be responsible for preparing, with the advice and consent
of counsel to MC, the transferor's portion of the submissions with respect to
the PN Licenses, and counsel to MC shall be responsible for preparing, with the
advice and consent of counsel to PN, the transferee's portion of such
submissions. Counsel to PN shall also be responsible for preparing, with the
advice and consent of counsel to MC, any pro forma transfer applications with
respect to the PN Licenses that are required to permit the Merger. All filing
fees associated with Regulatory Filings pursuant to this Section 5.6(c) shall
be shared equally by MC and PN. Each party shall bear its own counsel fees in
connection with the Regulatory Filings.
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(d) Notwithstanding any provision of this Agreement
or the PN Option Agreement to the contrary, MC shall not assume, either
directly or indirectly, de jure or de facto control of PN without the prior
consent of the FCC and any State Authority of competent jurisdiction. Nothing
contained herein shall, without the prior consent of the FCC and any State
Authority of competent jurisdiction, give MC any control or responsibility for
(i) PN's facilities, including without limitation control of use of the
facilities; (ii) daily operations; (iii) policy decisions, including preparing
and filing applications with the FCC; (iv) employment, supervision and
dismissal of personnel; or (v) payment of financing obligations, including
expenses arising out of operations.
Section 5.7 Access to Information. Upon reasonable notice,
each of PN and MC shall (and shall cause each of its Subsidiaries to) afford to
the officers, employees, accountants, counsel, financing sources and other
representatives of MC or PN, as the case may be, access, during normal business
hours during the period prior to the Effective Time, to all its officers,
employees, properties, facilities, books, contracts, commitments and records
and, during such period, each of PN and MC shall (and shall cause each of its
Subsidiaries to) furnish promptly to MC or PN, as the case may be (a) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of federal
securities laws and (b) all other information concerning its business,
properties and personnel as MC or PN, as the case may be, may reasonably
request. Each of MC and PN will hold any such information which is nonpublic
in confidence in accordance with the provisions of the Confidentiality
Agreement between PN and MC, dated on or about May 30, 1997 (the
"Confidentiality Agreement"). No investigation pursuant to this Section 5.7
shall affect any representations or warranties of the parties herein or the
conditions to the obligations of the parties hereto.
Section 5.8 [Reserved.]
Section 5.9 No Solicitation by PN. In light of the
consideration given by the Board of Directors of PN prior to the execution of
this Agreement to, among other things, the transactions contemplated hereby,
and the merits of the strategic business combination contemplated hereby, and
in light of advice received from the PN Financial Advisor, PN, its affiliates
and their respective officers, directors, employees, representatives and agents
shall immediately cease all existing discussions or negotiations, if any, with
any parties (other than MC) conducted heretofore with respect to any PN
Acquisition Proposal. For purposes of this Agreement, "PN Acquisition
Proposal" shall mean any proposal relating to (i) a possible acquisition of PN,
whether by way of merger, purchase of all or substantially all of the assets of
PN, or any similar transaction, or (ii) a tender offer for more than 5% of the
PN Shares.
(b) PN may, directly or indirectly, furnish
information and access, in each case only in response to a request for such
information or access, to any person made after the date hereof which was not
encouraged, solicited or initiated by PN or any of its affiliates or any of
their respective officers, directors, employees, representatives, financial
advisors or agents
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after the date hereof, pursuant to appropriate confidentiality agreements, and
may participate in discussions and negotiate with such party concerning any PN
Acquisition Proposal, but only if (i) such party has submitted a written
proposal to the Board of Directors of PN relating to any such transaction
involving economic consideration per PN Share that the Board of Directors of PN
reasonably believes is economically superior to the consideration to be paid
hereunder and which does not include or contemplate any condition relating to
the obtaining of funds for such PN Acquisition Proposal and (ii) the Board of
Directors of PN has made a determination in accordance with Section 5.9(f). PN
shall notify MC immediately if any written or oral PN Acquisition Proposal is
made, and in any event no less than two business days prior to responding to
such offer, shall keep MC promptly advised of all written or oral PN
Acquisition Proposals, and shall provide a copy of any written PN Acquisition
Proposal and provide in writing the terms of all oral PN Acquisition Proposals.
(c) Except as set forth in this Section 5.9,
neither PN or any of its affiliates, nor any of their respective officers,
directors, employees, representatives, financial advisors or agents, shall,
directly or indirectly, encourage or solicit submission of any inquiries,
proposals or offers by; participate in or initiate any discussions or
negotiations with; disclose any information about PN or its Subsidiaries to, or
otherwise assist, facilitate or encourage, or enter into any agreement or
understanding with any corporation, partnership, person or other entity or
group (other than MC, any affiliate or associate of MC or any designees of MC)
in connection with any PN Acquisition Proposal; and the Board of Directors of
PN shall not recommend that the stockholders of PN tender their PN Shares in
connection with any tender offer unless the Board of Directors of PN makes a
determination in accordance with Section 5.9(f).
(d) PN agrees not to release any third party
from, or waive any provisions of, any confidentiality or standstill agreement
to which PN is a party, unless the Board of Directors of PN makes a
determination in accordance with Section 5.9(f). PN will use all reasonable
efforts to have all copies of all nonpublic information it or PN Financial
Advisor has distributed to other potential purchasers returned to it as soon as
possible after the date hereof.
(e) Nothing contained in this Section 5.9 shall
prohibit PN or its Board of Directors from taking and disclosing to PN's
stockholders a position with respect to a tender or exchange offer by a third
party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act or
from making such disclosure to PN's stockholders or otherwise if the Board of
Directors makes a determination in accordance with Section 5.9(f).
(f) For purposes of this Agreement, a
determination of directors made in accordance with this Section 5.9(f) shall
mean that directors constituting a majority of all directors of PN then in
office shall have reasonably determined in good faith, based upon the advice of
PN's outside counsel, that, the taking of action or the failure to take action
(or to withdraw or modify a recommendation) is required to properly discharge
such directors' fiduciary duties to stockholders of PN under Delaware law.
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Section 5.10 Brokers or Finders. Each of MC and PN
represents, as to itself, its Subsidiaries and its affiliates, that no agent,
broker, investment banker, financial advisor or other firm or person is or will
be entitled to any brokers' or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this Agreement,
except the PN Financial Advisor, whose fees and expenses will be paid by PN in
accordance with its agreement with such firm, the MC Financial Advisor, whose
fees and expenses will be paid by MC in accordance with MC's agreement with
such firm, and as disclosed in Schedule 4.17 of the MC Disclosure Letter. Each
of MC and PN agrees to indemnify and hold the other harmless from and against
any and all claims, liabilities or obligations with respect to any other fees,
commissions or expenses asserted by any person on the basis of any act or
statement alleged to have been made by such party or its affiliates.
Section 5.11 Publicity. The initial press release with
respect to the execution of this Agreement shall be a joint press release
acceptable to MC and PN. Thereafter, so long as this Agreement is in effect,
neither PN, MC nor any of their respective affiliates shall issue or cause the
publication of any press release or other announcement with respect to the
Merger, this Agreement or the other transactions contemplated hereby without
the prior consultation of the other party, except as may be required by law or
by the rules of Nasdaq.
Section 5.12 Notification of Certain Matters. PN shall give
prompt notice to MC and MC shall give prompt notice to PN of (i) the occurrence
or non-occurrence of any event the occurrence or non-occurrence of which would
cause any representation or warranty contained in this Agreement to be untrue
or inaccurate in any material respect at or prior to the Effective Time and
(ii) any failure of PN or MC, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder in any material respect, provided, however, that the delivery of any
notice pursuant to this Section 5.12 (a) is not required until an executive
officer of PN or MC, as the case may be, has actual knowledge of the
circumstance requiring such notice and (b) shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
Section 5.13 Directors' and Officers' Insurance and
Indemnification.
(a) From and after the Effective Time, MC shall,
or shall cause the Surviving Corporation, to the fullest extent permitted under
applicable law, PN's Certificate of Incorporation, By-Laws or indemnification
agreements in effect on the date hereof, including provisions relating to
advancement of expenses incurred in the defense of any action or suit, to
indemnify, defend and hold harmless all persons who are now, or have been at
any time prior to the date hereof, or who become prior to the Effective Time,
an officer, director, employee or agent of PN or any of its Subsidiaries, or
who are or were serving at the request of PN or any of its Subsidiaries as a
director, officer, employee or agent of another corporation, partnership,
trust, limited liability company or other business enterprise (each, an
"Indemnified Party"), against all losses, claims, damages, liabilities, costs
and expenses (including attorney's fees and expenses) judgments, fines, losses,
and amounts paid in settlement in connection with any actual or
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threatened action, suit, claim, proceeding or investigation (each a "Claim") to
the extent that any such Claim is based on, or arises out of, (i) the fact that
such person is or was a director, officer, employee or agent of PN or any of
its Subsidiaries; or (ii) this Agreement, or any of the transactions
contemplated hereby or thereby, in each case to the extent that any such Claim
pertains to any matter or fact arising, existing, or occurring prior to or at
the Effective Time, regardless of whether such Claim is asserted or claimed
prior to, at or after the Effective Time. Without limiting the foregoing, in
the event that any Claim is brought against an Indemnified Party (whether
arising before or after the Effective Time), the Indemnified Party may retain
counsel satisfactory to it, and MC (or prior to the Effective Time, PN) shall
advance the fees and expenses of such counsel for the Indemnified Party in
accordance with the applicable indemnification provision of the PN Certificate
of Incorporation, PN Bylaws and any applicable indemnification agreements.
(b) MC and PN agree that the Surviving
Corporation's Certificate of Incorporation shall contain provisions no less
favorable with respect to rights to indemnification and limitations on
liability than those provided in PN's Certificate of Incorporation and By-Laws
as in effect as of the date hereof, for a period of six (6) years from the
Effective Time to the extent such rights are consistent with the DGCL;
provided, that, in the event any claim or claims are asserted or made within
such six (6) year period, all rights to indemnification in respect of any such
claim or claims shall continue until disposition of any and all such claims;
provided further, that any determination required to be made with respect to
whether an Indemnified Party's conduct complies with the standards set forth
under applicable law, MC's Certificate of Incorporation or By-Laws or such
agreements, as the case may be, shall be made by independent legal counsel
selected by MC and reasonably acceptable to the Indemnified Party and; provided
further, that nothing in this Section 5.13 shall impair any rights or
obligations of any present or former directors or officers of PN.
(c) In the event the Surviving Corporation or any
of its successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, then, and in each such case, to
the extent necessary to effectuate the purposes of this Section 5.13, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation shall succeed to the obligations set forth in this Section 5.13 and
none of the actions described in clauses (i) or (ii) shall be taken until such
provision is made.
(d) MC or the Surviving Corporation shall use
reasonable best efforts to maintain PN's existing officers' and directors'
liability insurance policy ("D&O Insurance") for a period of not less than six
(6) years after the Effective Date; provided, (i) that MC may substitute
therefor policies of substantially similar coverage containing terms no less
advantageous to such former directors or officers; and (ii) if the existing D&O
Insurance expires or is canceled during such period, MC or the Surviving
Corporation will use its reasonable best efforts to obtain substantially
similar D&O Insurance to the extent available.
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Section 5.14 Expenses. Except as otherwise provided in the
penultimate sentence of Section 5.6(c) and in Section 7.2, whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense, except that the filing fee for the Proxy Statement or
Registration Statement shall be borne by MC, and all expenses incurred in
connection with the printing and mailing of the Proxy Statement and prospectus
included in the Registration Statement shall be borne one-half by PN and
one-half by MC. The payment of costs and expenses by MC or PN shall not reduce
any consideration paid in the Merger. Notwithstanding the foregoing, the costs
and expenses incurred in connection with the PN Option Agreement and the MC
Voting Agreement will be paid in accordance with the terms of such Agreements.
Section 5.15 Further Assurances. Each party hereto shall take
all such actions and execute all such documents and instruments that are
reasonably requested by the other party to carry out the intent of the parties
under this Agreement, and in particular, subject to MC's repayment of PN's
indebtedness under that certain Second Amended and Restated Credit Agreement
dated as of June 14, 1996, as amended (the "PN Credit Agreement"), PN shall
take all such actions necessary to obtain the release, or assignment to MC's
lenders, of all liens in favor of First National Bank of Chicago and any other
required Lenders (as defined in the PN Credit Agreement) immediately prior to
or concurrently with the Effective Time, including executing and delivering for
filing appropriate UCC-3 statements and other necessary documents for release
or assignment of such liens.
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation To Effect
the Merger. The respective obligation of each party to effect the Merger shall
be subject to the satisfaction on or prior to the Closing Date of each of the
following conditions:
(a) Stockholder Approval. This Merger Proposal
and, in the case of MC, the Amendment Proposal, shall have been approved and
adopted by the requisite vote of the holders of capital stock of MC and PN in
accordance with the DGCL and the respective Certificates of Incorporation and
By-Laws of MC and PN;
(b) Statutes; Consents. No statute, rule, order,
decree or regulation shall have been enacted or promulgated by any Government
Entity preventing the consummation of the Merger, and all orders and approvals
from Governmental Entities required for the consummation of the Merger shall
have been obtained and shall be in effect at the Effective Time, except where
the failure to have obtained any such order or approval would not have a
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Material Adverse Effect on the Surviving Corporation and its Subsidiaries,
taken as a whole, after the Effective Time;
(c) Injunctions. There shall be no order or
injunction of a foreign or United States federal or state court or other
governmental authority of competent jurisdiction in effect precluding,
restraining, enjoining or prohibiting consummation of the Merger;
(d) Regulatory Approval. A Final Regulatory
Order permitting the Merger to be consummated shall have been received from the
FCC (or at the election of the parties hereto, approval shall have been
received from the FCC), and Regulatory Orders permitting the Merger to be
consummated shall have been received from any requisite State Authorities.
"Regulatory Order" shall mean an action taken or order issued by the FCC or a
State Authority with respect to the PN Licenses as to which (i) no request for
stay by the FCC or a State Authority of the action or order is pending, no such
stay is in effect, and, if any deadline for filing any such request is
designated by statute or regulation, it has passed; and (ii) with respect to an
action taken or order issued by the FCC or a State Authority granting consent
to the Merger, such consent shall be without material adverse conditions, other
than conditions that have been agreed to by PN and MC or that are routine
conditions with respect to transfers of this nature. A "Final Regulatory
Order" shall mean a Regulatory Order as to which (i) no petition for rehearing
or reconsideration of the action or order is pending before the FCC and the
time for filing any such petition has passed; and (ii) the FCC does not have
the action or order under reconsideration on its own motion and the time for
such reconsideration has passed;
(e) HSR Act. The expiration or early termination
of any waiting period under the HSR Act shall have occurred; and
(f) Registration Statement. The Registration
Statement shall have been declared effective and no stop order with respect
thereto shall be in effect at the Effective Time; and
Section 6.2 Conditions to Obligations of PN to Effect the
Merger. The obligation of PN to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of the following additional
conditions:
(a) MC shall have performed and complied in all
material respects with all obligations and agreements required to be performed
and complied with by it under this Agreement at or prior to the Effective Time;
(b) The representations and warranties of MC
contained in this Agreement shall have been true and correct in all material
respects at the time when made, and (except for representations made as of a
certain date) shall be deemed made again on the Closing Date and shall be true
and correct in all material respects as of such date, except for changes
specifically permitted by this Agreement;
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(c) Except for the transactions contemplated by
this Agreement, and except for matters which affect generally the economy or
the industry in which MC and its Subsidiaries are engaged, as of the Closing
Date, there shall not have occurred any change in the business, properties,
assets, liabilities, financial condition, cash flows, operations, licenses,
franchises or results of operations of MC or its Subsidiaries that has had a
Material Adverse Effect on MC and its Subsidiaries, taken as a whole;
(d) PN shall have received a certificate from MC,
signed on behalf of MC by the Chief Executive Officer and Chief Financial
Officer of MC, dated the Closing Date, to the effect that the conditions set
forth in paragraphs (a), (b) and (c) above have been satisfied;
(e) PN shall have received the opinion of Xxxxxx,
Xxxxxx & Xxxxxxxxx, dated the Closing Date and in a form reasonably acceptable
to PN, to the effect that MC Shares to be issued in the Merger have been duly
authorized, and when issued in accordance with this Agreement will be validly
issued and fully paid and nonassessable and no holder of any MC Shares
outstanding as of such date has any preemptive or other rights to subscribe for
MC Shares pursuant to the DGCL, the Certificate of Incorporation or pursuant to
agreements of MC set forth on a schedule to such opinion, which MC will have
certified to such counsel as representing all agreements which contain
preemptive rights or rights to subscribe for MC Shares;
(f) The MC Shares to be issued in the Merger
shall have been admitted for quotation on the Nasdaq Stock Market; and
(g) PN shall have received a written opinion from
Xxxxxx & Xxxxxx L.L.P. (based on certain factual representations received from
MC and PN, as reasonably requested by such firm) to the effect that the Merger
will be treated as a tax-free reorganization within the meaning of section
368(a) of the Code.
Section 6.3 Conditions to Obligations of MC to Effect the
Merger. The obligation of MC to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of the following additional
conditions:
(a) PN shall have performed or complied in all
material respects with all obligations and agreements required to be performed
or complied with by it under this Agreement at or prior to the Effective Time;
(b) The representations and warranties of PN
contained in this Agreement and the PN Option Agreement shall have been true
and correct in all material respects at the time when made, and (except for
representations made as of a certain date) shall be deemed made again on the
Closing Date and shall be true and correct in all material respects as of such
date, except for changes specifically permitted by this Agreement;
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50
(c) Except for the transactions contemplated by
this Agreement and the PN Option Agreement, and except for matters which affect
generally the economy or the industry in which PN and its Subsidiaries are
engaged, as of the Closing Date, there shall not have occurred any change in
business, properties, assets, liabilities, financial condition, cash flows,
operations, licenses, franchises or results of operations of PN or its
Subsidiaries that has had a Material Adverse Effect on PN and its Subsidiaries,
taken as a whole;
(d) MC shall have received a certificate from PN,
signed on behalf of PN by the Chief Executive Officer and Chief Financial
Officer of PN, dated the Closing Date, to the effect that the conditions set
forth in paragraph (a), (b) and (c) above have been satisfied;
(e) PN shall have delivered to MC audited
consolidated financial statements for the fiscal period beginning January 1,
1997 and ended September 30, 1997. PN shall have delivered monthly financial
statements for each calendar month after September 30, 1997, certified as true
and correct by the Chief Financial Officer of PN and, for months including and
after November 1997, SAS 71 review procedures with respect to such monthly
statements shall have been performed by Ernst & Young, and PN shall have
afforded MC the opportunity to perform such investigations as MC reasonably
deems necessary to confirm whether PN's calculation of Annualized Cash Flow (as
defined in Annex B) or Relevant Net Liabilities (as defined in Annex B) are
correct. PN shall have represented, as of the Closing Date, that the foregoing
financial statements described in the previous sentence were prepared from, and
are in accordance with, the books and records of PN and its consolidated
Subsidiaries, comply in all material respects with applicable accounting
requirements, shall have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto), and present fairly the consolidated financial position and
the consolidated results of operations and cash flows of PN and its
consolidated Subsidiaries as at the dates thereof or for the periods presented
therein. In the event of a dispute regarding the correct amount of Annualized
Cash Flow or Relevant Net Liabilities, the parties shall submit the matter to
the Washington office of KPMG Peat Marwick which shall determine the correct
amount within ten (10) business days and whose conclusions shall be binding on
the parties;
(f) (i) The settlement of the Plaintiffs'
Litigation shall not have been modified in any material respect, (ii) such
settlement shall have been approved by final order of all courts having
jurisdiction thereof and (iii) the time for any appeals of such orders shall
have expired, or any appeals thereof that have been or may be taken could not
reasonably result in a Material Adverse Effect to ProNet and its Subsidiaries,
taken as a whole. Plaintiffs representing no more than 90,000 PN Shares shall
have opted out of the Plaintiffs' Settlement.
(g) The settlement of the Xxxxxx Brothers, Inc.
v. ProNet Inc., No. 97-602688 (N.Y. Sup. Ct.) shall have been consummated in
accordance with the terms of the letter dated July 15, 1997 from Xxxxxxxx X.
Xxxxxxxxx to Xxxxxxx X. Xxxxxxxx.
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(h) Annualized Cash Flow shall be at least 80% of
Target Cash Flow (as defined in Annex B) for the Measurement Date (as defined
in Annex B) prior to the Closing Date; and
(i) MC shall have received a written opinion from
Xxxxxx, Xxxxxx & Xxxxxxxxx (based on certain factual representations received
from MC and PN, as reasonably requested by such firm) to the effect that the
Merger will be treated as a tax-free reorganization within the meaning of
section 368(a) of the Code.
ARTICLE VII
TERMINATION
Section 7.1 Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after stockholder approval thereof:
(a) By the mutual written consent of MC and PN.
(b) By either PN or MC:
(i) If (A) MC shall not have received
requisite approval from its lenders of the Merger as described
in Schedule 4.6 by August 22, 1997;
(ii) any Governmental Entity shall have
issued an order, decree or ruling or taken any other action
(which order, decree or other action in the parties hereto
shall use their reasonable efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final
and non-appealable; or
(iii) If the Merger shall not have
occurred by March 31, 1998, provided, that notwithstanding the
foregoing, the right to terminate this Agreement under this
Section 7.1(b)(ii) shall not be available to any party whose
failure to fulfill any obligation under this Agreement in any
material respect has been the proximate cause of or resulted
in the failure of the Merger to occur on or before March 31,
1998.
(c) By PN:
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(i) if (A) there has been a breach by MC
of any representation or warranty contained in this Agreement
which would have or would be reasonably likely to have a
Material Adverse Effect on MC and its Subsidiaries, taken as a
whole, or (B) MC or any of its subsidiaries shall have failed
to perform and comply in any material respect with the
obligations and agreements required to be performed and
complied with by it under this Agreement or the PN Option
Agreement, which failure to perform, if curable, shall not have
been cured prior to the expiration of thirty (30) days
following notice of such failure;
(ii) if the Merger Proposal or the
Amendment Proposal shall not have been approved and adopted by
the requisite vote of the holders of capital stock of MC in
accordance with the DGCL and the Certificate of Incorporation
and By-Laws of MC at a Meeting held for that purpose
(including any adjournment thereof); or
(iii) if, (A) pursuant to a determination
in accordance with Section 5.9(f), the Board of Directors of
PN shall have resolved to accept a PN Acquisition Proposal,
(B) PN pays MC a termination fee equal to Four Million Dollars
($4,000,000), and (C) PN shall otherwise be in compliance with
its obligations under Section 5.9.
(d) By MC:
(i) if (A) there has been a breach by
PN of any representation or warranty contained in this
Agreement which would have or would be reasonably likely to
have a Material Adverse Effect on PN and its Subsidiaries,
taken as a whole, or (B) PN or any of its Subsidiaries shall
have failed to perform and comply in any material respect with
the obligations and agreements required to be performed and
complied with by it under this Agreement which failure to
perform, if curable, shall not have been cured prior to the
expiration of thirty (30) days following notice of each
failure;
(ii) if the Merger Proposal shall not
have been approved and adopted by the requisite vote of the
holders of capital stock of PN in accordance with the DGCL and
the Certificate of Incorporation and By-Laws of PN at a
Meeting held for that purpose (including any adjournment
thereof); or
(iii) if the Board of Directors of PN
shall have (A) withdrawn or modified or changed, in any manner
adverse to MC, its approval or recommendation of this
Agreement or the Merger or (B) shall have failed to recommend
against a PN Acquisition Proposal involving a tender offer or
failed to reject any other PN Acquisition Proposal within ten
business days after receipt by the Board of Directors of PN of
such proposal or PN shall have executed an
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agreement in principle (or similar agreement) or definitive
agreement relating to an PN Acquisition Proposal (or the Board
of Directors of PN resolves to do any of the foregoing).
(iv) Annualized Cash Flow determined as
of any two Measurement Dates shall be less than 80% of Target
Cash Flow for such Measurement Dates.
Section 7.2 Termination Fee. (a) If this Agreement is
terminated by PN pursuant to Section 7.1(c)(ii), then MC will immediately pay
to PN a termination fee equal to Four Million Dollars $4,000,000 in cash.
(b) If this Agreement is terminated by PN pursuant
to Section 7.1(c)(iii), or by MC pursuant to Section 7.1(d)(ii) or (d)(iii),
then PN will immediately pay to MC a termination fee equal to Four Million
Dollars ($4,000,000) in cash.
(c) The agreement contained in Section 7.2 is an
integral part of the transactions contemplated by this Agreement and
constitutes liquidated damages in the event of a termination under the Sections
specified herein and not a penalty.
Section 7.3 Effect of Termination. In the event of the
termination of this Agreement as provided in Section 7.1, written notice
thereof shall forthwith be given to the other party or parties specifying the
provision hereof pursuant to which such termination is made, and this Agreement
(except for the provisions of Sections 5.14 and 7.2, which shall survive such
termination) shall forthwith become null and void and, subject to the
provisions of Section 7.2, there shall be no liability on the part of MC or PN
except for misrepresentation or material breach of this Agreement, and nothing
herein shall prejudice the ability of the non-breaching party to seek damages
from the other party for any breach of this Agreement, including without
limitation attorneys' fees and the right to pursue any remedy at law or in
equity.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Amendment. This Agreement may be amended by the
parties hereto, by action taken by their respective Boards of Directors, at any
time before or after approval of matters presented in connection with Merger by
the stockholders of MC and PN, but after any such stockholder approval, no
amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
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Section 8.2 Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
schedule, instrument or other document delivered pursuant to this Agreement
shall survive the Effective Time.
Section 8.3 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given upon (x) personal
delivery, (y) electronic confirmation of delivery by telecopy or telegraph, or
(z) the next business day following being sent by an overnight courier
service, such as Federal Express, to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) If to MC to:
0000 Xxxxxxxx Xxxxxxx
Xxxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Telecopy No.: (000) 000-0000
with a copy (which shall not constitute
notice) to:
Xxxxxx, Xxxxxx & Xxxxxxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxx and Xxxxxx X.
Xxxxx
Telecopy No.: (000) 000-0000
and
(b) if to PN, to:
0000 XXX Xxxxxxx
Xxxxxx, Xxxxx 00000
Attention: Chief Executive Officer
General Counsel
Telecopy No.: (000) 000-0000
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with a copy (which shall not constitute
notice) to:
Xxxxxx & Xxxxxx, L.L.P.
Attention: Xxxxxxx X. Xxxxxxx and Xxxx Early
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
Section 8.4 Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 8.5 Interpretation. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include," "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." As used in this Agreement, the term
"affiliate(s)" shall have the meaning set forth in Rule 12b-2 of the Exchange
Act.
Section 8.6 Counterparts. This Agreement may be executed in
two or more counterparts, all of which have been considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that both parties need not sign the same counterpart.
Section 8.7 Entire Agreement; Third Party Beneficiaries.
This Agreement, the PN Disclosure Letter, the MC Disclosure Letter, the PN
Option Agreement, the MC Voting Agreement and the Confidentiality Agreement:
(a) constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) are not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder, except that Section
2.4 and Section 5.13 shall confer on the third parties contemplated thereby the
benefits thereof.
Section 8.8 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of Delaware without
giving effect to the principles of conflicts of law thereof.
Section 8.9 Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
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Section 8.10 Further Assurances. The parties agree to
execute such further instruments and documents as shall reasonably be necessary
to carry out the transactions contemplated by this Agreement, including,
without limitation, to file any notices, or to obtain any consents appropriate
to carry out the transactions contemplated by this Agreement.
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IN WITNESS WHEREOF, MC and PN have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
METROCALL, INC.
By: /s/ Xxxxxxx X. Xxxxxxx, III
-------------------------------------
Name: Xxxxxxx X. Xxxxxxx, III
Title: Chief Executive Officer
and President
PRONET INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chairman & CEO
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ANNEX A
Directors Of The Surviving Corporation
Term Expiring in 1998
Xxxxxx X. Xxxxxxxxxx
Xxxx X. Xxxxx
Xxxxxxx X. Xxxxxx
Xxx X. Xxxxxx
Terms Expiring in 1999
Xxxxx X. Xxxxx, Xx.
Xxxxxxx X. Xxxxxxxx, Chairman of the Board
Xxx X. Xxxxxxxxxxxx
Xxxxxx X. Xxxxxx
Term Expiring in 2000
Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxxx, III
Xxxxxxx X. Xxxxxx, III
Xxxxxx X. Xxxxxxxxx
Designated by Series A Preferred Stock
Xxxxxxx Xxxxxx
Xxxxx Xxxxxxx
A-1
59
ANNEX B
Conversion Ratio Adjustments
The Conversion Ratio represents a basic conversion ratio
of .90 MC Shares for each PN Share. Based on 13,673,765 PN Shares outstanding
or issuable pursuant to existing agreements (other than employee stock
options), the Merger Consideration would consist of 12,306,388 MC Shares. The
Conversion Ratio is subject to adjustment if certain liabilities of PN exceed
certain targets, if operating cash flow (earnings before interest, taxes,
depreciation and amortization) is less or more than certain targets, and if new
pager inventory falls below certain targets. The Conversion Ratio shall be
determined in accordance with the following formulas which adjust the number of
MC Shares representing the Merger Consideration and therefore the Conversion
Ratio:
CONVERSION RATIO = ADJUSTED MC MERGER SHARES / 13,673,765
ADJUSTED MC MERGER SHARES = 12,306,388
- LIABILITY ADJUSTMENT
- NEGATIVE CASH FLOW ADJUSTMENT
(IF GREATER THAN ZERO)
+ POSITIVE CASH FLOW ADJUSTMENT
(IF GREATER THAN ZERO)
- NEW PAGER INVENTORY ADJUSTMENT
LIABILITY ADJUSTMENT =
(RELEVANT NET LIABILITIES - TARGET NET LIABILITIES)
(IF GREATER THAN ZERO)
/ $4.875
NEGATIVE CASH FLOW ADJUSTMENT =
([.9 * TARGET CASH FLOW] - ANNUALIZED CASH FLOW)
(IF GREATER THAN ZERO)
* 8.00
/ $4.875
X-0
00
XXXXXXXX XXXX FLOW ADJUSTMENT =
(ANNUALIZED CASH FLOW - [1.1 * TARGET CASH FLOW])
(IF GREATER THAN ZERO)
* 8.00
/ $4.875
NEW PAGER INVENTORY ADJUSTMENT =
(NEW PAGER INVENTORY SHORTFALL * $50.00)
/ $4.875
THE CONVERSION RATIO AS ADJUSTED SHALL BE EXPRESSED TO THE FOURTH DECIMAL
PLACE.
Definitions:
For purposes of this Annex C, the following terms shall
have the meanings set forth below. Capitalized terms not otherwise defined
will have the meanings given such terms in the Merger Agreement.
"Annualized Cash Flow" shall mean for the period
beginning July 1, 1997, and ending on a Measurement Date: (i) the sum of (A)
"Consolidated Cash Flow" of PN, as such term is defined in the Indenture
(including the other defined terms incorporated therein) plus, in each case to
the extent included, (1) costs associated with employee terminations not to
exceed $239,000 (to the extent included in expenses in calculating Annualized
Cash Flow); (2) verified costs of deconstructing PN's nationwide network, not
to exceed $2,500 per site, and (3) if approved by MC, expenditures generating a
future benefit for the Surviving Corporation, (ii) divided by the number of
months in such period and (iii) multiplied by 12.
"Measurement Date" shall mean the last day of each calendar
month prior to the Closing.
B-2
61
"Target Cash Flow" shall mean for each Measurement Date,
the amount specified below:
-----------------------------------------------------------------------------------------------------
MEASUREMENT DATE MONTHS IN ANNUALIZATION OF CASH TARGET ANNUALIZED CASH FLOW
FLOW (MILLIONS)
-----------------------------------------------------------------------------------------------------
9/30/97 3 $31.200
-----------------------------------------------------------------------------------------------------
10/31/97 4 $31.350
-----------------------------------------------------------------------------------------------------
11/30/97 5 $31.488
-----------------------------------------------------------------------------------------------------
12/31/97 6 $31.600
-----------------------------------------------------------------------------------------------------
1/31/98 7 $31.714
-----------------------------------------------------------------------------------------------------
2/28/98 8 $31.830
-----------------------------------------------------------------------------------------------------
"Relevant Net Liabilities" means at a Measurement Date,
the sum of (i) all "Debt" of PN, as such term is defined in the Indenture
(including the other defined terms incorporated therein and excluding the
"Deferred Settlement Costs"), plus (ii) the amount, if greater than zero, by
which consolidated current liabilities of PN exceed consolidated current assets
of PN; or minus (iii) the amount, if greater than zero, by which consolidated
current assets of PN exceeds consolidated current liabilities of PN; provided,
however, if PN achieves at least 100% of its Target Cash Flow for a Measurement
Date and upon the consent of MC, which shall not be unreasonably withheld, the
consolidated current liabilities of PN shall not include the accounts payable
by PN incurred in connection with PN's agreement with the State of Texas.
"Deferred Settlement Costs" means the accounting accrual
of the value of the 1 million PN Shares to be issued in conjunction with the
Plaintiffs' Settlement.
B-3
62
"Target Net Liabilities" means for any Measurement Date,
the amounts set forth below:
-------------------------------------------------------------------
MEASUREMENT DATE TARGET NET LIABILITIES
(MILLIONS)
-------------------------------------------------------------------
10/31/97 $183.2
-------------------------------------------------------------------
11/30/97 $184.2
-------------------------------------------------------------------
12/31/97 $185.2
-------------------------------------------------------------------
1/31/98 $185.2
-------------------------------------------------------------------
2/28/98 $185.2
-------------------------------------------------------------------
"New Pager Inventory Shortfall" means, at a Measurement
Date, if PN has less than 50,000 new pagers in inventory (45,000 of which must
be Motorola pagers), the greater of (i) the number of all new pagers in
inventory below 50,000 or (ii) the number of Motorola pagers below 45,000.
B-4
