<PAGE>
DEFINITIVE COPY
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
COMMNET CELLULAR INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/x/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $0.001 per share of CommNet Cellular Inc.
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(2) Aggregate number of securities to which transaction applies: 22,856,345
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined): $32.00
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(4) Proposed maximum aggregate value of transaction: $731,403,040
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(5) Total fee paid: $146,280.61
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/x/ Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $141,690.74
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(2) Form, Schedule or Registration Statement No.: Schedule 14A
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(3) Filing Party: CommNet Cellular Inc.
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(4) Date Filed: September 10, 1999
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<PAGE>
[LOGO COMMNET CELLULAR INC.]
October 1, 1999
Dear Shareholder:
You are cordially invited to a Special Meeting (the "Special Meeting") of
the shareholders of CommNet Cellular Inc. ("CommNet"), which will be held at the
Hyatt Regency Tech Center, 7800 E. Tufts Avenue, Denver, Colorado 80237, on
November 11, 1999 at 9:00 a.m. local time.
At the Special Meeting, the shareholders of CommNet will be asked to
consider and vote upon a proposal to approve and adopt an Agreement and Plan of
Merger, dated as of July 18, 1999 (the "Merger Agreement"), among CommNet,
Vodafone AirTouch Plc, an English corporation, ("Parent" or "Vodafone
AirTouch"), and Pacific Telecom Cellular of Colorado, Inc., a Colorado
corporation and a wholly owned subsidiary of Parent ("Merger Sub"). In the
merger, each share (other than shares owned by Parent or any subsidiary of
Parent including Merger Sub, or by CommNet, or Dissenting Shares (as defined
herein)) of CommNet Common Stock, par value $.001 per share, together with each
associated Right as described in the accompanying Proxy Statement ("CommNet
Common Stock"), will be converted into the right to receive $31.00 in cash, plus
8% annual interest from July 18, 1999 until the closing of the merger.
The merger cannot be completed unless the holders of a majority of the
outstanding shares of CommNet Common Stock vote to approve and adopt the Merger
Agreement. Pursuant to and subject to the terms of a Voting Agreement, dated as
of July 18, 1999 (the "Voting Agreement"), between Parent and BCP CommNet L.P.,
a Delaware limited partnership and the owner of approximately 86.17% of the
outstanding shares of CommNet Common Stock ("BCP CommNet"), BCP CommNet has
agreed to vote all of its shares of CommNet Common Stock in favor of the
adoption of the Merger Agreement. Accordingly, the vote of BCP CommNet is
sufficient to approve the Merger Agreement without the affirmative vote of any
other shareholder.
Detailed information concerning the merger is set forth in the accompanying
Proxy Statement, which you are urged to read carefully. A copy of the Merger
Agreement is attached as Annex I to the Proxy Statement and a copy of the Voting
Agreement is attached as Annex II. Holders of CommNet Common Stock will be
entitled to dissenters' rights under Colorado law in connection with the merger
as described in the accompanying Proxy Statement.
Your Board of Directors, after careful consideration, has unanimously
determined that the merger is fair to and in the best interests of CommNet and
its shareholders, has adopted and approved the Merger Agreement and recommends
that you vote FOR approval and adoption of the Merger Agreement and the
transactions contemplated thereby. In reaching its determination, the Board of
Directors considered, among other things, the opinion of Morgan Stanley Dean
Witter ("Morgan Stanley"), delivered on July 18, 1999, to the effect that, as of
such date, and based upon the assumptions made, matters considered and limits of
review set forth in such opinion, the proposed consideration to be received by
the holders of CommNet Common Stock in the merger, other than Parent and its
affiliates, is fair from a financial point of view to such holders. A copy of
the Morgan Stanley opinion, which sets forth the assumptions made, matters
considered and certain limitations on the scope of review undertaken by Morgan
Stanley, is attached as Annex III to the Proxy Statement. Shareholders are urged
to read such opinion in its entirety.
YOU ARE URGED TO COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT AS SOON
AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
Yours very truly,
/s/ Arnold C. Pohs
Arnold C. Pohs
Chairman of the Board
<PAGE>
[LOGO COMMNET CELLULAR INC.]
------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 11, 1999
TO THE SHAREHOLDERS OF COMMNET CELLULAR INC.
NOTICE IS HEREBY GIVEN that a Special Meeting of the shareholders
(including any adjournments or postponements thereof, the "Special Meeting") of
CommNet Cellular Inc., a Colorado corporation ("CommNet"), will be held at the
Hyatt Regency Tech Center, 7800 E. Tufts Avenue, Denver, Colorado 80237, on
November 11, 1999 at 9:00 a.m. local time, for the following purposes:
1. To consider and vote upon a proposal (the "Proposal") to approve
and adopt an Agreement and Plan of Merger, dated as of July 18, 1999 (the
"Merger Agreement"), among CommNet, Vodafone AirTouch Plc, an English
corporation ("Parent") and Pacific Telecom Cellular of Colorado, Inc., a
Colorado corporation and a wholly owned subsidiary of Parent ("Merger
Sub"). The Merger Agreement provides, among other things, for the merger of
Merger Sub with and into CommNet (the "Merger") pursuant to which each
share of CommNet common stock, par value $.001 per share (including each
associated Right described in the accompanying Proxy Statement, "CommNet
Common Stock"), issued and outstanding immediately prior to the effective
time of the Merger (other than shares owned by Parent or any Subsidiary (as
defined in the accompanying Proxy Statement) of Parent, including Merger
Sub, or by CommNet, and Dissenting Shares (as defined in the accompanying
Proxy Statement)) will be converted into the right to receive $31.00 in
cash plus 8% annual interest from July 18, 1999 until the closing of the
Merger.
2. To transact such other business as may properly come before the
Special Meeting.
Approval of the Proposal to approve and adopt the Merger Agreement and the
transactions contemplated thereby, including the Merger, requires the
affirmative vote of a majority of the outstanding shares of CommNet Common Stock
held by shareholders entitled to vote on September 27, 1999 (the "Record Date").
Pursuant to and subject to the terms of a Voting Agreement, dated as of July 18,
1999 (the "Voting Agreement"), between Parent and BCP CommNet L.P., a Delaware
limited partnership and the owner of approximately 86.17% of the outstanding
shares of CommNet Common Stock ("BCP CommNet"), BCP CommNet has agreed to vote
all of its shares of CommNet Common Stock in favor of the adoption of the Merger
Agreement. Accordingly, the vote of BCP CommNet is sufficient to approve the
Merger Agreement without the affirmative vote of any other shareholder. Detailed
information concerning the Merger is set forth in the accompanying Proxy
Statement, which you are urged to read carefully. A copy of the Merger Agreement
is attached as Annex I to the Proxy Statement and a copy of the Voting Agreement
is attached as Annex II.
Only holders of record of shares of CommNet Common Stock at the close of
business on the Record Date are entitled to notice of, and to vote at, the
Special Meeting. A complete list of shareholders entitled to vote at the Special
Meeting will be available for examination, for proper purposes, during ordinary
business hours at CommNet's principal executive offices, 8350 East Crescent
Parkway, Suite 400, Englewood, Colorado 80111 beginning on the earlier of ten
days before the Special Meeting or two business days after the date of this
notice and continuing through the Special Meeting.
In connection with the proposed Merger, holders of CommNet Common Stock as
of the Record Date are entitled to dissenters' rights under Sections 7-113-101
through 7-113-302 of the Colorado Business Corporation Act (the "CBCA"), a copy
of which is included as Annex IV to the accompanying Proxy Statement. To
exercise such rights, a CommNet shareholder must: (i) deliver to CommNet before
the vote at the Special Meeting a written notice of such shareholder's intent to
demand payment for her or his shares of CommNet Common Stock; (ii) either vote
against the Proposal or abstain from voting with respect to the Proposal; and
(iii) following the Special Meeting, comply with the provisions set forth in the
CBCA. A vote
<PAGE>
against the Proposal will not in and of itself constitute a written demand for
dissenters' rights satisfying the requirements of the CBCA. See "DISSENTING
SHAREHOLDERS' RIGHTS" in the accompanying Proxy Statement for a discussion of
the procedures to be followed in asserting dissenters' rights in connection with
the proposed Merger.
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO
ITS EXERCISE BY (1) ATTENDING AND VOTING IN PERSON AT THE SPECIAL MEETING,
(2) GIVING NOTICE OF REVOCATION OF THE PROXY AT THE SPECIAL MEETING OR
(3) DELIVERING TO THE SECRETARY OF COMMNET: (A) A WRITTEN NOTICE OF REVOCATION
OR (B) A DULY EXECUTED PROXY RELATING TO THE SAME SHARES AND THE PROPOSAL TO BE
CONSIDERED AT THE SPECIAL MEETING, BEARING A DATE LATER THAN THE PROXY
PREVIOUSLY EXECUTED.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ James C. Everson
JAMES C. EVERSON
Secretary
October 1, 1999
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOU HAVE ANY QUESTIONS OR REQUIRE ADDITIONAL COPIES OF THE PROXY
STATEMENT AND RELATED MATERIALS, PLEASE CONTACT BOSTON EQUISERVE AT
1-800-426-5523.
2
<PAGE>
[LOGO COMMNET CELLULAR INC.]
------------------------
PROXY STATEMENT
------------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 11, 1999
This Proxy Statement is being furnished to shareholders of CommNet Cellular
Inc., a Colorado corporation (together with its consolidated subsidiaries,
except where the context otherwise requires, "CommNet" or the "Company"), in
connection with the solicitation of proxies by the Board of Directors of the
Company (the "Board of Directors" or the "Board") for use at a special meeting
of shareholders, which will be held at the Hyatt Regency Tech Center, 7800 E.
Tufts Avenue, Denver, Colorado 80237, on November 11, 1999, at 9:00 a.m. local
time, and at any adjournments or postponements thereof (the "Special Meeting").
This Proxy Statement relates to the proposed Agreement and Plan of Merger, dated
as of July 18, 1999 (the "Merger Agreement"), among CommNet, Vodafone AirTouch
Plc, an English corporation ("Parent" or "Vodafone AirTouch"), and Pacific
Telecom Cellular of Colorado, Inc., a Colorado corporation and a wholly owned
subsidiary of Parent (the "Merger Sub"), and the transactions contemplated
thereby.
Pursuant to the merger, each share of CommNet's common stock, par value
$.001 per share (including each associated Right described in "DESCRIPTION OF
COMMNET CAPITAL STOCK--Shareholder Rights Plan," the "CommNet Common Stock"),
issued and outstanding immediately prior to the effective time of the merger
(the "Effective Time") (other than shares owned by Parent or any subsidiary of
Parent (as defined in the Merger Agreement, a "Subsidiary") including Merger
Sub, or by CommNet, or Dissenting Shares (as defined herein)) will be converted
into the right to receive $31.00 in cash plus 8% annual interest compounded
daily from July 18, 1999 until the closing of the merger.
Approval of the proposal (the "Proposal") to approve and adopt the Merger
Agreement and the transactions contemplated thereby, including the merger of the
Merger Sub with and into CommNet (the "Merger"), requires the affirmative vote
of a majority of the outstanding shares of CommNet Common Stock held by
shareholders entitled to vote on September 27, 1999 (the "Record Date").
Pursuant to and subject to the terms of a Voting Agreement, dated as of
July 18, 1999 (the "Voting Agreement"), between Parent and BCP CommNet L.P., a
Delaware limited partnership and the owner of approximately 86.17% of the
outstanding shares of CommNet Common Stock ("BCP CommNet"), BCP CommNet has
agreed to vote all of its shares of CommNet Common Stock in favor of the
adoption of the Merger Agreement. Accordingly, the vote of BCP CommNet is
sufficient to approve the Merger Agreement without the affirmative vote of any
other shareholder. A copy of the Merger Agreement is attached as Annex I to this
Proxy Statement and a copy of the Voting Agreement is attached as Annex II and
each is incorporated herein by reference. This Proxy Statement describes the
material provisions of the Merger Agreement; however, the descriptions set forth
herein are subject to, and are qualified in their entirety by reference to, the
text of such agreements.
The Board of Directors, after careful consideration, has unanimously
determined that the Merger is fair to and in the best interests of CommNet and
its shareholders, has adopted and approved the Merger Agreement and recommends
that you vote FOR approval and adoption of the Merger Agreement and the
transactions contemplated thereby. In reaching its determination, the Board of
Directors considered, among other things, the opinion of Morgan Stanley Dean
Witter ("Morgan Stanley"), delivered on July 18, 1999, to the effect that, as of
such date, and based upon the assumptions made, matters considered and limits of
review set forth in such opinion, the proposed consideration to be received by
the holders of CommNet Common Stock in the Merger, other than Parent and its
affiliates, was fair from a financial point of view to such holders. A copy of
the Morgan Stanley opinion, which sets forth the assumptions made, matters
considered and certain limitations on the scope of review undertaken by Morgan
Stanley, is attached as Annex III to the Proxy Statement. Shareholders are urged
to read such opinion in its entirety.
This Proxy Statement, the accompanying form of proxy (the "Proxy") and the
other enclosed documents are first being mailed to shareholders of the Company
on or about October 1, 1999.
The date of this Proxy Statement is October 1, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER..................................................................... 1
AVAILABLE INFORMATION...................................................................................... 3
FORWARD LOOKING STATEMENTS................................................................................. 3
SUMMARY.................................................................................................... 4
The Company.............................................................................................. 4
Parent and Merger Sub.................................................................................... 4
The Special Meeting...................................................................................... 5
SELECTED CONSOLIDATED FINANCIAL DATA....................................................................... 10
PRICE OF COMMNET COMMON STOCK.............................................................................. 11
THE COMPANY................................................................................................ 12
THE SPECIAL MEETING........................................................................................ 14
Matters to be Considered................................................................................. 14
Required Vote............................................................................................ 14
Voting and Revocation of Proxies......................................................................... 14
Record Date; Stock Entitled to Vote; Quorum.............................................................. 15
Dissenter's Rights....................................................................................... 15
Solicitation of Proxies.................................................................................. 15
Background of the Merger................................................................................. 16
Recommendation of the Board of Directors; Reasons for the Merger......................................... 19
Opinion of Morgan Stanley................................................................................ 20
Interests of Certain Persons in the Merger............................................................... 24
DESCRIPTION OF COMMNET CAPITAL STOCK....................................................................... 26
Common Stock............................................................................................. 26
Noncumulative Voting..................................................................................... 26
Dividend Policy.......................................................................................... 26
Preferred Stock.......................................................................................... 26
Shareholder Rights Plan.................................................................................. 26
Charter Documents of CommNet Following the Merger........................................................ 28
THE MERGER AGREEMENT....................................................................................... 29
The Merger............................................................................................... 29
Effect of the Merger..................................................................................... 29
Conversion of Shares; Procedures for Exchange of Certificates............................................ 29
Representations and Warranties........................................................................... 30
Certain Pre-Closing Covenants............................................................................ 31
No Solicitations of Transactions......................................................................... 31
Option and Benefit Plans................................................................................. 32
Access to Information.................................................................................... 33
Cooperation and Best Efforts............................................................................. 33
Indemnification and Insurance............................................................................ 33
Conditions to the Consummation of the Merger............................................................. 33
Termination.............................................................................................. 35
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Expenses and Certain Required Payments................................................................... 36
Amendment and Waiver..................................................................................... 38
THE VOTING AGREEMENT....................................................................................... 38
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................................................... 38
SELECTED CONSOLIDATED FINANCIAL DATA....................................................................... 40
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................. 41
REGULATORY APPROVALS....................................................................................... 41
DISSENTING SHAREHOLDERS' RIGHTS............................................................................ 41
CERTAIN PENDING LITIGATION................................................................................. 43
OTHER INFORMATION AND SHAREHOLDER PROPOSALS................................................................ 44
INDEPENDENT AUDITORS....................................................................................... 44
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................ 44
INDEX OF DEFINED TERMS..................................................................................... 45
</TABLE>
ANNEXES
<TABLE>
<S> <C>
Annex I Agreement and Plan of Merger dated as of July 18, 1999
Annex II Voting Agreement dated as of July 18, 1999
Annex III Opinion of Morgan Stanley Dean Witter dated July 18, 1999
Annex IV Dissenters' Rights Provisions of the Colorado Business Corporation Act
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: Please describe the merger transaction?
A: CommNet Cellular Inc., Vodafone AirTouch Plc and Pacific Telecom Cellular of
Colorado, Inc., a wholly owned subsidiary of Vodafone AirTouch Plc, entered
into the Merger Agreement on July 18, 1999. The Merger Agreement provides
that once the shareholder approval process has been completed and the other
conditions to the Merger have been satisfied, Pacific Telecom Cellular of
Colorado, Inc. will merge with and into CommNet Cellular Inc. which will be
the surviving corporation in the Merger and become a wholly owned subsidiary
of Vodafone AirTouch.
Q: Please explain what I will receive in the Merger?
A: In the Merger, each share of CommNet Common Stock that you own will be
canceled and converted into the right to receive $31.00 in cash plus 8%
annual interest compounded daily from July 18, 1999 until the closing of the
Merger.
Q: What shareholder approval is required?
A: Approval of the Proposal to approve and adopt the Merger Agreement and the
transactions contemplated thereby, including the Merger, requires the
affirmative vote of a majority of the outstanding shares of CommNet Common
Stock held by shareholders entitled to vote on September 27, 1999. Pursuant
to and subject to the terms of a Voting Agreement, dated as of July 18, 1999,
between Parent and BCP CommNet, the owner of approximately 86.17% of the
outstanding shares of CommNet Common Stock, BCP CommNet has agreed to vote
all of its shares of CommNet Common Stock in favor of the adoption of the
Merger Agreement. Accordingly, the vote of BCP CommNet is sufficient to
approve the Merger Agreement without the affirmative vote of any other
shareholder.
Q: If BCP CommNet has agreed to approve the Merger, why is the Special Meeting
being held?
A: Although BCP CommNet has agreed to vote for the Merger, Colorado law requires
CommNet to hold a Special Meeting of all of its shareholders and to conduct a
vote with respect to the adoption of the Merger Agreement.
Q: What regulatory approvals are required?
A: The Merger requires that the waiting period (and any extension thereof)
applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, shall have been terminated or shall have expired,
and certain approvals from the Federal Communications Commission.
Q: What do I need to do now?
A: Please read this document carefully, then complete, sign, date and mail the
Proxy in the enclosed return envelope as soon as possible.
Q: What do I do if I want to change my Proxy?
A: You may revoke your Proxy at any time prior to its exercise by (1) attending
and voting in person at the Special Meeting, (2) giving notice of revocation
of the Proxy at the Special Meeting or (3) delivering to the Secretary of
CommNet: (A) a written notice of revocation or (B) a duly executed proxy
relating to the same shares and the Proposal to be considered at the Special
Meeting, bearing a date later than the Proxy previously executed.
Q: If my shares of CommNet Common Stock are held in street name by my Broker,
will my Broker vote my shares for me?
A: Your broker will vote your shares of CommNet Common Stock only if you provide
instructions on how to vote your shares, following the directions provided by
your broker. Without instructions, your shares will not be voted, which will
have the effect of a vote against the Merger Agreement.
1
<PAGE>
Q: Should I send in my stock certificates now?
A: No. When the Merger is completed, we will send holders of shares of CommNet
Common Stock additional written instructions for exchanging their share
certificates and for receiving payment for their shares.
Q: When do you expect the Merger to be completed?
A: We are working toward completing the Merger as quickly as possible. We hope
to complete the Merger before the end of 1999.
Q: What are the tax consequences of this transaction?
A: If the Merger is consummated, you will recognize gain or loss for United
States federal income tax purposes. You are urged to consult your own tax
advisor to determine your particular tax consequences.
Q: Whom should I call with questions?
A: If you have any questions or require additional questions or require
additional copies of the proxy statement and related materials, please
contact Boston Equiserve at 1-800-426-5523.
2
<PAGE>
AVAILABLE INFORMATION
CommNet is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the web site (http://www.sec.gov) maintained by the Commission, or at its
regional offices located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and 7 World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. CommNet Common Stock is listed on the Nasdaq National Market. Reports and
other information concerning CommNet can also be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
FORWARD LOOKING STATEMENTS
This Proxy Statement includes "forward-looking statements" within the
meaning of various provisions of the Securities Act of 1933, as amended, and the
Exchange Act, including, without limitation, statements under "THE COMPANY" and
"THE SPECIAL MEETING--Background of the Merger." All statements included in this
Proxy Statement, other than statements of historical facts, that address
activities, events or developments that the Company expects or anticipates will
or may occur in the future, including such things as future capital expenditures
(including the amount and nature thereof), business strategy and measures to
implement strategy, competitive strengths, goals, expansion and growth of the
Company's business and operations, plans, references to future success and other
such matters are forward-looking statements. Such statements represent the
Company's reasonable judgment on the future and are subject to risks and
uncertainties that could cause the Company's actual results and financial
position to differ materially. Such factors include, but are not limited to: a
change in economic conditions in the Company's markets which adversely affects
the level of demand for wireless services; greater than anticipated competition
resulting in price reductions, new product offerings or higher customer
acquisition costs; better than expected customer growth necessitating increased
investment in network capacity; negative economies that could result if one or
more agreements to manage markets are not renewed; increased cellular fraud; the
impact of new business opportunities requiring significant initial investments;
and the impact of deployment of new technologies on capital spending.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN AS CONTAINED IN THIS PROXY STATEMENT, IN CONNECTION
WITH THE MERGER, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED ON AS HAVING BEEN AUTHORIZED BY COMMNET. THIS PROXY STATEMENT DOES
NOT CONSTITUTE A SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE, OR TO OR
FROM ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN SUCH
JURISDICTION. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF.
3
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. Reference is made to the more detailed information
contained in this Proxy Statement and the Annexes hereto. Shareholders of the
Company are urged to read this Proxy Statement and the Annexes hereto in their
entirety.
THE COMPANY
CommNet was organized under the laws of Colorado in 1983. The Company was
formed to acquire cellular interests through participation in the licensing
process conducted by the Federal Communications Commission ("FCC") and operates,
manages and finances cellular telephone systems, primarily in rural markets in
the mountain and plains regions of the United States. Cellular, Inc. Financial
Corporation ("CIFC") subsequently was organized to provide financing to
affiliates of the Company. Cellular Inc. Network Corporation ("CINC") and
CommNet Cellular License Holding LLC ("CCLHLLC") subsequently were organized to
acquire and hold interests in cellular licenses. CommNet Paging Inc. ("CPI")
subsequently was organized to provide paging services. CINC and CPI are wholly
owned subsidiaries of the Company. CIFC is a wholly owned subsidiary of CINC and
CCLHLLC is a wholly owned subsidiary of CIFC. Those corporations and
partnerships through which the Company holds ownership interests in cellular
licensees and those cellular licensees in which the Company holds a direct
ownership interest are referred to herein as "affiliates." Any reference herein
to an "affiliate" does not necessarily imply that the Company exercises, or has
the power to exercise, control over the management and policies of such entity.
The principal executive offices of CommNet are located at 8350 East Crescent
Parkway, Suite 400, Englewood, Colorado 80111, telephone number (303) 694-3234.
See "THE COMPANY."
PARENT AND MERGER SUB
Vodafone AirTouch is one of the world's leading wireless telecommunications
companies. Vodafone AirTouch provides a full range of wireless
telecommunications services, including cellular, broadband personal
communications, paging and data communications, and in the future expects to
additionally provide global satellite communications.
Following the combination of Vodafone Group Plc and AirTouch
Communications, Inc., ("AirTouch") which was completed on June 30, 1999,
Vodafone AirTouch has interests in 24 countries across five continents. As of
June 30, 1999, Vodafone AirTouch had approximately 28 million proportionate
customers (excluding paging customers), which reflects the number of customers
of a venture multiplied by its ownership interest, making it the world's largest
wireless telecommunications company in terms of number of proportionate
customers.
Vodafone AirTouch was incorporated in England and Wales in July 1984 as a
subsidiary of Racal Electronics Plc and became an independent company in
September 1991. Vodafone AirTouch's registered office is at The Courtyard, 2-4
London Road, Newbury, Berkshire RG14, 1JX. Vodafone AirTouch's ordinary shares
and American Depositary Shares are listed on the London and New York stock
exchanges, respectively. Merger Sub is a wholly owned subsidiary of Vodafone
AirTouch. The principal executive office of Merger Sub is located at 1
California Street, San Francisco, California 94111 telephone number (415)
658-2000.
4
<PAGE>
THE SPECIAL MEETING
TIME AND PLACE; RECORD DATE
The Special Meeting of shareholders of CommNet will be held on November 11,
1999, at 9:00 a.m. local time, at the Hyatt Regency Tech Center, 7800 E. Tufts
Avenue, Denver, Colorado 80237. Shareholders of record at the close of business
on the Record Date will be entitled to notice of, and to vote at, the Special
Meeting. The date of the mailing of this Proxy Statement to shareholders of the
Company will be on or about October 1, 1999. At the close of business on the
Record Date, there were 22,856,345 shares of CommNet Common Stock outstanding
and entitled to vote.
MATTERS TO BE CONSIDERED
At the Special Meeting, the shareholders of CommNet will consider and vote
upon the Proposal to approve and adopt the Merger Agreement, including the
Merger, pursuant to which Merger Sub will merge with and into the Company.
The Merger Agreement provides that, following the approval of the Proposal
by a vote of a majority of the outstanding shares of CommNet Common Stock
entitled to vote thereon and the satisfaction or waiver of the other conditions
to the Merger, Merger Sub will be merged with and into the Company, and the
Company will continue as the surviving corporation in the Merger (the "Surviving
Corporation"). Upon consummation of the Merger, each issued and outstanding
share of CommNet Common Stock issued and outstanding immediately prior to the
Effective Time (together with the associated Right) (other than shares owned by
Parent or any Subsidiary of Parent including Merger Sub, or by CommNet, or
Dissenting Shares (as defined herein)) shall be converted into the right to
receive an amount equal to $31.00 per share in cash plus 8% annual interest
compounded daily from July 18, 1999 until the closing of the Merger (the "Merger
Consideration"). See "THE MERGER AGREEMENT--Effect of the Merger."
REQUIRED VOTE
Approval of the Proposal will require the affirmative vote of a majority of
the outstanding shares of CommNet Common Stock held by shareholders entitled to
vote on the Record Date. Pursuant to and subject to the terms of the Voting
Agreement, between Parent and BCP CommNet L.P., the owner of approximately
86.17% of the outstanding shares of CommNet Common Stock, BCP CommNet has agreed
to vote all of its shares of CommNet Common Stock in favor of the adoption of
the Merger Agreement. Accordingly, the vote of BCP CommNet is sufficient to
approve the Merger Agreement without the affirmative vote of any other
shareholder. See "THE VOTING AGREEMENT."
VOTING OF PROXIES
All shares of CommNet Common Stock represented by a properly executed Proxy
received in time for the Special Meeting will be voted in the manner specified
in the Proxy. Proxies that do not contain any instruction to vote for or against
or to abstain from voting on a particular matter will be voted in accordance
with the recommendation of the Board of Directors. See "THE SPECIAL
MEETING--Voting and Revocation of Proxies."
It is not expected that any matter other than as referred to herein will be
brought before the shareholders at the Special Meeting. If, however, other
matters are properly presented, the persons named as proxies will vote in
accordance with their best judgment with respect to such matters, unless
authority to do so is withheld in the Proxy.
ADJOURNMENT; REVOCABILITY OF PROXIES
If the Special Meeting is adjourned for any reason, approval of the
Proposal shall be considered and voted upon by shareholders at the subsequent,
reconvened meeting, if any.
You may revoke your Proxy at any time prior to its exercise (i) by
attending the Special Meeting and voting in person (although attendance at the
Special Meeting will not in and of itself constitute revocation of
5
<PAGE>
a Proxy), (ii) by giving notice of revocation of your Proxy at the Special
Meeting or (iii) by delivering (a) a written notice of revocation of your Proxy
or (b) a duly executed Proxy relating to the matters to be considered at the
Special Meeting, bearing a date later than the Proxy previously executed, to the
Secretary of CommNet, 8350 East Crescent Parkway, Suite 400, Englewood, Colorado
80111. Unless revoked in one of the manners set forth above, Proxies in the form
enclosed will be voted at the Special Meeting in accordance with your
instructions or, if no instructions are given, in accordance with the
recommendations of the Board of Directors.
SOLICITATION OF PROXIES
The cost of soliciting Proxies will be borne by the Company. The Company
may solicit Proxies and the Company's directors, officers and employees may also
solicit Proxies by telephone, telecopier or personal interview. Such directors,
officers and employees will not be additionally compensated for any such
solicitation but may be reimbursed for reasonable out-of-pocket expenses in
connection therewith. Arrangements will be made to furnish copies of Proxy
materials to fiduciaries, custodians and brokerage houses for forwarding to
beneficial owners of CommNet Common Stock. Such persons will be paid reasonable
out-of-pocket expenses.
Corporate Investor Communications will assist in the distribution of
Proxies by the Company for an estimated fee of $2,000 plus reasonable
out-of-pocket expenses.
SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXIES. SEE
"THE MERGER AGREEMENT--Conversion of Shares; Procedures for Exchange of
Certificates."
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors, after careful consideration, has unanimously
determined that the Merger is fair to and in the best interests of the Company
and its shareholders, has adopted and approved the Merger Agreement and
recommends that the Company's shareholders approve and adopt the Merger
Agreement and the transactions contemplated thereby. The determination of the
Board of Directors with respect to the Merger is based on a number of factors.
See "THE SPECIAL MEETING--Background of the Merger" and "--Recommendation of the
Board of Directors; Reasons for the Merger."
OPINION OF MORGAN STANLEY
On July 18, 1999, Morgan Stanley delivered its written opinion, (the
"Morgan Stanley Opinion") to the Board to the effect that, as of such date, and
based upon the assumptions made, matters considered and limits of review set
forth in such opinion, the proposed consideration to be received by the holders
of CommNet Common Stock in the Merger, other than Parent and its affiliates, is
fair from a financial point of view to such holders. A copy of the Morgan
Stanley Opinion, which sets forth the assumptions made, matters considered and
certain limitations on the scope of review undertaken by Morgan Stanley, is
attached as Annex III to this Proxy Statement. Shareholders are urged to read
such opinion in its entirety. See "THE SPECIAL MEETING--Opinion of Morgan
Stanley."
SECURITY OWNERSHIP OF MANAGEMENT
As of the Record Date, directors and executive officers of the Company were
beneficial owners of an aggregate of 1,556,825 shares (approximately 6.38% of
the outstanding shares) of CommNet Common Stock, 23,580 shares of which were
represented by immediately exercisable options to acquire CommNet Common Stock.
The directors and executive officers of the Company have indicated that they
intend to vote their shares of CommNet Common Stock in favor of the Proposal.
In addition, four of the eight members of the Board are employees or
members of affiliates of BCP CommNet, the owner of 19,695,835 shares
(approximately 86.17% of the outstanding shares) of CommNet Common Stock as of
the Record Date. Pursuant to and subject to the terms of the Voting Agreement,
BCP CommNet has agreed to vote all of its shares of CommNet Common Stock in
favor of the Proposal. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT."
6
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and executive officers of the Company may have interests,
described herein, that present them with potential conflicts of interest in
connection with the Merger. The Board of Directors was aware of the potential
conflicts described below and considered them in its approval and adoption of
the Merger Agreement in addition to the other matters described under "THE
SPECIAL MEETING--Recommendation of the Board of Directors; Reasons for the
Merger" and "THE SPECIAL MEETING--Interests of Certain Persons in the Merger."
CONDITIONS TO THE MERGER
The obligations of CommNet and Merger Sub to consummate the Merger are
subject to various conditions, including:
o obtaining the requisite approval of CommNet's shareholders;
o obtaining the requisite approval of relevant government authorities,
including the FCC,
o the waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act") shall have been terminated or
shall have expired; and
o the absence of any injunction or other legal restraint or prohibition
preventing the consummation of the Merger. See "REGULATORY APPROVALS."
Parent and Merger Sub's obligations to effect the Merger are further
subject, among other things, to:
o the correctness of each representation and warranty of the Company set
forth in the Merger Agreement;
o the Company's performance or compliance with all agreements and
covenants as required under the Merger Agreement;
o the FCC having granted its consent to the consummation of the
transactions contemplated by the Merger Agreement ("FCC Consents"), and
no timely request for stay, motion or petition for reconsideration or
rehearing, application or request for review, or notice of appeal or
other judicial petition for review of the FCC Consents shall be pending,
and the time for filing any such request, motion, petition, application,
appeal, or notice, and for the entry of an order staying, reconsidering,
or reviewing on the FCC's own motion, shall have expired;
o no litigation or proceeding pending by a governmental entity that, among
other things, would prohibit the Merger; and
o the absence, since July 18, 1999, of a material adverse change relating
to the Company, which is continuing.
The Company's obligations to effect the Merger are further subject to
certain customary conditions, including:
o the correctness of each representation and warranty of Parent and Merger
Sub set forth in the Merger Agreement; and
o Parent and Merger Sub's performance or compliance with all agreements
and covenants as required under the Merger Agreement.
See "THE MERGER AGREEMENT--Conditions to the Consummation of the Merger"
and "REGULATORY APPROVALS."
REGULATORY APPROVALS
In order to consummate the Merger, the FCC must approve the transfer of
control of the Company to Parent. The Company and Parent completed filing joint
applications seeking these approvals on August 16, 1999. The FCC will consider
whether the Parent is qualified to control the Company's FCC licenses and
7
<PAGE>
authorizations and whether the public interest, convenience and necessity will
be served by the transfer of control to the Parent. The Company and the Parent
believe that the joint applications demonstrate compliance with these standards.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, the Company has agreed that prior to the
Effective Time its business and that of its consolidated subsidiaries and
certain affiliates will be conducted in the usual, regular and ordinary course
of business in all material respects. See "THE MERGER AGREEMENT--Certain Pre-
Closing Covenants."
TREATMENT OF COMPANY STOCK OPTIONS
Immediately prior to the Effective Time, each outstanding Option (as
defined under "THE MERGER AGREEMENT--Option and Benefit Plans") whether or not
then vested or exercisable, shall be canceled by the Company, and the holder
thereof shall be entitled to receive consideration as set forth in the Merger
Agreement. See "THE MERGER AGREEMENT--Option and Benefit Plans."
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time:
o by mutual written consent of the Company and Parent;
o by either the Company or Parent if the Effective Time has not occurred
on or before the sixth-month anniversary of the Merger Agreement (the
"Termination Date"), provided that any party whose failure to fulfill an
obligation resulted in the Effective Time not occurring may not so
terminate the Merger Agreement, provided further that the Termination
Date shall be extended to the twelve-month anniversary of the Merger
Agreement if conditions relating to regulatory approvals or governmental
litigation have not been satisfied by the six-month anniversary.
o by the Company or Parent, if a governmental authority permanently
prohibits the Merger;
o by the Company or Parent, if the shareholders of the Company do not
approve the Merger Agreement;
o by Parent if the Board of Directors (i) withdraws or modifies in any
adverse manner its approval or recommendation of the Merger, (ii) fails
to mail the proxy statement as promptly as practicable or fails to
include such recommendation in the proxy statement, (iii) fails to
reject a competing tender offer, (iv) approves or recommends any
Acquisition Proposal (as defined herein), (v) resolves to do any of
(i) through (iv), (vi) any person becomes the owner of more than 25% of
the outstanding Company Common Stock, or (vii) the Company fails to hold
the shareholders meeting before the Termination Date (except if Parent
could not then terminate pursuant to the second bullet point above);
o by the Company, if the Board of Directors accepts a Superior Proposal
(as defined below) after determining in good faith, that the failure to
accept such proposal would constitute a breach of its fiduciary duties;
or
o by Company or Parent, if the other party breaches or fails to comply
with any material representations or warranties or obligations under the
Merger Agreement, subject to a 60 day cure period.
If the Merger Agreement is terminated under certain circumstances, the
Company will be obligated to pay $35,000,000 to Merger Sub less amounts paid
under the expense reimbursement provision of the Merger Agreement (which amounts
cannot exceed $4,000,000). See "THE MERGER AGREEMENT--Termination."
8
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is generally anticipated that each shareholder will recognize capital
gain or loss equal, in each case, to the difference between the cash proceeds
received pursuant to the Merger and the shareholder's adjusted tax basis in the
CommNet Common Stock surrendered in exchange therefor. For a more detailed
summary of the material U.S. federal income tax consequences of the Merger, see
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING ON THE
PARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER, IT IS RECOMMENDED THAT HOLDERS OF
COMMNET COMMON STOCK CONSULT THEIR TAX ADVISORS CONCERNING THE FEDERAL (AND ANY
STATE, LOCAL AND FOREIGN) TAX CONSEQUENCES OF THE MERGER IN THEIR PARTICULAR
CIRCUMSTANCES.
DISSENTING SHAREHOLDERS' RIGHTS
Under Colorado law, shareholders of the Company who provide a written
notice of intention to demand payment to the Company prior to the Special
Meeting and who do not vote in favor of the Proposal ("Dissenting Shares") are
entitled to receive fair value for their shares of CommNet Common Stock and may
be entitled to an appraisal by the state district court of the fair value of
such shares, provided that they comply with all requirements under Colorado law.
TO PERFECT THEIR DISSENTERS' RIGHTS, COMMNET SHAREHOLDERS MUST COMPLY WITH ALL
CONDITIONS WHICH ARE SUMMARIZED UNDER "DISSENTING SHAREHOLDERS' RIGHTS" AND ARE
SET FORTH IN SECTIONS 7-113-101 THROUGH 7-113-302 OF THE COLORADO BUSINESS
CORPORATION ACT ("CBCA"), WHICH ARE REPRODUCED AS ANNEX IV TO THIS PROXY
STATEMENT. See "DISSENTING SHAREHOLDERS' RIGHTS."
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following selected consolidated financial data as of and for each of
the five years in the period ended September 30, 1998 are derived from
consolidated financial statements of the Company. The financial statements for
the years 1994 through 1997 have been audited by Ernst & Young LLP, independent
auditors. The financial statements for the year 1998 have been audited by
Deloitte & Touche LLP, independent auditors. The selected financial data for the
nine months ended June 30, 1999 and 1998 are derived from the unaudited
financial statements of the Company, which, in the opinion of the Company,
reflect all adjustments necessary for a fair presentation of the results for the
unaudited periods. Operating results for the nine months ended June 30, 1999 are
not necessarily indicative of the results that may be achieved for the fiscal
year ending September 30, 1999. The data should be read in conjunction with the
financial statements and other financial information included or incorporated by
reference in this Proxy Statement. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED JUNE
YEARS ENDED SEPTEMBER 30, 30,
-------------------------------------------------------------- -----------
1998 1997 1996 1995 1994 1999
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Revenues............................................ $ 171,435 $ 150,867 $ 115,196 $ 89,844 $ 61,360 $ 144,935
Costs and expenses (net of amounts allocated to
affiliates):
Cellular operations................................ 100,905 94,497 76,123 68,929 50,856 83,972
Corporate.......................................... 23,310 (985) 880 1,327 406 3,019
Total depreciation and amortization................ 26,636 22,116 19,750 16,655 11,578 21,346
Write-down of investment in cellular system
equipment........................................ -- -- -- -- 3,117 0
---------- ---------- ---------- ---------- ---------- -----------
Operating income (loss)............................. 20,584 35,239 18,443 2,933 (4,597) 36,598
Equity in net income (loss) loss of affiliates...... 5,127 (7,589) (1,636) (5,028) (5,092) 4,629
Minority interest in net income of consolidated
affiliates......................................... (5,701) (2,964) (1,123) (964) (544) (3,025)
Gains (losses) on sales of affiliates and other..... -- 350 (250) 19,471 3,912 0
Amortization of deferred costs...................... (2,651) (1,072) (2,090) (940) (1,072) (2,465)
Interest expense.................................... (49,212) (29,464) (28,208) (26,044) (21,339) (43,896)
Interest income..................................... 4,876 6,532 10,468 13,046 12,081 2,148
---------- ---------- ---------- ---------- ---------- -----------
Income (loss) before income taxes and extraordinary
charge............................................. (26,977) 1,032 (4,396) 2,474 (16,651) (6,011)
Income tax expense.................................. -- -- -- 400 100 597
---------- ---------- ---------- ---------- ---------- -----------
Income (loss) before extraordinary charge........... (26,977) 1,032 (4,396) 2,074 (16,751) (6,608)
Extraordinary charge................................ (33,500) -- -- (2,012) -- 0
---------- ---------- ---------- ---------- ---------- -----------
Net income (loss)................................... $ (60,477) $ 1,032 $ (4,396) $ 62 $ (16,751) $ (6,608)
---------- ---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- ---------- -----------
Basic and diluted income (loss) per common share
before extraordinary charge........................ $ (.68) $ .01 $ (.06) $ .03 $ (.29) $ (0.29)
Extraordinary charge................................ (.85) -- -- (.03) -- --
---------- ---------- ---------- ---------- ---------- -----------
Basic and diluted net income (loss) per common
share.............................................. $ (1.53) $ .01 $ (.06) $ -- $ (.29) $ (0.29)
---------- ---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- ---------- -----------
Weighted average shares outstanding................. 39,397,393 68,835,650 68,636,015 60,767,960 57,885,755 22,662,985
---------- ---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- ---------- -----------
BALANCE SHEET DATA (END OF PERIOD)(1):
Working capital..................................... $ 38,065 $ 15,840 $ 16,246 $ 39,911 $ 25,525 $ 3,200
Investments in and advances to affiliates........... 33,637 47,211 57,245 56,919 61,909 27,080
Net property and equipment.......................... 154,598 143,875 118,099 105,289 79,918 168,062
Total assets........................................ 384,752 352,916 331,837 325,668 282,638 432,337
Long-term debt...................................... 682,999 250,852 245,845 246,357 243,913 727,536
Total liabilities................................... 720,200 291,016 268,855 267,012 266,731 774,022
Shareholders' equity (deficit)(2)................... (335,448) 61,900 62,982 58,656 15,906 (341,685)
<CAPTION>
NINE MONTHS
ENDED JUNE
30,
-----------
1998
-----------
<S> <C>
STATEMENT OF OPERATIONS DATA(1):
Revenues............................................ $ 116,623
Costs and expenses (net of amounts allocated to
affiliates):
Cellular operations................................ 74,237
Corporate.......................................... 23,002
Total depreciation and amortization................ 20,184
Write-down of investment in cellular system
equipment........................................ 0
-----------
Operating income (loss)............................. (800)
Equity in net income (loss) loss of affiliates...... 2,700
Minority interest in net income of consolidated
affiliates......................................... (3,149)
Gains (losses) on sales of affiliates and other..... 0
Amortization of deferred costs...................... (2,043)
Interest expense.................................... (33,858)
Interest income..................................... 3,888
-----------
Income (loss) before income taxes and extraordinary
charge............................................. (33,262)
Income tax expense.................................. 0
-----------
Income (loss) before extraordinary charge........... (33,262)
Extraordinary charge................................ (33,500)
-----------
Net income (loss)................................... $ (66,762)
-----------
-----------
Basic and diluted income (loss) per common share
before extraordinary charge........................ $ (0.74)
Extraordinary charge................................ (0.74)
-----------
Basic and diluted net income (loss) per common
share.............................................. $ (1.48)
-----------
-----------
Weighted average shares outstanding................. 45,041,049
-----------
-----------
BALANCE SHEET DATA (END OF PERIOD)(1):
Working capital..................................... $ 33,515
Investments in and advances to affiliates........... 40,756
Net property and equipment.......................... 144,510
Total assets........................................ 377,274
Long-term debt...................................... 682,999
Total liabilities................................... 716,840
Shareholders' equity (deficit)(2)................... (339,566)
</TABLE>
- ------------------
(1) Markets in which the Company holds a greater than 50% net interest are
reflected on a consolidated basis in the Company's consolidated financial
statements. Markets in which the Company holds a net interest which is 50%
or less but 20% or greater are accounted for under the equity method.
Markets in which the Company holds a less than 20% interest are accounted
for under the cost method. The following table sets forth the number of
markets and relevant accounting methods at the end of each of the last five
fiscal years and at the end of the nine months ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
JUNE
YEARS ENDED SEPTEMBER 30, 30,
---------------------------------------- ------
1998 1997 1996 1995 1994 1999
---- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Consolidated.......................................................... 48 46 46 45 42 49
Equity................................................................ 17 18 18 20 35 16
Cost.................................................................. 17 18 18 18 18 17
-- -- -- -- -- --
Total................................................................. 82 82 82 83 95 82
-- -- -- -- -- --
-- -- -- -- -- --
<CAPTION>
NINE
MONTHS
ENDED
JUNE
30,
------
1998
------
<S> <C>
Consolidated.......................................................... 46
Equity................................................................ 18
Cost.................................................................. 18
--
Total................................................................. 82
--
--
</TABLE>
(2) No cash dividends were declared or paid during any period presented.
10
<PAGE>
PRICE OF COMMNET COMMON STOCK
CommNet Common Stock is traded on the Nasdaq National Market under the
symbol "CELS." The following table sets forth the range of high and low sale
prices of CommNet Common Stock, as adjusted for the 5 for 1 stock split on
May 7, 1998, for each fiscal quarter since October 1, 1997. The Company's first
fiscal quarter ends December 31, the second fiscal quarter ends March 31, the
third fiscal quarter ends June 30 and the fourth fiscal quarter ends
September 30.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR 1997
First Quarter......................................................................................... $ 6.250 $ 5.425
Second Quarter........................................................................................ 5.900 4.875
Third Quarter......................................................................................... 7.000 4.725
Fourth Quarter........................................................................................ 7.100 6.875
FISCAL YEAR 1998
First Quarter......................................................................................... 7.200 6.650
Second Quarter........................................................................................ 10.000 7.075
Third Quarter......................................................................................... 19.400 8.500
Fourth Quarter........................................................................................ 14.625 7.000
FISCAL YEAR 1999
First Quarter......................................................................................... 12.938 6.000
Second Quarter........................................................................................ 17.000 12.500
Third Quarter......................................................................................... 26.688 15.000
Fourth Quarter (through 9/27/99)...................................................................... 32.500 25.625
</TABLE>
On July 16, 1999, the last trading day before public announcement of the
execution of the Merger Agreement, the last sale price of CommNet Common Stock
on Nasdaq was $30.25 per share. On September 27, 1999, the most recent
practicable date prior to the distribution of this Proxy Statement, the last
sale price of CommNet Common Stock on Nasdaq was $31.125 per share. CommNet
shareholders should obtain current market prices for CommNet Common Stock. The
Company has not paid cash dividends on CommNet Common Stock and does not
anticipate that any cash dividends will be paid in the foreseeable future.
11
<PAGE>
THE COMPANY
As used in this Proxy Statement, the term "RSA" means the Cellular
Geographic Service Area ("CGSA") within a Rural Service Area, as defined by the
FCC, for which CommNet or its affiliates hold the cellular telephone license
issued by the FCC ("the cellular license"), and the term "MSA" means the CGSA
within a Metropolitan Statistical Area, as defined by the FCC, for which the
Company or its affiliates hold the cellular license. As used herein, "pops"
means the estimated total 1998 population of an MSA or RSA CGSA, based upon
Information Decision Systems population estimates. "Net Company pops" means an
MSA's or RSA's pops multiplied by the Company's net ownership interest in an
entity licensed by the FCC to operate a cellular telephone system in that MSA or
RSA. An MSA or RSA is referred to herein as a "market," and a market served by a
cellular telephone system that is managed, directly or indirectly, by the
Company is referred to herein as a "managed market." The radio signal from the
Company's managed systems covers virtually all of the pops within the managed
markets. The number of pops does not represent the current number of users of
cellular services and is not necessarily indicative of the number of users of
cellular services in the future.
The Company operates, manages and finances cellular telephone systems,
primarily in rural markets in the mountain and plains regions of the United
States. The Company's cellular interests currently represent approximately
3,891,000 net Company pops in 83 markets located in 14 states. These markets
consist of 72 RSA markets having a total of 5,271,000 pops and 11 MSA markets
having a total of 1,621,000 pops, of which the Company's interests represent
3,089,000 net Company pops and 801,000 net Company pops, respectively. Systems
in which the Company holds an interest constitute one of the largest geographic
collections of contiguous cellular markets in the United States.
The Company was formed to acquire cellular interests through participation
in the licensing process conducted by the FCC. In order to participate in that
process, the Company formed affiliates which originally were owned at least 51%
by one or more independent telephone companies ("telcos") and no more than 49%
by the Company. In exchange for the Company's 49% interest, the Company offered
to sell shares of CommNet Common Stock to the telcos and agreed to provide
financing to the affiliates. The Company subsequently purchased additional
interests in many of such affiliates, as well as in additional cellular
properties. The Company currently manages 56 of the 83 markets in which it holds
an interest and owns a greater than 50% interest in 49 of its 56 managed
markets. The Company provides capital and financing to entities holding
interests representing approximately 4,591,000 pops, of which 3,891,000 are
included in net Company pops and 700,000 are attributable to parties other than
the Company.
Since completion of the licensing process, the Company has concentrated on
creating an integrated network of contiguous cellular systems comprised of
markets which are managed by the Company. The network currently consists of 56
markets (49 RSA and 7 MSA markets) spanning nine states and represents
approximately 4,281,000 pops and 3,534,000 net Company pops. As of June 30,
1999, the RSA and MSA managed markets had 293,372 and 74,496 subscribers,
respectively.
The Company believes that certain demographic characteristics of the rural
marketplace should further facilitate commercial exploitation of the network. As
compared to urban residents, rural residents travel greater distances by
personal vehicle and have access to fewer public telephones along drive routes.
The Company believes that these factors will sustain demand for mobile
telecommunication service in the rural marketplace. These same factors produce
roaming revenues that are higher as a percentage of total revenues than would
likely be the case in more densely populated urban areas. In-roaming revenues
tend to produce higher margins because roaming calls on average are priced at
higher rates than local calls and because there are no associated sales
commission costs. Future in-roaming revenue growth will be contingent upon the
Company's ability to attract and serve customers of new wireless companies, not
necessarily in markets owned or operated by the Company in rural areas, but in
densely populated adjacent markets where there may be as many as eight wireless
providers, including possibly six PCS operators.
On February 10, 1998, the Company consummated a recapitalization whereby AV
Acquisition Corp., ("AV Acquisition"), a subsidiary of Blackstone CCI Capital
Partners L.P., a Delaware limited partnership ("Blackstone CCI") affiliated with
Blackstone Management Associates II L.L.C., a Delaware limited liability company
("Blackstone"), was merged into the Company (the "1997 Merger") pursuant to an
Agreement
12
<PAGE>
and Plan of Merger dated as of May 27, 1997 (the "1997 Merger Agreement"). At
the effective time of the 1997 Merger, each share of CommNet Common Stock issued
and outstanding (other than those shares described below) was converted, at the
election of the holder thereof and subject to the terms of the 1997 Merger
Agreement, into either (a) the right to receive $36.00 in cash or (b) the right
to retain one fully paid and nonassessable share of CommNet Common Stock. The
following shares of CommNet Common Stock were not subject to conversions
pursuant to the 1997 Merger: shares of CommNet Common Stock held by Blackstone
CCI, and partnerships affiliated with Blackstone that acquired interests in AV
Acquisition prior to the consummation of the 1997 Merger, AV Acquisition, and
any wholly-owned subsidiary of the Company or any wholly-owned subsidiary of AV
Acquisition; fractional shares that were converted to cash; and shares of
CommNet Common Stock in respect of which dissenters' rights had been properly
exercised. The election to retain CommNet Common Stock was subject to proration
so that, following the 1997 Merger, 2,943,055 shares (representing approximately
4% of the issued and outstanding CommNet Common Stock) were retained by existing
shareholders of the Company, representing approximately 13% of the shares of the
Company issued and outstanding immediately after the 1997 Merger. The shares of
CommNet Common Stock owned by Blackstone CCI and the other shareholders of AV
Acquisition represented approximately 87% of the shares of the Company issued
and outstanding after the Merger, resulting in such shareholders of AV
Acquisition becoming the controlling shareholders of the Company. Blackstone CCI
and the other shareholders have contributed all shares of CCI Common Stock owned
by each such shareholder to BCP CommNet in exchange for a percentage of Class A
partnership interests in BCP CommNet equal to the proportionate number of shares
of CCI Common Stock such shareholder contributed relative to the aggregate
number of shares contributed by all of the shareholders.
In addition, on February 10, 1998, the Company repurchased approximately
$176,600,000 of the approximately $176,700,000 aggregate principal amount of its
11 3/4% Senior Subordinated Discount Notes and all of the $80,000,000 aggregate
principal amount of its 11 1/4% Subordinated Notes, and repaid the entire amount
of indebtedness under the Consolidated Loan Agreement dated as of September 6,
1995 among Cellular, Inc. Financial Corporation, a direct wholly owned
subsidiary of the Company, CoBank ACB, as agent and the several lenders party
thereto. The 1997 Merger, debt repayment, and payment of certain costs and
expenses of the 1997 Merger were funded through borrowings under a new
$760,000,000 senior bank credit facility with the Chase Manhattan Bank as
administrative agent and collateral agent, Chase Manhattan Bank Delaware as
fronting bank, and a consortium of lenders.
In April 1999, the Company purchased an additional 11.84% interest in one
managed RSA market for approximately $2 million in cash.
In June 1999, fifteen nonmanaged RSAs in Kansas in which the Company holds
a 3.07% interest entered into a merger agreement with Alltel Corporation. If
consummated, the Company will receive 213,607 shares of Alltel Corporation
common stock. Also in June 1999, the Company entered into a definitive agreement
to sell its interests in four managed RSA markets and a portion of its interest
in a fifth managed RSA market in Iowa for approximately $83.3 million in cash
and repayment of debt totaling approximately $3.4 million. In addition, in July
1999, the Company entered into a definitive agreement to purchase all of the
independent telco interests in one managed MSA market and three managed RSA
markets in Colorado for approximately $17.5 million in cash and assumption and
forgiveness of $5.3 million of debt. Closing of these transactions is subject to
regulatory and other approvals.
In July 1999, the Company purchased an additional 51% interest in one
managed RSA market in Colorado for 190,360 shares of the Company's stock valued
at approximately $5,271,000.
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THE SPECIAL MEETING
MATTERS TO BE CONSIDERED
At the Special Meeting, the shareholders of CommNet will consider and vote
upon the Proposal to approve and adopt the Merger Agreement, including the
Merger, pursuant to which Merger Sub will merge with and into the Company.
The Merger Agreement provides that, following the approval of the Proposal
by a vote of a majority of the outstanding shares of CommNet Common Stock
entitled to vote thereon and the satisfaction or waiver of the other conditions
to the Merger, Merger Sub will be merged with and into the Company, and the
Company will continue as the Surviving Corporation in the Merger and a wholly
owned subsidiary of Vodafone AirTouch. Upon consummation of the Merger, each
issued and outstanding share of CommNet Common Stock issued and outstanding
immediately prior to the Effective Time (together with the associated Right)
(other than shares owned by Parent or any Subsidiary of Parent including Merger
Sub, or by CommNet, or Dissenting Shares (as defined herein)) shall be converted
into the right to receive the Merger Consideration. See "THE MERGER
AGREEMENT--Effect of the Merger."
REQUIRED VOTE
Approval of the Proposal will require the affirmative vote of a majority of
the outstanding shares of CommNet Common Stock held by shareholders entitled to
vote on the Record Date. Pursuant to and subject to the terms of the Voting
Agreement between Parent and BCP CommNet, the owner of approximately 86.18% of
the outstanding shares of CommNet Common Stock, BCP CommNet has agreed to vote
all of its shares of CommNet Common Stock in favor of the adoption of the Merger
Agreement. Accordingly, the vote of BCP CommNet is sufficient to approve the
Merger Agreement without the affirmative vote of any other shareholder. See "THE
VOTING AGREEMENT."
As of the Record Date, directors and executive officers of the Company were
beneficial owners of an aggregate of 1,556,825 shares of CommNet Common Stock
(approximately 6.38% of the outstanding shares), 23,580 shares of which were
represented by immediately exercisable options which are not entitled to vote.
The directors and executive officers of the Company have indicated that they
intend to vote their shares of CommNet Common Stock in favor of the Proposal. In
addition, four of the eight members of the Board are employees or members of
affiliates of BCP CommNet, the owner of 19,695,835 shares (approximately 86.17%
of the outstanding shares) of CommNet Common Stock as of the Record Date. See
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
VOTING AND REVOCATION OF PROXIES
Shares of CommNet Common Stock that are entitled to vote and are
represented by a Proxy properly signed and received at or prior to the Special
Meeting, unless subsequently properly revoked, will be voted in accordance with
the instructions indicated thereon. If a Proxy is signed and returned without
indicating any voting instructions, shares represented by such Proxy will be
voted FOR the Proposal. The Board of Directors is not currently aware of any
business to be acted upon at the Special Meeting other than as described herein.
If other matters are properly brought before the Special Meeting or any
adjournments or postponements thereof, the persons appointed as proxies will
have the discretion to vote or act thereon in accordance with their best
judgment, unless authority to do so is withheld in the Proxy.
Any Proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before the shares represented by such Proxy are voted at
the Special Meeting by (i) attending and voting in person at the Special
Meeting, (ii) giving notice of revocation of the Proxy at the Special Meeting,
or (iii) delivering to the Secretary of CommNet (a) a written notice of
revocation or (b) a duly executed Proxy relating to the same shares and matters
to be considered at the Special Meeting, bearing a date later than the Proxy
previously executed. Attendance at the Special Meeting will not in and of itself
constitute a revocation of a Proxy. All written notices of revocation and other
communications with respect to revocation of Proxies should be addressed as
follows: CommNet Cellular Inc., 8350 East Crescent Parkway, Suite 400,
Englewood,
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Colorado 80111, Attention: Secretary, and must be received before the taking of
the vote at the Special Meeting.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Only holders of CommNet Common Stock at the close of business on the Record
Date will be entitled to receive notice of and to vote at the Special Meeting.
At the close of business on September 27, 1999, the Company had outstanding and
entitled to vote 22,856,345 shares of CommNet Common Stock. Shares of CommNet
Common Stock represented by Proxies which are marked "abstain" or which are not
marked as to any particular matter or matters will be counted as shares present
for purposes of determining the presence of a quorum on all matters. Proxies
relating to street name shares that are voted by brokers will be counted as
shares present for purposes of determining the presence of a quorum on all
matters, but will not be treated as shares having voted at the Special Meeting
as to any proposal as to which authority to vote is withheld by the broker.
The presence, in person or by proxy, at the Special Meeting of the holders
of at least a majority of the shares entitled to vote at the Special Meeting is
necessary to constitute a quorum for the transaction of business. Pursuant to
the terms of the Voting Agreement, BCP CommNet has agreed to be present, in
person or by proxy, at the Special Meeting. Because BCP CommNet is the holder of
approximately 86.17% of the outstanding shares of CommNet Common Stock, such
shares are sufficient to establish a quorum at the Special Meeting. Abstentions
will be counted as present for the purposes of determining whether a quorum is
present but will not be counted as votes cast in favor of the Proposal. Because
the vote on the Proposal requires the approval of a majority of the outstanding
shares of CommNet Common Stock, abstentions will have the same effect as a
negative vote on the Proposal.
DISSENTER'S RIGHTS
Each holder of CommNet Common Stock has a right to dissent from the Merger
and, if the Merger is consummated, to receive fair value for his or her shares
in cash by complying with the provisions of Colorado law, including
Sections 7-113-101 through 7-113-302 of the CBCA. To exercise such rights, a
CommNet shareholder must: (i) deliver to the Company before the vote at the
Special Meeting a written notice of his or her intent to demand payment for his
or her shares; (ii) either vote against the Proposal or abstain from voting with
respect to the Proposal; and (iii) comply with the provisions set forth in the
CBCA following the Special Meeting. A vote against the Proposal will not in and
of itself constitute a written demand for dissenters' rights satisfying the
requirements of the CBCA. The full text of Sections 7-113-101 through 7-113-302
of the CBCA is attached as Annex IV hereto. See "DISSENTING SHAREHOLDERS'
RIGHTS" for a further discussion of such rights.
SOLICITATION OF PROXIES
The Company will bear the cost of the solicitation of Proxies and the cost
of printing and mailing this Proxy Statement. In addition to solicitation by
mail, the directors, officers and employees of the Company may solicit Proxies
from shareholders of the Company by telephone, telegram or by personal
interview. Such directors, officers and employees will not be additionally
compensated for any such solicitation but may be reimbursed for reasonable
out-of-pocket expenses in connection therewith. Arrangements will also be made
with brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of shares held of
record by such persons and the Company will reimburse such custodians, nominees
and fiduciaries for their reasonable out-of-pocket expenses in connection
therewith. Corporate Investor Communications will assist in the distribution of
Proxies by the Company for an estimated fee of $2,000 plus reasonable
out-of-pocket expenses.
If you have any questions or require additional material, please call
Boston Equiserve at 1-800-426-5523.
SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXIES. See
"THE MERGER AGREEMENT--Conversion of Shares; Procedures for Exchange of
Certificates."
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BACKGROUND OF THE MERGER
In February 1999, Arnold C. Pohs, the Chairman of the Board and Chief
Executive Officer of the Company, was contacted separately by two telephone
companies (other than Vodafone AirTouch) regarding the possibility of exploring
a business combination transaction with the Company.
At a regularly scheduled meeting held on February 18, 1999, Mr. Pohs
informed the Board of the contacts from these two companies. The Board discussed
these contacts in light of the Company's strategic plans. Following the February
18 meeting, the Company determined that it would be appropriate to engage Morgan
Stanley as its financial advisor to assist it in evaluating strategic
alternatives.
At a meeting held in early March, members of the Company's senior
management and representatives from Morgan Stanley and The Blackstone Group
L.P., an affiliate of the Company's 86% shareholder, reviewed the Company's
market valuation and the trading performance of the CommNet Common Stock and
discussed alternatives for enhancing shareholder value, including acquisitions
and possible business combinations. At the meeting, Morgan Stanley presented an
approach for soliciting offers from potential purchasers. Morgan Stanley was
instructed by the Company's senior management to plan a targeted auction process
that would obtain the highest value for the Company if it decided to proceed
with a business combination transaction.
The auction would be structured as a two-step process that initially
solicited non-binding indications of interest. Thereafter, selected potential
bidders would be invited to conduct due diligence on the Company, including
reviewing documents in a data room and attending management presentations.
Morgan Stanley and the Company, based upon their collective experience and
knowledge of the telecommunications industry, compiled a list of prospective
strategic and financial purchasers who would be contacted regarding their
potential interest in a possible transaction. Morgan Stanley also assisted the
Company in preparing a confidential memorandum describing the Company for use in
discussions with prospective purchasers (the "Descriptive Memorandum").
The Company and Morgan Stanley began to contact potential purchasers in
April 1999. Initial contacts made with potential purchasers consisted of a brief
discussion of the Company's possible interest in engaging in a business
combination and an inquiry as to whether the potential purchaser would be
interested in receiving further information. Morgan Stanley then sent a package
of publicly available information regarding the Company to 18 potential
purchasers that indicated an interest in pursuing a possible transaction.
Following its execution of a confidentiality agreement, each of the 18 potential
bidders, including Vodafone AirTouch, was sent the Descriptive Memorandum.
On May 7, 1999, Morgan Stanley sent letters to the 18 potential purchasers
seeking preliminary non-binding indications of interest by May 21, 1999 and
outlining procedures for conducting due diligence. On May 21, 1999, the Company
received six written indications of interest from potential strategic purchasers
one of which was a joint bid by two bidders (the "Joint Bidder"). Vodafone
AirTouch indicated a purchase price of $20.00 per share. The remaining bids
(some of which contained ranges) were from $19.80 per share to $28.00 per share.
During the month of June, representatives of four of the remaining six
potential purchasers conducted a due diligence review of various legal,
financial and accounting matters with respect to the Company.
On June 17, 1999, Morgan Stanley sent a letter to each of the four bidders
that continued to express an interest in acquiring the Company following its
initial due diligence, including Vodafone AirTouch and the Joint Bidder. The
letter requested that each bidder submit a "final binding offer", including the
aggregate amount of cash consideration offered by such potential purchaser and
the key terms and conditions of its bid, on July 9, 1999. The letter also stated
that such offers should not be conditioned on financing, additional corporate
approvals or additional due diligence and that such offers should remain open
until August 9, 1999. The letter was accompanied by a merger agreement and the
potential purchasers were instructed to submit any comments thereon with their
final offers. Subsequently, the four bidders were sent a proposed voting
agreement containing BCP CommNet's obligation to vote for the transaction.
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On the afternoon of July 9, Vodafone AirTouch and the Joint Bidder each
submitted a binding offer to the Company and Morgan Stanley. The two other
remaining potential purchasers had declined to make a final bid. The Vodafone
AirTouch proposal (the "Vodafone AirTouch Proposal") contemplated an all cash
merger transaction pursuant to which a subsidiary of Vodafone AirTouch would
acquire all of the outstanding CommNet Common Stock for $29.50 per share in
cash, plus annual interest of 8% compounded daily from the date of signing until
the closing of the transaction. The Vodafone AirTouch Proposal indicated that it
was not subject to any financing conditions and that the offer had been approved
by the Vodafone AirTouch board of directors. The Vodafone AirTouch Proposal
stated that it would expire on August 10, 1999. The Company, together with
Morgan Stanley and Simpson Thacher & Bartlett ("Simpson Thacher"), counsel to
the Company, reviewed the Vodafone AirTouch Proposal, including Vodafone's
comments to the merger agreement and the voting agreement, over the course of
the next several days and representatives of Morgan Stanley and Vodafone
AirTouch had additional conversations concerning the terms of the Vodafone
AirTouch Proposal during that period.
As a result of these conversations, Vodafone AirTouch delivered to Morgan
Stanley a revised bid on July 14, 1999 in which it confirmed its offer to
purchase the Company and increased the price per share offered from $29.50 to
$31.00, in each case plus 8% annual interest from the date of signing until the
closing of the transaction. In response to concerns raised by the Company, in
its revised proposal Vodafone AirTouch agreed that general industry and economic
changes would be excluded from any determination as to whether there had been a
material adverse change in the Company and agreed to reduce the scope of the
representations and warranties to be given by the Company.
The Joint Bidder proposal (the "Joint Bidder Proposal") contemplated an all
cash merger transaction pursuant to which a subsidiary of a newly formed entity,
equally owned by the two entities comprising the Joint Bidder, would acquire all
of the outstanding CommNet Common Stock for $29.5235 per share in cash, plus
annual interest of 8% from January 1, 2000 until the closing of the transaction.
The purchase price offered by the Joint Bidder was based on certain assumptions,
including the amount of transaction fees and expenses, the value of the payout
to the Company's option holders upon consummation of a transaction and the
number of outstanding shares of CommNet Common Stock. The Joint Bidder Proposal
also contained certain conditions, including with respect to the financing of
the transaction and the approval of the board of directors of one of the
entities comprising the Joint Bidder, which approval was scheduled for
consideration by such entity's board on July 21, 1999. The Joint Bidder Proposal
indicated that it would expire on July 26, 1999 and provided that the closing of
the transaction could not occur before February 1, 2000. The Company, together
with Morgan Stanley and Simpson Thacher, reviewed the Joint Bidder Proposal,
including the Joint Bidder's comments to the proposed merger agreement and
voting agreement, over the course of the next several days, and Morgan Stanley
and the Joint Bidder had additional conversations concerning the terms of the
Joint Bidder Proposal during that period.
As a result of these conversations, the Joint Bidder delivered to Morgan
Stanley a revised bid on July 14, 1999 in which it confirmed its offer to
purchase the Company and increased the price per share offered from $29.5235 to
$32.35, in each case plus 8% annual interest from January 1, 2000 until the
closing of the transaction. While the revised Joint Bidder Proposal removed the
contractual financing condition contained in its initial offer, the financing of
the transaction was still subject to contingencies. The entity that the Joint
Bidder proposed would enter into the Merger Agreement with the Company was a
shell entity with no operations or assets. Neither of the Joint Bidders were
willing to guarantee the performance of the shell under the agreement. Moreover,
(i) no documentation was provided by the Joint Bidders with respect to their
commitment to provide equity to the shell, (ii) one of the Joint Bidders needed
debt financing to fund its potential investment in the Joint Bidder and the
proposed commitment letter relating to such debt financing contained "market
out" and broad material adverse effect conditions and (iii) the Joint Bidder
needed debt financing to fund its potential acquisition of the Company and the
proposed commitment letter relating to such debt financing contained "market
out" and broad material adverse effect conditions.
In addition, the Joint Bidder Proposal, as revised, contained several
significant changes to the proposed Merger Agreement not included in the revised
Vodafone AirTouch Proposal that were detrimental to the Company, including the
(i) deletion of the "fiduciary out" provisions, (ii) prohibition on closing the
transaction between December 10, 1999 and January 4, 2000, (although the Joint
Bidder no longer required
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that a closing not occur prior to February 1, 2000) and (iii) addition of
certain significant covenants governing the Company's operation between signing
and closing. The "fiduciary out" provisions, which Vodafone AirTouch's proposal
modified but did not eliminate, would allow the Company, subject to certain
conditions, to provide information to, and negotiate with, a third party which
makes an unsolicited proposal to acquire the Company and to terminate the Merger
Agreement if the Company's Board approves a Superior Proposal (as defined
below), subject to payment of a termination fee. Upon termination of the Merger
Agreement, the Voting Agreement would terminate thereby allowing BCP CommNet to
vote its controlling interest in the Company in favor of the Superior Proposal.
Following the receipt of the revised proposals from Vodafone AirTouch and
the Joint Bidder, the Company, with the assistance of Morgan Stanley and Simpson
Thacher, compared the revised proposals and determined that Vodafone AirTouch's
proposal was more favorable to the Company and that the Company should continue
negotiations with Vodafone AirTouch. Although the Joint Bidder's $32.35 per
share price was nominally higher than Vodafone's $31.00 per share price,
interest on the $31.00 per share Vodafone AirTouch Proposal would begin to
accrue upon signing of the Merger Agreement, but interest on the $32.35 per
share Joint Bidder Proposal would not begin to accrue until January 1, 2000. In
light of the need to obtain FCC approval for the transaction, the Company
estimated that the transaction would not reasonably be expected to close for at
least five months. Accordingly, in comparing the two bids, the Vodafone AirTouch
Proposal actually represented an offer of approximately $32.00 per share, with
the additional $1.00 per share representing the estimated accrued interest
between the signing of the Merger Agreement and a closing five months later. The
Company and its representatives also noted that Vodafone AirTouch's proposal had
a higher probability of being consummated because of the financing contingencies
associated with the Joint Bidder's proposal and the need to obtain the approval
of the board of directors of one of the Joint Bidders.
On July 16, 1999, Simpson Thacher, after consultations with the Company and
Morgan Stanley, delivered a revised Merger Agreement to Vodafone AirTouch which
responded to the markup of the Merger Agreement contained in the Vodafone
AirTouch Proposal, as revised by the July 14 letter. Later that day, the Company
and Simpson Thacher negotiated the terms of the Merger Agreement with Vodafone
AirTouch. The negotiations included the scope of the termination provisions,
including the amount of the termination fee payable to Vodafone AirTouch if the
Merger Agreement were terminated by the Company under certain circumstances.
A meeting of the Company's Board was held on July 18, 1999 to consider the
Merger Agreement and the Merger. All members of the Board participated in the
meeting. Colorado counsel to the Company and Simpson Thacher discussed with the
Board its duties in evaluating the proposed transaction. Morgan Stanley then
reviewed the process by which it had sought and contacted potential buyers for
the Company and the manner in which it conducted the auction. Morgan Stanley
also provided the Board with a review of the principal economic terms of each of
the six initial proposals and the final proposals received from Vodafone
AirTouch and the Joint Bidder. Morgan Stanley also made a presentation to the
Board concerning its analysis of the fairness of the Merger to the Company's
shareholders from a financial point of view. See "--Opinion of Morgan Stanley."
Following discussion, Morgan Stanley delivered its oral opinion (which was
subsequently confirmed in writing) that, as of such date, and based upon the
assumptions made, matters considered and limits of review set forth in such
opinion, the consideration to be received by the holders of CommNet Common Stock
in the Merger, other than Parent and its affiliates, was fair from a financial
point of view to such holders. See "--Opinion of Morgan Stanley."
Simpson Thacher then discussed with the Board the material provisions of
the Merger Agreement and the Voting Agreement, and compared them to the terms of
the revised Joint Bidder Proposal. Morgan Stanley indicated that Vodafone
AirTouch's proposed termination fee of $35 million would not meaningfully impair
the possibility of a superior alternative transaction.
The members of the Board then entered into a discussion concerning the
terms of the Merger Agreement, including posing questions to the Company's
management and advisors. The Board also considered the factors discussed below
under "--Recommendation of the Board of Directors; Reasons for the Merger."
Following this discussion, the Board unanimously adopted resolutions (i)
determining that the
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Merger Agreement and the transactions contemplated thereby, including the
Merger, taken together are fair to and in the best interests of the shareholders
of the Company, (ii) approving the execution and delivery of the Merger
Agreement and the performance by the Company of its obligations thereunder and
the execution and delivery of all other agreements ancillary thereto and
(iii) recommending to the shareholders of the Company the approval of the Merger
Agreement and the consummation of the transactions contemplated thereby.
On the evening of July 18, the Merger Agreement was executed and delivered
by the Company and Vodafone and on the morning of July 19, the Company and
Vodafone AirTouch issued a joint press release announcing the proposed Merger.
RECOMMENDATION OF THE BOARD OF DIRECTORS; REASONS FOR THE MERGER
The Board has unanimously adopted and approved the Merger Agreement and has
determined that the Merger is fair to and in the best interests of the Company
and its shareholders and recommends that holders of CommNet Common Stock vote
FOR approval and adoption of the Merger Agreement. In the course of reaching its
decision to adopt and approve the Merger Agreement and the Merger, the Board
consulted with the Company's legal and financial advisors and considered a
number of factors, including, among others, the following principal factors
which were material to the Board's decision:
o the fact that Morgan Stanley conducted a broad-based search for potential
acquirors, including identifying all potential strategic bidders (a large
proportion of which were included in the pool of potential bidders) which
resulted in a two-step auction and the Merger Consideration, together
with the other terms of the Merger Agreement, represented the most
favorable alternative available to the Company;
o the opinion of Morgan Stanley delivered at the July 18, 1999 meeting of
the Board to the effect that, as of such date, and based upon the
assumptions made, matters considered and limits of review set forth in
such opinion, the proposed consideration to be received by the holders of
CommNet Common Stock in the Merger, other than Parent and its affiliates,
is fair from a financial point of view to such holders, and the
presentation of Morgan Stanley at the July 18, 1999 Board meeting in
connection with its opinion. See "--Opinion of Morgan Stanley";
o the premium represented by the approximately $32.00 per share price
(consisting of $31 per share plus 8% annual interest from the date of
signing until the closing of the Merger estimated to be five months
later) to be received by shareholders of the Company over the trading
price of the CommNet Common Stock (5.8% over the closing market price on
the last trading day prior to public announcement of the Merger; 11.7%
over the closing market price one week prior to public announcement of
the Merger; and 32.3% over the closing market price one month prior to
public announcement of the Merger);
o the ability of the Company, subject to certain conditions (i) to provide
information to, and negotiate with, a third party which has made an
unsolicited Acquisition Proposal and (ii) to terminate the Merger
Agreement if the Company's Board approves a Superior Proposal, subject to
payment of a termination fee in an amount which the Company's Board and
its financial advisor believed would not preclude the possibility of a
competing transaction;
o the relatively limited number of closing conditions which provides
increased certainty that the Merger will be consummated, including the
absence of a financing condition and the exclusion from the material
adverse effect condition of changes affecting companies in the cellular
telephone industry generally and those resulting from general economic
conditions;
o the other terms and conditions of the Merger Agreement; and
o the existence and terms of the Voting Agreement.
In its deliberations regarding the adoption and approval of the Merger
Agreement and the Merger, the Board also considered the possibility that the
Company might be sold for a higher price at some time in the future and the fact
that certain directors and executive officers of the Company may have interests
that
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present them with potential conflicts of interest in connection with the Merger.
See "--Interests of Certain Persons in the Merger."
The foregoing discussion of the information and factors considered by the
Board is not intended to be exhaustive but is believed to include all material
factors considered by the Board. In view of the variety of factors considered in
connection with its evaluation of the Merger, the Board did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weight to the specific factors considered in reaching its determination. In
addition, individual members of the Board may have given different weights to
different factors. In the course of its deliberations, the Board did not
establish a range of values for the Company; however, based on the factors
outlined above and on the presentation and opinion of Morgan Stanley, the Board
determined that the Merger Agreement and the Merger are fair to, and in the best
interests of, the Company and its shareholders and recommended shareholder vote
FOR the adoption of the Merger Agreement.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
OPINION OF MORGAN STANLEY
Under a letter agreement dated as of June 4, 1999, Morgan Stanley was
engaged to provide financial advisory services to CommNet. Morgan Stanley was
selected by the CommNet Board to act as its financial advisor for the merger
based on Morgan Stanley's qualifications, expertise and reputation, as well as
its knowledge of the business and affairs of CommNet. On July 18, 1999, Morgan
Stanley delivered its oral opinion to the CommNet Board that, as of such date,
the consideration to be received by the holders of shares of common stock
pursuant to the Merger Agreement was fair from a financial point of view to the
CommNet shareholders other than Parent and its affiliates. Morgan Stanley later
confirmed its oral opinion in writing by delivery of its written opinion dated
July 18, 1999, which stated the considerations and assumptions upon which Morgan
Stanley's oral opinion was based.
The full text of the opinion dated July 18, 1999, which sets forth
assumptions made, procedures followed, matters considered and limitations on the
scope of the review undertaken by Morgan Stanley in rendering its opinion, is
attached as Appendix III to this proxy statement. CommNet shareholders are urged
to read the entire opinion. Morgan Stanley's written opinion is directed to the
CommNet Board and only addresses the fairness of the consideration to be
received by the holders of shares of common stock pursuant to the Merger
Agreement from a financial point of view as of the date of the opinion. Morgan
Stanley's written opinion does not address any other aspect of the Merger and
does not constitute a recommendation to any CommNet shareholder as to how to
vote at the Special Meeting. This summary of the opinion is qualified in its
entirety by reference to the opinion's full text.
In arriving at Morgan Stanley's written opinion, Morgan Stanley, among
other things:
o reviewed certain publicly available financial statements and other
information of CommNet;
o reviewed and discussed certain internal financial statements and other
financial and operating data concerning CommNet prepared by the
management of the Company;
o analyzed certain financial projections prepared by the management of
CommNet;
o discussed the past and current operations and financial conditions and
the prospects of CommNet with senior executives of the Company;
o reviewed the reported prices and trading activity for the CommNet Common
Stock;
o compared the financial performance of the Company and the prices and
trading activity of the CommNet Common Stock with that of certain other
comparable publicly traded companies and their securities;
o reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;
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o participated in discussions and negotiations among representatives of the
Company and Parent and their legal advisors in connection with the
Merger;
o reviewed the Merger Agreement and certain related documents; and
o performed such other analyses and considered such other factors as Morgan
Stanley deemed appropriate.
Morgan Stanley has assumed and relied upon without independent verification
the accuracy and completeness of the information reviewed by it for the purposes
of its opinion. With respect to the financial projections, Morgan Stanley has
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the future financial performance
of the Company. Morgan Stanley has not made any independent valuation or
appraisal of the assets or liabilities of the Company, nor has it been furnished
with any such appraisals. Morgan Stanley has assumed that the Merger will be
consummated in accordance with the terms set forth in the Merger Agreement.
Morgan Stanley's opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to Morgan Stanley
as of, the date of such opinion.
The following is a brief summary of the material financial analyses
performed by Morgan Stanley in connection with its oral opinion and the
preparation of its opinion letter dated July 18, 1999. Certain of these
summaries of financial analyses include information presented in tabular format.
In order to fully understand the financial analyses used by Morgan Stanley, the
tables must be read together with the text of each summary. The tables alone do
not constitute a complete description of the financial analyses. Morgan Stanley
used financial estimates for CommNet developed by management of the Company in
performing some of its analyses.
Historical Public Market Trading Value. Morgan Stanley reviewed the recent
stock price performance of CommNet based on an analysis of the historical
closing prices and trading volumes from February 10, 1998, the date of the
closing of the 1997 Merger, through July 14, 1999. The following table lists the
average daily closing prices of shares of CommNet Common Stock for the periods
indicated. Morgan Stanley then compared the Merger Consideration at closing of
approximately $32.00 to the average CommNet closing prices over this period.
COMMNET HISTORICAL CLOSING PRICES
<TABLE>
<CAPTION>
PREMIUMS
IMPLIED BY
AVERAGE OFFER
------- -----------
<S> <C> <C>
Since 2/10/98.......................................................... $13.52 136.8%
One Year............................................................... 14.38 122.6
Six Months............................................................. 18.48 73.2
Three Months........................................................... 21.41 49.5
One Month.............................................................. 24.18 32.3
One Week............................................................... 28.66 11.7
Current (7/14/99)...................................................... 29.88 7.1
</TABLE>
Comparative Stock Price Performance. As part of its analysis, Morgan
Stanley reviewed the recent stock price performance of CommNet and compared this
performance with that of a group of five domestic cellular companies including:
DOMESTIC CELLULAR COMPANIES
- ---------------------------
Centennial Cellular Corp.
Rural Cellular Corporation
Price Communications Corporation
United States Cellular Corporation
Western Wireless Corporation
21
<PAGE>
Morgan Stanley observed that over the period from February 10, 1998, to
July 14, 1999, the closing market prices appreciated as set forth below:
<TABLE>
<CAPTION>
% APPRECIATION
--------------
<S> <C>
CommNet............................................................. 334%
Domestic Cellular Companies (equal-weighted index).................. 162%
</TABLE>
Peer Group Comparison. Morgan Stanley compared certain financial
information of CommNet with corresponding financial information for the five
domestic cellular companies referred to above.
Morgan Stanley analyzed, among other things, the current aggregate value of
each company expressed as a multiple of earnings before interest, taxes, and
depreciation and amortization expense ("EBITDA") in the calendar year 1999 and
2000, pops as of March 31, 1999 and cellular subscribers as of March 31, 1999.
As of July 14, 1999, and based on estimates of EBITDA taken from selected
securities research analysts, the statistics derived from this analysis are set
forth below:
<TABLE>
<CAPTION>
DOMESTIC CELLULAR
COMMNET COMPANIES
PRE-TRANSACTION TRANSACTION --------------------------
COMMNET MULTIPLES MEDIAN HIGH LOW
--------------- ----------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
1999 EBITDA Multiples............................. 11.7x 14.5x 10.9x 16.9x 9.9x
2000 EBITDA Multiples............................. 10.1x 12.5x 9.6x 14.1x 8.3x
lQ99 POP Multiples................................ $ 307 $ 381 $ 249 $ 450 $ 214
lQ99 Subscriber Multiples......................... $ 3,140 $ 3,899 $3,153 $5,267 $2,330
</TABLE>
Morgan Stanley calculated the financial multiples and ratios for CommNet
based on an unaffected trading price of $21 as of mid-June prior to market
rumors of a possible transaction which indicated that, based on this price,
CommNet Common Stock traded at a multiple of 11.7x estimated EBITDA for the
calendar year 1999 and 10.1x estimated EBITDA for the calendar year 2000. Morgan
Stanley noted that the Merger Consideration at closing represented a multiple of
14.5x calendar year 1999 EBITDA and 12.5x calendar year 2000 EBITDA.
No company used in the peer group comparison is identical to CommNet. In
evaluating the peer group companies, Morgan Stanley made judgments and
assumptions with regard to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of CommNet (e.g., the impact of competition on CommNet and the industry
generally, industry growth and the absence of any material adverse change in the
financial condition and prospects of CommNet or the industry or in the financial
markets in general).
Analysis of Selected Precedent Transactions. As part of its analysis,
Morgan Stanley reviewed the following nine transactions involving domestic
cellular companies since 1998:
o January 1998, AirTouch Communications, Inc. / U S WEST New Vector
o February 1998, Rural Cellular Corporation / Atlantic Cellular
o March 1998, American Cellular Corporation / PriCellular Corporation
o March 1998, ALLTEL Corporation / 360 Communications Company
o July 1998, Welsh, Carson / Centennial Cellular Corp.
o July 1998, Dobson Communications Corporation / Sygnet Wireless, Inc.
o October 1998, AT&T Corp. / Vanguard Cellular Systems Inc.
o May 1999, SBC Communications & Telefonos de Mexico SA / Cellular
Communications of Puerto Rico
o June 1999, ALLTEL Corporation / Liberty Cellular Corporation
For each of these, Morgan Stanley reviewed the prices paid and calculated
the multiples of one year forward EBITDA. This analysis indicated multiples
ranging from 7.0x to 10.5x one year forward EBITDA
22
<PAGE>
for these transactions, with a median multiple of 10.2x. Morgan Stanley noted
that Parent's offer price at closing represented a multiple of 12.5x forward
year EBITDA (calendar year 2000).
No transaction used in the analysis of selected precedent transactions is
identical to the Merger. In evaluating these transactions, Morgan Stanley made
judgments and assumptions with regard to industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of CommNet (e.g., the impact of competition on CommNet and
the industry generally, industry growth and the absence of any material adverse
change in the financial condition and prospects of CommNet or the industry or in
the financial markets in general).
Discounted Cash Flow Analysis. Morgan Stanley performed a discounted cash
flow analysis (i.e., an analysis of the present value of projected cash flows
using discount rates and terminal year EBITDA multiples as indicated below) of
CommNet's cellular business. Morgan Stanley analyzed CommNet's cellular business
using a forecast for the period beginning January 1, 2000 and ending
December 31, 2002, based on estimates developed by CommNet's management. Morgan
Stanley estimated CommNet's discounted cash flow value by using a discount rate
of 11% and terminal multiples of estimated 2002 EBITDA ranging from 10.0x to
11.0x. This analysis yielded a range of values for the CommNet Common Stock of
approximately $25.00 per share to $29.00 per share. The Merger Consideration at
closing of approximately $32.00 represented a premium to the discounted cash
flow ("DCF") values of 10% to 28%.
Morgan Stanley performed a variety of financial and comparative analyses
solely for purposes of providing its opinion to the CommNet Board as to the
fairness from a financial point of view to the CommNet shareholders of the
merger consideration. While the foregoing summary describes the analyses and
factors reviewed by Morgan Stanley for its opinion, it is not intended to be a
complete description of all the analyses performed by Morgan Stanley in arriving
at its opinion.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In arriving
at its opinion, Morgan Stanley considered the results of all of its analyses as
a whole and did not attribute any particular weight to any analysis or factor
considered by it. Furthermore, selecting any portion of its analyses, without
considering all analyses, would create an incomplete view of the process
underlying its opinion. In addition, Morgan Stanley may have given various
analyses and factors more or less weight than other analyses and factors, and
may have deemed various assumptions more or less probable than other
assumptions, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be Morgan Stanley's view of the
actual value of CommNet.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of CommNet. The analyses
performed by Morgan Stanley are not necessarily indicative of future results or
actual values, which may be significantly more or less favorable than those
suggested by such estimates. The analyses performed were prepared solely as part
of Morgan Stanley's analysis of the fairness of the merger consideration from a
financial point of view to the CommNet shareholders and were conducted in
connection with the delivery of its opinion. The analyses are not intended to be
appraisals or to reflect the prices at which CommNet might actually be sold or
the price at which their securities may trade.
The Merger Consideration was determined through arm's length negotiations
between CommNet and Parent and was approved by the CommNet Board. Morgan Stanley
did not recommend any specific merger consideration to CommNet or that any
specific merger consideration constituted the only appropriate merger
consideration for the Merger. Morgan Stanley's opinion to the CommNet Board was
one of many factors taken into consideration by the CommNet Board in making its
determination to approve the Merger. Consequently, the Morgan Stanley analyses
described above should not be viewed as determinative of the opinion of the
CommNet Board with respect to the value of CommNet or whether the CommNet Board
would have been willing to agree to different merger consideration.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
23
<PAGE>
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. In the ordinary course of
Morgan Stanley's trading, brokerage and financing activities, Morgan Stanley or
its affiliates may at any time hold long or short positions, may trade, make a
market or otherwise effect transactions, for its own account or for the accounts
of customers, in the securities of CommNet and Parent. In the past, Morgan
Stanley and its affiliates have provided financial advisory and financing
services for CommNet, affiliates of BCP CommNet and AirTouch and have received
fees for the rendering of these services.
Under the letter agreement dated as of June 4, 1999, Morgan Stanley has
provided advisory services and a financial opinion in connection with the Merger
and CommNet has agreed to pay a customary fee to Morgan Stanley based on the
aggregate value of the transaction if the Merger is consummated. In addition,
CommNet has also agreed to indemnify Morgan Stanley and its affiliates, their
respective directors, officers, agents and employees and each person, if any,
controlling Morgan Stanley or any of its affiliates against certain liabilities
and expenses, including the fees of its legal counsel and certain liabilities
under the federal securities laws, arising out of Morgan Stanley's engagement
and the transactions in connection therewith.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and executive officers of the Company may have interests,
described herein, that present them with potential conflicts of interest in
connection with the Merger. The Board of Directors was aware of the potential
conflicts described below and considered them in addition to the other matters
described under "--Recommendation of the Board of Directors; Reasons for the
Merger."
Shares of CommNet Common Stock held by officers and directors of the
Company will be converted into the right to receive the same consideration as
shares of CommNet Common Stock held by other shareholders.
Pursuant to the Merger Agreement, the Parent has agreed for six years after
the Effective Time to maintain the current provisions regarding indemnification
of officers and directors contained in the Company's Certificate of
Incorporation and By-laws and will, subject to certain limitations, maintain for
six years directors' and officers' liability insurance and fiduciary liability
insurance policies containing terms and conditions which are not less
advantageous than any such policies which may be in effect prior to the
Effective Time. See "THE MERGER AGREEMENT--Indemnification and Insurance."
In July 1993, the Board of Directors approved change in control agreements
with Arnold C. Pohs, Chairman of the Board and Chief Executive Officer and David
P. Dwyer, President and Chief Operating Officer. In November 1995, the Board
authorized comparable agreements with Andrew J. Gardner, Executive Vice
President, Treasurer and Chief Financial Officer; David S. Lynn, Executive Vice
President--Network Development; and Timothy C. Morissey, Executive Vice
President--Sales Operations. The purpose of these agreements is to reinforce and
encourage the officers to maintain objectivity and a high level of attention to
their duties without distraction from the possibility of a change in control of
the Company. These agreements provide that in the event of a change in control
of the Company, as that term is defined in these agreements, each officer is
entitled to receive certain severance benefits upon the subsequent termination
or constructive termination of employment, unless such termination is due to
death, disability or voluntary retirement; unless the termination is by the
Company for cause (as defined in these agreements) or is by the officer for
other than good reason (as defined in these agreements).
The severance benefits include the payment of the officer's full base
salary through the date of termination. The severance benefits also include a
lump sum payment equal to 2.99 times the sum of (a) the officer's annual base
salary in effect immediately prior to the circumstances giving rise to
termination, and (b) the actual bonus earned by the officer in the year prior to
the year in which termination occurs. In addition, each officer will be provided
with life and health benefits and a continuation of all other employee benefits
for 12 months following the date of termination. In addition, the officers will
be fully vested in all benefit plans to the extent not otherwise entitled to
100% of all contributions made by the Company on their behalf.
24
<PAGE>
On February 10, 1998, the date of the 1997 Merger, Messrs. Pohs, Dwyer,
Gardner, Lynn and Morrissey executed an amendment to their change in control
agreements. Under the amendment, each officer is entitled to receive certain
severance benefits upon termination or constructive termination of employment
subject to the same conditions as the original agreements, but only if
termination occurs prior to February 10, 2000. In addition, the amendment causes
the agreements to expire on February 10, 2001.
On March 30, 1997, CommNet and Mr. Pohs entered into a Retirement and
Consulting Agreement (the "Consulting Agreement") pursuant to which Mr. Pohs
will receive the following upon his retirement from the Company: (i) a payment
equal in amount to the additional employment contributions and matching
contributions under the CommNet Cellular Inc. Retirement Savings Plan and the
ESOP to which Mr. Pohs would have been entitled had such contributions been
determined without regard to the statutory limits applicable to such
contributions under the Code for the five year period ending on Mr. Pohs'
retirement date; (ii) a payment equal to the present value of five times the
annual premium cost with respect to Mr. Pohs' coverage level and plan option of
the Company's health plan and the Exec-U-Care Medical Reimbursement Insurance;
and (iii) a grant of 82,090 shares of restricted stock under the CommNet
Cellular Inc. Omnibus Stock and Incentive Plan (which shares will vest upon
death, disability, the end of the consulting period described below or a change
of control). The Consulting Agreement also provides that the Company will retain
Mr. Pohs as a consultant for a period of six years following his retirement in
exchange for a consulting fee equal to 50% of Mr. Pohs' final annualized base
salary plus his final year's annualized bonus per year. In the event of a change
in control of the Company, as defined in the Consulting Agreement, (i) if
Mr. Pohs has not yet retired, he may elect to receive the benefits set forth in
his change of control agreement, as described in the two preceding paragraphs,
or to receive the benefits provided for in the Consulting Agreement, and
(ii) if Mr. Pohs has retired, he will be entitled to receive a lump-sum payment
of all consulting fees due for the remaining portion of the consulting
arrangement, and all restrictions on the shares granted pursuant to the
Consulting Agreement will lapse.
The occurrence of the Merger will constitute a change in control of the
Company under these agreements. In the event any payment or benefit to be
received by an officer pursuant to these agreements would be subject to the
federal excise tax, the amount of the benefits payable under these agreements
will be increased such that the net amount retained by the officer after
deduction of any excise tax on such payment and any federal, state and local tax
and excise tax upon such additional payment shall be equal to the full severance
benefits contemplated by the agreement.
Certain of the Company's employees are limited partners of CommNet
Management L.P., a Delaware limited partnership ("CommNet Management"), and a
limited partner of BCP CommNet, the 86.17% shareholder of the Company. Pursuant
to the terms of the limited partnership agreements that govern CommNet
Management and BCP CommNet, CommNet Management is entitled to payments in
connection with certain dispositions by BCP CommNet of its shares of CommNet
Common Stock (including pursuant to the Merger). The limited partnership
agreements also provide that such funds will be distributed to CommNet
Management's limited partners. The funds due CommNet Management pursuant to the
limited partnership agreements will be payable by BCP CommNet and not the
Company, and will be paid out of the consideration received by BCP CommNet in
the Merger.
25
<PAGE>
DESCRIPTION OF COMMNET CAPITAL STOCK
COMMON STOCK
The Company has 40,000,000 shares of CommNet Common Stock, par value $.001
per share, authorized for issuance. Each share of CommNet Common Stock is
entitled to share pro rata in dividends and distributions with respect to the
CommNet Common Stock when, as and if declared by the Board from funds legally
available therefor. No holder of CommNet Common Stock has any preemptive right
to subscribe for any of the Company's securities. Subject to the rights of
creditors and holders of any Preferred Stock (as defined below) which may be
issued in the future, upon dissolution, liquidation or winding up of the
Company, the assets will be divided on a share-for-share basis among holders of
the shares of CommNet Common Stock. All shares of CommNet Common Stock
outstanding are fully paid and nonassessable.
NONCUMULATIVE VOTING
Each holder of CommNet Common Stock is entitled to one vote per share with
respect to all matters that are required by law to be submitted to shareholders.
The shareholders are not entitled to cumulative voting in the election of
directors. Accordingly, the holders of more than 50% of the shares voting for
the election of directors can elect 100% of the directors if they choose to do
so, subject to the rights, if any, of the holders of Preferred Stock, if any, to
elect directors. Accordingly, the holders of the remaining less than 50% of the
shares voting for the election of the directors could be unable to elect any
person or persons to the Board of Directors.
DIVIDEND POLICY
The Company has not paid dividends on the CommNet Common Stock, and under
the terms of the Merger Agreement, is prohibited from paying dividends in the
future.
PREFERRED STOCK
The Company has 1,000,000 shares of Preferred Stock, par value $.01 per
share (the "Preferred Stock"), authorized for issuance. There is no Preferred
Stock outstanding. The Board may provide for the issuance from time to time of
authorized and unissued shares of Preferred Stock in series and will establish
as to each series the designation and number of shares to be issued and the
relative rights and preferences of each series, including provisions regarding
voting powers, redemption, dividend rights, rights upon liquidation and
conversion rights. Pursuant to a Certificate of Designation of Series and
Determination of Rights and Preferences of Series A Preferred Stock, filed on
December 12, 1990, the Company designated 150,000 shares of Preferred Stock as
Series A Preferred Stock. See "--Shareholder Rights Plan" below. The Merger
Agreement prohibits the Company from issuing shares of Preferred Stock in the
future.
SHAREHOLDER RIGHTS PLAN
On December 10, 1990, the Board of Directors of the Company declared a
dividend distribution of one Right for each outstanding share of CommNet Common
Stock (each, a "Right") to shareholders of record at the close of business on
December 24, 1990. Each Right entitles the registered holder to purchase from
the Company one one-hundredth of a share of Series A Preferred Stock, at a price
of $45 per one one-hundredth of a share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in the Rights
Agreement dated as of December 10, 1990, as amended (the "Rights Agreement")
between the Company and State Street Bank and Trust Company, as successor to
Bank of New York, as rights agent.
The Rights are attached to all CommNet Common Stock certificates and no
separate rights certificates evidencing such Rights (the "Rights Certificates")
have been distributed. The Rights are evidenced by the CommNet Common Stock
certificates and may be transferred with and only with such CommNet Common Stock
certificates. CommNet Common Stock certificates issued after December 24, 1990
contain a notation incorporating the Rights Agreement by reference, and the
surrender for transfer of any certificate for
26
<PAGE>
CommNet Common Stock outstanding will also constitute the transfer of the Rights
associated with the CommNet Common Stock represented by such certificate.
The Rights will separate from the CommNet Common Stock and a Distribution
Date (as defined in the Rights Agreement) will occur upon the earliest of
(i) ten days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 25% or more of the
outstanding shares of CommNet Common Stock (the "Stock Acquisition Date"), (ii)
ten business days (or such later date as may be determined by action of a
majority of the Board of Directors) following the commencement of a tender offer
or exchange offer that would result in a person or group beneficially owning 30%
or more of such outstanding shares of CommNet Common Stock, or (iii) ten
business days after the Board of Directors of the Company declares any person to
be an Adverse Person (as defined in the Rights Agreement).
The Board of Directors may declare a person to be an Adverse Person upon a
determination that such person, alone or together with its affiliates and
associates, has become the beneficial owner of an amount of CommNet Common Stock
which the Board of Directors determines, by at least a majority of the Board of
Directors who are not officers of the Company, to be substantial (which amount
shall in no event be less than 15% of the shares of CommNet Common Stock then
outstanding) and after reasonable inquiry and investigation, including
consultation with such persons as such directors shall deem appropriate, that
(a) such beneficial ownership by such person is intended to cause the Company to
repurchase the CommNet Common Stock beneficially owned by such person or to
cause pressure on the Company to take action or enter into transactions intended
to provide such person with short-term financial gain under circumstances where
the Board of Directors determines the best long-term interests of the Company
and its shareholders would not be served by taking such action or entering into
such transactions at that time or (b) such beneficial ownership is causing or
reasonably likely to cause a material adverse impact (including, but not limited
to, impairment of relationships with customers or impairment of the Company's
ability to maintain its licenses) on the business or prospects of the Company.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on December 24, 2000, unless earlier redeemed by the
Company as described below. As soon as practicable after the Distribution Date,
Rights Certificates will be mailed to holders of record of the CommNet Common
Stock and, thereafter, the separate Rights Certificates will represent the
Rights.
In the event (a "Section 11(a)(ii) Event") that (i) the Board of Directors
declares a person to be an Adverse Person or, (ii) at any time following the
Distribution Date, a person becomes the beneficial owner of more than 20% of the
then outstanding shares of CommNet Common Stock (except pursuant to an offer for
all outstanding shares of CommNet Common Stock which the independent directors
determine to be fair to and otherwise in the best interests of the Company and
its shareholders), proper provision shall be made so that each holder of a Right
will thereafter have the right to receive, upon exercise, CommNet Common Stock
(or, in certain circumstances, cash, property, or other securities of the
Company) having a value equal to two times the Purchase Price.
In the event (a "Section 13 Event") that, at any time following the Stock
Acquisition Date (as defined in the Rights Agreement), (i) the Company is
acquired in a merger or other business combination transaction in which the
Company is not the surviving corporation (other than a merger which follows an
offer described in the preceding paragraph), or (ii) 50% or more of the
Company's assets, cash flow or earning power is sold or transferred, proper
provision shall be made so that each holder of a Right shall thereafter have the
right to receive, upon exercise, common stock of the acquiring company having a
value equal to two times the Purchase Price.
Notwithstanding the foregoing, following the occurrence of a Section
11(a)(ii) Event or a Section 13 Event, any Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person or Adverse Person will be null and void.
The Purchase Price payable, and the number of shares of Series A Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution. With certain
exceptions, no adjustment of the Purchase Price will be required until
cumulative adjustments
27
<PAGE>
require an adjustment of at least 1% of the Purchase Price. No fractional shares
of Series A Preferred Stock (other than fractions in multiples of one
one-hundredth of a share) will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Series A Preferred Stock on
the last trading date prior to the date of exercise.
In general, the Company may redeem the Rights in whole, but not in part, at
a price of $.01 per Right, at any time until ten days following the Stock
Acquisition Date. The Company may not redeem the Rights if the Board of
Directors has previously declared a person to be an Adverse Person. After the
redemption period has expired, the Company's right of redemption may be
reinstated if an Acquiring Person reduces his or her beneficial ownership to 10%
or less of the outstanding shares of CommNet Common Stock in a transaction not
involving the Company. Immediately upon the action of the Board of Directors
ordering redemption of the Rights, the Rights will terminate and the only right
of the holders of Rights will be to receive the $.01 redemption price per Right.
Until the Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including the right to vote or to
receive dividends. While the distribution of the Rights will not be taxable to
shareholders or to the Company, shareholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for CommNet Common Stock (or other consideration) of the Company or
for common stock of the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person, Adverse Person, or an affiliate or associate of any such
person), or to shorten or lengthen any time period under the Rights Agreement;
provided, however, that no amendment to adjust the time period governing
redemption shall be made at such time as the Rights are not redeemable.
The Rights Agreement was amended as of May 27, 1997, in accordance with the
terms of the 1997 Merger Agreement, to provide that (i) neither Blackstone nor
its affiliates will be deemed an Acquiring Person by virtue of the transactions
contemplating by the 1997 Merger Agreement, (ii) the transactions contemplated
by the 1997 Merger Agreement will not trigger a Distribution Date and (iii) the
transactions contemplated by the 1997 Merger Agreement will not give rise to a
Section 11(a)(ii) Event or a Section 13 Event. The Rights Agreement was amended
to insure that none of the approval, execution or delivery of the 1997 Merger
Agreement or the consummation of the 1997 Merger or the other transactions
contemplated by the 1997 Merger Agreement would cause the Rights to separate
from the CommNet Common Stock or become exercisable.
The Rights Agreement was amended again as of July 18, 1999 in accordance
with the terms of the Merger Agreement, to provide that (i) neither Parent nor
Merger Sub, nor any of their affiliates, will be deemed an Acquiring Person by
virtue of the transactions contemplating by the Merger Agreement, (ii) the
transactions contemplated by the Merger Agreement will not trigger a
Distribution Date and (iii) the transactions contemplated by the Merger
Agreement will not give rise to a Section 11(a)(ii) Event or a Section 13 Event.
The Rights Agreement was amended to insure that none of the approval, execution
or delivery of the Merger Agreement or the consummation of the Merger or the
other transactions contemplated by the Merger Agreement would cause the Rights
to separate from the CommNet Common Stock or become exercisable.
CHARTER DOCUMENTS OF COMMNET FOLLOWING THE MERGER
The By-Laws and Articles of Incorporation of Merger Sub in effect at the
Effective Time will be the By-Laws and Articles of Incorporation of the Company
following the Merger until thereafter changed or amended as provided therein or
by applicable law.
28
<PAGE>
THE MERGER AGREEMENT
The following summarizes the material provisions of the Merger Agreement,
which appears as Annex I to this Proxy Statement and is incorporated herein by
reference. Such summary is qualified in its entirety by reference to the Merger
Agreement.
THE MERGER
The Merger Agreement provides that, following the approval of the Proposal
by a vote of a majority of the outstanding shares of CommNet Common Stock
entitled to vote thereon and the satisfaction or waiver of the other conditions
to the Merger, Merger Sub will be merged with and into the Company, and the
Company will continue as the surviving corporation in the Merger.
The Merger shall become effective at the Effective Time . Such filing will
be made as soon as practicable after the closing under the Merger Agreement,
which, unless the parties to the Merger Agreement otherwise agree, is to occur
on the fifth business day after satisfaction or waiver of the conditions set
forth in the Merger Agreement. Subject to certain limitations, the Merger
Agreement may be terminated by either parent or the Company if, among other
reasons, the Merger has not been consummated on or before January 18, 2000;
provided, however, that such date will be extended to July 18, 2000 if the
completion of the Merger is delayed only because certain governmental approvals
have not been received. See "--Termination."
EFFECT OF THE MERGER
As of the Effective Time, by virtue of the Merger and without any action on
the part of Company, Parent, Merger Sub or the holders of any shares of CommNet
Common Stock or any shares of capital stock of Merger Sub:
o each share of CommNet Common Stock that is owned by Parent or any
Subsidiary of Parent (including Merger Sub) or by CommNet (together, in
each case, with the associated Right), shall automatically be cancelled
and retired and shall cease to exist and no consideration shall be
delivered in exchange therefor;
o except as otherwise provided in the Merger Agreement, each issued and
outstanding share of CommNet Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares to be
cancelled in accordance with the first bullet point above and Dissenting
Shares (as defined below)) together with the associated Right shall be
converted into the right to receive the Merger Consideration;
o as of the Effective Time, all shares of CommNet Common Stock (and the
associated Rights) issued and outstanding immediately prior to the
Effective Time shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a
certificate representing any such shares of CommNet Common Stock (and the
associated Rights) shall cease to have any rights with respect thereto,
except (i) the right to receive cash to be paid in consideration therefor
upon surrender of such certificate in accordance with the Merger
Agreement, or (ii) in the case of Dissenting Shares, any rights under
Article 113 of the CBCA; and
o each share of common, preferred or other capital stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of
identical common, preferred or other capital stock of the Surviving
Corporation.
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES
As soon as reasonably practicable after the Effective Time, each holder of
an outstanding certificate or certificates which prior thereto represented
shares of CommNet Common Stock (and the associated Rights) shall, upon surrender
to the paying agent of such certificate or certificates and acceptance thereof
by the Paying agent, be entitled to the amount of cash into which the number of
shares of CommNet Common Stock (and the associated Rights) previously
represented by such certificate or certificates surrendered shall
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have been converted pursuant to the Merger Agreement. The paying agent shall
accept such certificates upon compliance with such reasonable terms and
conditions as the paying agent may impose to effect an orderly exchange thereof
in accordance with normal exchange practices. After the Effective Time there
shall be no further transfer on the records of the Company or its transfer agent
of certificates representing shares of CommNet Common Stock (and the associated
Rights) which have been converted pursuant to the Merger Agreement into the
right to receive cash, and if such certificates are presented to the Company for
transfer, they shall be cancelled against delivery of cash. If payment of the
Merger Consideration is to be remitted to a person other than the person in
whose name the certificate for CommNet Common Stock surrendered for payment is
registered, it shall be a condition of such payment that the certificate so
surrendered shall be properly endorsed, with signature guaranteed by a firm
which is an "eligible guarantor institution" (as defined in Rule 17Ad-15 under
the Exchange Act, as defined below), or otherwise in proper form for transfer
and that the person requesting such payment shall have paid any transfer or
other taxes required by reason of the payment of the Merger Consideration to a
person other than the registered holder of the certificate surrendered or shall
have established to the satisfaction of the Surviving Corporation that such tax
either has been paid or is not applicable. Until surrendered as contemplated by
the Merger Agreement, each certificate for shares of CommNet Common Stock shall
be deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration as contemplated by the
Merger Agreement. Except as provided in the Merger Agreement, no interest will
be paid or will accrue on any cash payable as Merger Consideration.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties of
the Company with respect to the Company and its consolidated subsidiaries as to,
among other things:
o organization, standing and similar corporate matters;
o the Company's capital structure;
o the authorization, execution, delivery, performance and enforceability of
the Merger Agreement;
o documents filed by the Company with the Commission, the accuracy of
information contained therein and the absence of undisclosed liabilities;
o the accuracy of information supplied by the Company in connection with
this Proxy Statement;
o the absence of certain changes or events since March 31, 1999, including
material adverse changes with respect to the Company;
o pending or threatened material litigation, compliance with applicable
laws, and regulatory matters;
o benefit plans and other matters relating to the Employee Retirement
Income Security Act of 1974, as amended, and labor matters;
o filing of tax returns and payment of taxes;
o subsidiaries and affiliates;
o the vote required to approve the Merger and related transactions under
the Merger Agreement;
o the absence of defaults under material contracts;
o brokers' and finders' fees and expenses;
o receipt of an opinion of the Company's financial advisor;
o recommendation of the Board of Directors of the Company with respect to
the Merger Agreement and the Merger, and transactions contemplated
thereby;
o the inapplicability of the Rights issued to holders of CommNet Common
Stock under the Rights Agreement to the Merger Agreement, the Merger, or
transactions contemplated thereby; and
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o the inapplicability of any Colorado state takeover statute or similar
Colorado statute or regulation to the Merger Agreement, the Merger, or
transactions contemplated thereby.
The Merger Agreement also contains customary representations and warranties
of Parent and Merger Sub relating to, among other things:
o organization, standing and similar corporate matters;
o the authorization, execution, delivery, performance and enforceability of
the Merger Agreement;
o brokers' fees and expenses;
o the accuracy of information supplied by Parent or Merger Sub in
connection with this Proxy Statement;
o the absence of the need for any vote or approval of the holders of any
interest in the Parent or Merger Sub necessary to approve the Merger
Agreement;
o the absence of ownership of CommNet Common Stock by Parent or Merger Sub
or affiliates;
o FCC qualification of Parent and Merger Sub;
o the availability of sufficient funds to consummate the transaction; and
o the absence of business activities and subsidiaries of the Merger Sub.
CERTAIN PRE-CLOSING COVENANTS
During the period from the date of the Merger Agreement until the Effective
Time (except as expressly contemplated or permitted by the Merger Agreement or
to the extent that Merger Sub shall otherwise consent in writing), the Company
has agreed that the Company and its consolidated subsidiaries and certain
affiliates will carry on their respective businesses in the usual, regular and
ordinary course in all material respects, in substantially the same manner as
previously conducted, and will use reasonable best efforts to preserve intact
their present lines of business, maintain their rights and franchises and
preserve their relationships with employees, governmental entities, customers,
suppliers and others having business dealings with them to the end that their
ongoing businesses will not be impaired in any material respect at the Effective
Time.
The Merger Agreement contains certain other covenants of the Company
relating to the declaration and payment of dividends and changes in share
capital, the issuance of securities, the amendment of corporate governance
documents, the incurrence and satisfaction of indebtedness, executive
compensation and employee benefit plans, the taking of actions affecting the
representations and warranties of the Company in the Merger Agreement or the
conditions to the Merger, accounting methods, income tax elections, certain
agreements that limit or restrict competition, acquisitions, sale or transfer of
any ownership interest in or assets comprising any wireless system, line of
business, expenditures, claims, certain agreements involving Material Contracts,
agreements prohibited by the covenants, and compliance by affiliates of the
Company which hold FCC Licenses for which the Company serves as managing agent
(the "Managed Affiliates").
The Merger Agreement also contains certain covenants of Parent and Merger
Sub relating to the amendment of corporate governance documents and the taking
of actions affecting the representations and warranties of the Company in the
Merger Agreement or the conditions to the Merger.
NO SOLICITATIONS OF TRANSACTIONS
The Merger Agreement provides that neither the Company nor any of its
Subsidiaries, officers or directors will, and that the Company will direct and
use its best efforts to cause its employees, agents and representatives
(including any investment banker, attorney or accountant retained by the
Company) not to, directly or indirectly, (i) initiate, solicit, encourage or
otherwise facilitate any inquiries, or the making of any Acquisition Proposal
(as defined below), or (ii) provide any information or data to any person
relating to an Acquisition Proposal or engage in any negotiations concerning an
Acquisition Proposal. The Company and Parent have agreed in the Merger Agreement
that nothing contained in the Merger Agreement will prevent the Company or its
Board of Directors from (A) complying with Rule 14e-2 and Rule 14d-9 promulgated
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under the Exchange Act with regard to an Acquisition Proposal; (B) engaging in
any discussions or negotiations with, or providing any information to, any
person in response to a bona fide written Acquisition Proposal by any such
person; or (C) recommending such bona fide written Acquisition Proposal to the
shareholders of the Company, if and only to the extent that, in any such case as
is referred to in clause (B) or (C) of this sentence, (i) the Board of Directors
of the Company concludes in good faith (after consultation with its financial
advisors) that such Acquisition Proposal is reasonably capable of being
completed, taking into account all legal, financial, regulatory and other
aspects of the proposal and the person making the proposal, and is on terms that
would, if consummated, result in a transaction more favorable to Company
shareholders from a financial point of view than the transaction contemplated by
the Merger Agreement (any such more favorable Acquisition Proposal being
referred to as a "Superior Proposal") and (ii) the Board of Directors of the
Company determines in good faith after consultation with outside legal counsel
that such action is necessary for it not to breach its fiduciary obligations to
shareholders under applicable law. The Company has agreed that it will notify
Parent immediately if any inquiries, proposals or offers respecting an
Acquisition Proposal are received, in connection with such notice, the name of
such person and the material terms and conditions of any proposals or offers,
and shall keep Parent apprised with respect to the status and terms thereof. The
Company also agreed to immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted prior to
entering into the Merger Agreement with respect to any Acquisition Proposal. The
Company will also request that all confidential information furnished to any
person in connection with an Acquisition Proposal be returned. For a description
of the effects that an Acquisition Proposal prior to the Effective Time of the
Merger could have under the Merger Agreement, see "--Termination" below.
The term "Acquisition Proposal" means any proposal or offer with respect to
a merger, reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving, or
any purchase of all or any significant portion of the assets or any equity
securities of, the Company.
OPTION AND BENEFIT PLANS
As of the July 18, 1999, there were outstanding options representing in the
aggregate the right to purchase 1,787,790 shares of CommNet Common Stock
including 82,090 restricted shares under the Consulting Agreement. Options
representing in the aggregate the right to purchase 1,597,950 of such shares are
subject to the terms of both the CommNet Omnibus Stock and Incentive Plan and
the Replacement Stock Option Agreement covering the optionee (the "Agreement
Options"). The remaining options, excluding the restricted shares under the
Consulting Agreement, representing in the aggregate the right to purchase
107,750 of such shares, are subject only to the terms of such agreement (the
"Plan Options"; together with the Agreement Options, the "Options").
Prior to the closing date of the transaction, the Company shall use its
reasonable best efforts to obtain from each holder of outstanding Plan Options
his or her written consent to the treatment of his or her Plan Options as set
forth in the Merger Agreement. Immediately prior to the Effective Time, each
outstanding Option, whether or not then vested or exercisable, shall be
cancelled by the Company, and the holder thereof shall be entitled to receive,
at the Effective Time or as soon as practicable thereafter, from the Company in
consideration for such cancellation an amount in cash equal to the product of
(i) the number of shares of CommNet Common Stock previously subject to such
Option multiplied by (ii) the excess of the Merger Consideration over the
exercise price per share of CommNet Common Stock previously subject to such
Option, reduced by any applicable withholding taxes or other amounts required by
law to be paid or withheld by the Company. The Company may accelerate the
vesting of any outstanding Options in accordance with the terms thereof.
During the period from the date of the Merger Agreement to the Effective
Time, the Merger Agreement prohibits the Company from granting any Options or
issuing any stock to any director, officer or employee, except that it may
(i) issue stock pursuant to the exercise of Options, (ii) grant restricted stock
to Arnold C. Pohs pursuant to the terms of the Consulting Agreement, and
(iii) issue shares to directors under the Director's Compensation Plan of the
Company, in each case, in amounts not to exceed the amounts set forth in the
Merger Agreement.
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ACCESS TO INFORMATION
Subject to applicable provisions regarding confidentiality and certain
other qualifications, the Company has agreed in the Merger Agreement to, and to
cause its consolidated subsidiaries and certain affiliates to, afford the Parent
and its representatives reasonable access during normal business hours, during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments and records, and to furnish the Parent with information concerning
the Company's business, properties and personnel as the Parent may reasonably
request.
COOPERATION AND BEST EFFORTS
Pursuant to the Merger Agreement and subject to certain conditions and
limitations described therein, the parties have agreed to cooperate with each
other and to use their respective best efforts to take certain specified and
other actions so that the transactions contemplated by the Merger Agreement may
be consummated as soon as practicable.
INDEMNIFICATION AND INSURANCE
In the Merger Agreement, the Company and Merger Sub have agreed that the
Surviving Corporation in the Merger will cause to be maintained in effect for a
period of six years after the Effective Time (i) the current provisions
regarding indemnification of officers and directors contained in the Articles of
Incorporation and By-Laws of the Company and (ii) the current policies of
directors' and officers' liability insurance and fiduciary liability insurance
maintained by the Company (provided that the Surviving Corporation in the Merger
may substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are, in the aggregate, no less
advantageous to the insured) with respect to claims arising from facts or events
that occurred on or before the Effective Time.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The obligations of the Company and Merger Sub to effect the Merger are
subject to the satisfaction or waiver on or prior to the Closing Date of various
conditions which include:
o all approvals of holders of shares of capital stock of the Company
necessary to approve the Merger Agreement and the transactions
contemplated thereby, including the Merger shall have been obtained by
the Company;
o all required regulatory approvals, and all other authorizations,
consents, orders and approvals of, and declarations and filings with, and
all expirations of waiting periods imposed by, any governmental entity
which, if not obtained in connection with the consummation of the
transactions contemplated by the Merger Agreement, could reasonably be
expected to have a Material Adverse Effect (as defined in the Merger
Agreement) on the Company, shall have been obtained, have been declared
or filed or have occurred, as the case may be, and all such approval
shall be in full force and effect; provided that if the condition set
forth in the Merger Agreement, with respect to obtaining FCC Consents (as
defined below) is waived by Merger Sub, then this condition will be
deemed to have been satisfied;
o the waiting period (and any extension thereof) applicable to the Merger
under the HSR Act shall have been terminated or shall have expired; and
o no temporary restraining order, preliminary or permanent injunction or
other order issued by a court or other governmental entity being in
effect and having the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger;
Parent and Merger Sub's obligations to effect the Merger are further
subject to the satisfaction, or waiver by Merger Sub, on or prior to the Closing
Date, of the following additional conditions:
o each of the representations and warranties of the Company set forth in
the Merger Agreement that is qualified as to materiality shall have been
true and correct when made and shall be true and correct on and as of the
Closing Date as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct as of such
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certain date), and each of the representations and warranties of the
Company that is not so qualified shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of such date
(other than representations and warranties which address matters only as
of a certain date which shall be true and correct in all material
respects as of such certain date), and Merger Sub shall have received a
certificate of the chief executive officer and the chief financial
officer of the Company to such effect;
o the Company shall have performed or complied with all agreements and
covenants required to be performed by it under the Merger Agreement at or
prior to the Closing Date that are qualified as to materiality and shall
have performed or complied in all material respects with all other
agreements and covenants required to be performed by it under the Merger
Agreement at or prior to the Closing Date that are not so qualified as to
materiality, and Merger Sub shall have received a certificate of the
chief executive officer and the chief financial officer of the Company to
such effect;
o the FCC Consents, and no timely request for stay, motion or petition for
reconsideration or rehearing, application or request for review, or
notice of appeal or other judicial petition for review of the FCC
Consents shall be pending, and the time for filing any such request,
motion, petition, application, appeal, or notice, and for the entry of an
order staying, reconsidering, or reviewing on the FCC's own motion, shall
have expired;
o there shall not be pending any suit, action, investigation or proceeding
by any Governmental Entity (an "Action"):
o seeking to restrain or prohibit the consummation of the Merger or
any of the other transactions contemplated by the Merger Agreement
or seeking to obtain damages from the Company or Parent or any of
their respective Subsidiaries or the Managed Affiliates, which if
determined adversely to the Company, would be reasonably likely to
have a Material Adverse Effect on the Company;
o seeking to prohibit or limit the ownership or operation by the
Company or any of the Consolidated Subsidiaries or Managed
Affiliates or Parent of any material portion of the business or
assets of the Company, the Consolidated Subsidiaries and the Managed
Affiliates (taking the Company, the Consolidated Subsidiaries and
the Managed Affiliates as a whole), or seeking to require the
Company or any of the Consolidated Subsidiaries or Managed
Affiliates or Parent to dispose of or hold separate any material
portion of the business or assets of the Company, the Consolidated
Subsidiaries and the Managed Affiliates (taking the Company, the
Consolidated Subsidiaries and the Managed Affiliates as a whole) as
a result of the Merger or any of the other transactions contemplated
by this Agreement;
o seeking to prohibit Parent from effectively controlling in any
material respect the business or operations of the Company, the
Consolidated Subsidiaries and the Managed Affiliates, taken as a
whole; or
o seeking to impose limitations on the ability of Parent or Merger Sub
to acquire or hold, or exercise full rights of ownership of, any
shares of CommNet Common Stock, including, without limitation, the
right to vote CommNet Common Stock on all matters properly presented
to the shareholders of the Company or which otherwise would have a
Material Adverse Effect on the Company; provided, however, that the
provisions of this paragraph shall not be available to Merger Sub if
it has failed to fulfill its obligations pursuant to Section 5.3 of
the Merger Agreement (or other breach of a representation, warranty
or covenant hereof) shall have been the cause of, or shall have
resulted in, such suit, action, investigation or proceeding; and
o since July 18, 1999, no material adverse change relating to the Company
having occurred and been continuing.
The obligations of the Company to effect the Merger are further subject, in
addition to certain other customary conditions, to the satisfaction, or waiver
by the Company, on or prior to the Closing Date of the following additional
conditions:
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o each of the representations and warranties of Parent and Merger Sub set
forth in the Merger Agreement that is qualified as to materiality shall
have been true and correct when made and shall be true and correct on and
as of the Closing Date as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date), and each
of the representations and warranties of Parent and Merger Sub that is
not so qualified shall have been true and correct in all material
respects when made and shall be true and correct in all material respects
on and as of the Closing Date as if made on and as of such date (other
than representations and warranties which address matters only as of a
certain date which shall be true and correct in all material respects as
of such certain date), and the Company shall have received a certificate
of the chief executive officer and the chief financial officer of each of
Parent and Merger Sub to such effect;
o each of Parent and Merger Sub shall have performed or complied with all
agreements and covenants required to be performed by it under the Merger
Agreement at or prior to the Closing Date that are qualified as to
materiality and shall have performed or complied in all material respects
with all agreements and covenants required to be performed by it under
the Merger Agreement at or prior to the Closing Date that are not so
qualified as to materiality, and the Company shall have received a
certificate of the chief executive officer and the chief financial
officer of each of Parent and Merger Sub to such effect;
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, by action taken or authorized by the board of directors of the terminating
party or parties, whether before or after approval of the matters presented in
connection with the Merger by the shareholders of the Company:
o by mutual written consent of Parent and the Company;
o by either the Company or Parent if the Effective Time has not occurred on
or before the Termination Date; provided, however, that the right to
terminate the Merger Agreement under this clause will not be available to
any party whose failure to fulfill any obligation under the Merger
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the January 18, 1999; and provided,
further, that if on the Termination Date any conditions to the closing
relating to the FCC Consents, required regulatory approvals or absence of
litigation have not been fulfilled, but all other conditions to the
closing have been fulfilled or are capable of being fulfilled, then the
Termination Date will be extended to July 18, 2000;
o by either the Company or Parent if any governmental entity has issued an
order, decree or ruling or taken any other action (which order, decree,
ruling or other action each of the Company, Parent and Merger Sub shall
have used their best efforts to resist, resolve or lift, as required
pursuant to the Merger Agreement) permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by the Merger
Agreement, and such order, decree, ruling or other action has become
final and nonappealable;
o by either Parent or the Company if the approval by the shareholders of
the Company required for the consummation of the Merger or the other
transactions contemplated by the Merger Agreement has not been obtained
by reason of the failure to obtain the required vote at a duly held
meeting of shareholders or at any adjournment thereof;
o by Parent if the Board of Directors
o has withdrawn or modified in any manner adverse to Merger Sub its
approval or recommendation of the Merger Agreement or the Merger,
o failed as promptly as practicable to mail the Proxy Statement to its
shareholders or failed to include in such statement such
recommendation,
o in response to the commencement of any tender offer or exchange
offer for more than 20% of the outstanding shares of CommNet Common
Stock, does not recommend rejection of such tender
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offer or exchange offer by the date required for such recommendation
under Rule 14e-2 of the Exchange Act,
o has approved or recommended any Acquisition Proposal other than that
contemplated by the Merger Agreement ,
o has resolved to take any of the actions specified in the first four
items of this bullet point;
o any person (other than Parent or BCP CommNet or any of their
affiliates) or group becomes the beneficial owner of more than 25%
of the outstanding shares of CommNet Common Stock, or
o for any reason the Company fails to call or hold the Special Meeting
before the Termination Date (provided that Parent's right to
terminate the Merger Agreement under this item shall not be
available if at such time Parent would not be entitled to terminate
the Merger Agreement under the second bullet point above;
o by the Company, if the Board of Directors determines to accept a Superior
Proposal after determining in good faith after consultation with legal
counsel as to its fiduciary obligations under applicable law, that the
failure to accept such Superior Proposal would constitute a breach of its
fiduciary duties, but only after the Company provides Parent with two
business days' advance notice of its determination, including all
material terms and conditions thereof;
o by Parent, upon a material breach of any covenant or agreement on the
part of the Company set forth in the Merger Agreement, or if (i) any
representation or warranty of the Company that is qualified as to
materiality has become untrue or (ii) any representation or warranty of
the Company that is not so qualified has become untrue in any material
respect, in each case such that the conditions set forth in the Merger
Agreement relating to the representations and warranties of the Company
and the performance by the Company of its obligations under the Merger
Agreement would not be satisfied; provided, however, that, if such breach
is reasonably capable of being cured by the Company through the exercise
of its best efforts prior to the 60th day following the Company's
obtaining notice of such breach (or, if earlier, the Termination Date)
and for so long as the Company continues to exercise such best efforts,
Parent may not terminate the Merger Agreement under this bullet point; or
o by the Company, upon a material breach of any covenant or agreement on
the part of Parent or Merger Sub set forth in the Merger Agreement, or if
(i) any representation or warranty of Parent or Merger Sub that is
qualified as to materiality has become untrue or (ii) any representation
or warranty of Parent or Merger Sub that is not so qualified has become
untrue in any material respect, in each case such that the conditions set
forth in the Merger Agreement relating to the representations and
warranties of and the performance by Parent or merger Sub of its
obligations under the Merger Agreement would not be satisfied; provided,
however, that, if such breach is reasonably capable of being cured by
Parent or Merger Sub through the exercise of its best efforts prior to
the 60th day following Parent's obtaining notice of such breach and for
so long as Parent or Merger Sub continues to exercise such best efforts,
the Company may not terminate the Merger Agreement under this bullet
point.
EXPENSES AND CERTAIN REQUIRED PAYMENTS
Whether or not the Merger is consummated, all Expenses (as defined below)
incurred in connection with the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such Expenses, except
if the Merger is consummated, the Company will pay, or cause to be paid, any and
all property or transfer taxes imposed on the Company or certain of its
subsidiaries or affiliates and any real property transfer tax imposed on any
holder of shares of capital stock of the Company resulting from the Merger, and
as provided in the following paragraph.
"Expenses" of a party includes all out-of-pocket expenses (including,
without limitation, all fees and expenses of all banks, investment banking firms
and other financial institutions, and their respective agents and counsel,
accountants, experts and consultants to a party to the Merger Agreement and its
affiliates) incurred by a party or on its behalf, whether incurred prior to, on
or after the date of the Merger Agreement,
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in connection with or related to the authorization, preparation, negotiation,
execution and performance of the Merger Agreement and the transactions
contemplated thereby and the financing thereof, including the preparation,
printing, filing and mailing of this Proxy Statement, and the solicitation of
shareholder approvals and all other matters related to the transactions
contemplated by the Merger Agreement.
In addition to any other amounts which may be payable or become payable
pursuant to the Merger Agreement, if the Merger Agreement is terminated, the
Company will reimburse Merger Sub for all Expenses of Parent and Merger Sub;
provided that in no event will the Company be required to pay in excess of an
aggregate of $4,000,000 pursuant to this provision. Payment of such Expenses
will be made not later than two business days after delivery to the Company of
notice of demand for payment and a documented itemization setting forth in
reasonable detail all Expenses of Merger Sub (which itemization may be
supplemented and updated from time to time by such party until the 60th day
after such party delivers such notice of demand for payment).
Under the Merger Agreement, if either:
o the Merger Agreement has been terminated pursuant to the provisions
described in the second or seventh bullet points under "--Termination"
above, and either of the following has occurred prior to such
termination:
o any person (including the Company or certain of its subsidiaries or
affiliates, but excluding Parent, Merger Sub or any of their
affiliates) has become the beneficial owner of more than 25% of the
outstanding shares of CommNet Common Stock, or
o (x) on or after the date of the Merger Agreement any person (other
than Parent, Merger Sub or any of their affiliates) has made, or
proposed, communicated or disclosed a bona fide intention to make an
Acquisition Proposal which seeks to acquire a controlling interest
in the Company (a "Control Proposal") (including by making such
Control Proposal), and (y) on or prior to the twelve-month
anniversary of the date of such termination , the Company either
consummates with any person a transaction the proposal of which
would otherwise qualify as a Control Proposal or enters into a
definitive agreement with any person with respect to a transaction
the proposal of which would otherwise qualify as a Control Proposal
(whether or not such person is the person referred to in clause
(x) above); or
o the Merger Agreement is terminated pursuant to the provisions described
in the fourth, fifth or sixth bullet points under "--Termination" above;
then the Company will (1) in the case of first item under the first bullet
point above and the second bullet point above, promptly, but in no event later
than one business day after the termination of the Merger Agreement and (2) in
the case of the second item under the first bullet point above, promptly, but in
no event later than one business day after the consummation of a transaction
with a control person as described above, pay Merger Sub a fee equal to
$35 million less amounts paid pursuant to the expenses provisions described
above, in cash, which amount shall be payable in same day funds. No termination
of the Merger Agreement at a time when a fee is payable pursuant to this
paragraph following termination of the Merger Agreement will be effective until
such fee is paid. Only one fee will be payable pursuant to this paragraph.
Notwithstanding the foregoing, no amount will be payable pursuant to the
provisions of this section if:
o the Merger Agreement is Terminated pursuant to the second bullet point
under "--Termination" above, and at the time of such termination (i) the
Company is not in material breach of its obligations or representations
and warranties under the Merger Agreement, and (ii) any of the conditions
relating to the HSR Act, FCC Consents, required regulatory approvals and
absence of litigation, described under "--Conditions to the Consummation
of the Merger" have not been satisfied or waived, or
o the Merger Agreement has been terminated pursuant to (i) the provisions
described in the third bullet point under "--Termination" above, and at
the time of such termination the Company is not in material breach of its
obligations or representations and warranties under the Merger Agreement,
or (ii) the provisions described in the first or eighth bullet points
under "--Termination" above.
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AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties thereto, by action taken
or authorized by their respective boards of directors, at any time before or
after approval of the matters presented in connection with the Merger by the
shareholders of the Company, but, after any such approval, no amendment may be
made which by law or in accordance with the rules of Nasdaq requires further
approval by such shareholders without such further approval. The Merger
Agreement (including the annexes and schedules thereto) may not be amended
except by an instrument in writing signed on behalf of each of the parties
thereto.
At any time prior to the Effective Time, the parties to the Merger
Agreement, by action taken or authorized by their respective boards of
directors, may, to the extent legally allowed:
o extend the time for the performance of any of the obligations or other
acts of the other parties to the Merger Agreement,
o waive any inaccuracies in the representations and warranties contained in
the Merger Agreement or in any document delivered pursuant to the Merger
Agreement, and
o waive compliance with any of the agreements or conditions contained in
the Merger Agreement.
Any agreement on the part of a party to the Merger Agreement to any such
extension or waiver will be valid only if set forth in a written instrument
signed on behalf of such party. The failure of any party to the Merger Agreement
to assert any of its rights under the Merger Agreement or otherwise will not
constitute a waiver of those rights.
THE VOTING AGREEMENT
The following summarizes the material terms of the Voting Agreement, which
appears as Annex II to this Proxy Statement and is incorporated herein by
reference. Such summary is qualified in its entirety by reference to the Voting
Agreement.
In connection with the execution of the Merger Agreement on July 18, 1999,
BCP CommNet, the owner of approximately 86.17% of the outstanding shares of
CommNet Common Stock, and Vodafone AirTouch entered into the Voting Agreement.
Pursuant to and subject to the terms of the Voting Agreement, BCP CommNet has
agreed to vote all of its shares of CommNet Common Stock in favor of the Merger
and in favor of each agreement or action contemplated by the Merger Agreement
and the Voting Agreement, and to vote against any transaction that could
reasonably be expected to breach the Merger Agreement or impede, interfere with
or delay the Merger or the Merger Agreement. In addition, BCP CommNet has
irrevocably appointed Parent, and Megan Pierson and David Bagley in their
capacities as officers of Parent, with full power of substitution, as proxy for
BCP CommNet to vote BCP CommNet's shares as indicated in the Voting Agreement.
BCP CommNet has also agreed not to transfer any shares of CommNet Common Stock
it holds or acquires in the future during the term of the Voting Agreement. The
Voting Agreement and proxy contained therein terminate upon the first to occur
of either the Effective Time of the Merger or termination of the Merger
Agreement. See "THE MERGER AGREEMENT--Termination."
The affirmative vote of BCP CommNet pursuant to the terms of the Voting
Agreement is sufficient to approve the Merger Agreement without the affirmative
vote of any other shareholder.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material federal income tax
consequences of the Merger to the Company's shareholders. No foreign, state or
local tax considerations are addressed, nor are federal tax considerations other
than income tax considerations. The discussion is based on current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), currently applicable
Treasury regulations, and judicial and administrative decisions and rulings.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conclusions set forth
herein. Any such changes or interpretations could be retroactive and could
affect the tax consequences to the Company's shareholders.
38
<PAGE>
ALL SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX
CONSEQUENCES OF THE MERGER TO THEM WITH SPECIFIC REFERENCE TO THEIR PARTICULAR
TAX SITUATIONS, INCLUDING TAX CONSEQUENCES UNDER FOREIGN, STATE AND LOCAL TAX
LAWS.
The exchange of the shares of CommNet Common Stock for cash will be a
taxable transaction to the holders of such shares for federal income tax
purposes. In general, each shareholder will recognize gain or loss in an amount
equal to the difference between the cash received and such shareholder's tax
basis in the shareholder's shares. Gain or loss will be a capital gain or loss
if a shareholder has held his shares as a capital asset within the meaning of
Section 1221 of the Code. Capital gain or loss will be a long-term capital gain
or loss if a shareholder has held his shares for more than a year as of the date
of completion of the Merger. There are certain limitations on the deductibility
of capital losses. Capital gains of individuals derived in respect of capital
assets held for more than one year are eligible for reduced rates of taxation.
It is the responsibility of each shareholder to determine the tax basis of his
shares. The Company is unable to provide this information to its shareholders.
Cash received in exchange for shares of CommNet Common Stock may be subject
to a backup withholding tax at a rate of 31% unless the relevant shareholder is
an exempt recipient or complies with certain identification procedures.
39
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following selected consolidated financial data as of and for each of
the five years in the period ended September 30, 1998 are derived from
consolidated financial statements of the Company. The financial statements for
the years 1994 through 1997 have been audited by Ernst & Young LLP, independent
auditors. The financial statements for the year 1998 have been audited by
Deloitte & Touche LLP, independent auditors. The selected financial data for the
nine months ended June 30, 1999 and 1998 are derived from the unaudited
financial statements of the Company, which, in the opinion of the Company,
reflect all adjustments necessary for a fair presentation of the results for the
unaudited periods. Operating results for the nine months ended June 30, 1999 are
not necessarily indicative of the results that may be achieved for the fiscal
year ending September 30, 1999. The data should be read in conjunction with the
financial statements and other financial information included or incorporated by
reference in this Proxy Statement. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
NINE MONTHS
ENDED JUNE
YEARS ENDED SEPTEMBER 30, 30,
-------------------------------------------------------------- ------------
1998 1997 1996 1995 1994 1999
---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Revenues........................................ $ 171,435 $ 150,867 $ 115,196 $ 89,844 $ 61,360 $ 144,935
Costs and expenses (net of amounts allocated
to affiliates):
Cellular operations........................... 100,905 94,497 76,123 68,929 50,856 83,972
Corporate..................................... 23,310 (985) 880 1,327 406 3,019
Total depreciation and amortization........... 26,636 22,116 19,750 16,655 11,578 21,346
Write-down of investment in cellular system
equipment................................... -- -- -- -- 3,117 0
---------- ---------- ---------- ---------- ---------- ------------
Operating income (loss)......................... 20,584 35,239 18,443 2,933 (4,597) 36,598
Equity in net income (loss) loss of
affiliates.................................... 5,127 (7,589) (1,636) (5,028) (5,092) 4,629
Minority interest in net income of consolidated
affiliates.................................... (5,701) (2,964) (1,123) (964) (544) (3,025)
Gains (losses) on sales of affiliates and
other......................................... -- 350 (250) 19,471 3,912 0
Amortization of deferred costs.................. (2,651) (1,072) (2,090) (940) (1,072) (2,465)
Interest expense................................ (49,212) (29,464) (28,208) (26,044) (21,339) (43,896)
Interest income................................. 4,876 6,532 10,468 13,046 12,081 2,148
---------- ---------- ---------- ---------- ---------- ------------
Income (loss) before income taxes and
extraordinary charge.......................... (26,977) 1,032 (4,396) 2,474 (16,651) (6,011)
Income tax expense.............................. -- -- -- 400 100 597
---------- ---------- ---------- ---------- ---------- ------------
Income (loss) before extraordinary charge....... (26,977) 1,032 (4,396) 2,074 (16,751) (6,608)
Extraordinary charge............................ (33,500) -- -- (2,012) -- 0
---------- ---------- ---------- ---------- ---------- ------------
Net income (loss)............................... $ (60,477) $ 1,032 $ (4,396) $ 62 $ (16,751) $ (6,608)
---------- ---------- ---------- ---------- ---------- ------------
---------- ---------- ---------- ---------- ---------- ------------
Basic and diluted income (loss) per common share
before extraordinary charge................... $ (.68) $ .01 $ (.06) $ .03 $ (.29) $ (0.29)
Extraordinary charge............................ (.85) -- -- (.03) -- --
---------- ---------- ---------- ---------- ---------- ------------
Basic and diluted net income (loss) per common
share......................................... $ (1.53) $ .01 $ (.06) $ -- $ (.29) $ (0.29)
---------- ---------- ---------- ---------- ---------- ------------
---------- ---------- ---------- ---------- ---------- ------------
Weighted average shares outstanding............. 39,397,393 68,835,650 68,636,015 60,767,960 57,885,755 22,662,985
---------- ---------- ---------- ---------- ---------- ------------
---------- ---------- ---------- ---------- ---------- ------------
BALANCE SHEET DATA (END OF PERIOD)(1):
Working capital................................. $ 38,065 $ 15,840 $ 16,246 $ 39,911 $ 25,525 $ 3,200
Investments in and advances to affiliates....... 33,637 47,211 57,245 56,919 61,909 27,080
Net property and equipment...................... 154,598 143,875 118,099 105,289 79,918 168,062
Total assets.................................... 384,752 352,916 331,837 325,668 282,638 432,337
Long-term debt.................................. 682,999 250,852 245,845 246,357 243,913 727,536
Total liabilities............................... 720,200 291,016 268,855 267,012 266,731 774,002
Shareholders' equity (deficit)(2)............... (335,448) 61,900 62,982 58,656 15,906 (341,685)
<CAPTION>
1998
------------
<S> <C>
STATEMENT OF OPERATIONS DATA(1):
Revenues........................................ $ 116,623
Costs and expenses (net of amounts allocated
to affiliates):
Cellular operations........................... 74,237
Corporate..................................... 23,002
Total depreciation and amortization........... 20,184
Write-down of investment in cellular system
equipment................................... 0
------------
Operating income (loss)......................... (800)
Equity in net income (loss) loss of
affiliates.................................... 2,700
Minority interest in net income of consolidated
affiliates.................................... (3,149)
Gains (losses) on sales of affiliates and
other......................................... 0
Amortization of deferred costs.................. (2,043)
Interest expense................................ (33,858)
Interest income................................. 3,888
------------
Income (loss) before income taxes and
extraordinary charge.......................... (33,262)
Income tax expense.............................. 0
------------
Income (loss) before extraordinary charge....... (33,262)
Extraordinary charge............................ (33,500)
------------
Net income (loss)............................... $ (66,762)
------------
------------
Basic and diluted income (loss) per common share
before extraordinary charge................... $ (0.74)
Extraordinary charge............................ (0.74)
------------
Basic and diluted net income (loss) per common
share......................................... $ (1.48)
------------
------------
Weighted average shares outstanding............. 45,041,049
------------
------------
BALANCE SHEET DATA (END OF PERIOD)(1):
Working capital................................. $ 33,515
Investments in and advances to affiliates....... 40,756
Net property and equipment...................... 144,510
Total assets.................................... 377,274
Long-term debt.................................. 682,999
Total liabilities............................... 716,840
Shareholders' equity (deficit)(2)............... (339,566)
</TABLE>
- ------------------
(1) Markets in which the Company holds a greater than 50% net interest are
reflected on a consolidated basis in the Company's consolidated financial
statements. Markets in which the Company holds a net interest which is 50%
or less but 20% or greater are accounted for under the equity method.
Markets in which the Company holds a less than 20% interest are accounted
for under the cost method. The following table sets forth the number of
markets and relevant accounting methods at the end of each of the last five
fiscal years and at the end of the nine months ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED SEPTEMBER 30, ENDED JUNE 30,
------------------------------------ ----------------
1998 1997 1996 1995 1994 1999 1998
---- ---- ---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated......................................................... 48 46 46 45 42 49 46
Equity............................................................... 17 18 18 20 35 16 18
Cost................................................................. 17 18 18 18 18 17 18
-- -- -- -- -- -- --
Total................................................................ 82 82 82 83 95 82 82
-- -- -- -- -- -- --
-- -- -- -- -- -- --
</TABLE>
(2) No cash dividends were declared or paid during any period presented.
40
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 3, 1999, (i) each director
and each executive officer of the Company named below; (ii) all current
directors and executive officers of the Company as a group; and (iii) each
current beneficial owner of five percent or more of CommNet Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- -------------------------------------------------------------------------- -------------------- ----------------
<S> <C> <C>
Arnold C. Pohs ........................................................... 1,015,240(1) 4.25%
8350 East Crescent Parkway
Englewood, Colorado 80111
Daniel P. Dwyer .......................................................... 328,370(2) 1.42%
8350 East Crescent Parkway
Englewood, Colorado 80111
William J. Ryan .......................................................... 6,500 .02%
8111 Bay Colony Drive
Naples, Florida 34108
John P. Scully ........................................................... 1,500 .00%
2820 Terry Lake Road
Fort Collins, Colorado 80524
BCP CommNet L.P. ......................................................... 19,695,835 86.17%
c/o The Blackstone Group
345 Park Avenue, 31st Floor
New York, New York 10154
All executive officers and directors
(13 persons--stock, options and
restricted stock)....................................................... 1,556,825(3) 6.38%
</TABLE>
- ------------------
(1) Includes options to purchase 933,150 shares of Common Stock and restricted
stock to be granted subject to a retirement agreement of 82,090 shares.
(2) Includes options to purchase 328,370 shares of Common Stock.
(3) Includes options to purchase 1,466,735 shares of Common Stock and 82,090
shares of restricted stock.
REGULATORY APPROVALS
Prior to the Effective Time, the FCC must approve the transfer of control
of CommNet to Parent. CommNet and Parent completed filing joint applications
seeking such approval on August 16, 1999. The transfer of control from CommNet
to Parent of CommNet's cellular licenses must be approved by the FCC based on
its evaluation of whether the transfer will serve the public interest,
convenience and necessity. The Merger is also subject to the filing requirements
of the HSR Act.
The obligations of Merger Sub and the Company under the Merger Agreement
are also subject to certain required regulatory approvals, as described in the
Merger Agreement, having been obtained, having been declared or filed or having
occurred and all such required regulatory approvals being in full force and
effect. See "THE MERGER AGREEMENT--Conditions to Consummation of the Merger."
DISSENTING SHAREHOLDERS RIGHTS
The following discussion of the provisions of Sections 7-113-101 through
7-113-302, inclusive, of the CBCA is not intended to be a complete statement of
such provisions and is qualified in its entirety by reference to the full text
of those Sections, a copy of which is attached as Annex IV hereto.
Under Section 7-113-102 of the CBCA, a CommNet shareholder is entitled to
dissent from the Merger and obtain payment of the fair value of his or her
shares in the event the Merger is consummated. A
41
<PAGE>
shareholder who is entitled to dissent and obtain payment for his or her shares
under these Sections may not challenge the corporate action creating such
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
Each CommNet shareholder who asserts dissenters' rights and follows the
procedures specified in Sections 7-113-202 and 7-113-204 will be entitled to
have the CommNet Common Stock held of record by such shareholder exchanged for
cash or, if a demand for payment remains unresolved, appraised by a district
court in Colorado in a proceeding conducted in accordance with
Sections 7-113-301 and 7-113-302 of the CBCA and receive a judgment for (i) the
amount, if any, by which the court finds the fair value of the dissenter's
shares, plus interest, exceeds the amount paid by the Company in the Merger, or
(ii) for the fair value, plus interest, of the dissenter's shares for which the
Company elected to withhold payment under Section 7-113-208 of the CBCA, as
determined by such court. THE PROCEDURES SET FORTH IN SECTIONS 7-113-202 AND
7-113-204 OF THE CBCA SHOULD BE COMPLIED WITH STRICTLY. FAILURE TO FOLLOW ANY OF
SUCH PROCEDURES MAY RESULT IN THE TERMINATION OR WAIVER OF DISSENTERS' RIGHTS.
CommNet shareholders should note that failure to execute and return a proxy or
transmittal letter does not perfect dissenters' rights. In addition, neither
voting against the Proposal nor abstaining from voting will constitute a demand
for payment. HOWEVER, VOTING IN FAVOR OF THE PROPOSAL WILL WAIVE A SHAREHOLDER'S
DISSENTERS' RIGHTS. IF A SHAREHOLDER RETURNS A SIGNED PROXY THAT DOES NOT
SPECIFY A VOTE, THE PROXY WILL BE VOTED IN FAVOR OF THE PROPOSAL WHICH WILL HAVE
THE EFFECT OF WAIVING THE SHAREHOLDER'S DISSENTERS' RIGHTS.
Under Sections 7-113-202 and 7-113-204 of the CBCA, a CommNet shareholder
who desires to exercise dissenters' rights and who does not vote in favor of the
Proposal may perfect such rights by delivering to CommNet, for receipt before
the taking of the vote on the Proposal, written notice of the shareholder's
intention to demand payment for the shareholder's shares if the proposed Merger
is consummated. The written demand is separate from and in addition to any proxy
or vote against the Proposal. Such written demand for payment should be
delivered either in person to the corporate secretary of CommNet before the
Special Meeting or at the Special Meeting before the vote on the Proposal, or by
mail (certified mail, return receipt requested, being the recommended form of
transmittal), for receipt prior to the vote on the Proposal at the Special
Meeting, delivered to CommNet at the following address: CommNet Cellular Inc.,
8350 East Crescent Parkway, Suite 400, Englewood, Colorado 80111, Attention:
Secretary.
Only a CommNet shareholder of record, or a person duly authorized and
explicitly purporting to act on her or his behalf, is entitled to exercise
dissenters' rights for CommNet Common Stock.
A beneficial shareholder of CommNet Common Stock may assert dissenters'
rights as to the shares held on his or her behalf only if she or he submits to
CommNet the written consent of the shareholder of record to the dissent not
later than the time the beneficial shareholder asserts dissenters' rights and he
or she does so with respect to all shares beneficially owned by him or her. A
person who owns CommNet Common Stock beneficially, but not of record, and who
desires to exercise his or her dissenters' rights is, therefore, advised to
consult promptly with the person or entity that is the record holder of his or
her dissenters' Common Stock in order to receive and submit his or her written
consent to the exercise of such rights and to ensure the timely exercise of such
rights.
If the Merger is authorized, CommNet will give a written dissenters' notice
to all shareholders who are entitled to demand payment for their shares. The
notice will be sent no later than ten days after the Effective Time and will
provide information regarding where and when the shareholder must deliver a
demand for payment. The notice will also supply a form for demanding payment.
CommNet will set a date by which it must receive such demand for payment and
that date will not be less than 30 days after the date CommNet sends the written
dissenters' notice.
A CommNet shareholder who receives a dissenters' notice and who wishes to
assert dissenters' rights must demand payment in writing for his or her shares
of CommNet Common Stock. The CommNet shareholder who demands payment will be
required to deposit his or her stock certificates in accordance with the CommNet
dissenters' notice. A CommNet shareholder who demands payment and deposits his
or her certificates retains all other rights of a shareholder until those rights
are canceled or modified by the Merger.
42
<PAGE>
The demand for payment and deposit of certificates is irrevocable. A COMMNET
SHAREHOLDER WHO DOES NOT DEMAND PAYMENT AND DEPOSIT HIS OR HER CERTIFICATES AS
REQUIRED BY THE DATE SPECIFIED IN THE DISSENTERS' NOTICE, IS NOT ENTITLED TO
PAYMENT FOR HIS OR HER SHARES OF COMMNET COMMON STOCK.
Upon the Effective Time or upon receipt of a payment demand, whichever is
later, CommNet shall pay each dissenter who complied with Section 7-113-204, at
the address stated in the payment demand, or if no such address is stated in the
payment demand, at the address shown on CommNet's current record of shareholders
for the record shareholder holding the dissenter's shares, the amount the
Company estimates to be the fair value of the dissenter's shares, plus accrued
interest. The payment will be accompanied by certain financial information,
CommNet's estimate of the fair value of the shares, an explanation of how the
interest was calculated, a statement of the dissenter's right to demand payment
under Section 7-113-209, and a copy of the CBCA sections governing dissenters'
rights.
A dissenter may notify CommNet in writing of his or her own estimate of the
fair value of his or her shares of CommNet Common Stock and the amount of
interest due, and demand payment of his or her own estimate, less any payment
made under Section 7-113-206 of the CBCA. The dissenter may also elect to reject
CommNet's offer and demand payment of the fair value of the shares and interest
due, if he or she believes that the amount paid under Section 7-113- 206 or
offered under Section 7-113-208 is less than the fair value of the shares or
that the interest due was incorrectly calculated. If a demand for payment
remains unresolved, CommNet may, within 60 days after receiving the payment
demand, commence a proceeding and petition the court to determine the fair value
of the shares and accrued interest. If CommNet does not commence the proceeding
within the sixty-day period, it shall pay to each dissenter whose demand remains
unresolved the amount demanded. The proceeding will be commenced in a district
court in Colorado, and the court will determine the fair value of the shares of
CommNet Common Stock and accrued interest.
In determining the fair value of the CommNet Common Stock, the court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value.
No representation can be made as to the outcome of an appraisal proceeding.
Shareholders also should be aware that the appraisal rights process is subject
to uncertainties and to the possibility of lengthy and expensive litigation that
could extend for a substantial period of time (without the shareholders having
received any money for the CommNet Common Stock during such period).
Shareholders also should recognize that an appraisal proceeding could result in
a determination of a fair value higher or lower than or equal to the per share
consideration which would otherwise be received in the Merger.
The costs of an appraisal proceeding will be determined by the court and
assessed against the Company, except that the court may assess costs against
some or all of the dissenters, in amounts the court finds equitable, to the
extent the court finds the dissenters acted arbitrarily, vexatiously, or not in
good faith in demanding payment under Section 7-113-209. The court may also
assess the fees and expenses of counsel and experts for the respective parties
in amounts the court finds equitable against the Company or one or more
dissenters.
CERTAIN PENDING LITIGATION
On October 22, 1997, The Rye Telephone Company ("Rye"), a shareholder in
Pueblo Cellular, Inc. ("Pueblo") filed an action in the District Court, Pueblo
County, State of Colorado, against the Company. The lawsuit alleged intentional
interference with contract, breach of contract and breach of covenant of good
faith in connection with a proposed sale of shares in Pueblo by Rye and Pine
Drive Telephone Company ("Pine Drive") and a related lawsuit filed by the
Company against Pine Drive in Arapahoe County court. The court granted the
Company's motion for a directed verdict in favor of the Company. Rye has
appealed this decision to the Colorado Court of Appeals. Rye seeks, among other
things, general and specific damages of not less than $5,493,840, exemplary
damages, fees and costs.
A joint request for stay by all parties has been filed and granted pending
the closing of the sale of Rye's interest in the Pueblo MSA market to Cellular
Inc. Network Corporation (CINC), a wholly owned subsidiary of the Company.
Closing of the sale transaction would result in a full and complete settlement
of the lawsuit.
43
<PAGE>
There are no other material, pending legal proceedings to which the Company
or any of its subsidiaries is a party or of which any of their property is the
subject which, if adversely decided, would have a material adverse effect on the
Company.
OTHER INFORMATION AND SHAREHOLDER PROPOSALS
Management of the Company knows of no other matters that may properly be,
or which are likely to be, brought before the Special Meeting. However, if any
other matters are properly brought before such Special Meeting, the persons
named in the enclosed Proxy or their substitutes intend to vote the Proxies in
accordance with their judgment with respect to such matters, unless authority to
do so is withheld in the Proxy.
INDEPENDENT AUDITORS
The consolidated financial statements of CommNet Cellular Inc. appearing in
the Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1998, have been audited by Deloitte & Touche LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing. Representatives of Deloitte & Touche LLP are
expected to be present at the Special Meeting, where they will have the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement incorporates by reference documents which are not
presented herein or delivered herewith. Copies of any such documents relating to
the Company, other than exhibits to such documents (unless such exhibits
specifically are incorporated by reference in such documents), are available
without charge, upon written or oral request, from CommNet Cellular Inc., 8350
East Crescent Parkway, Suite 400, Englewood, Colorado 80111, Attention:
Secretary, telephone: (303) 694-3234. In order to ensure timely delivery of the
documents requested, any such request should be made by October 15, 1999.
The following documents previously filed by the Company with the Commission
(File Number 000-15056) are incorporated in this Proxy Statement by reference:
(1) the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1998;
(2) the Company's Quarterly Reports on Form 10-Q for the periods ended
December 31, 1998, March 31, 1999 and June 30, 1999; and
(3) the Company's Current Report on Form 8-K dated July 19, 1999.
All reports and other documents subsequently filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act
prior to the date of the Special Meeting shall be deemed to be incorporated by
reference herein and to be part hereof from the date of the filing of such
reports and documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein, or in any other subsequently filed document that also is or is deemed to
be incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute part of this Proxy Statement.
The Company has supplied all information contained in or incorporated in
this Proxy Statement relating to the Company, and Vodafone AirTouch has supplied
all such information relating to Vodafone AirTouch.
44
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ---- -----
<S> <C>
1997 Merger............................................................................................... 12
1997 Merger Agreement..................................................................................... 13
Acquiring Person.......................................................................................... 27
Acquisition Proposal...................................................................................... 32
Action.................................................................................................... 34
affiliates................................................................................................ 4
Agreement Options......................................................................................... 32
AirTouch.................................................................................................. 4
AV Acquisition............................................................................................ 12
BCP CommNet............................................................................................... 2
Blackstone................................................................................................ 12
Blackstone CCI............................................................................................ 12
Board..................................................................................................... 2
Board of Directors........................................................................................ 2
CBCA...................................................................................................... 9
CCLHLLC................................................................................................... 4
cellular license.......................................................................................... 12
CIFC...................................................................................................... 4
CGSA...................................................................................................... 12
CINC...................................................................................................... 4
Code...................................................................................................... 38
Commission................................................................................................ 3
CommNet Common Stock...................................................................................... 2
CommNet................................................................................................... 2
CommNet Management........................................................................................ 25
Company................................................................................................... 2
Consulting Agreement...................................................................................... 25
Control Proposal.......................................................................................... 37
CPI....................................................................................................... 4
DCF....................................................................................................... 23
Descriptive Memorandum.................................................................................... 16
Dissenting shares......................................................................................... 9
EBITDA.................................................................................................... 22
Effective Time............................................................................................ 2
eligible guarantor institution............................................................................ 30
Exchange Act.............................................................................................. 3
Expenses.................................................................................................. 36
FCC....................................................................................................... 4
FCC Consents.............................................................................................. 7
forward-looking statements................................................................................ 3
HSR Act................................................................................................... 7
Joint Bidder Proposal..................................................................................... 17
Joint Bidder.............................................................................................. 16
Managed Affiliates........................................................................................ 31
managed market............................................................................................ 12
market.................................................................................................... 12
Merger.................................................................................................... 2
Merger Consideration...................................................................................... 5
Merger Sub................................................................................................ 2
Merger Agreement.......................................................................................... 2
Morgan Stanley Opinion.................................................................................... 6
</TABLE>
45
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<TABLE>
<CAPTION>
TERM PAGE
- ---- -----
<S> <C>
Morgan Stanley............................................................................................ 2
MSA....................................................................................................... 12
Net Company pops.......................................................................................... 12
Options................................................................................................... 32
Parent.................................................................................................... 2
Pine Drive................................................................................................ 43
Plan Options.............................................................................................. 32
pops...................................................................................................... 12
Preferred Stock........................................................................................... 26
Proposal.................................................................................................. 2
Proxy..................................................................................................... 2
Pueblo.................................................................................................... 43
Purchase Price............................................................................................ 26
Record Date............................................................................................... 2
Right..................................................................................................... 26
Rights Agreement.......................................................................................... 26
Rights Certificates....................................................................................... 26
RSA....................................................................................................... 12
Rye....................................................................................................... 43
Section 13 Event.......................................................................................... 27
Section 11 (a)(ii) Event.................................................................................. 27
Simpson Thacher........................................................................................... 17
Special Meeting........................................................................................... 2
Stock Acquisition Date.................................................................................... 27
Subsidiary................................................................................................ 2
Superior Proposal......................................................................................... 32
Surviving Corporation..................................................................................... 5
telcos.................................................................................................... 12
Termination Date.......................................................................................... 8
Vodafone AirTouch......................................................................................... 2
Vodafone AirTouch Proposal................................................................................ 17
Voting Agreement.......................................................................................... 2
</TABLE>
46
<PAGE>
ANNEX I
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 18, 1999
AMONG
COMMNET CELLULAR INC.
VODAFONE AIRTOUCH PLC
AND
PACIFIC TELECOM CELLULAR OF COLORADO, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
ARTICLE I. THE MERGER............................................................................... 1
1.1. The Merger............................................................................... 1
1.2. Closing.................................................................................. 1
1.3. Effective Time........................................................................... 1
1.4. Effects of the Merger.................................................................... 1
1.5. Articles of Incorporation................................................................ 2
1.6 By-Laws.................................................................................. 2
1.7. Officers and Directors of Surviving Corporation.......................................... 2
1.8. Effect on Capital Stock.................................................................. 2
ARTICLE II. PAYMENT FOR SHARES....................................................................... 2
2.1. Exchange Fund............................................................................ 2
2.2. Exchange Procedures...................................................................... 2
2.3. No Further Ownership Rights in CCI Common Stock Exchanged for Cash....................... 3
2.4. Termination of Exchange Fund............................................................. 3
2.5. No Liability............................................................................. 3
2.6. Investment of Exchange Fund.............................................................. 3
2.7. Lost Certificates........................................................................ 3
2.8. Withholding Rights....................................................................... 14
2.9. Further Assurances....................................................................... 14
2.10. Shares of Dissenting Shareholders........................................................ 14
ARTICLE III. REPRESENTATIONS AND WARRANTIES........................................................... 4
3.1. Representations and Warranties of CCI.................................................... 4
3.2. Representations and Warranties of Parent and Merger Sub.................................. 12
ARTICLE IV. COVENANTS RELATING TO CONDUCT OF BUSINESS................................................ 14
4.1. Covenants of CCI......................................................................... 14
4.2. Covenants of Parent and Merger Sub....................................................... 16
4.3. Advice of Changes; Government Filings.................................................... 16
4.4. Transition Planning...................................................................... 17
4.5. Control of Other Party's Business........................................................ 17
ARTICLE V. ADDITIONAL AGREEMENTS.................................................................... 17
5.1. Preparation of Proxy Statement; CCI Shareholder Meeting.................................. 17
5.2. Access to Information.................................................................... 18
5.3. Approvals and Consents; Cooperation...................................................... 18
5.4. Acquisition Proposals.................................................................... 19
5.5. Stock Options and Other Benefit Plans.................................................... 20
5.6. Fees and Expenses........................................................................ 21
5.7. Indemnification; Directors' and Officers' Insurance...................................... 21
5.8. Rights Agreement......................................................................... 21
5.9. Public Announcements..................................................................... 21
</TABLE>
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<TABLE>
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PAGE
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5.10. Certain Agreements....................................................................... 21
ARTICLE VI. CONDITIONS PRECEDENT..................................................................... 21
6.1. Conditions to Each Party's Obligation to Effect the Merger............................... 21
6.2. Additional Conditions to Obligations of Merger Sub....................................... 22
6.3. Additional Conditions to Obligations of CCI.............................................. 23
ARTICLE VII. TERMINATION AND AMENDMENT................................................................ 24
7.1. Termination.............................................................................. 24
7.2. Effect of Termination.................................................................... 25
7.3. Amendment................................................................................ 26
7.4. Extension; Waiver........................................................................ 26
ARTICLE VIII. GENERAL PROVISIONS....................................................................... 26
8.1. Non-Survival of Representations, Warranties and Agreements............................... 26
8.2. Notices.................................................................................. 26
8.3. Interpretation........................................................................... 27
8.4. Counterparts............................................................................. 27
8.5. Entire Agreement; No Third Party Beneficiaries........................................... 27
8.6. Governing Law............................................................................ 27
8.7. Severability............................................................................. 27
8.8. Assignment............................................................................... 27
8.9. Enforcement.............................................................................. 27
8.10. Definitions.............................................................................. 27
8.11. WAIVER OF JURY TRIAL..................................................................... 28
8.12. Submission to Jurisdiction .............................................................. 29
</TABLE>
ANNEX AND CCI DISCLOSURE SCHEDULE
Annex
A. Employee Benefits Matters
CCI Disclosure Schedule
ii
<PAGE>
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
LOCATION OF
DEFINITION DEFINED TERMS
- --------------------------------------------------------------------------------------------------- -------------
<S> <C>
Acquiring Person................................................................................... 3.1(q)
Acquisition Proposal............................................................................... 5.4(a)
Action............................................................................................. 6.2(d)
Affiliate.......................................................................................... 8.10(a)
Agreement.......................................................................................... Recitals
Agreement Options.................................................................................. 5.5(a)
Board of Directors................................................................................. 8.10(b)
Business Day....................................................................................... 8.10(c)
CBCA............................................................................................... Recitals
CCI................................................................................................ Recitals
CCI Affiliates..................................................................................... 8.10(d)
CCI Benefit Plans.................................................................................. 3.1(m)
CCI Common Stock................................................................................... Recitals
CCI Disclosure Schedule............................................................................ 3.1
CCI Material Contracts............................................................................. 3.1(l)
CCI Permits........................................................................................ 3.1(f)
CCI SEC Reports.................................................................................... 3.1(d)
CCI Shareholders Meeting........................................................................... 5.1(c)
CCI Voting Debt.................................................................................... 3.1(b)
Chase Facility..................................................................................... 3.1(b)
CIFC Facilities.................................................................................... 3.1(b)
Closing............................................................................................ 1.2
Closing Date....................................................................................... 1.2
CoBank............................................................................................. 3.1(b)
Code............................................................................................... 2.8
Colorado Articles of Merger........................................................................ 1.3
Communications Act................................................................................. 3.1(c)
Consolidated Subsidiaries.......................................................................... 3.1(a)
Control Proposal................................................................................... 8.10(e)
CoreStates Facility................................................................................ 3.1(b)
Dissenting Shares.................................................................................. 2.10
Distribution Date.................................................................................. 3.1(q)
Effective Time..................................................................................... 1.3
ERISA.............................................................................................. 3.1(m)
Exchange Act....................................................................................... 3.1(c)
Exchange Fund...................................................................................... 2.1
Expenses........................................................................................... 5.6
FCC................................................................................................ 3.1(c)
FCC Consents....................................................................................... 6.1(c)
FCC Licenses....................................................................................... 3.1(f)
GAAP............................................................................................... 3.1(a)
General Partner Licensees.......................................................................... 3.1(f)
Governmental Entity................................................................................ 3.1(c)
HSR Act............................................................................................ 3.1(c)
IRS................................................................................................ 3.1(m)
Liens.............................................................................................. 3.1(b)
Limited Partner Licensees.......................................................................... 3.1(f)
Managed Affiliates................................................................................. 3.1(f)
Material Adverse Change............................................................................ 8.10(f)
Material Adverse Effect............................................................................ 8.10(g)
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
LOCATION OF
DEFINITION DEFINED TERMS
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<S> <C>
Merger............................................................................................. Recitals
Merger Consideration............................................................................... 1.8(b)
Merger Sub......................................................................................... Recitals
Nasdaq............................................................................................. 3.1(c)
Nonmanaged Affiliates.............................................................................. 3.1(f)
Options............................................................................................ 5.5(a)
Organizational Documents........................................................................... 8.10(h)
Parent............................................................................................. Recitals
Paying Agent....................................................................................... 2.1
Person............................................................................................. 8.10(i)
Plan Options....................................................................................... 5.5(a)
Proxy Statement.................................................................................... 3.1(c)
Required CCI Votes................................................................................. 3.1(k)
Required Consents.................................................................................. 3.1(c)
Required Regulatory Approvals...................................................................... 6.2(c)
Rights............................................................................................. 3.1(b)
Rights Agreement................................................................................... 3.1(b)
SEC................................................................................................ 3.1(d)
Securities Act..................................................................................... 3.1(b)
Share Reference Date............................................................................... 3.1(b)
Stock Acquisition Date............................................................................. 3.1(q)
Stockholder........................................................................................ Recitals
Subsidiary......................................................................................... 8.10(j)
Superior Proposal.................................................................................. 5.4(a)
Surviving Corporation.............................................................................. 1.1
Tax................................................................................................ 8.10(k)
Tax Return......................................................................................... 8.10(k)
Taxable............................................................................................ 8.10(k)
Taxes.............................................................................................. 8.10(k)
Terminating CCI Breach............................................................................. 7.1(g)
Terminating Merger Sub/Parent Breach............................................................... 7.1(h)
Termination Date................................................................................... 7.1(b)
the other party.................................................................................... 8.10(l)
Violation.......................................................................................... 3.1(c)
Voting Agreement................................................................................... Recitals
WARN............................................................................................... 4.1(f)
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of July 18, 1999 (this "Agreement"),
among COMMNET CELLULAR INC., a Colorado corporation ("CCI"), VODAFONE AIRTOUCH
PLC, a British corporation ("Parent"), and PACIFIC TELECOM CELLULAR OF COLORADO,
INC., a Colorado corporation and a wholly-owned subsidiary of Parent ("Merger
Sub").
W I T N E S S E T H :
WHEREAS, the Board of Directors of CCI has (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger (as
defined below), taken together are fair to and in the best interests of the
shareholders of CCI and (ii) resolved to recommend that the holders of the
shares of common stock, par value $.001 per share of CCI ("CCI Common Stock"),
approve this Agreement and the transactions contemplated herein, including the
Merger;
WHEREAS, the Boards of Directors of Parent and Merger Sub have each
determined that this Agreement and the transactions contemplated hereby,
including the Merger, taken together are fair to and in the best interests of
their respective shareholders;
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent and Merger Sub are entering into a Voting Agreement (the "Voting
Agreement") with BCP CommNet L.P., a Delaware limited partnership and the owner
of approximately 86% of the CCI Common Stock ("Stockholder"), pursuant to which
Stockholder has agreed to vote all the shares of CCI Common Stock owned by it in
favor of the Merger upon the terms and subject to the conditions set forth in
the Voting Agreement;
WHEREAS, in order to effectuate the foregoing, Merger Sub, upon the terms
and subject to the conditions of this Agreement and in accordance with the
Colorado Business Corporation Act (the "CBCA"), will merge with and into CCI
(the "Merger"); and
WHEREAS, CCI, Parent and Merger Sub desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the CBCA, Merger Sub shall be merged with
and into CCI at the Effective Time (as defined below). At the Effective Time,
the separate corporate existence of Merger Sub shall cease and CCI shall
continue as the surviving corporation (the " Surviving Corporation").
1.2. Closing. The closing of the Merger (the "Closing") will take place on
the fifth Business Day after satisfaction or waiver (as permitted by this
Agreement and applicable law) of the conditions (excluding conditions that, by
their terms, cannot be satisfied until the Closing Date) set forth in Article VI
(the "Closing Date"), unless another time or date is agreed to in writing by the
parties hereto. The Closing shall be held at the offices of Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York, New York, unless another place is
agreed to in writing by the parties hereto.
1.3. Effective Time. As soon as practicable following the Closing, the
parties shall (i) file articles of merger (the "Colorado Articles of Merger") in
such form as is required by and executed in accordance with the CBCA and
(ii) make all other filings or recordings required under the CBCA. The Merger
shall become effective at the later of (i) such time as the Colorado Articles of
Merger are duly filed with the Colorado Secretary of State or (ii) such other
time as Parent, Merger Sub and CCI shall agree in writing should be specified in
the Colorado Articles of Merger (the date and time the Merger becomes effective
being the "Effective Time").
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1.4. Effects of the Merger. At and after the Effective Time, the Merger
will have the effects set forth in the CBCA. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, powers and franchises of CCI and Merger Sub shall be vested
in the Surviving Corporation, and all debts, liabilities and duties of CCI and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.5. Articles of Incorporation. The articles of incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the articles
of incorporation of the Surviving Corporation, until thereafter changed or
amended as provided therein or by applicable law.
1.6. ByLaws. The by-laws of Merger Sub as in effect at the Effective Time
shall be the by-laws of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
1.7. Officers and Directors of Surviving Corporation. The directors of
Merger Sub shall be the directors of the Surviving Corporation and the officers
of the Surviving Corporation shall be those designated by Merger Sub prior to
the Effective Time, until the earlier of their resignation or removal or
otherwise ceasing to be an officer or director or until their respective
successors are duly elected and qualified, as the case may be.
1.8. Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of CCI, Parent, Merger Sub or the
holders of any shares of CCI Common Stock or any shares of capital stock of
Merger Sub:
(a) Each share of CCI Common Stock that is owned by Parent or any
Subsidiary of Parent (including Merger Sub) or of CCI (together, in each case,
with the associated Right), shall automatically be cancelled and retired and
shall cease to exist and no consideration shall be delivered in exchange
therefor.
(b) Except as otherwise provided herein, each issued and outstanding share
of CCI Common Stock issued and outstanding immediately prior to the Effective
Time (other than any shares to be cancelled in accordance with
Section 1.8(a) and Dissenting Shares (as defined below)) together with the
associated Right shall be converted into the right to receive an amount equal to
$31 per share in cash, plus interest thereon for the period commencing on the
date of this Agreement until, but not including, the Closing Date at a rate of
eight percent (8%) per annum compounded daily calculated on the basis of a
360-day year for the actual number of days elapsed (the "Merger Consideration").
(c) As of the Effective Time, all shares of CCI Common Stock (and the
associated Rights) issued and outstanding immediately prior to the Effective
Time shall no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of a certificate representing
any such shares of CCI Common Stock (and the associated Rights) shall cease to
have any rights with respect thereto, except (i) the right to receive cash to be
paid in consideration therefor upon surrender of such certificate in accordance
with Article II, or (ii) in the case of Dissenting Shares, any rights under
Article 113 of the CBCA.
(d) Each share of common, preferred or other capital stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of
identical common, preferred or other capital stock of the Surviving Corporation.
ARTICLE II.
PAYMENT FOR SHARES
2.1. Exchange Fund. Prior to the mailing of the Proxy Statement (as
defined below), Merger Sub shall appoint a bank or trust company which is
reasonably satisfactory to CCI to act as paying agent for the payment of the
Merger Consideration (the "Paying Agent"). At or prior to the Effective Time,
Parent or Merger Sub shall deposit the Merger Consideration with the Paying
Agent for the benefit of the holders of the shares of CCI Common Stock (and the
associated Rights) for payment pursuant to this Agreement. The Paying Agent
shall deliver such cash (such cash being hereinafter referred to as the
"Exchange Fund") in payment for outstanding shares of CCI Common Stock (and the
associated Rights).
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2.2. Exchange Procedures. As soon as reasonably practicable after the
Effective Time, each holder of an outstanding certificate or certificates which
prior thereto represented shares of CCI Common Stock (and the associated Rights)
shall, upon surrender to the Paying Agent of such certificate or certificates
and acceptance thereof by the Paying Agent, be entitled to the amount of cash
into which the number of shares of CCI Common Stock (and the associated Rights)
previously represented by such certificate or certificates surrendered shall
have been converted pursuant to this Agreement. The Paying Agent shall accept
such certificates upon compliance with such reasonable terms and conditions as
the Paying Agent may impose to effect an orderly exchange thereof in accordance
with normal exchange practices. After the Effective Time there shall be no
further transfer on the records of CCI or its transfer agent of certificates
representing shares of CCI Common Stock (and the associated Rights) which have
been converted pursuant to this Agreement into the right to receive cash, and if
such certificates are presented to CCI for transfer, they shall be cancelled
against delivery of cash. If payment of the Merger Consideration is to be
remitted to a Person other than the Person in whose name the certificate for CCI
Common Stock surrendered for payment is registered, it shall be a condition of
such payment that the certificate so surrendered shall be properly endorsed,
with signature guaranteed by a firm which is an "eligible guarantor institution"
(as defined in Rule 17Ad-15 under the Exchange Act, as defined below), or
otherwise in proper form for transfer and that the Person requesting such
payment shall have paid any transfer or other taxes required by reason of the
payment of the Merger Consideration to a Person other than the registered holder
of the certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such tax either has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.2, each
certificate for shares of CCI Common Stock shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Merger Consideration as contemplated by Section 1.8. Except as provided in
Section 1.8(b), no interest will be paid or will accrue on any cash payable as
Merger Consideration.
2.3. No Further Ownership Rights in CCI Common Stock Exchanged for
Cash. All cash paid upon the surrender for conversion of certificates
representing shares of CCI Common Stock (and the associated Rights) in
accordance with the terms of Article I and this Article II shall be deemed to
have been issued (and paid) in full satisfaction of all rights pertaining to the
shares of CCI Common Stock (and the associated Rights) surrendered for
conversion for cash theretofore represented by such certificates.
2.4. Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of certificates representing shares of CCI
Common Stock (and the associated Rights) for six months after the Effective Time
shall be delivered to the Surviving Corporation or otherwise on the instruction
of the Surviving Corporation, and any holders of such certificates who have not
theretofore complied with this Article II shall thereafter look only to the
Surviving Corporation for the Merger Consideration with respect to the shares of
CCI Common Stock (and the associated Rights) formerly represented thereby to
which such holders are entitled pursuant to Section 2.2 and only as general
creditors thereof for payment of their claim for the Merger Consideration.
2.5. No Liability. None of Parent, Merger Sub, CCI, the Surviving
Corporation or the Paying Agent shall be liable to any Person in respect of any
cash from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any certificates
representing shares of CCI Common Stock (and the associated Rights) shall not
have been surrendered prior to six months after the Effective Time (or
immediately prior to such earlier date on which any cash would otherwise escheat
to or become the property of any Governmental Entity (as defined below)), any
such cash shall, to the extent permitted by applicable law, become the property
of the Surviving Corporation, free and clear of all claims or interest of any
Person previously entitled thereto.
2.6. Investment of Exchange Fund. The Paying Agent shall invest any cash
included in the Exchange Fund as directed by the Surviving Corporation on a
daily basis. Any interest and other income resulting from such investments shall
promptly be paid to the Surviving Corporation.
2.7. Lost Certificates. If any certificate of CCI Common Stock (and the
associated Right) shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the Person claiming such certificate to be lost,
stolen or destroyed and, if required by CCI, the posting by such Person of a
bond in such reasonable amount as CCI may direct as indemnity against any claim
that may be made against it with
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<PAGE>
respect to such certificate, the Paying Agent will deliver in exchange for such
lost, stolen or destroyed certificate the applicable Merger Consideration with
respect to the shares of CCI Common Stock (and the associated Rights) formerly
represented thereby, pursuant to this Agreement.
2.8. Withholding Rights. CCI and the Paying Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of CCI Common Stock (and the associated
Rights) such amounts as CCI or the Paying Agent, as applicable, is required to
deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
CCI or the Paying Agent, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the shares of CCI Common
Stock (and the associated Rights) in respect of which such deduction and
withholding was made by such party.
2.9. Further Assurances. At and after the Effective Time, the officers and
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of CCI or Merger Sub, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf of
CCI or Merger Sub, any other actions and things to vest, perfect or confirm of
record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
2.10. Shares of Dissenting Shareholders. Notwithstanding anything in this
Agreement to the contrary, any shares of CCI Common Stock (and the associated
Rights) that are issued and outstanding immediately prior to the Effective Time
and that are held by shareholders who shall not have voted in favor of the
Merger and who shall have demanded properly in writing payment for such shares
in accordance with Article 113 of the CBCA (collectively, the "Dissenting
Shares") shall not be converted into or represent the right to receive the
Merger Consideration. Such shareholders shall be entitled to receive payment of
the fair value (as defined in Article 113) of such shares of CCI Common Stock
(and the associated Rights) held by them in accordance with the provisions of
Article 113 of the CBCA, except that all Dissenting Shares held by shareholders
who shall have failed to perfect or who effectively shall have withdrawn or lost
their rights to payment for such shares of CCI Common Stock (and the associated
Rights) under such Article 113 shall thereupon be deemed to have been converted,
as of the Effective Time, into the right to receive the Merger Consideration,
without any interest thereon (except as provided in Section 1.8(b)). CCI shall
give Merger Sub prompt notice of any notice or demands for payment in accordance
with Article 113 of the CBCA for shares of CCI Common Stock received by CCI and
Merger Sub shall have the right to participate in and approve all negotiations
and proceedings with respect to such demands. CCI shall not, except with the
prior written consent of Merger Sub, make any payment with respect to, or settle
or offer to settle, any such demands.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of CCI. Except as set forth in the CCI
Disclosure Schedule delivered by CCI to Merger Sub at or prior to the execution
of this Agreement (the "CCI Disclosure Schedule"), CCI represents and warrants
to Parent and Merger Sub as follows:
(a) Organization, Standing and Power.
(i) Each of CCI and each of the Consolidated Subsidiaries that is a
corporation has been duly organized and is validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each of
the Consolidated Subsidiaries that is a partnership or limited liability
company has been duly formed and is validly existing under the laws of
the jurisdiction of its formation. Each of CCI and each of the
Consolidated Subsidiaries is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification
necessary, other than in such jurisdictions where the failure so to
qualify could not reasonably be expected, either individually or in the
aggregate, to have a Material Adverse Effect on CCI. The copies of the
Organizational Documents of CCI and the Consolidated Subsidiaries which
were previously furnished to Merger Sub are true, complete
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and correct copies of such documents as in effect on the date of this
Agreement. As used herein, "Consolidated Subsidiaries" means the
corporations, partnerships and limited liability companies which are, or
which in accordance with generally accepted accounting principles
("GAAP") should be, consolidated for purposes of CCI's financial
reporting, exclusive of partnerships unless CCI or an entity which it
controls is the controlling general partner of such partnership.
(ii) Each of the Managed Affiliates (as defined below) that is a
corporation has been duly organized and is validly existing and in good
standing under the laws of its jurisdiction of incorporation or
organization. Each of the Managed Affiliates that is a partnership has
been duly formed and is validly existing under the laws of the
jurisdiction of its formation. Each of the Managed Affiliates is duly
qualified and in good standing to do business in each jurisdiction in
which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary, other than in such
jurisdictions where the failure so to qualify could not reasonably be
expected, either individually or in the aggregate, to have a Material
Adverse Effect on CCI.
(b) Capital Structure.
(i) As of the date of this Agreement (the "Share Reference Date"),
the authorized capital stock of CCI consisted of (A) 40,000,000 shares
of CCI Common Stock, of which 22,853,345 shares were outstanding and
(B) 1,000,000 shares of preferred stock, of which 150,000 shares of
Series A Preferred Stock have been designated (none of which have been
issued) and were reserved for issuance upon exercise of the rights (the
"Rights") distributed to the holders of CCI Common Stock pursuant to the
Rights Agreement dated as of December 10, 1990, as amended, between CCI
and State Street Bank and Trust Company, as successor to The Bank of New
York, as rights agent (the "Rights Agreement"). Since the Share
Reference Date, to the date of this Agreement, there have been no
issuances of shares of the capital stock of CCI or any other securities
of CCI other than issuances of shares pursuant to options or rights
outstanding as of the Share Reference Date under the CCI Benefit Plans
(as defined below). All issued and outstanding shares of the capital
stock of CCI are duly authorized, validly issued, fully paid and
non-assessable, and no class of capital stock is entitled to preemptive
rights. There were outstanding as of the Share Reference Date no
options, warrants or other rights to acquire capital stock from CCI
other than the options specified in Section 5.5(a). No options or
warrants or other rights to acquire capital stock from CCI have been
issued or granted since the Share Reference Date to the date of this
Agreement.
(ii) Except as set forth in Section 3.1(b) of the CCI Disclosure
Schedule, all of the issued and outstanding shares of capital stock of
each Consolidated Subsidiary that is a corporation are duly authorized,
validly issued, fully paid and non-assessable and are owned, directly or
indirectly, by CCI and, where owned by CCI or a Consolidated Subsidiary,
are owned free and clear of any liens, claims, encumbrances,
restrictions, preemptive rights or any other claims of any third party
("Liens"). Except as set forth in Section 3.1(b) of the CCI Disclosure
Schedule, all of the partnership or limited liability company interests
of each Consolidated Subsidiary that is a partnership or a limited
liability company have been validly created pursuant to its partnership
agreement or limited liability company agreement, as applicable, and all
of the partnership or limited liability interests of each such
Consolidated Subsidiary are owned, directly or indirectly, by CCI and,
where owned by CCI or a Consolidated Subsidiary, are owned free and
clear of any Liens.
(iii) Except as set forth in Section 3.1(b) of the CCI Disclosure
Schedule, all of the issued and outstanding shares of capital stock
owned by CCI or a Consolidated Subsidiary in each Managed Affiliate or
CCI Affiliate which is a corporation are duly authorized, validly
issued, fully paid and non-assessable and, where owned directly by CCI
or a Consolidated Subsidiary, as applicable, are owned free and clear of
any Liens. Except as set forth in Section 3.1(b) of the CCI Disclosure
Schedule, all of the partnership interests of each Managed Affiliate or
CCI Affiliate which is a partnership in which CCI or a Consolidated
Subsidiary has a direct partnership interest have been validly created
pursuant to such partnership's partnership agreement and all of the
partnership
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<PAGE>
interests of each partnership Managed Affiliate or CCI Affiliate
directly owned by CCI or a Consolidated Subsidiary, as applicable, are
free and clear of any Liens.
(iv) As of the date of this Agreement, no bonds, debentures, notes
or other indebtedness of CCI having the right to vote on any matters on
which shareholders may vote ("CCI Voting Debt") are issued or
outstanding.
(v) Except as otherwise set forth in this Section 3.1(b), as of the
date of this Agreement, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of
any kind to which CCI or any of the Consolidated Subsidiaries is a party
or by which any of them is bound obligating CCI or any of the
Consolidated Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other
voting securities of CCI or any of the Consolidated Subsidiaries or
obligating CCI or any of the Consolidated Subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the date of
this Agreement, there are no outstanding obligations of CCI or any of
the Consolidated Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock of CCI or any of the Consolidated
Subsidiaries.
(vi) As of July 16, 1999, the only outstanding indebtedness for
borrowed money of CCI, the Consolidated Subsidiaries and the Managed
Affiliates is (a) indebtedness under a Senior Bank Credit Facility dated
September 18, 1997 with The Chase Manhattan Bank, as administrative
agent and collateral agent, Chase Manhattan Bank Delaware, as fronting
bank, and the other lenders named therein (the "Chase Facility") not
exceeding $739,000,000, (b) indebtedness owed to CIFC by Consolidated
Subsidiaries or Managed Affiliates under the credit facilities set forth
on Section 3.1(i) of the CCI Disclosure Schedule (the "CIFC
Facilities"), (c) indebtedness to CoreStates Bank (now known as First
Union National Bank) under the Credit Agreement dated as of
September 4, 1996 between Sioux Falls Cellular Limited Partnership and
CoreStates Bank, N.A. (the "CoreStates Facility") not exceeding
$2,916,332, (d) indebtedness to CoBank ACB ("CoBank") under the Credit
Agreement dated as of July 31, 1997 between Eastern South Dakota
Cellular of South Dakota LP and CoBank not exceeding $0,
(e) indebtedness to CoBank under the Credit Agreement dated as of
July 31, 1997 between Sanborn Cellular of South Dakota Limited
Partnership and CoBank not exceeding $3,939,888, (f) indebtedness to
CoBank under the Credit Agreement dated as of July 31, 1997 between
Missouri Valley Cellular of South Dakota Limited Partnership and CoBank
not exceeding $3,172,258, (g) indebtedness to CoBank under the Credit
Agreement dated as of June 14, 1998 between Pueblo Cellular, Inc. and
CoBank not exceeding $5,604,851, and (h) other indebtedness for borrowed
money not exceeding $100,000. Other than any loans and other extensions
of credit under the facilities referred to in clauses (a) through
(g) above, all of which are prepayable in full in accordance with their
terms (without penalty other than break funding costs), no indebtedness
for borrowed money of CCI or the Consolidated Subsidiaries contains any
restriction upon the incurrence of indebtedness for borrowed money by
CCI or any Consolidated Subsidiary or any Managed Affiliate or restricts
the ability of any of the foregoing to grant any Liens on its properties
or assets. There are no agreements or arrangements pursuant to which CCI
or the Consolidated Subsidiaries has guaranteed or agreed to be liable
for the obligations of another Person for borrowed money, other than CCI
and its wholly owned Subsidiaries.
(vii) There are no agreements or arrangements pursuant to which
(i) except as set forth on Section 3.1(b) of the CCI Disclosure
Schedule, CCI is or could be required to register shares of CCI Common
Stock or other securities under the Securities Act of 1933, as amended
(the "Securities Act"), or (ii) CCI is a party and which restricts the
voting or disposition of any CCI Common Stock.
(c) Authority; No Conflicts.
(i) CCI has all requisite corporate power and authority to enter
into this Agreement and, subject to the adoption of this Agreement by
the requisite vote of the holders of CCI Common
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<PAGE>
Stock, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of CCI, subject in the case of the consummation of
the Merger to the adoption of this Agreement by the shareholders of CCI.
This Agreement has been duly executed and delivered by CCI and
constitutes a valid and binding agreement of CCI, enforceable against it
in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and
similar laws relating to or affecting creditors generally, by general
equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by an implied
covenant of good faith and fair dealing.
(ii) Except as set forth in Section 3.1(c)(ii) of the CCI
Disclosure Schedule, the execution and delivery of this Agreement does
not or will not, as the case may be, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in
any violation of, or constitute a default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
amendment, cancellation or acceleration of any obligation or the loss of
a material benefit under, or the creation of a lien, pledge, security
interest, charge or other encumbrance on any assets (any such conflict,
violation, default, right of termination, amendment, cancellation or
acceleration, loss or creation, a "Violation") pursuant to: (A) any
provision of the Organizational Documents of CCI, any Consolidated
Subsidiary or Managed Affiliate that is a corporation or (B) except as
could not reasonably be expected to have a Material Adverse Effect on
CCI or to prevent or materially delay the performance of this Agreement
by CCI and, subject to obtaining or making the consents, approvals,
orders, authorizations, registrations, declarations and filings referred
to in paragraph (iii) below, any loan or credit agreement, note,
mortgage, bond, indenture, lease, benefit plan or other agreement,
obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to CCI or any of the Consolidated Subsidiaries or their
properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational, national,
state, municipal or local government, any instrumentality, subdivision,
court, administrative agency or commission or other authority thereof,
or any quasi-governmental or private body exercising any regulatory,
taxing, importing or other governmental or quasi-governmental authority
(a "Governmental Entity"), is required by or with respect to CCI, any
Consolidated Subsidiary or, to the knowledge of CCI, any Managed
Affiliate, in connection with the execution and delivery of this
Agreement by CCI or the consummation by CCI of the transactions
contemplated hereby, except for (x) the filing with the SEC of (i) a
proxy statement relating to the Required CCI Votes at the CCI
Shareholders Meeting (as defined below) (such proxy statement as amended
or supplemented from time to time, the "Proxy Statement") and (ii) such
reports under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement
and the transactions contemplated by this Agreement, (y) those required
under or in relation to (A) the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), (B) the Communications Act of
1934, as amended (the "Communications Act"), and any rules and
regulations promulgated by the Federal Communications Commission
("FCC"), (C) state securities or "blue sky" laws, (D) the CBCA with
respect to the filing and recordation of appropriate merger or other
documents, (E) rules and regulations of the Nasdaq National Market
("Nasdaq"), and (F) antitrust or other competition laws of other
jurisdictions, and (z) such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to make or
obtain could not reasonably be expected to have a Material Adverse
Effect on CCI or to prevent or materially delay the performance of this
Agreement by CCI. Consents, approvals, orders, authorizations,
registrations, declarations and filings required under or in relation to
clause (x) or (y) are hereinafter referred to as "Required Consents."
(d) Reports and Financial Statements.
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<PAGE>
(i) CCI has filed all required reports, schedules, forms,
statements and other documents required to be filed by it with the
Securities and Exchange Commission (the "SEC") since September 30, 1996
(collectively, including all exhibits thereto, the "CCI SEC Reports").
No Consolidated Subsidiary of CCI is required to file any form, report
or other document with the SEC. None of the CCI SEC Reports, as of their
respective dates (and, if amended or superseded by a filing prior to the
date of this Agreement or of the Closing Date, then on the date of such
filing), contained or will contain any untrue statement of a material
fact or omitted or will omit to state a 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. Each of
the financial statements (including the related notes) included in the
CCI SEC Reports presents fairly, in all material respects, the
consolidated financial position and consolidated results of operations
and cash flows of CCI as of the respective dates or for the respective
periods set forth therein, all in conformity with GAAP consistently
applied during the periods involved except as otherwise noted therein,
and subject, in the case of the unaudited interim financial statements,
to normal and recurring year-end adjustments that have not been and are
not expected to be material in amount. All of such CCI SEC Reports, as
of their respective dates (and as of the date of any amendment to the
respective CCI SEC Report), complied as to form in all material respects
with the applicable requirements of the Securities Act and the Exchange
Act and the rules and regulations promulgated thereunder.
(ii) Except as set forth in the CCI SEC Reports filed prior to the
date of this Agreement, and except for liabilities and obligations
incurred in the ordinary course of business consistent with past
practice since March 31, 1999, as of the date of this Agreement neither
CCI nor any of the Consolidated Subsidiaries has any liabilities or
obligations (other than arising under this Agreement) of any nature
which, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect on CCI or could reasonably be expected to
prevent or materially delay the performance of this Agreement by CCI.
(e) Proxy Statement. The Proxy Statement will not, at the date it is first
mailed to CCI's shareholders or at the time of the CCI Shareholders Meeting,
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 the light of the circumstances under which they are made, not
misleading, and the Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder, except that in each case no representation is made by
CCI with respect to statements made or incorporated by reference therein based
on information supplied in writing by Merger Sub specifically for inclusion
therein.
(f) Compliance with Applicable Laws; Regulatory Matters. CCI, the
Consolidated Subsidiaries, the CCI Affiliates which hold FCC Licenses for which
CCI serves (pursuant to contract or otherwise) as managing agent (the "Managed
Affiliates"), the partnerships which hold FCC licenses to operate cellular
telephone systems (" FCC Licenses") for which a Consolidated Subsidiary is the
managing or majority general partner (the "General Partner Licensees") and, to
the knowledge of CCI, the CCI Affiliates for which CCI does not serve as
managing agent (the "Nonmanaged Affiliates") and the partnerships which hold FCC
Licenses for which Consolidated Subsidiaries are non-managing general partners
or are limited partners (the "Limited Partner Licensees") hold all permits,
licenses, certificates, franchises, registrations, variances, exemptions, orders
and approvals of all Governmental Entities which are material to the operation
of the businesses of CCI, taken as a whole (the "CCI Permits"). CCI, the
Consolidated Subsidiaries, the Managed Affiliates, the General Partner Licensees
and, to the knowledge of CCI, the Nonmanaged Affiliates and the Limited Partner
Licensees are in compliance with the terms of the CCI Permits, except where the
failure so to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on CCI or to prevent or materially
delay the performance of this Agreement by CCI. Except as disclosed in the CCI
SEC Reports, the businesses of CCI, the Consolidated Subsidiaries, the Managed
Affiliates, the General Partner Licensees and, to the knowledge of CCI, the
Nonmanaged Affiliates and the Limited Partner Licensees are not being and have
not been conducted in violation of any law, ordinance, regulation, judgment,
decree, injunction, rule or order of any Governmental Entity, except for
violations which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on CCI
I-8
<PAGE>
or to prevent or materially delay the performance of this Agreement by CCI. As
of the date of this Agreement, no investigation (other than with respect to
Taxes) by any Governmental Entity with respect to CCI or any of the Consolidated
Subsidiaries, the Managed Affiliates, the General Partner Licensees and, to the
knowledge of CCI, the Nonmanaged Affiliates and the Limited Partner Licensees is
pending or, to the knowledge of CCI, threatened, other than investigations
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on CCI or to prevent or materially delay the
performance of this Agreement by CCI. CCI and each of the Consolidated
Subsidiaries, the Managed Affiliates, the General Partner Licensees and, to the
knowledge of CCI, the Nonmanaged Affiliates and the Limited Partner Licensees
have filed with all applicable Governmental Entities all forms, statements,
reports and documents (including exhibits, annexes and any amendments thereto)
required to be filed by them, and each such filing complied with all applicable
laws, rules and regulations, except for such nonfiling or noncompliance which
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on CCI or to prevent or materially delay the performance
of this Agreement by CCI. Set forth in Section 3.1(f) of the CCI Disclosure
Schedule is a true and complete list of all cellular FCC Licenses held by CCI,
any Consolidated Subsidiary, or any Managed Affiliate.
(g) Litigation. Except as set forth in Section 3.1(g) of the CCI
Disclosure Schedule and other than rulemaking or other proceedings of general
applicability affecting the cellular telephone industry and except as disclosed
in the CCI SEC Reports, there is no litigation, arbitration, claim, suit,
action, investigation or proceeding pending or, to the knowledge of CCI,
threatened, against or affecting CCI or any Consolidated Subsidiary or, to CCI's
knowledge, Managed Affiliate which, individually or in the aggregate, has had or
could reasonably be expected to have a Material Adverse Effect on CCI, nor is
there any judgment, award, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against CCI or any Consolidated Subsidiary or,
to CCI's knowledge, Managed Affiliate which, individually or in the aggregate,
has had or could reasonably be expected to have a Material Adverse Effect on CCI
or to prevent or materially delay the performance of this Agreement by CCI.
(h) Taxes. (i) CCI and each of the Consolidated Subsidiaries and Managed
Affiliates have duly and timely filed (taking into account any extension of time
within which to file) all material Tax Returns required to be filed by any of
them and all such filed Tax Returns are complete and accurate in all material
respects; (ii) CCI and each of the Consolidated Subsidiaries and Managed
Affiliates have paid all Taxes that are shown as due on such filed Tax Returns
or that CCI or any of the Consolidated Subsidiaries or Managed Affiliates is
obligated to withhold from amounts owing to any employee, creditor or third
party, except with respect to matters contested in good faith or for such
amounts that, individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect on CCI; (iii) as of the date of this
Agreement, there are no pending or, to the knowledge of CCI, threatened in
writing audits, examinations, investigations or other proceedings in respect of
Taxes or Tax matters relating to CCI or any of the Consolidated Subsidiaries or
Managed Affiliates which, if determined adversely to CCI or such Consolidated
Subsidiary or Managed Affiliate, could reasonably be expected to have a Material
Adverse Effect on CCI; (iv) there are no deficiencies or claims for any Taxes
that have been proposed, asserted or assessed against CCI or any of the
Consolidated Subsidiaries or Managed Affiliates which, if such deficiencies or
claims were finally resolved against CCI or any of the Consolidated Subsidiaries
or Managed Affiliates, could reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on CCI; (v) there are no material
Liens for Taxes upon the assets of CCI or any of the Consolidated Subsidiaries
or Managed Affiliates, other than Liens for current Taxes not yet due and
payable and Liens for Taxes that are being contested in good faith by
appropriate proceedings; (vi) none of CCI or any of the Consolidated
Subsidiaries or Managed Affiliates has made an election under Section 341(f) of
the Code; (vii) except as set forth in Section 3.1(h) of the CCI Disclosure
Schedule, no extension of the statute of limitations on the assessment of any
Taxes has been granted by CCI or any of its Consolidated Subsidiaries or Managed
Affiliates and is currently in effect; (viii) except as set forth in
Section 3.1(h) of the CCI Disclosure Schedule, none of CCI, its Consolidated
Subsidiaries or Managed Affiliates is a party to any agreement or arrangement
that could reasonably be expected to result, separately or in the aggregate, in
the actual or deemed payment by CCI or a subsidiary of any "excess parachute
payments" within the meaning of Section 280G or 162(m) of the Code; (ix) none of
CCI, its Consolidated Subsidiaries and Managed Affiliates has been a United
States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in
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<PAGE>
Section 897(c)(l)(A)(ii) of the Code; (x) all Taxes required to be withheld,
collected or deposited by or with respect to CCI, its Consolidated Subsidiaries
and Managed Affiliates have been timely withheld, collected or deposited, as the
case may be, and, to the extent required, have been paid to the relevant taxing
authority; (xi) none of CCI, its Consolidated Subsidiaries and Managed
Affiliates has issued or assumed (A) any obligations described in
Section 279(A) of the Code, (B) except as set forth in Section 3.1(h) of the CCI
Disclosure Schedule, any applicable high yield discount obligations, as defined
in Section 163(i) of the Code, or (C) any registration-required obligations,
within the meaning of Section 163(f)(2) of the Code, that is not in registered
form; (xii) there are no requests for information currently outstanding that
could affect the Taxes of CCI, its Consolidated Subsidiaries and Managed
Affiliates; and (xiii) there are no proposed reassessments of any property owned
by CCI, its Consolidated Subsidiaries and Managed Affiliates or other proposals
that could increase the amount of any Tax to which CCI or any such Person would
be subject.
(i) Subsidiaries and Affiliates. Section 3.1(b) of the CCI Disclosure
Schedule lists CCI's ownership interests in all the Consolidated Subsidiaries,
the Managed Affiliates, the General Partner Licensees, the Nonmanaged Affiliates
and the Limited Partner Licensees as of the date of this Agreement. Section
3.1(i) of the CCI Disclosure Schedule lists all outstanding contractual
agreements of CCI or any of the Consolidated Subsidiaries to provide funds to,
or make any investment (in the form of a loan, capital contribution or
otherwise) in, any Consolidated Subsidiary, Managed Affiliate, General Partner
Licensee, Nonmanaged Affiliate and Limited Partner Licensee, except such
agreements as would not require any investment or provision of funds or assets
in an amount or having a fair market value in excess of $1,000,000 for any such
agreement or $2,500,000 in the aggregate for all such agreements.
(j) Absence of Certain Changes or Events. Except as disclosed in the CCI
SEC Reports: (A) since March 31, 1999, CCI and the Consolidated Subsidiaries and
Managed Affiliates have conducted their respective businesses in the ordinary
course consistent with their past practices and have not incurred any material
liability or obligation, except in the ordinary course of their respective
businesses consistent with their past practices; and (B) since March 31, 1999 to
the date of this Agreement, there has not been any Material Adverse Change.
(k) Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of CCI Common Stock (the "Required CCI Vote") is the only
vote of the holders of any class or series of CCI capital stock necessary to
approve this Agreement and the transactions contemplated hereby (assuming for
purposes of this representation the accuracy of the representations contained in
Section 3.2(f), without giving effect to the knowledge qualification thereto).
(l) Certain Agreements.
(i) All contracts (A) listed or which would be required to be
listed as an exhibit to CCI's Annual Report on Form 10-K under the rules
and regulations of the SEC relating to the business of CCI and the
Consolidated Subsidiaries and any contracts that would be required to be
so listed but for the exception with respect to listing contracts made
in the ordinary course of business, (B) to which CCI or a Consolidated
Subsidiary is a party providing for payments or the receipt of payments
or the sale, purchase or exchange of goods or services worth in excess
of $5,000,000 (or in fact resulting in such payments for the twelve
months ended June 30, 1999), which contracts described in this clause
(B) are listed on Section 3.1(l) of the CCI Disclosure Schedule or
(C) to which CCI or a Consolidated Subsidiary is a party which are
partnership, limited liability company, joint venture or similar
agreements or management agreements (the "CCI Material Contracts") are
valid and in full force and effect except to the extent they have
previously expired in accordance with their terms, and neither CCI nor
any of the Consolidated Subsidiaries has violated any provision of, or
committed or failed to perform any act which, with or without notice,
lapse of time, or both, could reasonably be expected to constitute a
default under the provisions of, any such CCI Material Contract, except
for defaults which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on CCI. To the
knowledge of CCI, no counterparty to any such CCI Material Contract has
violated any provision of, or committed or failed to perform any act
which, with or without notice, lapse of time, or both, could reasonably
be expected to constitute a default or other breach under the provisions
of, such CCI Material Contract,
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except for defaults or breaches which, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on
CCI.
(ii) Except as set forth in Section 3.1(l)(ii) of the CCI
Disclosure Schedule, as of the date of this Agreement none of CCI or any
of the Consolidated Subsidiaries or, to the knowledge of CCI, any of the
Managed Affiliates has entered into any agreement or arrangement: (A)
limiting or otherwise restricting CCI or any of the Consolidated
Subsidiaries or any of the Managed Affiliates from engaging or competing
in any line of business or in any geographic area or (B) with any Person
who owns more than 5% of the CCI Common Stock.
(m) Employee Benefit Plans; Labor Matters.
(i) With respect to each employee benefit plan, program,
arrangement and contract (including, without limitation, any "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and any bonus,
deferred compensation, stock bonus, stock purchase, restricted stock,
stock option, employment, termination, change in control and severance
plan, program, arrangement and contract), whether or not subject to
ERISA, to which CCI or any of the Consolidated Subsidiaries is a party
or has any liability in respect of or which is maintained or contributed
to by CCI or any of the Consolidated Subsidiaries (the "CCI Benefit
Plans"), CCI has made available to Parent a true and complete copy of
(A) such CCI Benefit Plan, (B) the two most recent annual reports (Form
5500) filed with the Internal Revenue Service (the "IRS"), (C) each
trust or other funding arrangement relating to such CCI Benefit Plan,
(D) the most recent summary plan description related to each CCI Benefit
Plan for which a summary plan description is required, (E) the most
recent actuarial report (if applicable) relating to a CCI Benefit Plan
and (F) the most recent determination letter, if any, issued by the IRS
with respect to any CCI Benefit Plan qualified under Section 401(a) of
the Code.
(ii) Each of the CCI Benefit Plans that is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA and that is
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS, and CCI is not aware, after
reasonable inquiry, of any circumstances likely to result in the
revocation of any such favorable determination letter that could
reasonably be expected to have a Material Adverse Effect on CCI.
(iii) No event has occurred and, to the knowledge of CCI, after
reasonable inquiry, there exists no condition or set of circumstances,
in connection with which CCI or any of the Consolidated Subsidiaries
could be subject to any liability under the terms of any CCI Benefit
Plans, ERISA, the Code or any other applicable law which, individually
or in the aggregate, could reasonably be expected to have a Material
Adverse Effect on CCI.
(iv) None of CCI, any of the Consolidated Subsidiaries or any of
the Managed Affiliates is a party to any collective bargaining or other
labor union contracts and no collective bargaining agreement is being
negotiated by CCI or any of the Consolidated Subsidiaries or Managed
Affiliates. There is no pending labor dispute, strike or work stoppage
against CCI or any of the Consolidated Subsidiaries or Managed
Affiliates which may interfere with the respective business activities
of CCI or any of the Consolidated Subsidiaries or Managed Affiliates,
except where such dispute, strike or work stoppage could not reasonably
be expected to have a Material Adverse Effect on CCI. There is no
pending charge or complaint against CCI or any of the Consolidated
Subsidiaries or Managed Affiliates by the National Labor Relations Board
or any comparable state agency, except where such unfair labor practice,
charge or complaint could not reasonably be expected to have a Material
Adverse Effect on CCI. Neither CCI nor any of the Consolidated
Subsidiaries has any present or future obligation to contribute to, or
any liability in respect of, any "multiemployer plan" as described in
Section 3(37) of ERISA.
(v) Except as set forth in Section 3.1(m)(v) of the CCI Disclosure
Schedule, no CCI Benefit Plan exists which could result in the payment
to any employee of CCI or any of the Consolidated Subsidiaries of any
money or other property or rights or accelerate or provide any other
rights or benefits to any such employee as a result of the transactions
contemplated by this Agreement,
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whether or not such payment would constitute a parachute payment within
the meaning of Code Section 280G.
(n) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement, based on arrangements made by
or on behalf of CCI, except Morgan Stanley & Co. Incorporated, whose fees and
expenses will be paid by CCI in accordance with CCI's agreement with such firm.
A true and complete copy of such agreement has been delivered to Parent prior to
the date hereof.
(o) Opinion of Financial Advisor. CCI has received the opinion of Morgan
Stanley & Co. Incorporated dated the date of this Agreement, to the effect that,
as of such date, the Merger Consideration is fair from a financial point of view
to the holders of CCI Common Stock (other than Parent or its Affiliates).
(p) Board Recommendation. As of the date hereof, the Board of Directors of
CCI, at a meeting duly called and held, has by unanimous vote of those directors
present (who constituted 100% of the directors then in office) (i) determined
that this Agreement and the transactions contemplated hereby, including the
Merger, taken together are fair to and in the best interests of the shareholders
of CCI and (ii) resolved to recommend that the holders of the shares of CCI
Common Stock approve this Agreement and the transactions contemplated herein,
including the Merger.
(q) Rights Agreement. Under the Rights Agreement, (i) none of the
approval, execution or delivery of this Agreement or the consummation of the
Merger or the other transactions contemplated hereby will cause (1) the Rights
to become exercisable, (2) Merger Sub or Parent to be deemed an "Acquiring
Person" (as defined in the Rights Agreement), or (3) the "Stock Acquisition
Date" (as defined in the Rights Agreement) to occur upon any such event. The
"Distribution Date" (as defined in the Rights Agreement) has not occurred.
(r) Takeover Statutes. No Colorado state takeover statute or similar
statute or regulation of the State of Colorado applies or purports to apply to
the Agreement or any of the transactions contemplated herein, including the
Merger. Subject to receipt of the FCC consents, no provision of the
Organizational Documents of CCI or Consolidated Subsidiaries or Managed
Affiliates would, as a result of the consummation of the transactions
contemplated hereby, directly or indirectly restrict or impair the ability of
Merger Sub or Parent to vote, or otherwise to exercise the rights of a
shareholder with respect to securities of CCI or of any Consolidated Subsidiary
(to the extent securities of any Consolidated Subsidiary are owned directly or
indirectly by CCI) or permit any shareholder or general partner to acquire
securities of CCI on a basis not available to Merger Sub or Parent.
3.2. Representations and Warranties of Parent and Merger Sub. Parent and
Merger Sub, jointly and severally, represent and warrant to CCI as follows:
(a) Organization, Standing and Power. Each of Parent and Merger Sub is a
corporation duly organized and validly existing under the laws of its
jurisdiction of incorporation and each of Parent and Merger Sub is in good
standing under the laws of its jurisdiction of incorporation, has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary other
than in such jurisdictions where the failure so to qualify could not reasonably
be expected, either individually or in the aggregate, to have a Material Adverse
Effect on Parent or Merger Sub, as the case may be.
(b) Authority; No Conflicts.
(i) Each of Parent and Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of each of Parent and Merger Sub. This Agreement has been duly executed
and delivered by each of Parent and Merger Sub and constitutes a valid
and binding agreement of each of Parent and Merger Sub, enforceable
against it
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in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors generally, or by general
equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(ii) The execution and delivery of this Agreement does not or will
not, as the case may be, and the consummation of the transactions
contemplated hereby will not, result in any Violation of: (A) any
provision of the Organizational Documents of either Parent or Merger Sub
or (B) except as could not reasonably be expected to have a Material
Adverse Effect on either Parent or Merger Sub, and subject to obtaining
or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph
(iii) below, any loan or credit agreement, note, mortgage, bond,
indenture, lease, benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to either
Parent or Merger Sub or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to either Parent or Merger Sub in connection
with the execution and delivery of this Agreement by Parent and Merger
Sub or the consummation by Parent and Merger Sub of the transactions
contemplated hereby, except for (A) the Required Consents set forth in
Section 3.1(c)(iii) and (B) such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of
which to make or obtain could not reasonably be expected to have a
Material Adverse Effect on either Parent or Merger Sub.
(c) Proxy Statement. None of the information supplied or to be supplied by
Parent or Merger Sub in writing for inclusion or incorporation by reference in
the Proxy Statement will, at the date it is first mailed to the shareholders of
CCI or at the time of the CCI Shareholders Meeting, 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.
(d) No Vote Required. No vote or approval of (i) any holder of any
interest in Parent or (ii) the holders of any class of Merger Sub shares is
necessary to approve this Agreement and the transactions contemplated hereby
other than those already obtained by Parent and Merger Sub on or before the date
hereof.
(e) Brokers or Finders. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based on arrangements made by or
on behalf of Merger Sub or Parent.
(f) Ownership of CCI Common Stock. As of the date of this Agreement,
neither Parent or Merger Sub nor, to the knowledge of Parent, any of Parent's
affiliates or associates (as such terms are defined under the Exchange Act)
(i) beneficially owns, directly or indirectly or (ii) is party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, in case of either clause (i) or (ii), shares of capital stock of
CCI.
(g) FCC Qualification. Parent and Merger Sub are each fully qualified
under the Communications Act, and any applicable state regulations, to control
all CCI Permits (including, without limitation, all FCC Licenses), without the
requirement of divestiture of any CCI Permits or FCC Licenses or of any
interests held by Parent or Merger Sub or any of their Affiliates.
(h) Financing. Parent and Merger Sub have or have available to them
sufficient committed funds to consummate the transactions contemplated by this
Agreement (including paying the Merger Consideration in respect of all
outstanding shares of CCI Common Stock) and to pay all related fees and
expenses.
(i) No Business Activities. Except for its ownership of a partnership
interest in Colorado RSA No. 3 Limited Partnership, Merger Sub is not a party to
any material agreements and has not conducted any activities other than in
connection with the organization of Merger Sub, the negotiation and execution of
this Agreement and the consummation of the transactions contemplated hereby.
Merger Sub has no Subsidiaries.
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ARTICLE IV.
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1. Covenants of CCI. During the period from the date of this Agreement
and continuing until the Effective Time (except as expressly contemplated or
permitted by this Agreement or to the extent that Merger Sub shall otherwise
consent in writing):
(a) Ordinary Course. Except as set forth in Section 4.1(a) of the CCI
Disclosure Schedule, CCI and the Consolidated Subsidiaries and Managed
Affiliates shall carry on their respective businesses in the usual, regular
and ordinary course in all material respects, in substantially the same
manner as heretofore conducted, and shall use reasonable best efforts to
preserve intact their present lines of business, maintain their rights and
franchises and preserve their relationships with employees, Governmental
Entities, customers, suppliers and others having business dealings with
them to the end that their ongoing businesses shall not be impaired in any
material respect at the Effective Time; provided, however, that no action
by CCI or the Consolidated Subsidiaries or Managed Affiliates with respect
to matters specifically addressed by any other provision of this
Section 4.1 shall be deemed a breach of this Section 4.1(a) unless such
action would constitute a breach of one or more of such other provisions.
(b) Dividends; Changes in Share Capital. CCI shall not, and shall not
permit any of the Consolidated Subsidiaries to, and shall not propose to,
(i) declare or pay any dividends on or make other distributions in respect
of any of its capital stock, except dividends by the Consolidated
Subsidiaries in the ordinary course of business consistent with past
practice, (ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its capital stock,
except for any such transaction by a wholly-owned Subsidiary of CCI which
remains a wholly-owned Subsidiary after consummation of such transaction,
or (iii) repurchase, redeem or otherwise acquire any shares of its capital
stock or any securities convertible into or exercisable for any shares of
its capital stock except for the purchase from time to time by CCI of CCI
Common Stock in the ordinary course of business consistent with past
practice in connection with the CCI Benefit Plans.
(c) Issuance of Securities. Except as set forth in Section 5.5, CCI
shall not, and shall not permit any of the Consolidated Subsidiaries to,
issue, deliver or sell, dispose, pledge or encumber or authorize or propose
the issuance, delivery, sale, disposition, pledge or encumbrance of, any
shares of its capital stock of any class, any CCI Voting Debt or any
securities convertible into or exercisable for, or any rights, warrants or
options to acquire, any such shares or CCI Voting Debt, or enter into any
agreement with respect to any of the foregoing and shall not amend any
equity-related awards issued pursuant to the CCI Benefit Plans, other than
(i) the issuance of CCI Common Stock (and the associated Rights) upon the
exercise of stock options issued in the ordinary course of business and
consistent with past practice in accordance with the terms of the CCI Stock
Option Plan as in effect on the date of this Agreement and (ii) issuances
of shares to directors in accordance with the Director's Compensation Plan
of CCI.
(d) Organizational Documents. Except to the extent required to comply
with their respective obligations hereunder, required by law or required by
the rules and regulations of Nasdaq, CCI and the Consolidated Subsidiaries
shall not amend or propose to amend their respective Organizational
Documents.
(e) Indebtedness. CCI shall not, and shall not permit any of the
Consolidated Subsidiaries to, (i) incur or suffer to exist any indebtedness
for borrowed money or guarantee any such indebtedness or issue or sell any
debt securities or warrants or rights to acquire any debt securities of CCI
or any of the Consolidated Subsidiaries or guarantee any debt securities of
other Persons other than indebtedness of CCI or any Consolidated Subsidiary
to CCI or any wholly-owned Subsidiary of CCI and other than in the ordinary
course of business or as permitted pursuant to Section 4.1(e) of the CCI
Disclosure Schedule, (ii) make any loans, advances or capital contributions
to, or investments in, any other Person, other than by CCI or a
Consolidated Subsidiary to or in CCI, any Consolidated Subsidiary or CCI
Affiliate in the ordinary course of business consistent with past practice
or as permitted pursuant to
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Section 4.1(e) of the CCI Disclosure Schedule or (iii) subject to
Section 4.1(n), pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than in the ordinary course of business consistent with
past practice.
(f) Benefit Plans; WARN. CCI shall not, and shall not permit any of
the Consolidated Subsidiaries to (i) increase the compensation payable or
to become payable to any of its executive officers or employees,
(ii) adopt or amend (except as may be required or prudent under law) any
bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan,
agreement, trust, fund or other arrangement (including any CCI Benefit
Plan) for the benefit or welfare of any employee, director or former
director or employee, (iii) grant any new or modified severance or
termination arrangement or increase or accelerate any benefits payable
under its severance or termination pay policies in effect on the date
hereof, (iv) effectuate a "plant closing" or "mass layoff," as those terms
are defined in the Worker Adjustment and Retraining Notification Act of
1988 ("WARN"), affecting in whole or in part any site of employment,
facility, operating unit or employee of CCI or any of the Consolidated
Subsidiaries, without notifying Merger Sub in advance and without complying
with the notice requirements and other provisions of WARN, or (v) take any
action with respect to the grant of any severance or termination pay, or
stay, bonus or other incentive arrangement (other than pursuant to benefit
plans and policies in effect on the date of this Agreement), except in each
case of clauses (i) - (v) any such increases or grants, or amendments or
modifications, made in the ordinary course of business and in accordance
with past practice but in any event, in an aggregate amount, not exceeding
$1,000,000.
(g) Other Actions. CCI shall not, and shall not permit any of the
Consolidated Subsidiaries to, take any action that could reasonably be
expected to result in (i) any of the representations or warranties of CCI
set forth in this Agreement that are qualified as to materiality becoming
untrue, (ii) any of such representations or warranties that are not so
qualified becoming untrue in any material respect or (iii) except as
otherwise permitted by Section 5.4, any of the conditions to the Merger set
forth in Article VI not being satisfied.
(h) Accounting Methods; Income Tax Elections. Except as disclosed in
CCI SEC Reports filed prior to the date of this Agreement, or as required
by a Governmental Entity, CCI shall not change any of its methods of
accounting in effect at March 31, 1999, except as required by changes in
GAAP as concurred in by CCI's independent auditors. CCI shall not
(i) change its fiscal year or (ii) make or rescind any material Tax
election or settle or compromise any federal, state, local or foreign Tax
liability, other than in the ordinary course of business consistent with
past practice, without consultation with Merger Sub.
(i) Certain Agreements. Except as set forth in Section 4.1(i) of the
CCI Disclosure Schedule, CCI shall not, and shall not permit any of the
Consolidated Subsidiaries to, enter into any agreement or arrangement:
(i) that limits or otherwise restricts CCI or any of the Consolidated
Subsidiaries or any of their respective affiliates or any successor thereto
or that could, after the Closing, limit or restrict Surviving Corporation
or any of its affiliates or any successor thereto from engaging or
competing in any line of business or in any geographic area or (ii) with
any Person who owns more than 5% of the CCI Common Stock.
(j) Acquisitions; Use of Funds. Except as set forth on Schedule
4.1(a) of the CCI Disclosure Schedule, CCI and the Consolidated
Subsidiaries shall not make any acquisition, by means of merger,
consolidation or otherwise, of (i) any direct or indirect ownership
interest in assets comprising any business enterprise or operation or
spectrum or (ii) except in the ordinary course of business consistent with
past practices, any other asset.
(k) Wireless Assets. Except as set forth on Schedule 4.1(a) of the
CCI Disclosure Schedule, CCI and the Consolidated Subsidiaries shall not
sell, transfer, lease, license, pledge, mortgage, encumber or otherwise
dispose of any direct or indirect ownership interest in or assets
comprising any wireless system or part thereof (including any shares of
capital stock of any Subsidiary holding such interest) or other investment
or business enterprise or operation, other than (i) the replacement or
upgrade of assets, or the disposition of redundant assets, in each case, in
the ordinary course of business consistent with
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past practice and (ii) sales of individual assets in the ordinary course of
business consistent with past practice.
(l) Line of Business. CCI and the Consolidated Subsidiaries shall
not, directly or indirectly, engage in the conduct of any business or in
any territory, other than the wireless telecommunications business and
related businesses conducted by CCI on the date hereof and in the
territories where so conducted.
(m) Expenditures. For any fiscal quarter commencing with the quarter
ending September 30, 1999, CCI and the Consolidated Subsidiaries shall not
make any capital expenditures, other than handsets, in excess of $12
million per quarter; provided that any amounts not spent in prior quarters
as permitted hereunder may be spent in succeeding quarters. CCI and the
Consolidated Subsidiaries shall not enter into any agreements, arrangements
or understandings requiring capital expenditures at times or in amounts
other than as set forth in the preceding sentence.
(n) Claims. Without the prior consent of Merger Sub (which shall not
be unreasonably withheld or delayed), CCI and the Consolidated Subsidiaries
shall not settle or compromise any material claim, action, suit,
litigation, arbitration, investigation or proceeding (in each case, whether
pending or threatened) not covered by insurance, including any claim,
action, suit, litigation, arbitration, investigation or proceeding (in each
case, whether pending or threatened) to the effect that this Agreement or
the consummation of the transactions contemplated hereby conflicts with, or
results in a Violation pursuant to, any provision of the Organizational
Documents of CCI or any Consolidated Subsidiary or Managed Affiliate.
(o) Certain Agreements. CCI and the Consolidated Subsidiaries shall
not enter into any agreement, arrangement or understanding that would
constitute a CCI Material Contract if it were in effect on the date of this
Agreement. CCI and the Consolidated Subsidiaries shall not prepay, modify,
amend or terminate (or waive, release or assign any material rights or
claims under) any CCI Material Contract or other material agreement,
arrangement or understanding of CCI or any Consolidated Subsidiary, in each
case, except in the ordinary course of business consistent with past
practice.
(p) Intention. CCI and the Consolidated Subsidiaries shall not enter
into any agreement, commitment or obligation to take any action prohibited
by this Section.
(q) Managed Affiliates. CCI and the Consolidated Subsidiaries will
use reasonable efforts to cause each Managed Affiliate to comply with the
provisions of this Section to the same extent as if such Managed Affiliate
were a Consolidated Subsidiary.
4.2. Covenants of Parent and Merger Sub. During the period from the date
of this Agreement and continuing until the Effective Time (except as expressly
contemplated or permitted by this Agreement or to the extent that CCI shall
otherwise consent in writing):
(a) Governing Documents. Except to the extent required to comply with
its obligations hereunder or required by law, Merger Sub shall not amend or
propose to amend its Organizational Documents in any manner that could
reasonably be expected to prevent or materially delay the performance of
this Agreement; provided, however, that (i) Merger Sub shall not amend or
propose to amend its Organizational Documents in any way at any time
following the date of the Proxy Statement and (ii) Merger Sub shall amend
its Organizational Documents prior thereto to the extent necessary to
comply with Section 5.7.
(b) Other Actions. Neither Parent nor Merger Sub shall take any
action that could reasonably be expected to result in (i) any of the
representations or warranties of either Parent or Merger Sub set forth in
this Agreement that are qualified as to materiality becoming untrue,
(ii) any of such representations or warranties that are not so qualified
becoming untrue in any material respect or (iii) any of the conditions to
the Merger set forth in Article VI not being satisfied.
4.3. Advice of Changes; Government Filings. Each party shall (a) confer on
a regular and frequent basis with the other, (b) report (to the extent permitted
by law, regulation and any applicable confidentiality agreement) on operational
matters and (c) promptly advise the other orally and in writing of (i) any
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representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it (A) to comply with or
satisfy in any respect any covenant, condition or agreement required to be
complied with or satisfied by it under this Agreement that is qualified as to
materiality or (B) to comply with or satisfy in any material respect any
covenant, condition or agreement required to be complied with or satisfied by it
under this Agreement that is not so qualified as to materiality or (iii) any
change, event or circumstance that has had or could reasonably be expected to
have a Material Adverse Effect on such party; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement. CCI and Merger Sub shall file all reports required to be
filed by each of them with the SEC (and all other Governmental Entities) between
the date of this Agreement and the Effective Time and shall (to the extent
permitted by law or regulation or any applicable confidentiality agreement)
deliver to the other party copies of all such reports promptly after the same
are filed. Subject to applicable laws relating to the exchange of information,
each of CCI and Merger Sub shall have the right to review in advance, and to the
extent practicable each will consult with the other, with respect to all the
information relating to the other party and each of their respective
Subsidiaries, which appears in any filings, announcements or publications made
with, or written materials submitted to, any third party or any Governmental
Entity in connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties hereto agrees to act
reasonably and as promptly as practicable. Each party agrees that, to the extent
practicable, it will consult with the other party with respect to the obtaining
of all permits, consents, approvals and authorizations of all third parties and
Governmental Entities necessary or advisable to consummate the transactions
contemplated by this Agreement and each party will keep the other party apprised
of the status of matters relating to completion of the transactions contemplated
hereby.
4.4. Transition Planning. Brian Shay, as President of Merger Sub, and
Arnold C. Pohs, as Chief Executive Officer of CCI, jointly shall be responsible
for coordinating all aspects of transition planning and implementation relating
to the Merger and the other transactions contemplated hereby. If either such
person ceases to be President or Chief Executive Officer, respectively, of his
company for any reason, such person's successor shall assume his predecessor's
responsibilities under this Section 4.4. During the period between the date of
this Agreement and the Effective Time, Messrs. Shay and Pohs jointly shall
coordinate policies and strategies with respect to regulatory authorities and
bodies, in all cases subject to applicable law.
4.5. Control of Other Party's Business. Nothing contained in this
Agreement shall give CCI, directly or indirectly, the right to control or direct
Parent's operations prior to the Effective Time. Nothing contained in this
Agreement shall give Parent directly or indirectly, the right to control or
direct CCI's operations prior to the Effective Time. Prior to the Effective
Time, each of CCI and Parent shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its
respective operations.
ARTICLE V.
ADDITIONAL AGREEMENTS
5.1. Preparation of Proxy Statement; CCI Shareholder Meeting.
(a) As soon as practicable following the date of this Agreement, CCI
shall prepare the Proxy Statement. Parent and Merger Sub will cooperate
with CCI in connection with the preparation of the Proxy Statement
including, but not limited to, furnishing to CCI any and all information
regarding Parent and its affiliates as may be required to be disclosed
therein. CCI will use its best efforts to cause the Proxy Statement to be
mailed to its shareholders as promptly as practicable.
(b) CCI will as promptly as practicable notify Merger Sub of (i) the
receipt of any comments from the SEC and (ii) any request by the SEC for
any amendment to the Proxy Statement or for additional information. All
filings by CCI with the SEC, including the Proxy Statement and any
amendment thereto, and all mailings to CCI's shareholders in connection
with the Merger, including the Proxy Statement, shall be subject to the
prior review, comment and approval of Merger Sub (such approval not to be
unreasonably withheld or delayed).
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(c) Unless the Board of Directors of CCI determines in good faith
after consultation with outside legal counsel that in connection with the
receipt of a Superior Proposal such action would breach its fiduciary
obligations to shareholders under applicable law, (i) CCI shall, as soon as
practicable following the date of this Agreement, duly call, give notice
of, convene and hold a meeting of its shareholders (the "CCI Shareholders
Meeting") for the purpose of obtaining the Required CCI Votes with respect
to this Agreement, (ii) the Board of Directors of CCI shall unanimously
recommend adoption of this Agreement by the shareholders of CCI as set
forth in Section 3.1(p), and (iii) CCI shall take all lawful action to
solicit such adoption. Any such recommendation, together with a copy of the
opinion referred to in Section 3.1(o) shall be included in the Proxy
Statement. CCI will use its best efforts to hold such meeting as soon as
practicable after the date hereof.
5.2. Access to Information. Upon reasonable notice, CCI shall (and shall
cause each of the Consolidated Subsidiaries and Managed Affiliates, to the
extent affording such access is permitted by the Organizational Documents or
other pertinent agreements of such entity, to) afford to the officers,
employees, accountants, counsel, financial advisors and other representatives of
Parent reasonable access during normal business hours, during the period prior
to the Effective Time, to all its properties, books, contracts, commitments and
records and, during such period, CCI shall (and shall cause each of the
Consolidated Subsidiaries and Managed Affiliates, to the extent causing such
furnishing is permitted by the Organizational Documents or other pertinent
agreements of such entity, to) furnish promptly to Parent (a) access to each
report, schedule, registration statement and other document filed, published,
announced or received by it during such period pursuant to the requirements of
Federal or state securities laws, as applicable (other than reports or documents
which such party is not permitted to disclose under applicable law) and (b)
consistent with its legal obligations, all other information concerning its
business, properties and personnel as Parent may reasonably request; provided,
however, CCI may restrict the foregoing access to the extent that (i) a
Governmental Entity requires CCI or any of the Consolidated Subsidiaries or
Managed Affiliates to restrict access to any properties or information
reasonably related to any such contract on the basis of applicable laws and
regulations with respect to national security matters or (ii) any law, treaty,
rule or regulation of any Governmental Entity applicable to CCI or the
Consolidated Subsidiaries or Managed Affiliates requires CCI or the Consolidated
Subsidiaries or Managed Affiliates to restrict access to any properties or
information.
5.3. Approvals and Consents; Cooperation.
(a) Subject to Section 5.3(b), each of CCI, Parent and Merger Sub
shall cooperate with each other and use (and shall cause their respective
Subsidiaries to use) its best efforts to take or cause to be taken all
actions, and do or cause to be done all things, necessary, proper or
advisable on their part under this Agreement and applicable laws
(including, without limitation, the Communications Act and the HSR Act) to
consummate and make effective the Merger and the other transactions
contemplated by this Agreement as soon as practicable, including
(i) preparing and filing as promptly as practicable all documentation to
effect all necessary applications, notices, petitions, filings, tax ruling
requests and other documents and to obtain as promptly as practicable all
consents, waivers, licenses, orders, registrations, approvals, permits, tax
rulings and authorizations necessary or advisable to be obtained from any
third party and/or any Governmental Entity in order to consummate the
Merger or any of the other transactions contemplated by this Agreement and
(ii) taking all reasonable steps as may be necessary to obtain all such
consents, waivers, licenses, registrations, permits, authorizations, tax
rulings, orders and approvals. Without limiting the generality of the
foregoing, each of CCI, Parent and Merger Sub agrees to make all necessary
filings in connection with the Required Regulatory Approvals as promptly as
practicable after the date of this Agreement, and to use its best efforts
to furnish or cause to be furnished, as promptly as practicable, all
information and documents requested with respect to such Required
Regulatory Approvals and, subject to Section 5.3(b), shall otherwise
cooperate with the applicable Governmental Entity in order to obtain any
Required Regulatory Approvals in as expeditious a manner as possible.
Subject to Section 5.3(b), each of CCI, Parent and Merger Sub shall use its
best efforts to resolve such objections, if any, as any Governmental Entity
may assert with respect to this Agreement and the transactions contemplated
hereby in connection with the Required Regulatory Approvals. Subject to
Section 5.3(b), in the event that a suit is instituted by a Person or
Governmental Entity challenging this Agreement and the transactions
contemplated hereby as violative of applicable
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antitrust or competition laws or the Communications Act, each of CCI,
Parent and Merger Sub shall use its best efforts to resist or resolve such
suit. Each of CCI, Parent and Merger Sub each shall, upon request by the
other party, furnish the other with all information concerning itself, its
Subsidiaries, directors, officers and shareholders and such other matters
as may reasonably be necessary or advisable in connection with the Proxy
Statement or any other statement, filing, tax ruling request, notice or
application made by or on behalf of CCI, Parent or Merger Sub or any of
their respective Subsidiaries to any third party and/or any Governmental
Entity in connection with the Merger or the other transactions contemplated
by this Agreement.
(b) Notwithstanding the provisions of Section 5.3(a) or anything in
this Agreement to the contrary, (i) neither CCI nor Parent or Merger Sub
shall be required to grant any consent under, or waive any right under or
provision of, this Agreement, (ii) neither Parent nor any of its
Subsidiaries shall be required to divest or hold separate or otherwise take
(or refrain from taking) or commit to take (or refrain from taking) any
action that limits its freedom of action with respect to, or its ability to
retain, CCI or the Consolidated Subsidiaries or any material portion of the
assets of CCI or the Consolidated Subsidiaries, or any significant business
or assets of Parent or any of its Subsidiaries and (iii) neither CCI nor
any of its Subsidiaries shall, without Parent's prior written consent,
commit to any divestiture or agreement to hold separate or similar
transaction and each of CCI and the Consolidated Subsidiaries shall commit
to, and shall use best efforts to effect, such thereof (which may, at CCI's
option, be conditioned upon and effective as of the Effective Time) as
Parent shall request, and if such consent is granted or request made, such
divestiture, agreement to hold separate or similar transaction (or
commitment with respect thereto) shall not constitute a breach of a
representation or warranty or covenant hereunder.
5.4. Acquisition Proposals.
(a) CCI agrees that neither it nor any of its Subsidiaries, officers
and directors shall, and that it shall direct and use its best efforts to
cause its employees, agents and representatives (including any investment
banker, attorney or accountant retained by it) not to, directly or
indirectly, initiate, solicit, encourage or otherwise facilitate any
inquiries or the making of any proposal or offer with respect to a merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving, or any purchase of all or any significant portion of the assets
or any equity securities of, CCI (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal"). CCI further agrees
that neither it nor any of its Subsidiaries, officers and directors shall,
and that it shall direct and use its best efforts to cause its employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it) not to, directly or indirectly, provide any
information or data to any Person relating to or in contemplation of an
Acquisition Proposal or engage in any discussions or negotiations relating
to or in contemplation of an Acquisition Proposal; provided, however, that
nothing contained in this Agreement shall prevent CCI or its Board of
Directors from (A) complying with Rule 14e-2 and Rule 14d-9 promulgated
under the Exchange Act with regard to an Acquisition Proposal;
(B) engaging in any discussions or negotiations with, or providing any
information to, any Person in response to a bona fide written Acquisition
Proposal by any such Person; or (C) recommending such bona fide written
Acquisition Proposal to the shareholders of CCI, if and only to the extent
that, in any such case as is referred to in clause (B) or (C), (i) the
Board of Directors of CCI concludes in good faith (after consultation with
its financial advisors) that such Acquisition Proposal is reasonably
capable of being completed, taking into account all legal, financial,
regulatory and other aspects of the proposal and the Person making the
proposal, and is on terms that would, if consummated, result in a
transaction more favorable to CCI shareholders from a financial point of
view than the transaction contemplated by this Agreement (any such more
favorable Acquisition Proposal being referred to in this Agreement as a
"Superior Proposal") and (ii) the Board of Directors of CCI determines in
good faith after consultation with outside legal counsel that such action
is necessary for it not to breach its fiduciary obligations to shareholders
under applicable law. CCI will notify Parent immediately if any inquiries,
proposals or offers respecting an Acquisition Proposal are received by, any
such information or data is requested from, or any such discussions or
negotiations are sought to be initiated or continued with, it or any such
Persons indicating, in connection
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with such notice, the name of such Person and the material terms and
conditions of any proposals or offers, and shall keep Parent apprised with
respect to the status and terms thereof. CCI agrees that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with, and the provision of information and data
to, any parties conducted heretofore with respect to any Acquisition
Proposal. CCI will also promptly request each Person that has heretofore
executed a confidentiality agreement in connection with its consideration
of an Acquisition Proposal to return all confidential information
heretofore furnished to such Person by or on behalf of it or any of its
Subsidiaries. CCI will provide Parent at least two business days' advance
notice of its intention to present to its Board of Directors or accept any
Superior Proposal and shall provide Parent with a summary of the terms and
conditions thereof.
(b) Parent and Merger Sub agree that, while this Agreement remains in
effect, at any meeting of the holders of shares of CCI Common Stock at
which Parent or Merger Sub or any of their Affiliates shall have the right
to vote its shares of CCI Common Stock or at any meeting of the holders of
shares of CCI Common Stock, however called, or in connection with any
written consent of the holders of shares of CCI Common Stock, each of
Parent and Merger Sub and any such Affiliate shall vote (or cause to be
voted) the shares of CCI Common Stock held by it, to the extent voting
rights exist with respect to the proposals to be acted upon, in favor of
adoption of this Agreement and approval of the other transactions
contemplated by this Agreement.
5.5. Stock Options and Other Benefit Plans.
(a) As of the Share Reference Date, there were outstanding options
representing in the aggregate the right to purchase 1,787,790 shares of CCI
Common Stock including 82,090 restricted shares under the agreement
referred to in clause (ii) of Section 5.5(e). Options representing in the
aggregate the right to purchase 1,597,950 of such shares are subject to the
terms of both the CCI Omnibus Stock and Incentive Plan and the Replacement
Stock Option Agreement covering the optionee (the "Agreement Options"). The
remaining options, excluding the restricted shares under the agreement
referred to in clause (ii) of Section 5.5(e), representing in the aggregate
the right to purchase 107,750 of such shares, are subject only to the terms
of such Plan (the "Plan Options"; together with the Agreement Options, the
"Options").
(b) Prior to the Closing Date, CCI shall use its reasonable best
efforts to obtain from each holder of outstanding Plan Options his or her
written consent to the treatment of his or her Plan Options as set forth in
this Section.
(c) Immediately prior to the Effective Time, each outstanding Option,
whether or not then vested or exercisable, shall be cancelled by CCI, and
the holder thereof shall be entitled to receive, at the Effective Time or
as soon as practicable thereafter, from CCI in consideration for such
cancellation an amount in cash equal to the product of (i) the number of
shares of CCI Common Stock previously subject to such Option multiplied by
(ii) the excess of the Merger Consideration over the exercise price per
share of CCI Common Stock previously subject to such Option, reduced by any
applicable withholding taxes or other amounts required by law to be paid or
withheld by CCI.
(d) CCI may accelerate the vesting of any outstanding Options in
accordance with the terms thereof.
(e) Anything to the contrary set forth herein notwithstanding, during
the period from the date of this Agreement to the Effective Time, CCI shall
not grant any Options or issue any stock to any director, officer or
employee, except that it may (i) issue stock pursuant to the exercise of
Options, (ii) grant restricted stock to Arnold C. Pohs pursuant to the
terms of the Retirement and Consulting Agreement, dated March 30, 1997, as
amended, between CCI and Mr. Pohs, and (iii) issue shares to directors
under the Director's Compensation Plan of CCI, in each case, in amounts not
to exceed the amounts set forth in Section 3.1(b) of the CCI Disclosure
Schedule.
(f) Annex A hereto sets forth certain additional agreements among the
parties hereto with respect to employee benefits matters and is hereby
incorporated herein by reference.
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5.6. Fees and Expenses. Whether or not the Merger is consummated, all
Expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such Expenses, except
(a) if the Merger is consummated, the Surviving Corporation shall pay, or cause
to be paid, any and all property or transfer taxes imposed on CCI, the
Consolidated Subsidiaries or the CCI Affiliates and any real property transfer
tax imposed on any holder of shares of capital stock of CCI resulting from the
Merger, and (b) as provided in Section 7.2. As used in this Agreement,
"Expenses" of a party includes all out-of-pocket expenses (including, without
limitation, all fees and expenses of all banks, investment banking firms and
other financial institutions, and their respective agents and counsel,
accountants, experts and consultants to a party hereto and its Affiliates)
incurred by a party or on its behalf, whether incurred prior to, on or after the
date of this Agreement, in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement and the
transactions contemplated hereby and the financing thereof, including the
preparation, printing, filing and mailing of the Proxy Statement and the
solicitation of shareholder approvals and all other matters related to the
transactions contemplated hereby.
5.7. Indemnification; Directors' and Officers' Insurance. The Surviving
Corporation shall cause to be maintained in effect (i) for a period of six years
after the Effective Time, the current provisions regarding indemnification of
officers and directors contained in the Organizational Documents of CCI and
(ii) for a period of six years after the Effective Time, the current policies of
directors' and officers' liability insurance and fiduciary liability insurance
maintained by CCI (provided that the Surviving Corporation may substitute
therefor policies of at least the same coverage and amounts containing terms and
conditions which are, in the aggregate, no less advantageous to the insured)
with respect to claims arising from facts or events that occurred on or before
the Effective Time.
5.8. Rights Agreement. The Board of Directors of CCI shall take all action
necessary (including redeeming the Rights immediately prior to the Effective
Time or amending the Rights Agreement) in order to render the Rights
inapplicable to the Merger and the other transactions contemplated by this
Agreement.
5.9. Public Announcements. CCI and Merger Sub shall use all reasonable
efforts to develop a joint communications plan and each party shall use all
reasonable efforts (i) to ensure that all press releases and other public
statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby.
5.10. Certain Agreements. Neither CCI nor any subsidiary of CCI will waive
or fail to enforce any provision of any confidentiality or standstill or similar
agreement to which it is a party entered into in connection with a possible sale
of CCI, without the prior written consent of Merger Sub (which shall not be
unreasonably withheld or delayed).
ARTICLE VI.
CONDITIONS PRECEDENT
6.1. Conditions to Each Party's Obligation to Effect the Merger. The
obligations of CCI and Merger Sub to effect the Merger are subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Shareholder Approval. CCI shall have obtained all approvals of
holders of shares of capital stock of CCI necessary to approve this
Agreement and all the transactions contemplated hereby (including the
Merger).
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(c) Required Regulatory Approvals. All Required Consents and all
other authorizations, consents, orders and approvals of, and declarations
and filings with, and all expirations of waiting periods imposed
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by, any Governmental Entity which, if not obtained in connection with the
consummation of the transactions contemplated hereby, could reasonably be
expected to have a Material Adverse Effect on CCI (collectively, "Required
Regulatory Approvals") shall have been obtained, have been declared or
filed or have occurred, as the case may be, and all such Required
Regulatory Approvals shall be in full force and effect; provided that if
the condition set forth in Section 6.2(c) is waived by Merger Sub, then
this condition will be deemed to have been satisfied with respect to FCC
Consents.
(d) No Injunctions or Restraints, Illegality. No temporary
restraining order, preliminary or permanent injunction or other order
issued by a court or other Governmental Entity of competent jurisdiction
shall be in effect and have the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
6.2. Additional Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction, or waiver by Merger Sub, on or prior to the Closing Date, of the
following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of CCI set forth in this Agreement that is qualified as to
materiality shall have been true and correct when made and shall be true
and correct on and as of the Closing Date as if made on and as of such date
(other than representations and warranties which address matters only as of
a certain date which shall be true and correct as of such certain date),
and each of the representations and warranties of CCI that is not so
qualified shall have been true and correct in all material respects when
made and shall be true and correct in all material respects on and as of
the Closing Date as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct in all material respects as of such
certain date), and Merger Sub shall have received a certificate of the
chief executive officer and the chief financial officer of CCI to such
effect.
(b) Performance of Obligations of CCI. CCI shall have performed or
complied with all agreements and covenants required to be performed by it
under this Agreement at or prior to the Closing Date that are qualified as
to materiality and shall have performed or complied in all material
respects with all other agreements and covenants required to be performed
by it under this Agreement at or prior to the Closing Date that are not so
qualified as to materiality, and Merger Sub shall have received a
certificate of the chief executive officer and the chief financial officer
of CCI to such effect.
(c) FCC Consents. The FCC shall have granted its consent to the
consummation of the transactions contemplated hereby ("FCC Consents"). No
timely request for stay, motion or petition for reconsideration or
rehearing, application or request for review, or notice of appeal or other
judicial petition for review of the FCC Consents shall be pending, and the
time for filing any such request, motion, petition, application, appeal, or
notice, and for the entry of an order staying, reconsidering, or reviewing
on the FCC's own motion, shall have expired.
(d) No Litigation. There shall not be pending any suit, action,
investigation or proceeding by any Governmental Entity (an "Action")
(i) seeking to restrain or prohibit the consummation of the Merger or any
of the other transactions contemplated by this Agreement or seeking to
obtain damages from CCI or Parent or any of their respective Subsidiaries
or the Managed Affiliates, which if determined adversely to CCI, would be
reasonably likely to have a Material Adverse Effect on CCI, (ii) seeking to
prohibit or limit the ownership or operation by CCI or any of the
Consolidated Subsidiaries or Managed Affiliates or Parent of any material
portion of the business or assets of CCI, the Consolidated Subsidiaries and
the Managed Affiliates (taking CCI, the Consolidated Subsidiaries and the
Managed Affiliates as a whole), or seeking to require CCI or any of the
Consolidated Subsidiaries or Managed Affiliates or Parent to dispose of or
hold separate any material portion of the business or assets of CCI, the
Consolidated Subsidiaries and the Managed Affiliates (taking CCI, the
Consolidated Subsidiaries and the Managed Affiliates as a whole) as a
result of the Merger or any of the other transactions contemplated by this
Agreement, (iii) seeking to prohibit Parent from effectively controlling in
any material respect the business or operations of CCI, the Consolidated
Subsidiaries and the Managed Affiliates, taken as a whole, or (iv) seeking
to impose limitations on the ability of Parent or Merger Sub to acquire or
hold, or exercise full rights of ownership of, any shares of CCI Common
Stock, including,
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without limitation, the right to vote CCI Common Stock on all matters
properly presented to the shareholders of CCI or which otherwise would have
a Material Adverse Effect on CCI; provided, however, that the provisions of
this Section 6.2(d) shall not be available to Merger Sub if it has failed
to fulfill its obligations pursuant to Section 5.3 (or other breach of a
representation, warranty or covenant hereof) shall have been the cause of,
or shall have resulted in, such suit, action, investigation or proceeding.
(e) Material Adverse Change. Since the date of this Agreement, no
Material Adverse Change shall have occurred and not been cured.
6.3. Additional Conditions to Obligations of CCI. The obligations of CCI
to effect the Merger are subject to the satisfaction, or waiver by CCI on or
prior to the Closing Date, of the following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Parent and Merger Sub set forth in this Agreement that is
qualified as to materiality shall have been true and correct when made and
shall be true and correct on and as of the Closing Date as if made on and
as of such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct as of
such certain date), and each of the representations and warranties of
Parent and Merger Sub that is not so qualified shall have been true and
correct in all material respects when made and shall be true and correct in
all material respects on and as of the Closing Date as if made on and as of
such date (other than representations and warranties which address matters
only as of a certain date which shall be true and correct in all material
respects as of such certain date), and CCI shall have received a
certificate of the chief executive officer and the chief financial officer
of each of Parent and Merger Sub to such effect.
(b) Performance of Obligations of Parent and Merger Sub. Each of
Parent and Merger Sub shall have performed or complied with all agreements
and covenants required to be performed by it under this Agreement at or
prior to the Closing Date that are qualified as to materiality and shall
have performed or complied in all material respects with all agreements and
covenants required to be performed by it under this Agreement at or prior
to the Closing Date that are not so qualified as to materiality, and CCI
shall have received a certificate of the chief executive officer and the
chief financial officer of each of Parent and Merger Sub to such effect.
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ARTICLE VII.
TERMINATION AND AMENDMENT
7.1. Termination. This Agreement may be terminated at any time prior to
the Effective Time, by action taken or authorized by the Board of Directors of
the terminating party or parties, whether before or after approval of the
matters presented in connection with the Merger by the shareholders of CCI:
(a) By mutual written consent of Parent and CCI;
(b) By either CCI or Parent if the Effective Time shall not have
occurred on or before the six-month anniversary of the date of this
Agreement (the "Termination Date"); provided, however, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available
to any party whose failure (or if Parent is the terminating party, the
failure of Parent or Merger Sub) to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the Termination Date; and provided,
further, that if on the Termination Date any conditions to the Closing set
forth in Section 6.1(b), 6.1(c), 6.1(d), 6.2(c) or 6.2(d) shall not have
been fulfilled, but all other conditions to the Closing shall be fulfilled
or shall be reasonably capable of being fulfilled, then the Termination
Date shall be extended to the twelve-month anniversary of the date of this
Agreement;
(c) By either CCI or Parent if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action (which order,
decree, ruling or other action CCI (if it is the terminating party) or
Parent and Merger Sub (if Parent is the terminating party) shall have used
their best efforts to resist, resolve or lift, as applicable, subject to
the provisions of Section 5.3) 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
nonappealable;
(d) By either Parent or CCI if the approval by the shareholders of CCI
required for the consummation of the Merger or the other transactions
contemplated hereby shall not have been obtained by reason of the failure
to obtain the required vote at a duly held meeting of shareholders or at
any adjournment thereof;
(e) By Parent if the Board of Directors of CCI (i) shall withdraw or
modify in any manner adverse to Merger Sub its approval or recommendation
of this Agreement or the Merger, (ii) failed as promptly as practicable to
mail the Proxy Statement to its shareholders or failed to include in such
statement such recommendation, (iii) in response to the commencement of any
tender offer or exchange offer for more than 20% of the outstanding shares
of CCI Common Stock, shall have not recommended rejection of such tender
offer or exchange offer by the date required for such recommendation under
Rule 14e-2 of the Exchange Act, (iv) shall approve or recommend any
Acquisition Proposal other than that contemplated by this Agreement,
(v) shall resolve to take any of the actions specified in clauses (i) or
(iv) above, (vi) any Person (other than Parent or an Affiliate of Parent or
BCP CommNet L.P. or an Affiliate of BCP CommNet L.P.) or "group" becomes
the "beneficial owner" (such terms having the meaning in this Agreement
ascribed under regulation 13D under the Exchange Act) of more than 25% of
the outstanding shares of CCI Common Stock, or (vii) for any reason the
Company fails to call or hold the CCI Shareholders Meeting before the
Termination Date (provided that Parent's right to terminate this Agreement
under such clause (vii) shall not be available if at such time Parent would
not be entitled to terminate this Agreement under Section 7.1(b));
(f) By CCI, prior to the Required CCI Vote having been obtained if the
Board of Directors of CCI determines to accept a Superior Proposal after
determining in good faith after consultation with legal counsel as to its
fiduciary obligations under applicable law, that the failure to accept such
Superior Proposal would constitute a breach of its fiduciary duties, but
only after CCI provides Parent with not less than two business days'
advance notice of its determination to accept such Superior Proposal
including all material terms and conditions thereof;
(g) By Parent, upon a material breach of any covenant or agreement on
the part of CCI set forth in this Agreement, or if (i) any representation
or warranty of CCI that is qualified as to materiality shall have become
untrue or (ii) any representation or warranty of CCI that is not so
qualified shall have
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become untrue in any material respect, in each case such that the
conditions set forth in Section 6.2(a) or Section 6.2(b) would not be
satisfied (a "Terminating CCI Breach"); provided, however, that, if such
Terminating CCI Breach is reasonably capable of being cured by CCI through
the exercise of its best efforts prior to the 60th day following CCI's
obtaining notice of such breach (or, if earlier, the Termination Date) and
for so long as CCI continues to exercise such best efforts, Parent may not
terminate this Agreement under this Section 7.1(g); or
(h) By CCI, upon a material breach of any covenant or agreement on the
part of Parent or Merger Sub set forth in this Agreement, or if (i) any
representation or warranty of Parent or Merger Sub that is qualified as to
materiality shall have become untrue or (ii) any representation or warranty
of Parent or Merger Sub that is not so qualified shall have become untrue
in any material respect, in each case such that the conditions set forth in
Section 6.3(a) or Section 6.3(b) would not be satisfied (a "Terminating
Parent/Merger Sub Breach"); provided, however, that, if such Terminating
Parent/Merger Sub Breach is reasonably capable of being cured by Parent or
Merger Sub, as applicable, through the exercise of its best efforts prior
to the 60th day following Parent's obtaining notice of such breach (or, if
earlier, the Termination Date) and for so long as Parent or Merger Sub, as
applicable, continues to exercise such best efforts, CCI may not terminate
this Agreement under this Section 7.1(h).
7.2. Effect of Termination.
(a) In the event of termination of this Agreement by either CCI or Parent
as provided in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Merger Sub or CCI or
their respective officers or directors except (i) with respect to
Sections 3.1(n), 3.2(e), Section 5.6, this Section 7.2 and Article VIII and (ii)
with respect to any liabilities or damages incurred or suffered by a party as a
result of the willful breach by the other party of any of its representations,
warranties, covenants or other agreements set forth in this Agreement.
(b) Subject to Sections 7.2(c) and 7.2(d), in the event of any termination
of this Agreement, in addition to any other amounts which may be payable or
become payable pursuant to any other paragraph of this Section 7.2, CCI shall
reimburse Merger Sub for all Expenses of Parent and Merger Sub; provided that in
no event shall CCI be required to pay in excess of an aggregate of $4,000,000
pursuant to this Section 7.2(b). Payment of Expenses pursuant to this
Section 7.2(b) shall be made not later than two Business Days after delivery to
CCI of notice of demand for payment and a documented itemization setting forth
in reasonable detail all Expenses of Merger Sub (which itemization may be
supplemented and updated from time to time by such party until the 60th day
after such party delivers such notice of demand for payment).
(c)(i) If this Agreement shall have been terminated pursuant to
Sections 7.1(b) or 7.1(g) and either of the following shall have occurred prior
to such termination: (A) any Person (including CCI or any of its Subsidiaries or
CCI Affiliates, but excluding Parent, Merger Sub or any of their Affiliates)
shall have become the beneficial owner of more than 25% of the outstanding
shares of CCI Common Stock, or (B)(x) on or after the date of this Agreement any
Person (other than Parent, Merger Sub or any of their Affiliates) shall have
made, or proposed, communicated or disclosed a bona fide intention to make a
Control Proposal (including by making such a Control Proposal), and (y) on or
prior to the twelve-month anniversary of the date of such termination, CCI
either consummates with any Person a transaction the proposal of which would
otherwise qualify as a Control Proposal or enters into a definitive agreement
with any Person with respect to a transaction the proposal of which would
otherwise qualify as a Control Proposal (whether or not such Person is the
Person referred to in clause (x) above); or
(ii) if this Agreement is terminated pursuant to Section 7.1(d),
Section 7.1(e) or Section 7.1(f);
then CCI shall, (1) in the case of clause (c)(i)(A) and (c)(ii) above, promptly,
but in no event later than one Business Day after the termination of this
Agreement and (2) in the case of clause (c)(i)(B) above, promptly, but in no
event later than one Business Day after an event specified in subclause (y)
thereof shall have occurred, pay Merger Sub a fee equal to $35 million less
amounts paid pursuant to Section 7.2(b), in cash, which amount shall be payable
in same day funds. No termination of this Agreement at a time when a fee is
payable pursuant to this Section 7.2(c) following termination of this Agreement
shall be effective until such fee is paid. Only one fee shall be payable
pursuant to this Section 7.2(c).
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(d) Notwithstanding the foregoing, no amount shall be payable pursuant to
Section 7.2(b) or 7.2(c) if (i)(x) this Agreement shall have been terminated
pursuant to Section 7.1(b), (y) at the time of such termination CCI is not in
material breach of its obligations or representations and warranties under this
Agreement and (z) at the time of such termination any of the conditions set
forth in Sections 6.1(b), 6.1(c), 6.2(c) and 6.2(d), shall not have been
satisfied or waived or (ii) this Agreement shall have been terminated pursuant
to (x) Section 7.1(c) and at the time of such termination CCI is not in material
breach of its obligations or representations and warranties under this
Agreement, or (y) Section 7.1(a) or 7.1(h).
7.3. Amendment. This Agreement (including the Annexes and Schedules
hereto) may be amended by the parties hereto, by action taken or authorized by
their respective Boards of Directors, at any time before or after approval of
the matters presented in connection with the Merger by the shareholders of CCI,
but, after any such approval, no amendment shall be made which by law or in
accordance with the rules of Nasdaq requires further approval by such
shareholders without such further approval. This Agreement (including the
Annexes and Schedules hereto) may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
7.4. Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE VIII.
GENERAL PROVISIONS
8.1. Non-Survival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants and other agreements, shall survive the Effective Time, except for
those covenants and agreements contained herein and therein that by their terms
apply or are to be performed in whole or in part after the Effective Time and
for the provisions of this Article VIII. Nothing in this Section 8.1 shall
relieve any party for any breach of any representation, warranty, covenant or
other agreement in this Agreement occurring prior to termination.
8.2. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally or delivered by facsimile (but in the case of facsimile transmission,
transmitted on the same day by the method described in clause (b)), (b) on the
first Business Day following the date of dispatch if delivered by a recognized
next-day courier service, or (c) on the tenth Business Day following the date of
mailing if delivered by registered or certified mail, return receipt requested,
postage prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:
(i) if to Parent or Merger Sub, to Vodafone Airtouch PLC, 1 California
Street, 18th Floor, San Francisco, California 94111, Attention: David
Bagley, Director, Corporate Development, Facsimile No. (415) 658-5239.
(ii) if to CCI, to CommNet Cellular Inc., 8350 East Crescent Parkway,
Suite 400, Englewood, Colorado 80111, Attention: President, Facsimile No.:
(303) 694-5590, with copies to Blackstone Management Associates II L.L.C.,
345 Park Avenue, 31st Floor, New York, New York 10154, Attention: Mark T.
Gallogly, Facsimile No. (212) 754-8704, and to Simpson Thacher & Bartlett,
425 Lexington Avenue, New York, New York 10017, Attention: Brian M.
Stadler, Esq., Facsimile No. (212) 455-2502.
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8.3. Interpretation. When a reference is made in this Agreement to
Sections, Annexes or Schedules, such reference shall be to a Section of or Annex
or Schedule to this Agreement unless otherwise indicated. The table of contents,
glossary of defined terms and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
8.4. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one 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.
8.5. Entire Agreement; No Third Party Beneficiaries.
(a) This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, other than the Voting Agreement and
the Confidentiality Agreement dated May 12, 1999 entered into by Airtouch
Communications, Inc. and CCI in connection with the transactions contemplated
hereby, which shall survive the execution and delivery of this Agreement.
(b) This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement, other than
Section 5.7 (which is intended to be for the benefit of the Persons covered
thereby and may be enforced by such Persons).
8.6. Governing Law. Except to the extent the CBCA shall govern the Merger,
this Agreement shall be governed and construed in accordance with the laws of
the State of New York.
8.7. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
8.8. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other party, and any attempt to make any such assignment
without such consent shall be null and void, except that Merger Sub may assign,
in its sole discretion, any or all of its rights, interests and obligations
under this Agreement to any direct or indirect wholly-owned Subsidiary of Parent
without the consent of CCI, but no such assignment shall relieve Merger Sub of
any of its obligations under this Agreement. 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.
8.9. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.10. Definitions. As used in this Agreement:
(a) "Affiliate" shall have the meaning ascribed to such term under
Rule 12b-2 under the Exchange Act.
(b) "Board of Directors" means the Board of Directors of any specified
Person and any properly serving and acting committees thereof.
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(c) "Business Day" means any day on which banks are not required or
authorized to close in the City of New York.
(d) "CCI Affiliates" means each of the corporations and partnerships
through which CCI holds indirect ownership interests in cellular licensees
and those cellular licensees in which CCI holds an ownership interest which
is not a Consolidated Subsidiary.
(e) "Control Proposal" means an Acquisition Proposal which seeks to
acquire a significant portion of the assets or more than 25% of the equity
securities of CCI.
(f) "Material Adverse Change" means any change in the business,
financial condition or results of operations of CCI or any of the
Consolidated Subsidiaries or Managed Affiliates that has had, or could
reasonably be expected to have, a Material Adverse Effect on CCI.
(g) "Material Adverse Effect" means, with respect to any entity, any
adverse change, circumstance or effect that, individually or in the
aggregate with all other adverse changes, circumstances and effects, is or
is reasonably likely to be materially adverse to the business, operations,
assets, liabilities (including, without limitation, contingent
liabilities), financial condition or results of operations of such entity
and its Subsidiaries taken as a whole, other than any change, circumstance
or effect (i) affecting companies in the cellular telephone industry
generally, (ii) resulting from general economic conditions or
(iii) resulting from the announcement or performance of this Agreement and
the transactions contemplated hereby.
(h) "Organizational Documents" means, with respect to any entity, the
charter, by-laws or other governing documents of such entity.
(i) "Person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, entity
or "group" (as referred to in Section 13(d)(3) of the Exchange Act).
(j) "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated,
(i) of which such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of which
held by such party or any Subsidiary of such party do not have a majority
of the general partner interests or the ordinary voting interests in such
partnership) or (ii) at least a majority of the securities or other
interests of which 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.
(k)(i) "Tax" (including, with correlative meaning, the terms "Taxes"
and "Taxable") means all federal, state, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, payroll, sales, employment, unemployment disability, use,
property, withholding, excise, production, value added, occupancy and other
taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties, fines and additions to tax imposed with respect to
such amounts and any interest in respect of such penalties and additions to
tax, and (ii) "Tax Return" means all returns and reports (including
elections, claims, declarations, disclosures, schedules, estimates,
computations and information returns) required to be supplied to a Tax
authority in any jurisdiction relating to Taxes.
(l) "the other party" means, with respect to CCI, Parent and Merger
Sub and means, with respect to Parent or Merger Sub, CCI.
8.11. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND FOR ANY
COUNTERCLAIM THEREIN.
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8.12 Submission to Jurisdiction. Parent irrevocably submits to the
non-exclusive jurisdiction of the United States District Court for the Southern
District of New York located in the borough of Manhattan in the City of New
York, or if such court does not have jurisdiction, the Supreme Court of the
State of New York, New York County, for the purposes of any suit, action or
other proceeding arising out of this Agreement (and agrees not to commence any
action, suit or proceeding relating hereto except in such courts). Parent
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (a) the Supreme Court of the State of New York, New York
County, or (b) the United States District Court for the Southern District of New
York (each, a "New York Court"), and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum. Parent hereby appoints CT Corporation System, 1633
Broadway, New York, New York 10019, as its authorized agent upon which process
may be served in any action arising out of or based on this Agreement which may
be instituted in any New York Court. Such appointment shall be irrevocable until
all obligations of Parent under this Agreement have been performed. Parent shall
take any and all action, including the filing of any and all documents and
instruments, that may be necessary to continue such appointment or appointments
in full force and effect as aforesaid. Service of process upon the authorized
agent at the address indicated above, as such address may be changed by notice
given by the authorized agent to Parent and CCI, shall be deemed, in every
respect, effective service of process upon Parent.
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IN WITNESS WHEREOF, CCI, Parent and Merger Sub have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
COMMNET CELLULAR INC.
By: /s/ ARNOLD C. POHS
--------------------------------------
Name: Arnold C. Pohs
Title: CEO
VODAFONE AIRTOUCH PLC
By: /s/ MOHAN S. GYANI
--------------------------------------
Name: Mohan S. Gyani
Title: Chief Financial Officer
PACIFIC TELECOM CELLULAR OF
COLORADO, INC.
By: /s/ MOHAN S. GYANI
--------------------------------------
Name: Mohan S. Gyani
Title: Chief Financial Officer
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<PAGE>
ANNEX A
EMPLOYEE BENEFITS MATTERS
Parent and Merger Sub agree to the following with respect to the
compensation and benefits program of CCI and its Subsidiaries:
Survival of Plans. The following employee benefit plans and policies of CCI
existing on the date of this Agreement shall be kept in full force and effect
for the benefit of the CCI employees (or former employees) then entitled to such
benefits under the terms of such plans and policies for a period of one year
following the Closing:
The CommNet Cellular Inc. Exclusive Provider Program
The CommNet Cellular Inc. Preferred Provider Organization/Conventional
Medical Plan
The CommNet Cellular Inc. Basic Medical Plan
The CommNet Cellular Inc. Dental Plan
The CommNet Cellular Inc. Employee Assistance Plan
The CommNet Cellular Inc. Basic Life and Accidental Death and
Dismemberment Insurance Plan
The CommNet Cellular Inc. Business travel Accident Plan
The CommNet Cellular Inc. Voluntary Life Insurance Plan
The CommNet Cellular Inc. Sick Pay and Long-Term Disability Plan
The CommNet Cellular Inc. Flexible Spending Accounts
Health and Welfare Benefit Option Plans at Termination, including Medical,
Outpatient Prescription Drug, Dental, Employee Assistance, and
Flexible Spending Account Plans, Basic Life and AD&D and Voluntary
Life Insurance Plans, Business travel Accident, Exempt Basic and
Extended Sick Pay, Nonexempt Sick Pay/Personal Time and Short-Term
Disability Plans, Long-Term Disability Conversion Option, Vision
Plan, Long Term Care Insurance Plan and Flexible Spending Accounts
The CommNet Cellular Inc. 401(k) Plan (including the profit sharing
portion of the Plan)
CommNet Cellular Inc. Short-Term Incentive Plan
Exec-u-care Group Medical Reimbursement Insurance Trust coverage for
Executive Vice
Presidents, President and Chief Executive Officer of CCI
Enhanced Long-Term Disability Policy coverage for Vice Presidents and
senior management of CCI
Vacation and severance policies set forth in the CCI Employee Handbook
The CommNet Cellular Inc. Vision Plan
The CommNet Cellular Inc. Long Term Care Insurance Plan
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ANNEX II
VOTING AGREEMENT
VOTING AGREEMENT, dated as of July 18, 1999 (this "Agreement"), between
VODAFONE AIRTOUCH PLC, a British corporation ("Parent"), and BCP COMMNET L.P., a
Delaware limited partnership ("Stockholder").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Parent, Pacific Telecom Cellular of
Colorado, Inc., a Colorado corporation and a wholly-owned subsidiary of Parent
("Merger Sub"), and CommNet Cellular Inc., a Colorado corporation ("CCI"), are
entering into an Agreement and Plan of Merger dated as of the date hereof (the
"Merger Agreement"; capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement), pursuant to which, and subject to
the terms and conditions thereof, Merger Sub will merge with and into CCI (the
"Merger");
WHEREAS, as of the date hereof, Stockholder owns of record or beneficially
19,695,835 shares of common stock, par value $.001 per share, of CCI ("CCI
Common Stock") (such 19,695,835 shares, the "Existing Shares" and, together with
any shares of CCI Common Stock acquired after the date hereof, whether upon the
exercise of options, conversion of convertible securities or otherwise, the
"Shares"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement and to consummate the transactions contemplated thereby, Parent has
required that Stockholder agree (i) simultaneously with the execution of the
Merger Agreement, to execute and deliver this Agreement and (ii) to grant a
proxy to vote all of the Shares owned by Stockholder on the terms and conditions
provided for herein.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties agree as follows:
1. Agreement to Vote; Proxy.
(a) Stockholder agrees that, during the time this Agreement is in
effect, at any meeting of the stockholders of CCI, however called or at any
adjournment thereof, or in connection with any written consent of the
stockholders of CCI, Stockholder shall be present (in person or by proxy)
and vote (or cause to be voted) all of the Shares (i) in favor of the
Merger, the execution and delivery by CCI of the Merger Agreement and the
approval of the terms thereof and each of the other actions contemplated by
the Merger Agreement and this Agreement; (ii) against any action or
agreement that would result in a breach in any material respect of any
covenant, representation or warranty or any other obligation or agreement
of the CCI under the Merger Agreement; and (iii) against any action or
agreement (other than the Merger Agreement or the transactions contemplated
thereby) that, could reasonably be expected to impede, interfere with or
delay the Merger or this Agreement (or is otherwise inconsistent
therewith), including, but not limited to: (A) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving CCI or its subsidiaries (other than a transaction involving
Parent or its Affiliates); (B) a sale, lease or transfer of a material
amount of assets of CCI and its subsidiaries or a reorganization,
recapitalization or liquidation of CCI or its subsidiaries (other than a
transaction involving Parent or its Affiliates); (C) any change in the
management or board of directors of CCI, except as otherwise agreed to in
writing by Parent; (D) any material change in the present capitalization or
dividend policy of CCI or any amendment of CCI's articles of incorporation;
or (E) any other material change in CCI's corporate structure or business.
Stockholder agrees not to enter into any agreement or understanding with
any Person the effect of which would be inconsistent with any of the
foregoing.
(b) STOCKHOLDER HEREBY GRANTS TO, AND APPOINTS, PARENT AND MEGAN
PIERSON OF PARENT AND DAVID BAGLEY OF PARENT, IN THEIR RESPECTIVE
CAPACITIES AS OFFICERS OF PARENT, AND ANY INDIVIDUAL WHO SHALL HEREAFTER
SUCCEED TO ANY SUCH OFFICE OF PARENT, AND ANY OTHER DESIGNEE OF PARENT,
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EACH OF THEM INDIVIDUALLY, THE STOCKHOLDER'S IRREVOCABLE (UNTIL THE
TERMINATION DATE) PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF
SUBSTITUTION) TO VOTE THE SHARES AS INDICATED IN SECTION 1(A) OF THIS
AGREEMENT. STOCKHOLDER INTENDS THIS PROXY TO BE IRREVOCABLE (UNTIL THE
TERMINATION DATE) AND COUPLED WITH AN INTEREST AND WILL TAKE SUCH FURTHER
ACTION OR EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE
THE INTENT OF THIS PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY
STOCKHOLDER WITH RESPECT TO THE SHARES.
2. Termination. This Agreement, the proxy contained herein and Parent's
right to vote the Shares shall terminate on the Termination Date. As used
herein, the term "Termination Date" means the first to occur of (a) the
Effective Time and (b) termination of the Merger Agreement in accordance with
its terms.
3. Representation and Warranties of Parent. Parent hereby represents
and warrants to Stockholder as follows:
(a) Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite power and authority to
own, lease and operate its properties and to carry on its business as now
being conducted.
(b) Authority. Parent has all requisite corporate power and authority
to enter into this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement by Parent and the performance by
Parent of its obligations hereunder have been duly authorized by all
necessary corporate action on the part of Parent. This Agreement has been
duly executed and delivered by Parent and constitutes a valid and binding
agreement of Parent, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally, or by general equity principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
(c) No Conflicts. The execution and delivery of this Agreement does
not or will not, as the case may be, and the performance by Parent of its
obligations hereunder will not, result in any Violation of: (A) any
provision of the Organizational Documents of Parent or (B) any loan or
credit agreement, note, mortgage, bond, indenture, lease, benefit plan or
other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or its properties or assets.
(d) No Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Parent in connection with the execution and
delivery of this Agreement by Parent or the performance by Parent of its
obligations hereunder.
4. Representations and Warranties of Stockholder. Stockholder hereby
represents and warrants to Parent as follows:
(a) Ownership of Shares. On the date hereof, the Existing Shares are
owned of record or beneficially by the Stockholder, and, on the date
hereof, the Existing Shares constitute all of the shares of Company Common
Stock owned of record or beneficially by Stockholder. Stockholder has sole
voting power and sole power of disposition with respect to all of the
Existing Shares, with no restrictions, subject to applicable federal
securities laws on Stockholder's rights of disposition pertaining thereto.
Stockholder has not granted any proxy which is still in effect with respect
to the Existing Shares.
(b) Organization, Standing and Power. Stockholder is a limited
partnership duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all requisite power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted.
(c) Authority. Stockholder has all requisite partnership power and
authority to enter into this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by
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Stockholder and the performance by Stockholder of its obligations hereunder
have been duly authorized by all necessary action on the part of
Stockholder. This Agreement has been duly executed and delivered by
Stockholder and constitutes a valid and binding agreement of Stockholder,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors
generally, or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(d) No Conflicts. The execution and delivery of this Agreement does
not or will not, as the case may be, and the performance by Stockholder of
its obligations hereunder will not, result in any Violation of: (A) any
provision of the Organizational Documents of Stockholder or (B) any loan or
credit agreement, note, mortgage, bond, indenture, lease, benefit plan or
other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Stockholder or its properties or assets.
(e) No Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to Stockholder in connection with the execution
and delivery of this Agreement by Stockholder or the performance by
Stockholder of its obligations hereunder.
5. Certain Covenants of Stockholder. In accordance with the terms of
this Agreement, Stockholder hereby covenants and agrees as follows:
(a) Restriction on Transfer, Proxies and
Non-Interference. Stockholder hereby agrees, while this Agreement is in
effect, and except as contemplated hereby, not to (i) sell, transfer,
pledge, encumber, assign or otherwise dispose of, or enter into any
contract, option or other arrangement or understanding with respect to the
sale, transfer, pledge, encumbrance, assignment or other disposition of,
any of the Existing Shares or Shares acquired after the date hereof, or any
interest in any of the foregoing or (ii) grant any proxies or powers of
attorney, deposit any Shares into a voting trust or enter into a voting
agreement with respect to any Shares.
(b) Additional Shares. Stockholder hereby agrees, while this
Agreement is in effect, to promptly notify Parent of the number of any new
Shares of CCI Common Stock acquired by Stockholder, if any, after the date
hereof.
(c) No Solicitations. Stockholder agrees that neither it nor any of
its Affiliates, officers, directors, employees, agents or representatives
(collectively, "Representatives") shall, directly or indirectly:
(i) initiate, solicit, encourage or otherwise facilitate any inquiries or
the making of any Acquisition Proposal or (ii) provide any information or
data to, or engage in any discussions or negotiations with, any Person
(other than Parent) relating to or in contemplation of an Acquisition
Proposal. Stockholder will notify Parent immediately if any inquiries,
proposals or offers respecting an Acquisition Proposal are received by, or
any such information or data is requested from, or any such discussions or
negotiations are sought to be initiated or continued with Stockholder or
its Representatives indicating, in connection with such notice, the name of
such Person and the material terms and conditions of any proposals or
offers, and keep Parent apprised with respect to the status and terms
thereof. The provisions of this Section 5(c) shall not restrict activities
of CCI or any other Person permitted in accordance with Section 5.4 of the
Merger Agreement.
6. Further Assurances. From time to time, at the other party's request
and without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement.
7. General Provisions.
(a) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed duly given (a) on the date of delivery if
delivered personally or delivered by facsimile (but in the case of
facsimile transmission, transmitted on the same day by the method described
in clause (b)), (b) on the first Business Day following the date of
dispatch if delivered by a recognized next-day
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courier service, or (c) on the tenth Business Day following the date of
mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
(i) If to Parent, to Vodafone Airtouch PLC, 1 California Street,
18th Floor, San Francisco, California 94111, Attention: David Bagley,
Director, Corporate Development, Facsimile No. (415) 658-5239.
(ii) If to Shareholder, to BCP CommNet L.P., c/o Blackstone
Management Associates II L.L.C., 345 Park Avenue, 31st Floor, New
York, New York 10154, Attention: Mark T. Gallogly, Facsimile No.
(212) 754-8704 with a copy to Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, New York 10017, Attention: Brian M.
Stadler, Esq., Facsimile No. (212) 455-2502.
(b) Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(c) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement
and shall become effective when one 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.
(d) Entire Agreement; No Third Party Beneficiaries. This Agreement
(i) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, between the parties with respect
to the subject matter hereof and (ii) shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person
any right, benefit or remedy of any nature whatsoever under or by reason of
this Agreement.
(e) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(f) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public
policy, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
(g) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise),
without the prior written consent of the other party, and any attempt to
make any such assignment without such consent shall be null and void.
(h) Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed
that the parties shall be entitled to specific performance of the terms
hereof, this being in addition to any other remedy to which they are
entitled at law or in equity.
(i) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND FOR
ANY COUNTERCLAIM THEREIN.
(j) Amendments. 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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IN WITNESS WHEREOF, Parent and Stockholder have caused this Agreement to be
duly executed as of the day and year first above written.
VODAFONE AIRTOUCH PLC
By: /s/ MOHAN S. GYANI
--------------------------------------
Name: Mohan S. Gyani
Title: Chief Financial Officer
BCP COMMNET L.P.
By: Blackstone CCI Capital Partners
L.P., general partner
By: Blackstone Management Associates
II L.L.C., general partner
By: /s/ MARK T. GALLOGLY
--------------------------------------
Name: Mark T. Gallogly
Title: Member
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<PAGE>
ANNEX III
July 18, 1999
Board of Directors
CommNet Cellular Inc.
Suite 400
8350 East Crescent Parkway
Englewood, CO 80111
Members of the Board
We understand that CommNet Cellular Inc. ("CommNet" or the "Company"),
Vodafone AirTouch PLC ("AirTouch") and Pacific Telecom Cellular of Colorado,
Inc., a wholly owned subsidiary of AirTouch ("Acquisition Sub") propose to enter
into an Agreement and Plan of Merger, to be dated as of July 18, 1999 (the
"Merger Agreement"), which provides, among other things, for the merger (the
"Merger") of Acquisition Sub with and into CommNet. Pursuant to the Merger,
CommNet will become a wholly owned subsidiary of AirTouch and each issued and
outstanding share of common stock, par value $0.001 per share (the "Common
Stock") of CommNet, other than shares held in treasury, held directly or
indirectly by AirTouch, or as to which dissenters' rights have been perfected,
will be converted into the right to receive $31.00 per share in cash, plus
interest theron accrued from the date of the Merger Agreement to closing at a
rate of 8% per annum, compounded daily. The terms and conditions of the Merger
are more fully set forth in the Merger Agreement. We further understand that
approximately 86% of the outstanding shares of Common Stock is owned by BCP
CommNet L.P. ("Blackstone").
You have asked for our opinion as to whether the consideration to be
received by the holders of shares of Common Stock including those holders other
than Blackstone pursuant to the Merger Agreement is fair from a financial point
of view to such holders (other than AirTouch and its affiliates).
For purposes of the opinion set forth herein, we have
(i) reviewed certain publicly available financial statements and
other information of the Company;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company prepared by
the management of the Company;
(iii) analyzed certain financial projections prepared by the
management of the Company;
(iv) discussed the past and current operations and financial
condition and the prospects of the Company with senior
executives of the Company;
(v) reviewed the reported prices and trading activity for the Common
Stock;
(vi) compared the financial performance of the Company and the prices
and trading activity of the Common Stock with that of certain
other comparable publicly-traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
(viii) participated in discussions and negotiations among
representatives of the Company and AirTouch and their legal
advisors in connection with the Merger;
(ix) reviewed the Merger Agreement, an certain related documents; and
(x) performed such other analyses and considered such other factors
as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of the
Company. We have not made any independent valuation or
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appraisal of the assets or liabilities of the Company, nor have we been
furnished with any such appraisals. We have assumed that the Merger will be
consummated in accordance with the terms set forth in the Merger Agreement. Our
opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for CommNet, Blackstone, and AirTouch
and have received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company, except that this opinion may be included in its
entirety in any filing made by the Company in respect of the Merger with the
Securities and Exchange Commission and for proxy statements delivered to
shareholders. In addition, Morgan Stanley expresses no opinion or recommendation
as to or how such shareholders should vote at the shareholders' meeting held in
connection with the Merger.
Based on the foregoing, we are of the opinion on the date hereof that the
consideration to be received by the holders of shares of Common Stock pursuant
to the Merger Agreement is fair from a financial point of view to such holders
(other than AirTouch and its affiliates).
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ SCOTT W. MATLOCK
--------------------------------------
Scott W. Matlock
Principal
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<PAGE>
ANNEX IV
DISSENTERS' RIGHTS PROVISIONS OF THE
COLORADO BUSINESS CORPORATION ACT
PART 1: RIGHT OF DISSENT--PAYMENT FOR SHARES
7-113-101 DEFINITIONS.
For purposes of this article: (1) "Beneficial shareholder" means the
beneficial owner of shares held in a voting trust or by a nominee as the record
shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring domestic or foreign
corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right at the
time and in the manner required by part 2 of this article.
(4) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action except to the extent that exclusion would
be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at the legal rate as
specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent such owner is
recognized by the corporation as the shareholder as provided in section
7-107-204.
(7) "Shareholder" means either a record shareholder or a beneficial
shareholder.
7-113-102 RIGHT TO DISSENT.
(1) A shareholder, whether or not entitled to vote, is entitled to dissent
and obtain payment of the fair value of the shareholder's shares in the event of
any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party if:
(I) Approval by the shareholders of that corporation is required
for the merger by section 7-111-103 or 7-111-104 or by the articles of
incorporation, or
(II) The corporation is a subsidiary that is merged with its parent
corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired;
(c) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of the corporation for which a
shareholder vote is required under section 7-112-102(1); and
(d) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote
upon the consent of the corporation to the disposition pursuant to
section 7-112-102(2).
(1.3) A shareholder is not entitled to dissent and obtain payment, under
subsection (1) of this section, of the fair value of the shares of any class or
series of shares which either were listed on a national securities exchange
registered under the federal "Securities Exchange Act of 1934", as amended, or
on the national market system of the national association of securities dealers
automated quotation system, or were held of record by more than two thousand
shareholders, at the time of:
(a) The record date fixed under section 7-107-107 to determine the
shareholders entitled to receive notice of the shareholders' meeting at
which the corporate action is submitted to a vote;
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(b) The record date fixed under section 7-107-104 to determine
shareholders entitled to sign writings consenting to the corporate action;
or
(c) The effective date of the corporate action if the corporate action
is authorized other than by a vote of shareholders.
(1.8) The limitation set forth in subsection (1.3) of this section shall
not apply if the shareholder will receive for the shareholder's shares, pursuant
to the corporate action, anything except:
(a) Shares of the corporation surviving the consummation of the plan
of merger or share exchange;
(b) Shares of any other corporation which at the effective date of the
plan of merger or share exchange either will be listed on a national
securities exchange registered under the federal "Securities Exchange Act
of 1934," as amended, or on the national market system of the national
association of securities dealers automated quotation system, or will be
held of record by more than two thousand shareholders.
(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or cash in lieu
of fractional shares.
(2.5) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in the
event of a reverse split that reduces the number of shares owned by the
shareholder to a fraction of a share or to scrip if the fractional share or
scrip so created is to be acquired for cash or the scrip is to be voided under
section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the fair
value of the shareholder's shares in the event of any corporate action to the
extent provided by the bylaws or a resolution of the board of directors.
(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate action
creating such entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
7-113-103 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
person and causes the corporation to receive written notice which states such
dissent and the name, address, and federal taxpayer identification number, if
any, of each person on whose behalf the record shareholder asserts dissenters'
rights. The rights of a record shareholder under this subsection (1) are
determined as if the shares as to which the record shareholder dissents and the
other shares of the record shareholder were registered in the names of different
shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial shareholders, each
such beneficial shareholder must certify to the corporation that the beneficial
shareholder and the record shareholder or record shareholders of all shares
owned beneficially by the beneficial shareholder have asserted, or will timely
assert, dissenters' rights as to all such shares as to which there is no
limitation on the ability to exercise dissenters' rights. Any such requirement
shall be stated in the dissenters' notice given pursuant to section 7-113-203.
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<PAGE>
PART 2: PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
7-113-201 NOTICE OF DISSENTERS' RIGHTS.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting, the notice
of the meeting shall be given to all shareholders, whether or not entitled to
vote. The notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this article and shall be accompanied by a copy of this
article and the materials, if any, that, under articles 101 to 117 of this
title, are required to be given to shareholders entitled to vote on the proposed
action at the meeting. Failure to give notice as provided by this subsection (1)
shall not affect any action taken at the shareholders' meeting for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202(1).
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, any written or oral solicitation of a shareholder to execute
a writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
title, would have been required to be given to shareholders entitled to vote on
the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give notice as provided by this subsection (2)
shall not affect any action taken pursuant to section 7-107-104 for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202(2).
7-113-202 NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting and if
notice of dissenters' rights has been given to such shareholder in connection
with the action pursuant to section 7-113-201(1), a shareholder who wishes to
assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is taken,
written notice of the shareholder's intention to demand payment of the
shareholder's shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders' pursuant to
section 7-107-104 and if notice of dissenters' rights has been given to such
shareholder in connection with the action pursuant to section 7-113-201(2), a
shareholder who wishes to assert dissenters' rights shall not execute a writing
consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection
(1) or (2) of this section is not entitled to demand payment for the
shareholder's shares under this article.
7-113-203 DISSENTER'S NOTICE.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized, the corporation shall give a written
dissenters' notice to all shareholders who are entitled to demand payment for
their shares under this article.
(2) The dissenters' notice required by subsection (1) of this section shall
be given no later than ten days after the effective date of the corporate action
creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment
demands and the address of a place where certificates for certificated
shares must be deposited;
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<PAGE>
(c) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment
demand and certificates for certificated shares, which date shall not be
less than thirty days after the date the notice required by subsection
(1) of this section is given;
(f) State the requirement contemplated in section 7-113-103(3), if
such requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204 PROCEDURE TO DEMAND PAYMENT.
(1) A shareholder who is given a dissenters' notice pursuant to section
7-113-203 and who wishes to assert dissenters' rights shall, in accordance with
the terms of the dissenters' notice:
(a) Cause the corporation to receive a payment demand, which may be
the payment demand form contemplated in section 7-113-203(2)(d), duly
completed, or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection (1) of
this section retains all rights of a shareholder, except the right to transfer
the shares, until the effective date of the proposed corporate action giving
rise to the shareholder's exercise of dissenters' rights and has only the right
to receive payment for the shares after the effective date of such corporate
action.
(3) Except as provided in section 7-113-207 or 7-113-209(1)(b), the demand
for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the shareholder's
share certificates as required by the date or dates set in the dissenters'
notice is not entitled to payment for the shares under this article.
7-113-205 UNCERTIFICATED SHARES.
(1) Upon receipt of a demand for payment under section 7-113-204 from a
shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the transfer
thereof.
(2) In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.
7-113-206 PAYMENT.
(1) Except as provided in section 7-113-208, upon the effective date of the
corporate action creating dissenters' rights under section 7-113-102 or upon
receipt of a payment demand pursuant to section 7-113-204, whichever is later,
the corporation shall pay each dissenter who complied with section 7-113-204, at
the address stated in the payment demand, or if no such address is stated in the
payment demand, at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares, the
amount the corporation estimates to be the fair value of the dissenter's shares,
plus accrued interest.
(2) The payment made pursuant to subsection (1) of this section shall be
accompanied by:
(a) The corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the corporation's balance sheet
as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, and, if the
corporation customarily provides such statements to shareholders, a
statement of changes in shareholders' equity for that year and a statement
of cash flow for that year, which balance sheet and statements shall have
been audited if the corporation customarily provides audited financial
statements to shareholders, as well as
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<PAGE>
the latest available financial statements, if any, for the interim or
full-year period, which financial statements need not be audited;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under
section 7-113-209; and
(e) A copy of this article.
7-113-207 FAILURE TO TAKE ACTION.
(1) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 does not occur within sixty days after the date
set by the corporation by which the corporation must receive the payment demand
as provided in section 7-113-203, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(2) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 occurs more than sixty days after the date set by
the corporation by which the corporation must receive the payment demand as
provided in section 7-113-203, then the corporation shall send a new dissenters'
notice, as provided in section 7-113-203, and the provisions of sections
7-113-204 to 7-113-209 shall again be possible.
7-113-208 SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER ANNOUNCEMENT
OF PROPOSED CORPORATE ACTION.
(1) The corporation may, in or with the dissenters' notice given pursuant
to section 7-113-203, state the date of the first announcement to news media or
to shareholders of the terms of the proposed corporate action creating
dissenters' rights under section 7-113-102 and state that the dissenter shall
certify in writing, in or with the dissenter's payment demand under section
7-113-204, whether or not the dissenter (or the person on whose behalf
dissenters' rights are asserted) acquired beneficial ownership of the shares
before that date. With respect to any dissenter who does not so certify in
writing, in or with the payment demand, that the dissenter or the person on
whose behalf the dissenter asserts dissenters' rights acquired beneficial
ownership of the shares before such date, the corporation may, in lieu of making
the payment provided in section 7-113-206, offer to make such payment if the
dissenter agrees to accept it in full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section 7-113-206(2).
7-113-209 PROCEDURE IF DISSENTER IS DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of the
amount of interest due and may demand payment of such estimate, less any payment
made under section 7-113-206, or reject the corporation's offer under section
7-113-208 and demand payment of the fair value of the shares and interest due,
if:
(a) The dissenter believes that the amount paid under section
7-113-206 or offered under section 7-113-208 is less than the fair value of
the shares or that the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section 7-113-206
within sixty days after the date set by the corporation by which the
corporation must receive the payment demand; or
(c) The corporation does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as
required by section 7-113-207(1).
(2) A dissenter waives the right to demand payment under this section
unless the dissenter causes the corporation to receive the notice required by
subsection (1) of this section within thirty days after the corporation made or
offered payment for the dissenter's shares.
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<PAGE>
PART 3: JUDICIAL APPRAISAL OF SHARES
7-113-301 COURT ACTION.
(1) If a demand for payment under section 7-113-209 remains unresolved, the
corporation may, within sixty days after receiving the payment demand, commence
a proceeding and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay to each dissenter whose demand remains
unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in subsection
(1) of this section in the district court of the county in this state where the
corporation's principal office is located or, if the corporation has no
principal office in this state, in the district court of the county in which its
registered office is located. If the corporation is a foreign corporation
without a registered office, it shall commence the proceeding in the county
where the registered office of the domestic corporation merged into, or whose
shares were acquired by, the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unresolved parties to the proceeding commenced
under subsection (2) of this section as in an action against their shares, and
all parties shall be served with a copy of the petition. Service on each
dissenter shall be by registered or certified mail, to the address stated in
such dissenter's payment demand, or if no such address is stated in the payment
demand, at the address shown on the corporation's current record of shareholders
for the record shareholder holding the dissenter's shares, or as provided by
law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision in the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to such order. The parties to
the proceeding are entitled to the same discovery rights as parties in other
civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount, if any,
by which the court finds the fair value of the dissenter's shares, plus
interest, exceeds the amount paid by the corporation, or the fair value, plus
interest, of the dissenter's shares for which the corporation elected to
withhold payment under section 7-113-208.
7-113-302 COURT COSTS AND COUNSEL FEES.
(1) The court in an appraisal proceeding commenced under section 7-113-301
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation; except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if the
court finds the corporation did not substantially comply with the
requirements of part 2 of this article; or
(b) Against either the corporation or one or more dissenters, in favor
of any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this article.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to said counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefitted.
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<PAGE>
FORM OF PROXY
COMMNET CELLULAR INC.
ENGLEWOOD, COLORADO
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON NOVEMBER 11, 1999
The undersigned holder of shares of Common Stock of CommNet Cellular Inc.
(the "Company" or "CommNet") hereby appoints Arnold C. Pohs, Daniel P. Dwyer and
James C. Everson, and each of them, as proxies of the undersigned, with full
power of substitution, to act and to vote for and in the name, place and stead
of the undersigned at the Special Meeting of Shareholders of the Company to be
held at the Hyatt Regency Tech Center, 7800 E. Tufts Avenue, Denver, Colorado
80237, at 9:00 a.m. local time, on November 11, 1999 and at any and all
adjournments thereof, according to the number of votes and as fully as the
undersigned would be entitled to vote if personally present at such meeting, and
particularly with respect to the proposals listed below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
(1) To consider and vote upon a proposal (the "Proposal") to approve and adopt
an Agreement and Plan of Merger, dated as of July 18, 1999 (the "Merger
Agreement"), among CommNet, Vodafone AirTouch Plc, an English corporation
("Parent") and Pacific Telecom Cellular of Colorado, Inc., a Colorado
corporation and a wholly owned subsidiary of Parent ("Merger Sub"). The
Merger Agreement provides, among other things, for the merger of Merger Sub
with and into CommNet (the "Merger") pursuant to which each share of CommNet
common stock, par value $.001 per share (including each associated Right
described in the accompanying Proxy Statement, "CommNet Common Stock"),
issued and outstanding immediately prior to the effective time of the Merger
(other than shares owned by Parent or any Subsidiary (as defined in the
accompanying Proxy Statement) of Parent, including Merger Sub, or by
CommNet, and Dissenting Shares (as defined in the accompanying Proxy
Statement)) will be converted into the right to receive $31.00 in cash plus
8% annual interest compounded daily from July 18, 1999 until the closing of
the Merger.
FOR: / / AGAINST: / / ABSTAIN: / /
(continued and to be signed on reverse side)
<PAGE>
THE PROXY WILL BE VOTED AS SPECIFIED, OR IF NO CHOICE IS SPECIFIED, FOR
PROPOSAL 1, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
Please mark, sign, date and return this
Proxy in the enclosed envelope as soon
as possible, even if you plan to attend
this meeting. To help our preparation
for the meeting, please check here if
you plan to attend. / /
SIGN HERE EXACTLY AS
NAME(S) APPEAR(S) AT LEFT
Receipt of the Proxy Statement dated
October 1, 1999 is hereby acknowledged.
Date
-------------------------
Date
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WHEN SHARES ARE HELD BY JOINT TENANTS,
BOTH SHOULD SIGN. WHEN SIGNING AS
ATTORNEY, EXECUTOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON. IF YOUR ADDRESS HAS
CHANGED, PLEASE NOTE NEW
ADDRESS:
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Zip Code:
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