SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 22, 1995
NATIONWIDE CELLULAR SERVICE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 0-14959 11-2692099
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
20 East Sunrise Highway, Valley Stream, New York 11581-1252
(Address of Principal Executive Offices) (Zip Code)
(516) 568-2000
(Registrant's Telephone Number, Including Area Code)<PAGE>
Item 5. Other Events.
On May 22, 1995, the registrant entered into an Agreement and
Plan of Merger (the "Merger Agreement") with MCI Communications
Corporation ("MCI") and NTS Acquisition Corp. ("NTS"), pursuant to
which NTS, an indirect wholly-owned subsidiary of MCI, will be
merged into the registrant and each outstanding share of Common
Stock, $.01 par value per share, of the registrant (the
"Registrant Common Stock") will be cancelled and the holders
thereof will be entitled to receive $18.50 per share in cash (the
"Merger"). The Merger Agreement provides that immediately prior
to the effectiveness of the Merger the registrant will make a
distribution (the "Distribution") of the shares of Common Stock,
$.001 par value per share, of Cellular Technical Services Company,
Inc. (the "CTS Common Stock") then owned by the registrant to the
holders of record of Registrant Common Stock. The Distribution
will be in an amount per share of Registrant Common Stock as
follows: (i) if the average closing market price of CTS Common
Stock on each of the three trading days ending on the date
immediately preceding the Distribution (the "Distribution Price")
is equal to or less than $22.00 per share, then each share of
Registrant Common Stock shall be entitled to receive that number
of shares of CTS Common Stock equal to the quotient obtained by
dividing 3,980,000 by the sum of the then outstanding shares of
Registrant Common Stock and the shares of Registrant Common Stock
then reserved for issuance upon exercise of outstanding options
and warrants to purchase shares of Registrant Common Stock, and
(ii) if the Distribution Price per share is more than $22.00 per
share, then each share of Registrant Common Stock shall be
entitled to receive that number of shares of CTS Common Stock
equal to the quotient obtained by dividing (a) (x) the number of
shares which, based on the Distribution Price, have an aggregate
value equal to the product of $22.00 times 3,980,000, plus (y) the
number of shares which, based on the Distribution Price, have an
aggregate value equal to the product of 60% of the difference
between the Distribution Price and $22.00 times 3,980,000 by (b)
the sum of the then outstanding shares of Registrant Common Stock
and the shares of Registrant Common Stock then reserved for
issuance upon exercise of outstanding options and warrants to
purchase shares of Registrant Common Stock. Upon the
effectiveness of the Merger, each outstanding stock option and
stock purchase warrant for Registrant Common Stock will be
cancelled and the holder thereof entitled to receive (a) an amount
in cash equal to the difference, if any, between $18.50 and the
exercise price of such option or warrant, whether or not then
vested or exercisable, multiplied by the number of shares of
Registrant Common Stock subject to such option or warrant, and (b)
the number of shares of CTS Common Stock equal to the total number
of shares of Registrant Common Stock subject to such option or
warrant multiplied by the number of shares of CTS Common Stock
distributable per share of Registrant Common Stock pursuant to the
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Distribution. In no event will the registrant deliver any
fractional shares in the Distribution. In lieu of such fractional
shares, the registrant will deliver cash to each holder of
Registrant Common Stock who would otherwise be entitled to a
fractional share in an amount equal to such fraction times the
Distribution Price rounded to the nearest $0.01. Consummation of
the Merger and the Distribution are subject to certain conditions
described in the Merger Agreement. In connection with the
execution of the Merger Agreement, the registrant and MCI jointly
issued a press release. The full text of the Merger Agreement and
the press release are attached hereto as Exhibits 2 and 99,
respectively, and are incorporated herein by reference.
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits
(c) Exhibits:
Exhibit Number Description
2* Agreement and Plan of Merger dated May
22, 1995 among MCI Communications
Corporation, NTS Acquisition Corp. and
Nationwide Cellular Service, Inc.
99* Press Release issued May 22, 1995.
_______________________________
* Filed herewith.
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S I G N A T U R E
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned
hereunto duly authorized.
NATIONWIDE CELLULAR SERVICE, INC.
(Registrant)
Date: June 6, 1995
By: /s/ Stephen Katz
Stephen Katz, Chairman of the
Board and Chief Executive
Officer
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EXHIBIT INDEX
Exhibit Number Description Page Number
2* Agreement and Plan of Merger dated 5
May 22, 1995 among MCI Communications
Corporation, NTS Acquisition Corp.
and Nationwide Cellular Service, Inc.
99* Press Release issued May 22, 1995.
91
_______________________________
* Filed herewith.<PAGE>
EXHIBIT 2<PAGE>
____________________________________
AGREEMENT AND PLAN OF MERGER
AMONG
MCI COMMUNICATIONS CORPORATION,
NTS ACQUISITION CORP.
AND
NATIONWIDE CELLULAR SERVICE, INC.
DATED MAY 22, 1995
____________________________________<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I 3
THE MERGER 3
SECTION 1.1 The Merger . . . . . . . . . . . . . . . . 3
SECTION 1.2 Closing . . . . . . . . . . . . . . . . . . 3
SECTION 1.3 Effective Time of the Merger . . . . . . . 4
SECTION 1.4 Effects of the Merger . . . . . . . . . . . 4
SECTION 1.5 Certificate of Incorporation; By-Laws . . . 4
SECTION 1.6 Directors and Officers . . . . . . . . . . 5
SECTION 1.7 Stockholders' Meeting . . . . . . . . . . . 5
SECTION 1.8 Company Action . . . . . . . . . . . . . . 6
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES 7
SECTION 2.1 Effect on Capital Stock . . . . . . . . . . 7
(a) Common Stock of the Purchaser . . . . . . . . 7
(b) Cancellation of Treasury Stock and Parent-
Owned Company Common Stock . . . . . . . . . . 7
(c) Conversion of Company Common Stock . . . . . . 8
(d) Shares of Dissenting Holders . . . . . . . . . 8
SECTION 2.2 Exchange of Certificates . . . . . . . . . 9
(a) Paying Agent. . . . . . . . . . . . . . . . . 9
(b) Exchange Procedures . . . . . . . . . . . . . 10
(d) Termination of Exchange Fund . . . . . . . . . 11
(e) No Liability . . . . . . . . . . . . . . . . . 12
(f) Withholding Rights . . . . . . . . . . . . . . 12
SECTION 2.3 Treatment of Employee Options . . . . . . . 13
ARTICLE III
REPRESENTATIONS AND WARRANTIES 15
SECTION 3.1 Representations and Warranties of the
Company. . . . . . . . . . . . . . . . . . 15
(a) Organization and Qualification; Subsidiaries . 15
(b) Certificates of Incorporation and By-Laws . . 16
(c) Capitalization . . . . . . . . . . . . . . . . 16
(d) Authority Relative to Agreements . . . . . . . 19
(e) No Conflict; Required Filings and Consents . . 20
(f) Compliance . . . . . . . . . . . . . . . . . . 23
(g) SEC Filings; Financial Statements . . . . . . 24
(h) Information Supplied . . . . . . . . . . . . . 26
(i) Absence of Certain Changes or Events . . . . . 27
(j) Absence of Litigation . . . . . . . . . . . . 28
(k) Employment and Labor Contracts . . . . . . . . 29
(l) Employee Benefit Plans . . . . . . . . . . . . 29
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Page
(m) Tax Matters . . . . . . . . . . . . . . . . . 32
(n) Intellectual Property . . . . . . . . . . . . 34
(o) Environmental Matters. . . . . . . . . . . . . 36
(p) Spin-Off Distribution . . . . . . . . . . . . 37
(q) Transactions with Affiliates . . . . . . . . . 37
(r) Opinion of Financial Advisor . . . . . . . . . 37
(s) Brokers . . . . . . . . . . . . . . . . . . . 37
SECTION 3.2 Representations and Warranties of the
Parent and the Purchaser . . . . . . . . . 38
(a) Corporate Organization . . . . . . . . . . . . 38
(b) Authority Relative to Agreements . . . . . . . 38
(c) No Conflict; Required Filings and Consents . . 39
(d) Information Supplied . . . . . . . . . . . . . 41
(e) Financing. . . . . . . . . . . . . . . . . . . 41
(f) Brokers . . . . . . . . . . . . . . . . . . . 41
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER;
OTHER COVENANTS 41
SECTION 4.1 Conduct of Business of the Company
Pending the Merger . . . . . . . . . . . . 41
SECTION 4.2 Conduct of Business of the Purchaser . . . 48
SECTION 4.3 Preparation of Proxy Statement . . . . . . 48
SECTION 4.4 Access to Information; Confidentiality . . 48
SECTION 4.5 No Solicitation . . . . . . . . . . . . . . 50
SECTION 4.6 Employee Benefits Matters . . . . . . . . . 52
SECTION 4.7 Directors' and Officers' Indemnification
and Insurance . . . . . . . . . . . . . . 53
SECTION 4.8 Further Action; Reasonable Best Efforts . . 54
SECTION 4.9 Public Announcements . . . . . . . . . . . 55
SECTION 4.10 Taxes . . . . . . . . . . . . . . . . . . . 55
SECTION 4.11 Spin-Off Distribution . . . . . . . . . . . 55
SECTION 4.12 Certain Agreements . . . . . . . . . . . . 60
SECTION 4.13 CTS Warrant . . . . . . . . . . . . . . . . 61
SECTION 4.14 Conveyance Taxes . . . . . . . . . . . . . 61
ARTICLE V
CONDITIONS OF MERGER 61
SECTION 5.1 Conditions to Obligation of Each Party to
Effect the Merger . . . . . . . . . . . . 61
SECTION 5.2 Conditions to Obligations of Parent and
Purchaser . . . . . . . . . . . . . . . . 62
SECTION 5.3 Conditions to Obligations of the Company . 64
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER 65
SECTION 6.1 Termination . . . . . . . . . . . . . . . . 65
SECTION 6.2 Effect of Termination . . . . . . . . . . . 69
SECTION 6.3 Fees and Expenses . . . . . . . . . . . . . 69
-ii-<PAGE>
Page
SECTION 6.4 Amendment . . . . . . . . . . . . . . . . . 73
SECTION 6.5 Waiver . . . . . . . . . . . . . . . . . . 74
ARTICLE VII
GENERAL PROVISIONS 74
SECTION 7.1 Non-Survival of Representations,
Warranties and Agreements . . . . . . . . . 74
SECTION 7.2 Notices . . . . . . . . . . . . . . . . . . 75
SECTION 7.3 Certain Definitions . . . . . . . . . . . . 75
SECTION 7.4 Severability . . . . . . . . . . . . . . . 78
SECTION 7.5 Entire Agreement; Assignment . . . . . . . 78
SECTION 7.6 Parties in Interest . . . . . . . . . . . . 79
SECTION 7.7 Governing Law . . . . . . . . . . . . . . . 79
SECTION 7.8 Headings . . . . . . . . . . . . . . . . . 79
SECTION 7.9 Counterparts . . . . . . . . . . . . . . . 79
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated May 22, 1995 (this
"Agreement"), among MCI COMMUNICATIONS CORPORATION, a Delaware
corporation (the "Parent"), NTS ACQUISITION CORP., a Delaware
corporation and an indirect wholly owned subsidiary of the Parent
(the "Purchaser"), and NATIONWIDE CELLULAR SERVICE, INC., a
Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of the Company and the
Purchaser have approved, and deem it advisable and in the best
interests of their respective stockholders to consummate, the
business combination transaction provided for herein in which the
Purchaser will merge with and into the Company (the "Merger");
WHEREAS, the Merger and this Agreement require the vote
of a majority of the shares of Company Common Stock (as defined
below) for the approval thereof;
WHEREAS, as a condition and inducement to their
willingness to enter into this Agreement and to consummate the
transactions contemplated hereby, the Parent and the Purchaser
have required that each of the stockholders listed on Schedule A
hereto agree, simultaneously with the execution of this
Agreement, to execute and deliver a Voting Agreement (a "Voting
Agreement") and, pursuant thereto, to grant a proxy to vote in
favor of the Merger (a "Management Proxy"); and in order to
induce the Parent and the Purchaser to enter into this Agreement,
each of such shareholders has agreed to execute a Voting
Agreement and Management Proxy simultaneously with the execution
of this Agreement;
WHEREAS, as a further condition and inducement to their
willingness to enter into this Agreement and to consummate the
transactions contemplated hereby, the Parent and the Purchaser<PAGE>
have required that Mr. Merv Adelson ("Mr. Adelson") agree,
simultaneously with the execution of this Agreement, to execute
and deliver a Voting Agreement (the "Adelson Agreement") and,
pursuant thereto (i) to grant a proxy to vote in favor of the
Merger (the "Adelson Proxy," and together with the Management
Proxies, the "Proxies") and (ii) to waive certain rights and make
certain undertakings with respect to the Warrant (the "Warrant")
to purchase up to 850,000 shares of the Company Common Stock (as
defined below) at an exercise price of $11.00 per share; and in
order to induce the Parent and the Purchaser to enter into this
Agreement, Mr. Adelson has agreed to execute and deliver the
Adelson Agreement simultaneously with the execution of this
Agreement;
WHEREAS, the Parent, the Purchaser and the Company
desire to make certain representations, warranties, covenants and
agreements in connection with the Merger and also to prescribe
various conditions to the Merger; and
NOW, THEREFORE, in consideration of the foregoing and
the respective representations, warranties, mutual covenants and
agreements herein contained, and intending to be legally bound
hereby, the Parent, the Purchaser and the Company hereby agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to
the conditions set forth in this Agreement, and in accordance
with the General Corporation Law of the State of Delaware (the
"DGCL"), at the Effective Time (as defined in Section 1.3 below),
the Purchaser shall be merged with and into the Company. Upon
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the Effective Time, the separate corporate existence of the
Purchaser shall cease, and the Company shall continue as the
surviving corporation of the Merger (the "Surviving Corporation")
and shall continue under the name Nationwide Cellular Service,
Inc. At the Parent's election, the Merger may alternatively be
structured so that (i) the Company is merged with and into the
Parent, the Purchaser or any other direct or indirect subsidiary
of the Parent or (ii) any direct or indirect subsidiary of the
Parent other than the Purchaser is merged with and into the
Company. In the event of such an election, the parties agree to
execute an appropriate amendment to this Agreement in order to
reflect such election.
SECTION 1.2 Closing. Unless this Agreement shall have
been terminated and the transactions herein contemplated shall
have been abandoned pursuant to Section 6.1 and subject to the
satisfaction or waiver of the conditions set forth in Article V,
the closing of the Merger (the "Closing") will take place as
promptly as practicable (and in any event within two business
days) following satisfaction or waiver of the conditions set
forth in Article V (the "Closing Date"), at the offices of
Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New
York 10017, unless another date, time or place is agreed to in
writing by the parties hereto.
SECTION 1.3 Effective Time of the Merger. As soon as
practicable after the satisfaction or waiver of the conditions
set forth in Article V, the parties hereto shall cause the Merger
to be consummated by filing this Agreement or a certificate of
merger or a certificate of ownership and merger (the "Certificate
of Merger") with the Secretary of State of the State of Delaware,
in such form as required by, and executed in accordance with the
-3-<PAGE>
relevant provisions of, the DGCL (the date and time of the filing
of the Certificate of Merger with the Secretary of State of the
State of Delaware (or such later time as is specified in the
Certificate of Merger) being the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall
have the effects set forth in Section 259 of the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the properties, rights, privileges,
immunities, powers and franchises of the Company and the
Purchaser shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and the Purchaser shall
become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.5 Certificate of Incorporation; By-Laws.
(a) At the Effective Time, the Certificate of Incorporation of
the Surviving Corporation shall be amended in accordance with the
DGCL such that, at the Effective Time, the Certificate of
Incorporation of the Surviving Corporation shall consist of the
provisions set forth in the Certificate of Incorporation of the
Purchaser, as in effect immediately prior to the Effective Time,
except that Article I of the Certificate of Incorporation of the
Surviving Corporation shall read in its entirety as follows:
"The name of this Corporation is 'Nationwide Cellular Service,
Inc.'"
(b) At the Effective Time and without any other
further action on the part of the Company and the Purchaser, the
By-Laws of the Purchaser shall be the By-Laws of the Surviving
Corporation and thereafter may be amended or repealed in
accordance with their terms or the Certificate of Incorporation
of the Surviving Corporation and as provided by law.
-4-<PAGE>
SECTION 1.6 Directors and Officers. The directors of
the Purchaser immediately prior to the Effective Time shall be
the initial directors of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and
By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until
their respective successors are duly elected or appointed, as the
case may be, and qualified.
SECTION 1.7 Stockholders' Meeting. The Company will
take all action necessary in accordance with and subject to
applicable law and its Certificate of Incorporation and By-Laws
to convene a meeting of its stockholders (the "Stockholders'
Meeting") as soon as practicable after the date of this Agreement
to consider and vote upon the adoption and authorization of this
Agreement. Subject to the fiduciary duties of the Board of
Directors to the stockholders of the Company, the Company,
through its Board of Directors, shall recommend to its
stockholders adoption and authorization of this Agreement and the
transactions contemplated hereby and shall use all reasonable ef-
forts to obtain adoption and authorization of this Agreement and
the Merger by the stockholders of the Company.
SECTION 1.8 Company Action. The Company hereby
approves of and consents to the Merger and represents and
warrants that its Board of Directors, at a meeting duly called
and held on May 21, 1995, has (a) determined that this Agreement
and the transactions contemplated hereby, including (i) the
Merger and (ii) the declaration and payment of the Spin-Off
Distribution (as defined below) of the common stock ("CTS Common
Stock"), par value $.001 per share, of Cellular Technical
-5-<PAGE>
Services Company, Inc. ("CTS") owned by the Company (and to be
owned by the Company following the exercise of warrants to
purchase CTS Common Stock as contemplated hereby), taken
together, are fair to and in the best interests of the holders of
the shares of Company Common Stock, (b) approved this Agreement
and the transactions contemplated hereby (other than the Spin-Off
Distribution), and (c) resolved to recommend that the
stockholders of the Company approve this Agreement and the
transactions contemplated hereby; provided, however, that it is
understood and agreed that stockholder approval is not required
in order to consummate the Spin-Off Distribution, and unless
necessary in order to obtain the no-action letter contemplated by
Section 4.11(e) hereof or to consummate the Spin-Off
Distribution, stockholder approval thereof will not be sought.
The Company further represents and warrants that the approvals
referred to in clause (b) above include and constitute approval
of this Agreement, the Voting Agreements, the Warrant Agreement,
the grant of the Proxies and the transactions contemplated hereby
and thereby, including the Merger, for purposes of Section 203 of
the DGCL.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. At the Effective
Time, by virtue of the Merger and without any action on the part
of the holders of any shares of Common Stock, par value $.10 per
share, of the Company (the "Company Common Stock"), or any shares
of capital stock of the Purchaser:
(a) Common Stock of the Purchaser. Each share of
Common Stock, par value $.10 per share, of the Purchaser issued
-6-<PAGE>
and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable
share of Common Stock, par value $.10 per share, of the Surviving
Corporation, which shall be all of the issued and outstanding
capital stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned
Company Common Stock. Each share of Company Common Stock that is
owned by the Company or by any subsidiary of the Company, and
each share of Company Common Stock that is owned by the Parent,
the Purchaser or any other subsidiary of the Parent shall
automatically be cancelled and retired and shall cease to exist,
and no stock of the Parent or other consideration shall be
delivered or deliverable in exchange therefor.
(c) Conversion of Company Common Stock. Except as
otherwise provided herein and subject to Section 2.1(d), each
issued and outstanding share of Company Common Stock (other than
shares to be cancelled in accordance with Section 2.1(b)) shall
be converted into the right to receive $18.50, payable to the
holder thereof, without interest (the "Merger Consideration"),
upon surrender of the certificate formerly representing such
share of Company Common Stock in the manner provided in
Section 2.2. All such shares of Company Common Stock, when so
converted, shall no longer be outstanding and shall automatically
be cancelled and retired and shall cease to exist, and each
certificate previously representing any such shares shall cease
to have any rights with respect thereto, except the right to
receive the Merger Consideration therefor upon the surrender of
such certificates in accordance with Section 2.2, without
interest.
-7-<PAGE>
(d) Shares of Dissenting Holders. Notwithstanding
anything in this Agreement to the contrary, shares of Company
Common Stock issued and outstanding immediately prior to the
Effective Time held by holders (if any) who have not voted in
favor of the Merger or consented thereto in writing and who have
demanded appraisal rights with respect thereto in accordance with
Section 262 of the DGCL (the "Dissenting Shares") shall not be
converted as described in Section 2.1(c), but holders of such
shares shall be entitled to receive payment of the appraised
value of such shares in accordance with the provisions of such
Section 262, except that any Dissenting Shares held by a holder
who shall thereafter withdraw such demand for appraisal of such
shares or lose the right to appraisal as provided in Section 262
of the DGCL shall thereupon be deemed to have been converted, at
the Effective Time, as described in Section 2.1(c). The Company
shall give the Parent (i) prompt notice of any written demands
for appraisal of any shares, attempted withdrawals of such
demands, and any other instruments served pursuant to the DGCL
received by the Company relating to stockholders' rights of
appraisal and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the DGCL.
The Company shall not, except with the prior written consent of
the Parent, voluntarily make any payment with respect to any
demands for appraisals of capital stock of the Company, offer to
settle or settle any such demands or approve any withdrawal of
any such demands.
SECTION 2.2 Exchange of Certificates.
(a) Paying Agent. The Parent shall designate a bank
or trust company to act as agent for the holders of shares of
Company Common Stock in connection with the Merger, which Paying
-8-<PAGE>
Agent shall be reasonably satisfactory to the Company (the
"Paying Agent"), to receive the funds to which holders of shares
of Company Common Stock shall become entitled pursuant to
Section 2.1(c). Such funds shall be invested by the Paying Agent
as directed by the Parent or the Surviving Corporation.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Paying Agent shall mail
to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding
shares of Company Common Stock (the "Certificates"), whose shares
were converted pursuant to Section 2.1 into the right to receive
the Merger Consideration (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon proper delivery
of the Certificates to the Paying Agent and shall be in such form
and have such other provisions as the Parent and the Company may
reasonably specify) and (ii) instructions to effect the surrender
of the Certificates in exchange for payment of the Merger
Consideration. Upon surrender of one or more Certificates for
cancellation to the Paying Agent or to such other agent or agents
as may be appointed by the Parent, which agents shall be
reasonably satisfactory to the Company, together with such letter
of transmittal, duly executed, the holder of such Certificates
shall be entitled to receive in exchange therefor the Merger
Consideration for each share of Company Common Stock formerly
represented by such Certificate, and the Certificates so
surrendered shall forthwith be cancelled. If payment of the
Merger Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is registered,
it shall be a condition of payment that the Certificate so
-9-<PAGE>
surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the person requesting such
payment shall have paid any transfer and 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 shall be deemed at any time after the
Effective Time to represent only the right to receive the Merger
Consideration in cash as contemplated by this Section 2.2.
(c) After the Effective Time there shall be no
transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be cancelled and exchanged for the Merger
Consideration as provided in this Article II.
(d) Termination of Exchange Fund. Any portion of the
funds held by the Paying Agent pursuant to this Section 2.2 which
remain undistributed to the stockholders of the Company for six
months after the Effective Time shall be delivered to the Parent,
upon demand, and any stockholders of the Company who have not
theretofore complied with this Article II shall thereafter look
only to the Parent, and only as general creditors thereof, for
payment of their claim for the Merger Consideration to which such
stockholders may be entitled.
(e) No Liability. None of the Parent, the Purchaser,
the Company or the Paying Agent shall be liable to any holder of
shares of Company Common Stock for any cash delivered to a public
-10-<PAGE>
official pursuant to any applicable abandoned property, escheat
or similar law. If any Certificates shall not have been
surrendered prior to five years after the Effective Time (or
immediately prior to such earlier date on which any payment in
respect thereof would otherwise escheat to or become the property
of any Governmental Entity (as defined in Section 3.1(e))), the
payment in respect of such Certificates 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.
(f) Withholding Rights. The Parent or 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 Company Common Stock such amounts as the
Parent or the Paying Agent is required to deduct and withhold
with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law, or any court order.
To the extent that amounts are so withheld by the Parent 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 Company Common Stock in respect of which such
deduction and withholding was made by the Parent or the Paying
Agent.
SECTION 2.3 Treatment of Employee Options. (a) Prior
to the Effective Time, the Board of Directors of the Company (or,
if appropriate, any committee thereof) shall adopt appropriate
resolutions and take all other actions necessary to provide for
the cancellation, effective at the Effective Time, of all the
outstanding stock options, stock appreciation rights, limited
stock appreciation rights and performance units (the "Options")
-11-<PAGE>
heretofore granted under any stock option, performance unit or
similar plan of the Company (the "Stock Plans"). Immediately
prior to the Effective Time, each Option, whether or not then
vested or exercisable, shall no longer be exercisable but shall
entitle each holder thereof (subject to applicable withholding
taxes), in cancellation and settlement therefor, to (i) the
number of shares of CTS Common Stock equal to the product of (x)
the total number of shares of Company Common Stock subject, or
related, to such Option, and (y) the number of shares of CTS
Common Stock distributable per share of Company Common Stock; and
(ii) a cash payment equal to (x) the excess, if any, of the
Merger Consideration over the exercise price of each Option held
by the holder, whether or not then vested or exercisable,
multiplied by (y) the number of shares of Company Common Stock
subject to such Option. Each distribution of CTS Common Stock
shall be made to each holder of an outstanding Option as soon as
practicable on or after the Effective Time; provided, however,
that no fractional shares shall be distributed hereunder and in
lieu thereof an Option holder shall receive the cash value of any
fractional share of CTS Common Stock due to the Option holder
under the terms of this Section 2.3(a). Any amounts payable or
shares distributable to an Option holder under this Section
2.3(a) shall be reduced by the amount of any applicable
withholding taxes.
(b) As provided herein, the Stock Plans and any other
plan, program or arrangement providing for the issuance or grant
of any other interest in respect of the capital stock of the
Company or any subsidiary (collectively with the Stock Plans,
referred to as the "Stock Incentive Plans") shall terminate as of
the Effective Time. The Company will take all necessary steps to
-12-<PAGE>
ensure that none of the Parent, the Company or any of their
respective subsidiaries is or will be bound by any Options, other
options, warrants, rights or agreements which would entitle any
person, other than Parent or its affiliates, to own any capital
stock of the Surviving Corporation or any of its subsidiaries or
to receive any payment in respect thereof after the Effective
Time. The Company will use its best efforts to obtain all
necessary consents to ensure that after the Effective Time, the
only rights of the holders of Options to purchase shares of
Common Stock in respect of such Options will be to receive the
distribution provided herein in cancellation and settlement
thereof.
(c) The aggregate exercise price of all Options and
the Warrant, together with the warrant owned by Jay Brown to
acquire 125,000 shares of Company Common Stock equals
$25,496,534.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the
Company. The Company hereby represents and warrants to the
Parent and the Purchaser as follows:
(a) Organization and Qualification; Subsidiaries.
Each of the Company and each of its subsidiaries is a corporation
duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority and any necessary
governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing and in good
-13-<PAGE>
standing or to have such power, authority and governmental
approvals could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect (as defined below).
Each of the Company and each of its subsidiaries is duly
qualified or licensed as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature
of its activities makes such qualification or licensing
necessary, except for such failures to be so duly qualified or
licensed and in good standing which could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse
Effect.
When used in connection with the Company or any of its
subsidiaries, the term "Material Adverse Effect" means any change
or effect that is or could reasonably be expected to be
materially adverse to the business, assets, results of
operations, condition (financial or other) or prospects of the
Company and its subsidiaries taken as a whole or to impair the
ability of the Company to perform its obligations hereunder or
under the other agreements to which it is or is to become a party
as contemplated hereby.
(b) Certificates of Incorporation and By-Laws. The
Company has heretofore furnished to the Parent a complete and
correct copy of the Certificate of Incorporation and the By-Laws
of the Company and each subsidiary of the Company as currently in
effect. The Certificate of Incorporation and By-Laws of the
Company are in full force and effect and no other organizational
documents are applicable to or binding upon the Company. The
Certificates of Incorporation and By-Laws of each of the
Company's subsidiaries are in full force and effect and no other
-14-<PAGE>
organizational documents are binding upon any such subsidiary.
Neither the Company nor any subsidiary thereof is in violation of
any of the provisions of its Certificate of Incorporation or By-
Laws.
(c) Capitalization. The authorized capital stock of
the Company consists of 20,000,000 shares of Company Common Stock
and 800,000 shares of Preferred Stock, $.01 par value per share
(collectively, "Company Preferred Stock"). As of May 19, 1995,
(i) 7,938,599 shares of Company Common Stock were issued and
outstanding, all of which were validly issued, fully paid and
nonassessable and were issued free of preemptive (or similar)
rights, (ii) 32,000 shares of Company Common Stock were held in
the treasury of the Company, (iii) an aggregate of 1,423,940
shares of Company Common Stock were reserved for issuance and
issuable upon or otherwise deliverable in connection with the
exercise of outstanding employee Options issued pursuant to the
Plans (as defined in Section 3.1(l)) and (iv) an aggregate of
975,000 shares of Company Common Stock were reserved for issuance
and issuable upon exercise of certain stock purchase warrants,
including the Warrant. Since May 19, 1995, no options to
purchase shares of Company Common Stock have been granted and no
shares of Company Common Stock have been issued except for shares
issued pursuant to the exercise of employee Options outstanding
as of May 19, 1995. As of the date hereof, no shares of Company
Preferred Stock are issued and outstanding. Except as set forth
above and except as a result of the exercise of employee Options
outstanding as of May 19, 1995, there are outstanding (i) no
shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company convertible into or
exchangeable or exercisable for shares of capital stock or voting
-15-<PAGE>
securities of the Company, (iii) no options or other rights to
acquire from the Company or any subsidiary, and no obligation of
the Company or any subsidiary to issue, any capital stock, voting
securities or securities convertible into or exchangeable or
exercisable for capital stock or voting securities of the Company
or any subsidiary and (iv) no equity equivalents, interests in
the ownership or earnings of the Company or any subsidiary or
other similar rights (collectively, "Company Securities").
Except as set forth on Schedule 3.1(c) hereto, there are no
outstanding obligations of the Company or any of its subsidiaries
to repurchase, redeem or otherwise acquire any Company
Securities, and there are no other options, calls, warrants or
other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the
Company or any of its subsidiaries to which the Company or any of
its subsidiaries is a party. All shares of Company Common Stock
subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they
are issuable, shall be duly authorized, validly issued, fully
paid and nonassessable and free of preemptive (or similar)
rights. There are no outstanding contractual obligations of the
Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of Company Common Stock or the
capital stock of any subsidiary or, except as described in
Schedule 3.1(c) hereto, to provide funds to or make any
investment (in the form of a loan, capital contribution,
guarantee or otherwise) in any such subsidiary or any other
entity. Except as set forth in Schedule 3.1(c) hereto, each of
the outstanding shares of capital stock of each of the Company's
subsidiaries is duly authorized, validly issued, fully paid and
-16-<PAGE>
nonassessable and is owned free and clear of all security
interests, liens, claims, pledges, agreements, limitations in
voting rights, charges or other encumbrances of any nature
whatsoever, except where the failure to own such shares free and
clear could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Attached as Annex A
hereto is a list of the subsidiaries of the Company and other
entities in which the Company holds an equity interest which
evidences the percentage of capital stock or other equity
interests owned by the Company, directly or indirectly, in such
subsidiaries or entities. Except for Mobile Datacom Corporation
common stock, of which the Company on the date hereof owns
736,945 shares, representing 25% of its outstanding common stock,
and except for CTS Common Stock, of which the Company (i) on the
date hereof owns 3,340,000 shares, representing 33.56% of its
outstanding common stock, (ii) following the full exercise of the
warrant to purchase additional shares of CTS Common Stock (the
"CTS Warrant"), will own 3,980,000 shares representing 37.58% of
its outstanding common stock, and (iii) Page Telecommunications
Inc., in which the Company has invested $70,000 in exchange for a
warrant to purchase 20,000 shares of common stock and a $70,000
promissory note due 2003, and the Company does not own, directly
or indirectly, less than a 50% equity interest in any other
corporation, partnership, joint venture or other entity.
(d) Authority Relative to Agreements. The Company has
all necessary corporate power and authority to execute and
deliver this Agreement, to declare and make payment of the Spin-
Off Distribution, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by the Company, the
-17-<PAGE>
consummation by the Company of the transactions contemplated
hereby (other than the declaration and payment of the Spin-Off
Distribution) have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement
or to consummate such transactions (other than the approval and
adoption of the Merger and this Agreement by the holders of a
majority of the outstanding shares of Company Common Stock, and,
with respect to the Merger, the filing of appropriate merger
documents as required by the DGCL and the declaration by the
Board of Directors of the Company of the Spin-Off Distribution).
This Agreement has been duly and validly executed and delivered
by the Company and, assuming the due authorization, execution and
delivery hereof by the other parties thereto, constitutes a
legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. The only vote
required to authorize the Merger is the affirmative vote of a
majority of the outstanding shares of Company Common Stock. The
approval of the transactions contemplated by this Agreement,
including the Merger, the Warrant Agreement and the grant of the
Proxies, by the Board of Directors of the Company shall
constitute, for the purposes of Section 203 of the DGCL, the
approval of a "business combination" (as defined in Section 203
of the DGCL) between the Company and the Parent or any affiliate
thereof.
(e) No Conflict; Required Filings and Consents. (i)
The execution, delivery and performance of this Agreement by the
Company and the declaration and payment of the Spin-Off
Distribution do not and will not: (A) conflict with or violate
the Certificate of Incorporation or By-Laws of the Company or the
-18-<PAGE>
equivalent organizational documents of any of its subsidiaries;
(B) assuming that all consents, approvals and authorizations
contemplated by subsection (ii) below have been obtained and all
filings described in such clauses have been made, conflict with
or violate any law, rule, regulation, order, judgment or decree
applicable to the Company or any of its subsidiaries or by which
its or any of their respective properties are bound or affected;
or (C) result in any breach or violation of or constitute a
default (or an event which with notice or lapse of time or both
could become a default) or result in the loss of a benefit under,
or give rise to any right of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company or
any of its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries or its or any of their respective properties are
bound or affected, except, in the case of clauses (B) and (C),
for any such conflicts, violations, breaches, defaults or other
occurrences which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The
Company has, and on the date the Board of Directors declares the
Spin-Off Distribution and on the Spin-Off Distribution Payment
Date (as defined below) will have, the ability to declare and pay
the Spin-Off Distribution under Section 170 of the DGCL.
(ii) The execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions
contemplated hereby by the Company do not and will not require
any consent, approval, authorization or permit of, action by,
-19-<PAGE>
filing with or notification to, any court, administrative agency
or commission, or entity created by rule, regulation or order of
any commission or other governmental authority or other
governmental authority or instrumentality, domestic or foreign (a
"Governmental Entity"), except for: (A) the filing with the SEC
of (1) a proxy statement in definitive form relating to the
Stockholders' Meeting (such proxy statement as amended or
supplemented from time to time, the "Proxy Statement") and (2)
such other filings under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or the Securities Act of 1933, as
amended (the "Securities Act"), as may be required in connection
with this Agreement and the transactions contemplated hereby and
the obtaining from the SEC of such orders as may be required in
connection therewith; (B) applicable filings, if any, pursuant to
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"); (C) applicable permits, licenses,
waivers, authorizations, approvals and certificates of public
convenience and necessity ("Licenses"), including Licenses by the
Federal Communications Commission ("FCC") and state public
utility or public service commissions ("Public Utility
Commissions") which are necessary to enable the Company and its
subsidiaries to conduct their operations after the Merger in the
manner heretofore conducted (collectively, the "Regulatory
Requirements") and which are listed in Schedule 3.1(e) hereto;
(D) the filing and recordation of appropriate merger or other
documents as required by the DGCL; (E) compliance with the
statutory provisions and regulations relating to real property
transfer gains taxes and real property transfer taxes; and (F)
such consents, approvals, authorizations, permits, actions,
filings or notifications which the failure to make or obtain
-20-<PAGE>
could not individually or in the aggregate reasonably be expected
to (x) prevent consummation of Merger or materially delay the
Merger, (y) otherwise prevent or delay the Company from
performing its obligations under this Agreement or (z)
individually or in the aggregate, have a Material Adverse Effect.
(f) Compliance. The Company and its subsidiaries hold
all Licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary or appropriate for the operation
of the businesses of the Company and each subsidiary, except to
the extent the failure to hold such will not have a Material
Adverse Effect on the Company or any such subsidiary. Neither
the Company nor any of its subsidiaries is in conflict with, or
in default or violation of, (i) any law, rule, regulation, order,
judgment or decree applicable to the Company or any of its
subsidiaries or by which its or any of their respective
properties are bound or affected, or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, License, permit,
franchise or other instrument or obligation to which the Company
or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries or its or any of their respective
properties are bound or affected, except for any such conflicts,
defaults or violations which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect on the Company or any such subsidiary.
(g) SEC Filings; Financial Statements. (i) The
Company, each of its then or current subsidiaries (to the extent
applicable) and, to the best knowledge of the Company, CTS, have
filed all forms, reports, statements and documents required to be
filed with the SEC since January 1, 1992 (collectively, the "SEC
Reports"), each of which has complied in all material respects
-21-<PAGE>
with the applicable requirements of the Securities Act or the
Exchange Act, as applicable, each as in effect on the date so
filed. The Company has delivered to the Parent, in the form
filed with the SEC (including any amendments thereto), (A) its
(and, to the extent applicable, its subsidiaries') Annual Reports
on Form 10-K for each of the three fiscal years ended December
31, 1992, 1993 and 1994, and the Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995 (the "March 1995 10-Q") (B)
all definitive proxy statements relating to the Company's (and
such subsidiaries') meetings of stockholders (whether annual or
special) held since January 1, 1992 and (C) all other reports or
registration statements filed by the Company (and such
subsidiaries) with the SEC since January 1, 1992. None of such
forms, reports or documents (including but not limited to any
financial statements or schedules included or incorporated by
reference therein) filed by the Company and its then or current
subsidiaries contained, when filed, any untrue statement of a
material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Except to the extent
revised or superseded by a subsequent filing with the SEC (a copy
of which has been provided to the Parent prior to the date
hereof), none of the SEC Reports filed by the Company since
December 31, 1994 and prior to the date hereof contains any
untrue statement of a material fact or omits to state a material
fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.
-22-<PAGE>
(ii) Each of the audited and unaudited consolidated
interim financial statements of the Company (including, in each
case, any related notes thereto) included in its Annual Reports
on Form 10-K for each of the three fiscal years ended
December 31, 1992, 1993 and 1994, and in the March 1995 10-Q,
which have previously been furnished to the Parent, complies as
to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the
SEC with respect thereto, has been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated
in the notes thereto) and each fairly presents the consolidated
financial position of the Company and its subsidiaries at the
respective dates thereof and the consolidated results of its
operations and changes in cash flows for the periods indicated.
(iii) Except as and to the extent set forth on the
consolidated balance sheet of the Company and its subsidiaries at
December 31, 1994, including the notes thereto, neither the
Company nor any of its subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent
or otherwise) which would be required to be reflected on a
balance sheet or in the notes thereto prepared in accordance with
generally accepted accounting principles, except for liabilities
or obligations incurred in the ordinary course of business since
December 31, 1994 which could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(iv) The Company has heretofore furnished to the Parent
a complete and correct copy of any amendments or modifications,
which have not yet been filed with the SEC, to agreements,
-23-<PAGE>
documents or other instruments which previously were filed by the
Company with the SEC pursuant to the Securities Act or the
Exchange Act or which would be required to be so filed in
connection with the filing of any annual or interim report or
registration statement.
(h) Information Supplied. The Proxy Statement (or any
amendment thereof or supplement thereto) will, at the date of
mailing to stockholders of the Company and at the time of the
Stockholders' Meeting to be held in connection with the Merger,
not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading,
except that no representation is made by the Company with respect
to statements made therein based on information supplied by the
Parent or the Purchaser in writing for inclusion in the Proxy
Statement. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
(i) Absence of Certain Changes or Events. Since
December 31, 1994, except as contemplated by this Agreement, as
set forth on Schedule 3.1(i) hereto or disclosed in the SEC
Reports filed since that date and up to the date of this
Agreement, the Company and its subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent
with past practice and, since such date, there has not been (i)
any condition, event or occurrence which, individually or in the
aggregate, has had, or could reasonably be expected to have, a
Material Adverse Effect, (ii) any termination or cancellation of,
or any modification to, any agreement, arrangement or
-24-<PAGE>
understanding pursuant to which the Company purchases or has the
right to purchase cellular telephone service, or to any other
agreement, arrangement or understanding which is material to the
Company or to any subsidiary thereof, which is or could
reasonably be expected to be adverse to the Company, any
subsidiary of the Company, the Parent or the Purchaser, (iii)
any change by the Company in its accounting methods, principles
or practices, (iv) any revaluation by the Company of any of its
material assets, including but not limited to writing down the
value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business, (v) any entry by
the Company or any of its subsidiaries into any commitment or
transactions material to the Company or any such subsidiary, (vi)
except for the Spin-Off Distribution, any declaration, setting
aside or payment of any dividends or distributions in respect of
the shares of Company Common Stock or any redemption, purchase or
other acquisition of any of its securities, or (vii) any increase
in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options,
stock appreciation rights, performance awards, or restricted
stock awards), stock purchase or other employee benefit plan or
agreement or arrangement, or any other increase in the
compensation payable or to become payable to any officers or key
employees of the Company or any of its subsidiaries.
(j) Absence of Litigation. Except as disclosed in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, there are no suits, claims, actions,
proceedings or investigations pending or, to the knowledge of the
Company, threatened against the Company or any of its
-25-<PAGE>
subsidiaries, or any properties or rights of the Company or any
of its subsidiaries, or, to the best knowledge of the Company,
against CTS in circumstances in which a claim against the
Company, as a controlling person or otherwise, is possible,
before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign, that (i)
individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect or (ii) seek to delay or prevent
the consummation of the transactions contemplated hereby. As of
the date hereof, neither the Company nor any of its subsidiaries
nor any of their respective properties is or are subject to any
order, writ, judgment, injunction, decree, determination or award
having, or which could reasonably be expected to have, a Material
Adverse Effect or which could prevent or delay the consummation
of the transactions contemplated hereby.
(k) Employment and Labor Contracts. (i) Except as
disclosed in the SEC Reports or on Schedule 3.1(k) hereto, there
exist no employment, consulting, severance or indemnification
agreements between the Company and any current or former
director, officer or employee of the Company pursuant to which
the Company has, or may have, obligations as of the date hereof,
and no such person is entitled to any severance benefits from the
Company or any of its subsidiaries.
(ii) Neither the Company nor any of its subsidiaries
is a party to any collective bargaining agreement. Since
January 1, 1992, neither the Company nor any of its subsidiaries
has (x) had any employees strikes, work stoppages, slowdowns or
lockouts or (y) received any requests for certifications of
bargaining units or any other requests for collective bargaining.
-26-<PAGE>
(l) Employee Benefit Plans. With respect to all the
employee benefit plans, programs and arrangements maintained for
the benefit of any current or former employee, officer or
director of the Company or any subsidiary of the Company
(collectively, the "Plans") and to all the employment,
consulting, severance, change-in-control, termination,
compensation, collective bargaining or indemnification
agreements, arrangements or understandings between the Company or
any of its subsidiaries and any current or former employee,
officer or director of the Company or any of its subsidiaries
(collectively, the "Employment Arrangements"), except as set
forth in the SEC Reports or in the attached Schedule 3.1(l)
hereto and except as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect: (i)
there has not been any adoption or amendment by the Company or
any of its subsidiaries of any Plan; (ii) there exists no
Employment Arrangement; (iii) none of the Plans is a
multiemployer plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"); (iv) none of
the Plans promises or provides retiree medical or life insurance
benefits to any person, except as otherwise required by law in
the applicable jurisdiction and, outside of the United States, in
accordance with local custom and practice; (v) each Plan intended
to be qualified under Section 401(a) of the Internal Revenue Code
of 1986, as amended, has received a favorable determination
letter from the Internal Revenue Service that it is so qualified
and nothing has occurred since the date of such letter that could
reasonably be expected to affect the qualified status of such
Plan; (vi) each Plan has been operated in all respects in
accordance with its terms and the requirements of applicable law;
-27-<PAGE>
(vii) neither the Company nor any subsidiary of the Company has
incurred any direct or indirect liability under, arising out of
or by operation of Title IV of ERISA in connection with the
termination of, or withdrawal from, any Plan or other retirement
plan or arrangement, and no fact or event exists that could
reasonably be expected to give rise to any such liability; (viii)
the Company and its subsidiaries have not incurred any liability
under, and have complied in all respects with, the Worker
Adjustment Retraining Notification Act, and no fact or event
exists that could give rise to liability under such Act; and (ix)
no Plan or Employment Arrangement exists which could result in
the payment to any current, former or future director or employee
of the Company or any commonly controlled entity of any money or
other property or rights or accelerate or provide any other
rights or benefits to any such employee or director as a result
of the transactions contemplated by this Agreement, whether or
not such payment, acceleration or provision would constitute a
"parachute payment" (within the meaning of Section 280G of the
Code) or whether or not some other subsequent action or event
would be required to cause such payment, acceleration or
provision to be triggered. Except as set forth in the SEC
Reports, the aggregate accumulated benefit obligations of each
Plan subject to Title IV of ERISA (as of the date of the most
recent actuarial valuation prepared for such Plan) do not exceed
the fair market value of the assets of such Plan (as of the date
of such valuation).
(m) Tax Matters. (i) Except as set forth in the SEC
Reports filed prior to the date of this Agreement or in Schedule
3.1(m), (A) the Company and its subsidiaries have filed, been
included in or sent, all material returns, material declarations
-28-<PAGE>
and reports and information returns and statements required to be
filed or sent by any of them relating to any Taxes (as defined
below) with respect to any material income, properties or
operations of the Company or any of its subsidiaries
(collectively, "Returns"); (B) as of the time of filing, the
Returns correctly reflected in all material respects the facts
regarding the income, business, assets, operations, activities
and status of the Company and its subsidiaries and any other
material information required to be shown therein; (C) the
Company and its subsidiaries have timely paid or made provision
for all material Taxes that have been shown as due and payable on
the Returns that have been filed; (D) the Company and its
subsidiaries have made or will make provision for all material
Taxes payable for any periods that end before the Effective Time
for which no Returns have yet been filed and for any periods that
begin before the Effective Time and end after the Effective Time
to the extent such Taxes are attributable to the portion of any
such period ending at the Effective Time; (E) the charges,
accruals and reserves for taxes reflected on the books of the
Company and its subsidiaries are adequate under generally
accepted accounting principles to cover the Tax liabilities
accruing or payable by the Company and its subsidiaries in
respect of periods prior to the date hereof; (F) neither the
Company nor any of its subsidiaries is delinquent in the payment
of any material Taxes or has requested any extension of time
within which to file or send any material Return (other than
extensions granted to the Company for the filing of its Returns
as set forth in Schedule 3.1(m)), which Return has not since been
filed or sent; (G) no material deficiency for any Taxes has been
proposed, asserted or assessed in writing against the Company or
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any of its subsidiaries (or any member of any affiliated or
combined group of which the Company or any of its subsidiaries is
or has been a member for which either the Company or any of its
subsidiaries could be liable) other than those Taxes being
contested in good faith by appropriate proceedings and set forth
in Schedule 3.1(m) (which shall set forth the nature of the
proceeding, the type of return, the deficiencies proposed,
asserted or assessed and the amount thereof, and the taxable year
in question); (H) neither the Company nor any of its subsidiaries
has granted any extension of the limitation period applicable to
any material Tax claims other than those Taxes being contested in
good faith by appropriate proceedings; (I) neither the Company
nor any of its subsidiaries is subject to liability for Taxes of
any person (other than the Company or its subsidiaries),
including, without limitation, liability arising from the
application of U.S. Treasury Regulation section 1.1502-6 or any
analogous provision of state, local or foreign law; and
(J) neither the Company nor any of its subsidiaries is or has
been a party to any material tax sharing agreement with any
corporation which is not currently a member of the affiliated
group of which the Company is currently a member.
(ii) "Tax" means with respect to any person (A) any
net income, gross income, gross receipts, sales, use, ad valorem,
franchise, profits, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, value-
added, windfall profits, custom duty or other tax, governmental
fee, capital stock, social security (or similar), unemployment,
disability, transfer, registration, alternative or add-on
minimum, estimated or other like assessment or charge of any kind
whatsoever, together with any interest and any penalty, addition
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to tax or additional amount imposed by any taxing authority
(domestic or foreign) on such person and (B) any liability of the
Company or any subsidiary for the payment of any amount of the
type described in clause (i) as a result of being a member of an
affiliated or combined group.
(iii) The Company's tax basis in the shares of CTS
Common Stock is equal to $2,750,782, and the Company holds such
shares as a long-term capital asset. The Company's tax basis in
the shares of CTS Common Stock to be acquired prior to the
Effective Time upon exercise of the CTS Warrant will be
$1,600,000.
(n) Intellectual Property. Except to the extent that
the inaccuracy of any of the following (or the circumstances
giving rise to such inaccuracy), individually or in the
aggregate, could not reasonably be expected to have a Material
Adverse Effect: (a) the Company and each of its subsidiaries
owns, or is licensed to use (in each case, clear of any liens or
encumbrances of any kind), all Intellectual Property (as defined
below) used in or necessary for the conduct of its business as
currently conducted; (b) the use of any Intellectual Property by
the Company and its subsidiaries does not infringe on or
otherwise violate the rights of any person and is in accordance
with any applicable license pursuant to which the Company or any
subsidiary acquired the right to use any Intellectual Property;
and (c) to the knowledge of the Company, no person is
challenging, infringing on or otherwise violating any right of
the Company or any of its subsidiaries with respect to any
Intellectual Property owned by and/or licensed to the Company and
its subsidiaries. For purposes of this Agreement "Intellectual
Property" shall mean trademarks, service marks, brand names and
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other indications of origin, the goodwill associated with the
foregoing and registrations in any jurisdiction of, and
applications in any jurisdiction to register, the foregoing,
including any extension, modification or renewal of any such
registration or application; inventions, discoveries and ideas,
whether patentable or not in any jurisdiction; patents,
applications for patents (including, without limitation,
divisions, continuations, continuations in part and renewal
applications), and any renewals, extensions or reissues thereof,
in any jurisdiction; nonpublic information, trade secrets and
confidential information and rights in any jurisdiction to limit
the use or disclosure thereof by any person; writings and other
works, whether copyrightable or not in any jurisdiction;
registrations or applications for registration of copyrights in
any jurisdiction, and any renewals or extensions thereof; any
similar intellectual property or proprietary rights; and any
claims or causes of action arising out of or relating to any
infringement or misappropriation of any of the foregoing.
(o) Environmental Matters. Except as disclosed in the
SEC Reports filed prior to the date of this Agreement, there are
no Environmental Liabilities (as defined below) of the Company or
any of its subsidiaries which would, individually or in the
aggregate, have a Material Adverse Effect. As used in this
Agreement, "Environmental Laws" means any and all federal, state,
local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decisions, injunctions, orders, decrees,
requirements of any Governmental Entity, any and all common law
requirements, rules and bases of liability regulating, relating
to or imposing liability or standards of conduct concerning
pollution, Hazardous Materials or protection of human health or
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the environment, as now or may at any time hereafter be in
effect. "Environmental Liabilities" with respect to any person
means any and all liabilities of or relating to such person or
any of its subsidiaries (including any entity which is, in whole
or in part, a predecessor of such person or any of such
subsidiaries), whether vested or unvested, contingent or fixed,
actual or potential, known or unknown, which (i) arise under or
relate to matters covered by Environmental Laws and (ii) relate
to actions occurring or conditions existing on or prior to the
Closing Date. "Hazardous Materials" means any hazardous or toxic
substances, materials or wastes, defined, listed, classified or
regulated as such in or under any Environmental Laws, including,
without limitation, asbestos, petroleum or petroleum products
(including gasoline, crude oil or any fraction thereof),
polychlorinated biphenyls, and urea-formaldehyde insulation.
(p) Spin-Off Distribution. The Company will have, on
the date the Spin-Off Distribution is declared, and on the Spin-
Off Distribution Payment Date, sufficient surplus, or if there
shall be no such surplus, net profits for the current fiscal year
and/or preceding fiscal year, to make the Spin-Off Distribution.
(q) Transactions with Affiliates. Except as set forth
on Schedule 3.1(q) hereto, there are no contracts, agreements,
arrangements or understandings of any kind between CTS or any
other affiliate of the Company, on the one hand, and the Company
or any subsidiary of the Company, on the other hand.
(r) Opinion of Financial Advisor. On the date hereof,
the Company has received the opinion of Paine Webber Incorporated
to the effect that, in the context of the transactions
contemplated hereby, the Merger Consideration is fair to the
stockholders of the Company from a financial point of view.
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(s) Brokers. No broker, finder or investment banker
(other than Paine Webber Incorporated) is entitled to any
brokerage, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of the Company. The Company
has heretofore furnished to the Parent a complete and correct
copy of all agreements between the Company and Paine Webber
Incorporated pursuant to which such firm would be entitled to any
payment relating to the transactions contemplated by this
Agreement.
SECTION 3.2 Representations and Warranties of the
Parent and the Purchaser. The Parent and the Purchaser hereby,
jointly and severally, represent and warrant to the Company as
follows:
(a) Corporate Organization. Each of the Parent and
the Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and
has the requisite corporate power and authority and any necessary
governmental authority to own, operate or lease its properties
and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing and in good
standing or to have such power, authority and governmental
approvals could not, individually or in the aggregate, reasonably
be expected to prevent the consummation of the Merger.
(b) Authority Relative to Agreements. Each of the
Parent and the Purchaser has all necessary corporate power and
authority to enter into this Agreement to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by each
of the Parent and the Purchaser and, subject to Section 5.2(e),
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the consummation by each of the Parent and the Purchaser of the
transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the
Parent and the Purchaser, and no other corporate proceedings on
the part of the Parent and the Purchaser are necessary to
authorize this Agreement or to consummate such transactions,
other than filing and recordation of appropriate merger documents
as required by the DGCL and the approval of the Board of
Directors of the Parent. This Agreement has been duly executed
and delivered by each of the Parent and the Purchaser and,
assuming due authorization, execution and delivery by the other
parties hereto, constitutes a legal, valid and binding obligation
of each such corporation enforceable against such corporation in
accordance with its terms.
(c) No Conflict; Required Filings and Consents. (i)
The execution, delivery and performance of this Agreement by the
Parent and the Purchaser do not and will not: (A) conflict with
or violate the respective certificates of incorporation or by-
laws of the Parent or the Purchaser, as the case may be; (B)
assuming that all consents, approvals and authorizations
contemplated by subsection (ii) below have been obtained and all
filings described in such subsection have been made, conflict
with or violate any law, rule, regulation, order, judgment or
decree applicable to the Parent or the Purchaser or by which
either of them or their respective properties are bound or
affected; or (C) result in any breach or violation of or
constitute a default (or an event which with notice or lapse of
time or both could become a default) or result in the loss of a
material benefit under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the
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creation of a lien or encumbrance on any of the property or
assets of the Parent or the Purchaser pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, License,
franchise or other instrument or obligation to which the Parent
or the Purchaser is a party or by which the Parent or the
Purchaser or any of their respective properties are bound or
affected, except, in the case of clauses (B) and (C), for any
such conflicts, violations, breaches, defaults or other
occurrences which could not, individually or in the aggregate,
reasonably be expected to prevent the consummation of the Merger.
(ii) The execution, delivery and performance of this
Agreement by the Parent and the Purchaser and the consummation of
the transactions contemplated hereby by the Parent and the
Purchaser do not and will not require any consent, approval,
authorization or permit of, action by, filing with or
notification to, any Governmental Entity, except for: (A)
applicable filings, if any, pursuant to HSR, (B) applicable
requirements, if any, under any License, including any License by
the FCC or any Public Utility Commission, (C) the filing and
recordation of appropriate merger or other documents as required
by the DGCL, (D) compliance with the statutory provisions and
regulations relating to any real property transfer gains tax or
real property transfer tax, (E) applicable filings under state
anti-takeover laws and (F) such consents, approvals,
authorizations, permits, actions, filings or notifications the
failure of which to make or obtain could not, individually or in
the aggregate, reasonably be expected to prevent the consummation
of the Merger.
(d) Information Supplied. None of the information
supplied or to be supplied by the Parent or the Purchaser for
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inclusion or incorporation by reference in the Proxy Statement
will, at the date of mailing to stockholders and at the time of
the Stockholders' 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 were
made, not misleading.
(e) Financing. Either the Parent or the Purchaser
has, or will have prior to the satisfaction of the conditions to
the Merger, sufficient funds available (through existing credit
arrangements or otherwise) to deliver the Merger Consideration
with respect to all of the shares of Company Common Stock.
(f) Brokers. No broker, finder or investment banker
(other than Lazard Freres & Company, LLC) is entitled to any
brokerage, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of the Parent or the
Purchaser.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER; OTHER COVENANTS
SECTION 4.1 Conduct of Business of the Company Pending
the Merger. The Company covenants and agrees that, during the
period from the date hereof to the Effective Time, except
pursuant to the terms hereof, or unless the Parent shall
otherwise agree in writing, the businesses of the Company and its
subsidiaries shall be conducted only in, and the Company shall
not take any action and its subsidiaries shall not take any
action except in the ordinary course of business and in a manner
consistent with past practice and in compliance with applicable
laws; and the Company and its subsidiaries shall each use its
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best efforts to preserve intact the business organization of the
Company and its subsidiaries, to keep available the services of
the present officers, employees and consultants of the Company
and its subsidiaries and to preserve the present relationships of
the Company and its subsidiaries with customers, providers of
cellular telephone service and other suppliers and other persons
with which the Company or any of its subsidiaries has significant
business relations. By way of amplification and not limitation,
neither the Company nor any of its subsidiaries shall, between
the date of this Agreement and the Effective Time, directly or
indirectly do, or propose or commit to do, any of the following
without the prior written consent of the Parent:
(a) (i) declare, set aside or pay any dividends on,
or make any other distributions in respect of, any of its
capital stock (except (x) the Spin-Off Distribution or (y)
dividends and distributions by a wholly owned subsidiary of
the Company to its parent), (ii) split, combine or
reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock or
(iii) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its subsidiaries or
any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities
(except for the cashless exercise of the Warrant);
(b) authorize for issuance, issue, deliver, sell or
agree or commit to issue, sell or deliver (whether through
the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), pledge or
otherwise encumber any shares of its capital stock or the
-38-<PAGE>
capital stock of any of its subsidiaries, any other voting
securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares,
voting securities or convertible securities or any other
securities or equity equivalents (including without
limitation stock appreciation rights) (other than sales of
capital stock of any wholly owned subsidiary of the Company
to the Company or another wholly owned subsidiary of the
Company); provided, however, and not in limitation of the
foregoing, no additional equity securities or rights to
purchase equity securities will be granted after the date
hereof;
(c) except to the extent required under existing Plans
or Employment Arrangements as in effect on the date of this
Agreement, (i) increase the compensation or fringe benefits
of any of its directors, officers or employees, except for
increases in salary or wages of employees of the Company or
its subsidiaries who are not officers of the Company in the
ordinary course of business in accordance with past
practice, or (ii) grant any severance or termination pay not
currently required to be paid under existing Plans, or (iii)
enter into any Employment Arrangement with any present or
former director level or other equivalent or more senior
officer or employee, or, other than in the ordinary course
of business consistent with past practice, any other
employee of the Company or any of its subsidiaries, or (iv)
establish, adopt, enter into or amend or terminate any Plan
or Employment Arrangement or other plan, agreement, trust,
fund, policy or arrangement for the benefit of any
directors, officers or employees except to the extent
-39-<PAGE>
amendment or termination is necessary or desirable to
effectuate the provisions herein and the purposes of
Section 2.3;
(d) amend its Certificate of Incorporation, By-Laws or
other comparable charter or organizational documents or
alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate
structure or ownership of any subsidiary of the Company;
(e) acquire or agree to acquire (i) by merging or
consolidating with, or by purchasing a substantial portion
of the stock or assets of, or by any other manner, any
business or any corporation, partnership, joint venture,
association or other business organization or division
thereof or (ii) any assets that are material, individually
or in the aggregate, to the Company and its subsidiaries
taken as a whole, except purchases of cellular telephone
minutes in the ordinary course of business consistent with
past practice and except for the exercise of the CTS
Warrant;
(f) sell, lease, license, mortgage or otherwise
encumber or subject to any lien or otherwise dispose of any
of its properties or assets, except sales of (i) cellular
telephone minutes and cellular telephone equipment in the
ordinary course of business consistent with past practice,
(ii) sales of accounts receivable in the ordinary course of
business consistent with past practice, and (iii) in
connection with capital expenditures permitted to be
expended by the Company pursuant to Section 4.1(h);
(g) (i) except as set forth on Schedule 4.1(g) hereto,
incur any indebtedness for borrowed money or guarantee any
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such indebtedness of another person (other than guarantees
by the Company in favor of any of its wholly owned
subsidiaries or by any of its subsidiaries in favor of the
Company), issue or sell any debt securities or warrants or
other rights to acquire any debt securities of the Company
or any of its subsidiaries, guarantee any debt securities of
another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of
another person or enter into any arrangement having the
economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of
business consistent with past practice or (ii) make any
loans, advances or capital contributions to, or investments
in, any other person, other than to the Company or any
direct or indirect wholly owned subsidiary of the Company,
except for the exercise of the CTS Warrant;
(h) expend funds for capital expenditures other than
in accordance with the Company's current capital expenditure
plans (which plans shall have been disclosed in writing to
the Parent on or prior to the date hereof) or replace or
modify the Company's billing system, whether or not such
replacement or modification was included in current capital
expenditure plans and/or disclosed in writing to the Parent;
(i) enter into or amend, supplement or otherwise
modify any agreement, arrangement or understanding other
than in the ordinary course of business, consistent with
past practice, except that the Warrant may be amended to
provide that in the event of a cashless exercise of the
Warrant upon a Change of Control (as defined therein), in
addition to receiving the excess of the Merger Consideration
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over the exercise price, Mr. Adelson will be entitled to
receive the number of shares of CTS Common Stock which he
would have received in the Spin-Off Distribution had he
exercised the Warrant in full prior to the Spin-Off
Distribution Record Date;
(j) (A) waive, release, grant or transfer any rights,
or extend or modify or change in any material respect any
services agreement or other arrangement or understanding
with CTS or any subsidiary of CTS, or enter into any
additional agreement, arrangement or understanding with CTS
or any subsidiary of CTS, in each case, except for
extensions up to the date of the Effective Time of any
existing agreement which would otherwise expire before then,
or (B) waive, release, grant or transfer any rights of
value, or extend or modify or change in any material respect
any existing, or enter into any additional, license, lease,
contract or other document, other than in the ordinary
course of business consistent with past practice;
(k) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation
or a dissolution, merger, consolidation, restructuring,
recapitalization or reorganization;
(l) recognize any labor union (unless legally required
to do so) or enter into or amend any collective bargaining
agreement;
(m) change any accounting principle used by it, unless
required by the SEC or the Financial Accounting Standards
Board;
(n) make any Tax election or settle or compromise any
income Tax liability or file any federal income tax return
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prior to the last day (including extensions) prescribed by
law, in the case of any of the foregoing, material to the
business, financial condition or results of operations of
the Company and its subsidiaries taken as a whole;
(o) settle or compromise any litigation in which the
Company or any subsidiary is a defendant (whether or not
commenced prior to the date of this Agreement) or settle,
pay or compromise any claims not required to be paid, which
payments are individually in an amount in excess of $500,000
and in the aggregate in an amount in excess of $1,000,000;
and
(p) authorize any of, or commit or agree to take any
of, the foregoing actions.
SECTION 4.2 Conduct of Business of the Purchaser. The
Purchaser has not engaged, and during the period from the date of
this Agreement to the Effective Time, the Purchaser shall not
engage, in any activities of any nature except as provided in, or
in connection with the transactions contemplated by, this
Agreement.
SECTION 4.3 Preparation of Proxy Statement. The
Company shall promptly prepare and file with the SEC a
preliminary proxy statement relating to the Merger and this
Agreement and use its best efforts (x) to obtain and furnish the
information required to be included by the SEC in the Proxy
Statement (as hereinafter defined) and, after consultation with
the Parent, to respond promptly to any comments made by the SEC
with respect to the preliminary proxy statement and cause a
definitive proxy statement (the "Proxy Statement") to be mailed
to its stockholders and (y) to obtain the necessary approvals of
the Merger and this Agreement by its stockholders.
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SECTION 4.4 Access to Information; Confidentiality.
(a) From the date hereof to the Effective Time, the Company
shall, and shall cause its subsidiaries, officers, directors,
employees, auditors and other agents to, afford the officers,
employees, auditors and other agents of the Parent, complete
access at all reasonable times to its officers, employees,
agents, properties, offices, plants and other facilities and to
all books and records, and shall furnish the Parent and such
other persons with all financial, operating and other data and
information as the Parent, through its officers, employees or
agents may from time to time request.
(b) Each of the Parent and the Purchaser will hold and
will cause its officers, employees, auditors and other agents to
hold in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law or
regulation (in which event the Parent shall give prompt notice
thereof to the Company), all documents and information concerning
the Company and its subsidiaries furnished to the Parent or the
Purchaser in connection with the transactions contemplated in
this Agreement (except to the extent that such information can be
shown to have been (i) previously known by the Parent or the
Purchaser from sources other than the Company, or its directors,
officers, auditors or other agents, (ii) in the public domain
through no fault of the Parent or the Purchaser or (iii) lawfully
acquired by the Parent or the Purchaser on a non-confidential
basis from sources who are not known by the Parent or the
Purchaser to be bound by a confidentiality agreement or otherwise
prohibited from transmitting the information to the Parent or the
Purchaser by a contractual, legal or fiduciary obligation) and
will not release or disclose such information to any other
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person, unless compelled to disclose by judicial or
administrative process or by other requirements of law or
regulation (in which event the Parent shall give prompt notice
thereof to the Company), except its auditors and other advisors
in connection with this Agreement who need to know such
information. If the transactions contemplated by this Agreement
are not consummated, such confidence shall be maintained for a
period of two years from the date hereof and, if requested by or
on behalf of the Company, the Parent and the Purchaser will, and
will cause their auditors and other agents to, return to the
Company or destroy all copies of written information furnished by
the Company to the Parent and the Purchaser or their agents,
representatives or advisors. It is understood that the Parent
and the Purchaser shall be deemed to have satisfied their
obligation to hold such information confidential in accordance
herewith if they exercise the same care as they take to preserve
confidentiality for their own similar information. The
provisions of this Section 4.4(b) replace and supersede the
obligations of the Parent set forth in any confidentiality
agreement previously entered into between the Parent and the
Company.
(c) No investigation pursuant to this Section 4.4
shall affect any representations or warranties of the parties
herein or the conditions to the obligations of the parties
hereto.
SECTION 4.5 No Solicitation. Neither the Company nor
any of its subsidiaries shall, nor shall the Company or any of
its subsidiaries authorize or permit any of its officers,
directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by
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it or any of its subsidiaries to solicit, encourage (including by
way of furnishing information or assistance), or take any other
action to facilitate, any inquiries or the making of any proposal
which constitutes, or may reasonably be expected to lead to, any
Transaction Proposal (as defined below), or enter into or
maintain or continue discussions or negotiate with any person in
furtherance of such inquiries or to obtain a Transaction
Proposal, or agree to or endorse any Transaction Proposal, and
the Company shall notify the Parent orally (within one business
day) and in writing (as promptly as practicable), in reasonable
detail, as to any inquiries and proposals which it or any of its
subsidiaries or any of their respective representatives or agents
may receive; provided, however, that (i) the Company may furnish
or cause to be furnished information concerning the Company and
its businesses, properties or assets to a third party, and (ii)
the Company may engage in discussions or negotiations with a
third party if, and only to the extent that (A) the Board of
Directors of the Company shall conclude in good faith on the
basis of advice from outside counsel that such action is required
in order for the Board of Directors of the Company to satisfy its
fiduciary obligations under applicable law and (B) prior to
taking any of the foregoing actions referred to in clauses (i) or
(ii) above, the Company provides reasonable notice (no less than
one business day) to and keeps the Parent informed, on a current
basis, with respect to such action and obtains a confidentiality
agreement from the third party substantially the same as that
obtained from the Parent prior to delivering to any such person
any non-public information. As used herein, the term
"Transaction Proposal" means (x) any acquisition or purchase of a
substantial amount of assets of, or any equity interest in, the
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Company or any of its subsidiaries or any tender offer (including
a self tender offer) or exchange offer, merger, consolidation,
business combination, sale of substantially all assets, sale of
securities, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of its subsidiaries
(other than the transactions contemplated hereby) or any other
transaction the consummation of which would or could reasonably
be expected to impede, interfere with, prevent or materially
delay the consummation of the Merger or the other transactions
contemplated hereby or (y) any proposal, plan or intention to do
any of the foregoing either publicly announced or communicated to
the Company or any agreement to engage in any of the foregoing.
The Company will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. This
section shall not prohibit accurate disclosure by the Company in
any document that is required to be filed by the Company with the
SEC.
SECTION 4.6 Employee Benefits Matters. (a) The
Parent agrees that, during the period commencing at the Effective
Time and ending on December 31, 1995, the employees of the
Company and its subsidiaries (other than those employees covered
by a collective bargaining agreement) will continue to be
provided with employee benefit plans which in the aggregate are
substantially comparable to those currently provided by the
Company and its subsidiaries to such employees (other than plans
involving or related to the securities of the Company). Subject
to the foregoing, nothing herein shall (i) prevent the amendment
or termination of any such plan, program or arrangement, (ii)
interfere with the Surviving Corporation's right or obligation to
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take any action or refrain from taking any action which the
Company could take or refrain from taking prior to the Effective
Time. In addition, in administering such plans, programs or
arrangements, the Parent may cause a reduction of benefits under
any such plans, programs or arrangements to the extent necessary
to avoid duplication of benefits with respect to the same covered
matter or years of service.
SECTION 4.7 Directors' and Officers' Indemnification
and Insurance. (a) The By-Laws of the Surviving Corporation
shall contain provisions no less favorable with respect to
indemnification than are set forth in the By-laws of the Company,
which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of
individuals who at the Effective Time were directors, officers,
agents or employees of the Company or otherwise entitled to
indemnification pursuant to the Company's By-Laws. In the event
that the Surviving Corporation transfers all or substantially all
of its operations, the Parent shall guarantee, or shall cause MCI
Telecommunications, Inc. to guarantee, the obligations of the
Surviving Corporation under this Section 4.7(a).
(b) The Parent shall cause to be maintained in effect
for six years from the Effective Time the current policies of the
directors' and officers' liability insurance maintained by the
Company (provided that the Parent may substitute therefor
policies of at least the same coverage containing terms and
conditions which are not materially less advantageous) with
respect to matters occurring prior to the Effective Time to the
extent available; provided, however, that in no event shall the
Parent or the Surviving Corporation be required to expend more
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than an amount per year equal to 150% of current annual premiums
paid by the Company to maintain or procure insurance coverage
pursuant hereto.
SECTION 4.8 Further Action; Reasonable Best Efforts.
Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do or cause to
be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including but
not limited to (i) cooperation in the preparation and filing of
the Proxy Statement, any required filings under the HSR Act and
other Regulatory Requirements, and any amendments to any thereof
and (ii) using its reasonable best efforts to make all required
regulatory filings and applications and to obtain all Licenses,
permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts with
the Company and its subsidiaries as are necessary for the
consummation of the transactions contemplated by this Agreement
and to fulfill the conditions to the Merger. In case at any time
after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall use
their reasonable best efforts to take all such necessary action.
In addition, the Company shall cause senior management of the
Company and its subsidiaries to cooperate in good faith with
representatives of the Parent in identifying transition issues
and formulating plans and strategies to address any such issues.
SECTION 4.9 Public Announcements. The Parent and the
Company shall consult with each other before issuing any press
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release or otherwise making any public statements with respect to
the Merger and shall not issue any such press release or make any
such public statement prior to such consultation, except as may
be required by law or any listing agreement with its securities
exchange or quotation system.
SECTION 4.10 Taxes. Any liability with respect to
taxes specified in Section 4.14 hereof that are incurred in
connection with the Merger shall be borne by the Company and
expressly shall not be a liability of the stockholders of the
Company.
SECTION 4.11 Spin-Off Distribution. (a) After the
Proxy Statement has been mailed to the Stockholders of the
Company but prior to the tenth day before the date of the
Stockholders' Meeting, the Board of Directors of the Company
shall declare a distribution (the "Spin-Off Distribution") of CTS
Common Stock to the holders of Company Common Stock, which
distribution shall be payable, contingent on the satisfaction or
waiver of the conditions hereto, other than the conditions set
forth in Section 5.2(d), in an amount per share of Company Common
Stock as follows, in each case subject to Section 4.11(b): (i)
if the average closing market price of CTS Common Stock on each
of the three trading-days ending on the Spin-Off Distribution
Record Date (as defined below) (the "Distribution Price") is
equal to or less than $22.00 per share, then each share of
Company Common Stock shall be entitled to receive that number of
shares of CTS Common Stock equal to the quotient obtained by
dividing 3,980,000 by the sum of the then outstanding shares of
Company Common Stock and the shares of Company Common Stock then
reserved for issuance upon exercise of Options, the Warrant and
the warrant held by Jay Brown, and (ii) if the Distribution Price
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per share is more than $22.00 per share, then each share of
Company Common Stock shall be entitled to receive that number of
shares of CTS Common Stock equal to the quotient obtained by
dividing (A) (x) the number of shares which, based on the
Distribution Price, have an aggregate value equal to the product
of $22.00 times 3,980,000, plus (y) the number of shares which,
based on the Distribution Price, have an aggregate value equal to
the product of 60% of the difference between the Distribution
Price and $22.00 times 3,980,000 by (B) the sum of the then
outstanding shares of Company Common Stock and the shares of
Company Common Stock then reserved for issuance upon exercise of
Options, the Warrant and the warrant held by Jay Brown. In the
event of any stock split, combination, reclassification, share
dividend or other event similarly altering or affecting the value
of CTS Common Stock, the foregoing shall be adjusted to the
extent deemed appropriate by the Board of Directors of the
Company, and subject to the reasonable approval of the Parent, to
carry out fully the purposes and intents hereof. The resolutions
of the Board of Directors declaring the Spin-Off Distributions
and setting forth the terms and conditions described above shall
in form and substance be reasonably satisfactory to the Parent.
(b) In no event will any fractional shares be
delivered in the Spin-Off Distribution, and in lieu of fractional
shares, the Company shall deliver cash to each holder who would
otherwise be entitled to a fractional share in an amount equal to
the Distribution Price times such fraction, rounded to the
nearest $0.01.
(c) The Company agrees that until the Spin-Off
Distribution has occurred, the resolutions of the Board of
Directors of the Company pursuant to which the Spin-Off
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Distribution is to be declared shall not be terminated, modified,
amended or supplemented without the consent of the Parent if the
Parent would be adversely affected thereby.
(d) The Spin-Off Distribution shall occur after the
Merger has been approved by the stockholders of the Company and
the satisfaction of any other conditions set forth herein (other
than as set forth in Section 5.2(d)) and immediately prior to the
Effective Time (the "Spin-Off Distribution Payment Date") and be
payable to holders of record of Company Common Stock at the close
of business on the date immediately preceding the Spin-Off
Distribution Payment Date (the "Spin-Off Record Date").
(e) The Company shall promptly prepare and submit a
no-action request letter to the SEC requesting the Division of
Corporate Finance of the SEC to confirm that (i) it would not
recommend enforcement action to the SEC if the Spin-Off
Distribution were effected without registration under the
Securities Act, (ii) the shares of CTS Common Stock received in
the distribution by stockholders of the Company would not be
"restricted securities" within the meaning of Rule 144(a)(3) of
the Securities Act, and (iii) such other matters as are
customarily requested in effecting distributions of shares in
similar circumstances. The Company shall exercise its best
efforts to obtain a no-action letter confirming the foregoing
and, unless such letter includes terms and conditions that are
not customary and that are not reasonably satisfactory to the
Company, to comply with any conditions imposed by the Division of
Corporate Finance in connection therewith. Prior to submitting
any such request, the Company will provide counsel to the
Purchaser with the opportunity to review and comment thereon, and
the Company will cooperate in good faith in responding to any
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such comments. The Company will promptly furnish to the Parent
and its counsel copies of all correspondence with the SEC in
connection with the Spin-Off Distribution.
(f) In the event that the Division of Corporate
Finance declines to issue a no-action letter in response to the
request described in Section 4.11(e) above, or issues a letter
with other than customary terms and conditions which are not
reasonably satisfactory to the Parent or the Company, so that the
conditions set forth in Sections 5.2(d) and 5.3(c) below cannot
be satisfied, then, at the Parent's request, the Company will use
its best efforts to enter into a registration rights agreement
with CTS on terms and conditions satisfactory to Parent pursuant
to which CTS will promptly prepare and file a registration
statement (the "CTS Registration Statement") with respect to the
CTS Common Stock with the SEC and exercise best efforts to cause
such registration statement to be declared effective by the SEC
as promptly as practicable, and the Company will use its best
efforts to cause the prospectus contained within the CTS
Registration Statement to be mailed to the Company's stockholders
as promptly as practicable after the CTS Registration Statement
is declared effective. The Company hereby covenants that the CTS
Registration Statement, at the time it is declared effective, and
any amendments or supplements thereto, shall not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances in
which they were made, not misleading, and shall comply as to form
in all material respects with the requirements of the Securities
Act and the rules and regulations promulgated thereunder. Any
registration rights agreement with CTS will require that, prior
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to filing the CTS Registration Statement or any amendment
thereto, CTS will provide the Purchaser and its counsel the
opportunity to review and comment thereon, and CTS will cooperate
in good faith in responding to any such comments. Any
registration rights agreement with CTS will also provide the
Purchaser and its legal, financial and other advisors the
opportunity to conduct such legal, financial and business due
diligence with respect to CTS as they shall reasonably request
and that CTS will use its best efforts to cause to be delivered
to the Company a letter of Ernst & Young LLP, the independent
auditors of CTS, dated a date within two business days of the
date on which the registration statement shall become effective
and addressed to the Company, in form and substance reasonably
satisfactory to the Parent and customary in scope and substance
for letters delivered by independent accountants in connection
with registration statements similar to the registration
statement filed in connection with the CTS Common Stock.
SECTION 4.12 Certain Agreements. Neither the Company
nor any subsidiary will waive any provision of any
confidentiality or standstill or similar agreement to which it is
a party without the prior written consent of the Parent, unless
the Board of Directors of the Company or such subsidiary
concludes in good faith that waiving such provision is necessary
or appropriate in order for the Board of Directors of the Company
to act in a manner which is consistent with its fiduciary
obligations under applicable law.
SECTION 4.13 CTS Warrant. The Company shall timely
exercise the CTS Warrant to acquire shares of CTS Common Stock in
order to include the shares deliverable upon any such exercise in
the Spin-Off Distribution.
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SECTION 4.14 Conveyance Taxes. The Parent and the
Company shall cooperate in the preparation, execution and filing
of all returns, questionnaires, applications, or other documents
regarding any real property transfer gains, sales, use, transfer,
value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes
that become payable in connection with the transactions
contemplated hereby that are required or permitted to be filed on
or before the Effective Time.
ARTICLE V
CONDITIONS OF MERGER
SECTION 5.1 Conditions to Obligation of Each Party to
Effect the Merger. The respective obligations of each party to
effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have
been approved and adopted by the affirmative vote of the holders
of a majority of the outstanding shares of Company Common Stock
entitled to vote thereon.
(b) Other Approvals. Other than the filing
contemplated by Section 1.3, all consents, approvals,
authorizations or permits of, actions by, or filings with or
notifications to, and all expirations of waiting periods imposed
by, any Governmental Entity (all the foregoing, "Consents") which
are necessary for the consummation of the Merger, other than
immaterial Consents the failure to obtain which would have no
material adverse effect on the consummation of the Merger, shall
have been filed, occurred or been obtained (all such permits,
approvals, filings and consents and the lapse of all such waiting
periods being referred to as the "Requisite Regulatory
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Approvals"), and all such Requisite Regulatory Approvals shall be
in full force and effect.
(c) No Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the consummation
of the Merger shall be in effect, nor shall any proceeding by any
Governmental Entity seeking any of the foregoing be pending.
There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the
Merger illegal.
SECTION 5.2 Conditions to Obligations of Parent and
Purchaser. The obligations of the Parent and the Purchaser to
effect the Merger are subject to the satisfaction of the
following conditions unless waived by the Parent and the
Purchaser:
(a) Representations and Warranties. The
representations and warranties of the Company set forth in this
Agreement shall be true and correct in all material respects as
of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date,
except as otherwise contemplated by this Agreement, and the
Parent shall have received a certificate signed on behalf of the
Company by the Chairman of the Board and Chief Executive Officer
of the Company, and by the Chief Financial Officer of the Company
to such effect.
(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects all
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obligations required to be performed by it under this Agreement
at or prior to the Closing Date, and the Parent shall have
received a certificate signed on behalf of the Company by the
Chairman of the Board and Chief Executive Officer of the Company,
and by the Chief Financial Officer of the Company to such effect.
(c) Burdensome Condition. There shall not be any
action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger, by any
federal or state Governmental Entity which, (i) in connection
with the grant of a Requisite Regulatory Approval, imposes any
condition or restriction upon the Parent or its subsidiaries
which would require the Parent or any subsidiary, including the
Company or any of its subsidiaries after the Merger, to dispose
of any assets with a value in excess of $15 million or which
would so materially adversely impact the economic or business
benefits of the transactions contemplated by this Agreement as to
render inadvisable the consummation of the Merger, provided that
the parties shall have contested in good faith the imposition of
any such condition or restriction or (ii) in connection with the
grant of a Requisite Regulatory Approval or otherwise, would be
reasonably likely to result in a Material Adverse Effect with
respect to the Company or any subsidiary thereof.
(d) Spin-Off Distribution. The Company shall have
received a no-action letter from the Division of Corporate
Finance of the SEC granting the relief requested in the request
letter contemplated by Section 4.11 above and subject only to
such customary terms and conditions as may be reasonably
satisfactory to the Parent or a CTS Registration Statement shall
have been declared effective by the SEC and no stop order shall
have been issued. The Board of Directors of the Company shall
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have set the Spin-Off Record Date and paid the Spin-Off
Distribution as contemplated hereby and in compliance with the
terms and conditions of the no-action letter so received.
(e) Parent Board Approval. The Board of Directors of
Parent shall have duly authorized and approved this Agreement,
the Merger and the other transactions contemplated hereby.
(f) Dissenters' Rights. No more than 7% of the shares
of Company Common Stock shall be, or have the right to become,
Dissenting Shares.
SECTION 5.3 Conditions to Obligations of the Company.
The obligation of the Company to effect the Merger is subject to
the satisfaction of the following unless waived by the Company:
(a) Representations and Warranties. The
representations and warranties of the Parent and the Purchaser
set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to
the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of
the Closing Date, except as otherwise contemplated by this
Agreement, and the Company shall have received a certificate
signed on behalf of the Parent by the Chief Financial Officer of
the Parent to such effect.
(b) Performance of Obligations of the Parent and the
Purchaser. The Parent and the Purchaser shall have performed in
all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, and
the Company shall have received a certificate signed on behalf of
the Parent by the President of the Parent to such effect.
(c) Spin-Off Distribution. The Company shall have
received a no-action letter from the Division of Corporate
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Finance of the SEC granting the relief requested in the request
letter contemplated by Section 4.11 above and subject only to
such customary terms and conditions as may be reasonably
satisfactory to the Company, or a CTS Registration Statement
shall have been declared effective by the SEC and no stop-order
shall have been issued.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.1 Termination. This Agreement may be
terminated and the Merger contemplated hereby may be abandoned at
any time prior to the Effective Time, notwithstanding approval
thereof by the stockholders of the Company:
(a) by mutual written consent of the Parent, the
Purchaser and the Company; or
(b) by the Parent, upon a breach of any material
representation, warranty, covenant or agreement on the part of
the Company set forth in this Agreement, or if any such
representation or warranty of the Company shall have been or
become untrue, in each case such that the conditions set forth in
Section 5.2(a) or Section 5.2(b), as the case may be, would be
incapable of being satisfied (following notice and a reasonable
opportunity to cure) by October 21, 1995;
(c) by the Company, upon a breach of any material
representation, warranty, covenant or agreement on the part of
the Parent set forth in this Agreement, or if any such
representation or warranty of the Parent shall have been or
become untrue, in each case such that the conditions set forth in
Section 5.3(a) or Section 5.3(b), as the case may be, would be
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incapable of being satisfied (following notice and a reasonable
opportunity to cure) by October 21, 1995;
(d) by either the Parent or the Company if, any
permanent injunction or action by any Governmental Entity
preventing the consummation of the Merger shall have become final
and nonappealable; provided that such right of termination shall
not be available to any party if such party shall have failed to
make reasonable efforts to prevent or contest the imposition of
such injunction or action and such failure materially contributed
to such imposition;
(e) by either the Parent or the Company if (other than
due to the willful failure of the party seeking to terminate this
Agreement to perform its obligations hereunder required to be
performed at or prior to the Effective Time) the Merger shall not
have been consummated on or prior to October 21, 1995, and in any
event if the Merger shall not have been consummated on or prior
to December 31, 1995;
(f) by the Parent, if the approval of the stockholders
of the Company of this Agreement and the Merger required for the
consummation of the Merger shall not have been obtained by reason
of the failure to obtain the required vote at a duly held meeting
of stockholders or at any adjournment thereof;
(g) by the Parent, if (i) the Board of Directors of
the Company shall have withdrawn, modified or changed its
approval or recommendation of this Agreement or the Merger in any
manner which is adverse to the Parent or the Purchaser or shall
have resolved to do the foregoing; or (ii) the Board of Directors
of the Company shall have approved or have recommended to the
stockholders of the Company a Transaction Proposal or shall have
resolved to do the foregoing; or (iii) a tender offer or exchange
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offer for 15% or more of the outstanding shares of the Company
Common Stock is commenced (other than by the Parent or any of its
subsidiaries or affiliates), and the Board of Directors of the
Company recommends that the stockholders of the Company tender
their shares in such tender or exchange offer or otherwise fails
to recommend that such stockholders reject such tender offer or
exchange offer within ten business days of the commencement
thereof; or (iv) (A) any person (including the Company or any of
its subsidiaries or affiliates, but excluding Mr. Adelson) or
group (other than the Parent or any of its subsidiaries or
affiliates) shall have become the beneficial owner of either (x)
15% or more of the outstanding shares of the Company Common Stock
and the Company has directly or indirectly encouraged or assisted
such acquisition (including, without limitation, taking any
action under Section 203 of the DGCL) or (y) 25% or more of the
outstanding shares of the Company Common Stock, or (B) if Mr.
Adelson becomes the beneficial owner of shares of Company Common
Stock in addition to those owned on the date hereof; or
(h) by the Company, if prior to the Stockholders'
Meeting the Board of Directors of the Company (i) shall fail to
make or shall withdraw or modify its recommendation of this
Agreement or the Merger if there shall exist at such time a
tender offer or exchange offer or a written, bona fide proposal
by a third party to acquire the Company pursuant to a merger,
consolidation, share exchange, business combination, tender or
exchange offer or other similar transaction or (ii) recommends to
the Company's stockholders approval or acceptance of any such
transaction, in each case if, and only to the extent that, the
Board of Directors of the Company, after consultation with and
based upon the advice of independent legal counsel, determines in
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good faith that such action is required for the Board of
Directors of the Company to comply with its fiduciary duties to
stockholders under applicable law;
(i) by the Parent if the SEC has declined to issue a
favorable no-action letter, or has issued a no-action letter that
does not satisfy the requirements of Section 4.11(e) and the
Company has not entered into a registration rights agreement with
CTS that satisfies the requirements of Section 4.11(f) within 15
days after the SEC declines to issue a no action letter or issues
a no action letter that does not satisfy the requirements of
Section 4.11(e); or
(j) by the Parent or the Company if the condition
precedent set forth in Section 5.2(e) shall not have been
satisfied on or prior to June 9, 1995.
SECTION 6.2 Effect of Termination. In the event of
the termination of this Agreement pursuant to Section 6.1, this
Agreement shall forthwith become void and there shall be no
liability on the part of any party hereto except as set forth in
Section 6.3, Section 4.4(b) and Section 7.1; provided, however,
that nothing herein shall relieve any party from liability for
any breach hereof.
SECTION 6.3 Fees and Expenses. (a) The Company
agrees that if this Agreement shall be terminated pursuant to:
(i) Section 6.1(b) and (x) such termination is the
result of wilful breach by the Company of any material
covenant, agreement, representation or warranty contained
herein and (y) at any time during the period commencing on
the date hereof and ending twelve months after the date of
termination of this Agreement, a Business Combination (as
defined in Section 6.3(e) below) involving the Company shall
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have occurred or the Company shall have entered into a
definitive agreement providing for such a Business
Combination;
(ii) Section 6.1(e) and (x) there shall exist a
Transaction Proposal with respect to the Company, and (y) at
any time during the period commencing on the date hereof and
ending twelve months after the date of termination of this
Agreement, a Business Combination involving the Company
shall have occurred or the Company shall have entered into a
definitive agreement providing for a Business Combination;
(iii) Section 6.1(f) because the Agreement and the
Merger shall fail to receive the requisite vote for approval
and adoption by the stockholders of the Company at a meeting
of stockholders of the Company called to vote thereon and at
the time of such meeting (x) there shall exist a Transaction
Proposal with respect to the Company or (y) any event
specified in Section 6.1(g)(iv) shall have occurred;
(iv) Section 6.1(g)(i) and at the time of the
withdrawal, modification or change (or resolution to do so)
of its recommendation by the Board of Directors of the
Company, there shall exist a Transaction Proposal with
respect to the Company or any event specified in
Section 6.1(g)(iv) shall have occurred; or
(v) Section 6.1(g)(iv) and at any time during the
period commencing on the date hereof and ending twelve
months after the date of termination of this Agreement,
either (A) a Business Combination specified in clause (i) or
(ii) of the definition thereof shall have occurred or the
Company shall have entered into a definitive agreement
providing for such a Business Combination or (B) any person
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or group shall acquire beneficial ownership of 50% or more
of the outstanding Company Common Stock; or
(vi) Sections 6.1(g)(ii) or (iii), or Section 6.1(h);
then the Company shall pay to the Parent an amount equal to
(x) $7,500,000, plus (y) all out-of-pocket fees and expenses
(including, without limitation, reasonable fees and
disbursements payable to any investment bankers, counsel to
the Parent, counsel to such investment bankers, and
accountants) incurred by the Parent or on its behalf in
connection with the analysis, negotiation, preparation,
execution and performance of this Agreement, and the Voting
Agreements and the consummation of the transactions
contemplated hereby and thereby ("Expenses") up to
$1,500,000.
(b) The Company agrees that if this Agreement shall be
terminated pursuant to Section 6.1(f) because the Agreement and
the Merger shall fail to receive the requisite vote for approval
and adoption by the stockholders of the Company at a meeting of
stockholders of the Company called to vote thereon, or pursuant
to Section 6.1(b), Section 6.1(g)(i) or Section 6.1(i), then, in
any such event, the Company shall pay to the Parent an amount
equal to the Parent's Expenses, provided that the Company shall
not be obligated to make any payment pursuant to this Section
6.3(b) if the Company shall be obligated to make a payment to the
Parent pursuant to Section 6.3(a).
(c) The Parent agrees that if this Agreement shall be
terminated pursuant to Section 6.1(c) or 6.1(j), then the Parent
shall pay to the Company an amount equal to (x) $1,500,000 plus
(y) all out-of-pocket fees and expenses (including, without
limitation, reasonable fees and disbursements payable to any
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investment bankers, counsel to the Company, counsel to such
investment bankers, and accountants) incurred by the Company or
on its behalf in connection with the analysis, negotiation,
preparation, execution and performance of this Agreement and the
consummation of the transactions contemplated hereby, up to
$1,500,000.
(d) Any payment required to be made pursuant to
Section 6.3(a) through Section 6.3(c), inclusive, shall be made
contemporaneously with the termination of this Agreement and
shall be made by wire transfer of immediately available funds to
an account designated by the recipient of such payment, and
termination by any party required to make such payment
contemporaneously therewith shall not be effective until such
payment shall have been made pursuant hereto, except that any
payment to be made as the result of an event described in Section
6.3(a)(i), 6.3(a)(ii) or 6.3(a)(v) shall be made as promptly as
practicable but not later than five business days after the
occurrence of the Business Combination or the execution of the
definitive agreement providing for a Business Combination. Any
payment made pursuant to Sections 6.3(a) through 6.3(c),
inclusive, shall not preclude the recipient of such payment from
seeking monetary damages from the other party as described in of
Section 6.2.
(e) For purposes of this Section 6.3, the term
"Business Combination" shall mean any of the following involving
the Company: (i) any merger, consolidation, share exchange,
business combination or similar transaction; (ii) any sale,
lease, exchange, transfer or other disposition of 15% or more of
the assets of the Company and its subsidiaries, taken as a whole,
in a single transaction or series of related transactions; or
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(iii)(A) any person (including the Company or any of its
subsidiaries or affiliates, but excluding Mr. Adelson) or any
group (other than the Parent or any of its subsidiaries or
affiliates) becoming the beneficial owner of either (x) 15% or
more of the outstanding shares of the Company Common Stock and
the Company has directly or indirectly encouraged or assisted
such acquisition (including, without limitation, taking any
action under Section 203 of the DGCL) or (y) 25% or more of the
outstanding shares of the Company Common Stock, or (B) Mr.
Adelson becoming the beneficial owner of shares of Company Common
Stock in addition to those owned on the date hereof.
(f) Except as specifically provided in this Section
6.3, each party shall bear its own expenses in connection with
this Agreement and the transactions contemplated hereby.
SECTION 6.4 Amendment. This Agreement may be amended
by the parties hereto by action taken by or on behalf of the
Parent and the respective Boards of Directors of the Purchaser
and the Company at any time prior to the Effective Time;
provided, however, that, after approval of the Merger by the
stockholders of the Company, no amendment may be made which would
reduce the amount or change the type of consideration into which
each share of Company Stock shall be converted upon consummation
of the Merger. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 6.5 Waiver. At any time prior to the
Effective Time, any party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the
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agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1 Non-Survival of Representations,
Warranties and Agreements. The representations, warranties and
agreements in this Agreement shall terminate at the Effective
Time or upon the termination of this Agreement pursuant to
Section 6.1, except that those set forth in Section 4.4(b),
Section 6.3 and Article VII shall survive termination
indefinitely (in accordance with the terms of such provisions).
SECTION 7.2 Notices. All notices, requests, claims,
demands and other communications hereunder shall be in writing
and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in person, by cable, telecopy, telegram
or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as
shall be specified by like notice):
if to the Parent or the Purchaser:
MCI Communications Corporation
1801 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attention: John R. Worthington, Esq.
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Richard Capelouto, Esq.
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if to the Company:
Nationwide Cellular Service, Inc.
20 East Sunrise Highway
Valley Stream, New York 11582
Attention: Stephen Katz
with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1121 Avenue of the Americas
New York, New York 10036
Attention: Edward R. Mandell, Esq.
SECTION 7.3 Certain Definitions. For purposes of this
Agreement, the term:
(a) "affiliate" of a person means a person that
directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with,
the first mentioned person;
(b) "beneficial owner" with respect to any shares of
Company Common Stock means a person who shall be deemed to
be the beneficial owner of such shares of Company Common
Stock (i) which such person or any of its affiliates or
associates beneficially owns, directly or indirectly, (ii)
which such person or any of its affiliates or associates (as
such term is defined in Rule 12b-2 of the Exchange Act) has,
directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the
passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of consideration rights,
exchange rights, warrants or options, or otherwise, or (B)
the right to vote pursuant to any agreement, arrangement or
understanding or (iii) which are beneficially owned,
directly or indirectly, by any other persons with whom such
person or any of its affiliates or person with whom such
person or any of its affiliates or associates has any
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agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares;
(c) "control" (including the terms "controlled by" and
"under common control with") means the possession, directly
or indirectly or as trustee or executor, of the power to
direct or cause the direction of the management policies of
a person, whether through the ownership of stock, as trustee
or executor, by contract or credit arrangement or otherwise;
(d) "generally accepted accounting principles" shall
mean the generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified
Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a
significant segment of the accounting profession in the
United States, in each case applied on a basis consistent
with the manner in which the audited financial statements
for the fiscal year of the Company ended December 31, 1994
were prepared;
(e) "knowledge" means knowledge after reasonable
inquiry;
(f) "person" means an individual, corporation,
partnership, association, trust, unincorporated
organization, other entity or group (as defined in Section
13(d)(3) of the Exchange Act); and
(g) "subsidiary" or "subsidiaries" of the Company, the
Surviving Corporation, the Parent or any other person means
any corporation, partnership, joint venture or other legal
entity of which the Company, the Surviving Corporation, the
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Parent or such other person, as the case may be (either
alone or through or together with any other subsidiary),
owns, directly or indirectly, 50% or more of the stock or
other equity interests the holder of which is generally
entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal
entity. For purposes of this Agreement, CTS shall not be
considered a subsidiary of the Company.
SECTION 7.4 Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law, or public policy, all other
conditions 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 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 to the
end that the transactions contemplated hereby are fulfilled to
the fullest extent possible.
SECTION 7.5 Entire Agreement; Assignment. This
Agreement constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior
agreements and undertakings, both written and oral, among the
parties, or any of them, with respect to the subject matter
hereof. This Agreement shall not be assigned by operation of law
or otherwise, except that the Parent and the Purchaser may assign
all or any of their respective rights and obligations hereunder
to any direct or indirect wholly owned subsidiary or subsidiaries
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of the Parent, provided that no such assignment shall relieve the
assigning party of its obligations hereunder if such assignee
does not perform such obligations.
SECTION 7.6 Parties in Interest. 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 rights,
benefits or remedies of any nature whatsoever under or by reason
of this Agreement.
SECTION 7.7 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the
State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
SECTION 7.8 Headings. The descriptive headings
contained in this Agreement are included for convenience of
reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 7.9 Counterparts. This Agreement may be
executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
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IN WITNESS WHEREOF, the Parent, the Purchaser and the
Company have caused this Agreement to be executed as of the date
first written above by their respective officers thereunto duly
authorized.
MCI COMMUNICATIONS CORPORATION
By: /s/ Bert C. Roberts, Jr.
Name: Bert C. Roberts, Jr.
Title: Chairman
NTS ACQUISITION CORP.
By: /s/ Bert C. Roberts, Jr.
Name: Bert C. Roberts, Jr.
Title: Chairman
NATIONWIDE CELLULAR SERVICE, INC.
By: /s/ Stephen Katz
Name: Stephen Katz
Title: Chief Executive Officer
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SCHEDULE A
Stockholders of the Company to Execute and
Deliver Voting Agreements
1. Stephen Katz
2. Jay Bernstein
3. Mel Steinberg
4. Larry Altman
5. Jerome Sanders
6. Joseph A. Gregori
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ANNEX A
SUBSIDIARIES OF THE COMPANY AND OTHER ENTITIES
IN WHICH THE COMPANY HAS AN EQUITY INTEREST
Percentage Ownership
Name of Subsidiary by the Company
Nova Cellular Co. 100%
N.C.S Equipment Corporation 100%
Cellular Technical Services Company, Inc. 33.8%
Page Telecommunications Inc. (5% warrant)
Nationwide RSA Service, Inc. 100%
Portable Cellular Communications, Inc. 100%
Nationwide Cellular Service
of California, Inc. 100%
Nationwide Cellular Service
of New York, Inc. 100%
Nationwide Paging, Inc. 100%
Nationwide MDC, Inc. 100%
Nationwide Long Distance Service, Inc. 100%
Nationwide Switching Services, Inc. 100%
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SCHEDULE 3.1(c)
1. Mr. Adelson has a warrant to purchase up to 850,000 shares
of the Company Common Stock at an exercise price of $11.00 per
share. The Company may be required to redeem this warrant under
the circumstances set forth therein.
2. The Company is required to guarantee obligations of Cellular
Marketing, Inc. in the amount of $66,000 in any six month period,
in addition to a rolling three month guarantee of the rent in the
amount of $12,000 per month.
3. All of the outstanding stock of Nova Cellular Co., a wholly-
owned subsidiary of the Company, is pledged to Core States Bank,
N.A.
4. Jay Brown has a warrant to purchase 125,000 shares of the
Company Common Stock at an exercise price of $9.25 per share.
The warrant grants to Mr. Brown piggyback registration rights
under the Securities Act of 1933, as amended.
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Schedule 3.1(e)
1. The Company has obtained certificates of public convenience
and necessity and filed tariffs for the rates it can charge in
New York and California.
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Schedule 3.1(i)
1. The Company has amended its 401(k) plan to increase annual
contributions by the Company from $750 to $1,000.
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Schedule 3.1(k)
The Company has employment agreements with:
1. Bud Dealoia
2. Lynn Goffiney
3. Martin Johanson
4. Patrick McGuirk
5. Linda O'Neill (verbal agreement)
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Schedule 3.1(l)
1. The Company has amended its 401(k) plan to increase annual
contributions by the Company from $750 to $1,000.
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Schedule 3.1(m)
1. The Company has received an extension until September 15,
1995 for the filing of Form 1120 for the year ended December 31,
1994.
2. The Company has received identical extensions with respect to
all filings to be made in the states of New York, Illinois,
Massachusetts, Maryland, Pennsylvania, Virginia, New Jersey and
California.
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Schedule 3.1(q)
1. In August 1991, the Company and CTS entered into a
Management Services Agreement pursuant to which Company personnel
would provide managerial, financial and administrative services
to CTS on a part-time or consulting basis for a monthly fee of
$25,000. This contract expires in August 1995.
2. The Company leases its principal office facility from
Phoenix Capital & Management Co., a partnership consisting of
three directors of the Company. The lease expired on October 31,
1994 and is continuing on a month-to-month basis.
3. The Company has entered into employment agreements with the
following individuals:
(a) Stephen Katz
(b) Joseph Gregori
(c) Jerome Sanders
(d) Harold F. Saving
(e) Edward Seidenberg
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Schedule 4.1(g)
1. Borrowings under existing credit facilities in order to
finance the purchase and renovation of the Company's
headquarters.
-82-<PAGE>
EXHIBIT 99
<PAGE>
MCI Communications
Corporation MCI
News
1801 Pennsylvania Avenue, NW
Washington, DC 20006
Contacts: For Release:
Ray Allieri, Vice President May 22, 1995
MCI Investor Relations
(202) 887-2028
Joe Pititto
Nationwide Cellular Service, Inc.
516-887-0399
MCI TO ACQUIRE NATIONWIDE CELLULAR SERVICE AS PART OF
PLAN TO PROVIDE NATIONWIDE WIRELESS COMMUNICATIONS
SERVICES
WASHINGTON, D.C., May 22, 1995 -- MCI
Communications Corporation (NASDAQ: MCIC) and Nationwide
Cellular Service, Inc. (NASDAQ: NCEL) today announced
that they have entered into a definitive merger
agreement whereby MCI would acquire Nationwide, the
nation's largest cellular reseller, for approximately
$190 million in cash, or $18.50 per share.
Prior to the merger, Nationwide will distribute
pro rata to its shareholders the shares it holds in
Cellular Technical Services Company, Inc. (NASDAQ:CTSC).
These shares will be distributed at a rate of
approximately 0.38 CTS shares per share of Nationwide
held.
MCI said the acquisition of Nationwide is the
first step of its strategy to provide national wireless
services integrated with other MCI services for both
consumer and business customers. Instead of owning
local wireless transmission facilities, MCI will invest
in the creation and delivery of value-added wireless<PAGE>
services that are uniquely different from those offered
today.
MCI said it is currently working with a number
of large cellular facility providers to expand coverage
on a national basis.
Nationwide, which reported 1994 revenue of $213
million, provides wireless services to more than 275,000
business and residential customers in 10 major U.S.
cities including Baltimore, Boston, Chicago, Los
Angeles, Milwaukee, New York City, Philadelphia, San
Diego, San Francisco and Washington, D.C. These cities
encompass nearly 25 percent of the U.S. population.
The merger is subject to approval by the MCI
board of directors, Nationwide stockholders, certain
state regulatory bodies, clearance under the Hart-Scott-
Rodino Act and other customary conditions. Nationwide
Chairman Stephen Katz and certain directors and
executive officers have agreed to vote their shares
(representing approximately 25 percent of outstanding
Nationwide shares) in favor of the merger. Nationwide's
board of directors has voted in favor of the merger.
MCI, headquartered in Washington, D.C., has
expanded from its core long distance business to become
the world's third-largest carrier of international
calling and a premier provider of data communications
over the vast Internet network. With annual revenue of
more than $13.3 billion, the company today provides a
wide array of consumer and business long distance voice
and local services, data and video communications, on-
line information, electronic mail, network management
services and communications software.
####
Conference Call Information
A conference call will be held with MCI's chief
financial officer, Doug Maine, and Nationwide's<PAGE>
chairman, Stephen Katz, at 10:00 a.m. EDT. To access
the call, dial 1-800-988-9680, password "MCI." For
international calls, place a reservation by calling 319-
326-5200. Please place your call at least 15 minutes in
advance. The operator will call you back in time to
access the conference call. The call will be
rebroadcast through May 26 by dialing 1-800-475-4387,
passcode "1234." <PAGE>
